EXHIBIT 10.1
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS STOCK FOR STOCK AGREEMENT ("Agreement") is made and entered into this
day of November 1, 2005, by and between Xxxxxx Xxxxxx and Xxxxxx Xxxxx Xxxxxx
individuals, (hereinafter collectively referred to as "XXXXXX"), the owners of
the shares of common stock of Spectrum Communications Cabling Services, Inc., a
California corporation (hereinafter referred to as "SPECTRUM"), and Network
Installation Corp, a Nevada corporation (hereinafter referred to as "NIC");
WITNESSETH:
WHEREAS, XXXXXX is the record owner and holder of an aggregate of
twenty-thousand (20,000) -----shares (the "Shares") which represents one-hundred
percent (100%) of the issued and outstanding common stock of SPECTRUM. Xxxxxx
Xxxxxx is the owner of ten-thousand two-hundred (10,200) shares and Xxxxxx Xxxxx
Xxxxxx is the owner of nine-thousand eight-hundred (9,800) shares.
WHEREAS, NIC desires to exchange for its shares, and XXXXXX desires to exchange
the Shares, pursuant to Type B Reorganization - Stock for Stock Under IRC Sec.
368(a)(1)(B) of the Internal Revenue Code, upon terms and subject to the
conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and in order to consummate the exchange of Shares,
it is hereby agreed as follows:
1. CLOSING.
A. PROCEDURE FOR CLOSING. The closing of the transaction contemplated by
this Agreement shall be held at SPECTRUM's offices on or about November 1, 2005,
at 5:00 pm PST ("Closing Date") or such other place, date and time as the
parties hereto may otherwise agree.
B. EXCHANGE OF SPECTRUM STOCK. Upon the date set forth in this Agreement,
and subject to the terms and conditions hereinafter set forth, XXXXXX shall
exchange, convey and transfer, or cause to be exchanged, conveyed or
transferred, all of the outstanding Shares of SPECTRUM's Stock representing 100%
ownership of SPECTRUM on or about the Closing Date.
C. SECTION 368 STOCK FOR STOCK EXCHANGE. The Exchange of Shares shall be
affected as a tax-free exchange pursuant to IRC Sec. 368 (a) (1) (B) of the
Internal Revenue Code.
D. AMOUNT AND PAYMENT OF EXCHANGE SHARES. The total amount of NIC shares
received, ("Exchange Shares") is computed by first multiplying SPECTRUM's
current estimated 2005 revenues of fourteen million dollars ($14,000,000) by a
factor of one (1). The amount of Stock XXXXXX shall receive is then equal to the
"Exchange Shares" divided by the average closing price of NIC Stock for the ten
(10) trading days prior to the Closing Date. The NIC Stock shall be restricted
and issued pursuant to Rule 144 and delivered to XXXXXX no later than seven (7)
days following the Closing Date. NIC shall receive 100% of the outstanding
shares of SPECTRUM in a tax free exchange pursuant to IRC Sec. 368(a)(1)(B) of
the Internal Revenue Code.
E. APPOINTMENT OF DIRECTORS. At Closing, XXXXXX will have the right to
appoint two (2) members to NIC's Board of Directors. The members must be
reasonably acceptable to NIC. In addition XXXXXX will have observation rights
for all Board meetings for five (5) years from the closing date. The XXXXXX
designee may be removed as an Observer for cause, as defined in the Company's
Articles, By-laws and applicable corporate law.
1. REPRESENTATIONS AND WARRANTIES OF XXXXXX.
XXXXXX hereby warrants and represents:
A. AUTHORITY RELATIVE TO THIS AGREEMENT. Except as otherwise stated herein,
XXXXXX and SPECTRUM have full power and authority to execute this Agreement and
carry out the transactions contemplated by it and no further action is necessary
by XXXXXX nor SPECTRUM to make this Agreement valid and binding upon XXXXXX and
SPECTRUM enforceable against them in accordance with the terms hereof, or to
carry out the actions contemplated hereby. The execution, delivery and
performance of this Agreement by XXXXXX and SPECTRUM will not:
(i) constitute a breach or a violation of SPECTRUM's Certificate of
Incorporation, By-Laws, or of any law, agreement, indenture, deed of trust,
mortgage, loan agreement or other instrument to which it is a party, or by which
it is bound;
(ii) constitute a violation of any order, judgment or decree to which it is
a party or by which its assets or properties are bound or affected; or
(iii) result in the creation of any lien, charge or encumbrance upon its
assets or properties, except as stated herein.
B. OWNERSHIP. All of SPECTRUM's outstanding shares have been duly
authorized, validly issued and are fully paid and non-assessable, were not
issued in violation of the terms of any agreement or other understanding legally
binding upon XXXXXX and SPECTRUM and were issued in compliance with all
applicable laws and regulations.
C. REVENUES. XXXXXX represents and warrants that the estimated gross
revenue of fourteen million dollars ($14,000,000) for the fiscal year ended
December 31, 2005, as reported on the Contracts in Progress Report, under column
"Total Revised Contract Price" dated August 31, 2005, is substantially correct
and supported to date by SPECTRUM's books and records.
D. ASSETS & LIABILITIES. XXXXXX represents and warrants that NIC is entitled
to receive all SPECTRUM's assets and shall assume all SPECTRUM's liabilities
with the exception of the "LITIGATION RECEIVABLES," which are identified in
Exhibit A. and the SPECTRUM SERVERS, which are identified in Exhibit B.The
Parties agree that XXXXXX shall be personally entitled to receive any and all
proceeds successfully recovered from the LITIGATION RECEIVABLES and shall bear
any and all costs associated with any claims regarding the LITIGATION
RECEIVABLES.
(1) Management by Board of Directors and Executive Committee.
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(a) Upon the closing, SPECTRUM shall be governed by the NIC Board of
Directors, which shall be elected by the shareholders. The Board of Directors
shall consist of five(5) directors and no more than seven directors as
determined by the shareholders. The Board of Directors shall immediately form
an Executive Committee regarding the LITIGATION RECEIVABLES, as identified in
Exhibit A, consisting of one director and shall appoint XXXXXX'X designee on the
Board as the Executive Committee. Thereafter, the Executive Committee, shall
have the authority to:
(i) Prosecute the LITIGATION RECEIVABLES actions;
(ii) Determine the strategies to be pursued;
(iii) Employ counsel and experts to assist in the actions;
(iv) Enter into, and enforce settlements; and
(v) Perform all other acts required for the conduct of the LITIGATION
RECEIVABLES to conclusion.
(b) The approval of the Executive Committee, will be required for all
decisions relating to the LITIGATION RECEIVABLES until final conclusion.
(c) The Board of Directors may disapprove of any actions of and give
directions to the Executive Committee if all its members find that any action
would have a material adverse effect upon SPECTRUM or NIC.
(d) The Board of Directors will monitor and promptly determine if any
action of the Executive Committee would represent a material adverse change in
the condition or business, financial or otherwise, of SPECTRUM or NIC, and if
any of the pending actions or proceedings threatened SPECTRUM or NIC which, if
adversely determined, in the reasonable judgment of SPECTRUM or NIC, could have
a material adverse effect on SPECTRUM or NIC or their respective financial
conditions, business or prospects.
(e) XXXXXX shall also indemnify the NIC INDEMNITIES under Section 6(b) of
this Agreement for all NIC INDEMNIFIED LIABILITIES as a result of or arising out
of, or relating to any cause of action, suit or claim brought or made against
such NIC INDEMNITY arising out of the LITIGATION RECEIVABLES.
E. LAWSUITS, LIENS & TAXES. XXXXXX represents that to the best of XXXXXX'x
knowledge, other than those items identified in Exhibit A, that neither XXXXXX
nor SPECTRUM is currently the subject of any other lawsuit threatened or filed.
XXXXXX also represents that SPECTRUM is free from any liens or encumbrances,
other than what is known regarding XXXXXX'x and SPECTRUM's obligations contained
on Spectrum's balance sheet as of the closing of this transaction. XXXXXX shall
be solely responsible for all taxes which may be incurred by XXXXXX resulting
from the receipt of consideration by XXXXXX pursuant to this Agreement.
F. BROKERAGE. XXXXXX or SPECTRUM have not made any agreement or taken any
other action which might cause anyone to become entitled to a broker's fee or
commission from the as a result of the transactions contemplated hereunder.
2. REPRESENTATIONS AND WARRANTIES OF THE NIC. NIC hereby warrants and
represents:
A. AUTHORITY RELATIVE TO THIS AGREEMENT AND ANCILLARY DOCUMENTS. Except as
otherwise stated herein, the NIC has full power and authority to execute this
Agreement, and carry out the transactions contemplated hereby and thereby and no
further action is necessary by NIC to make this Agreement valid and binding upon
NIC and enforceable against it in accordance with the terms hereof, or to carry
out the actions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement by the NIC will not:
i. constitute a breach or a violation of any law, agreement, indenture, deed
of trust, mortgage, loan agreement or other instrument to which it is a party,
or by which it is bound;
ii. constitute a violation of any order, judgment or decree to which it is a
party or by which its assets or properties are bound or affected; or
iii. result in the creation of any lien, charge or encumbrance upon its
assets or properties except as stated herein.
B. BROKERAGE. The NIC has not made any agreement or taken any other action
which might cause anyone to become entitled to a broker's fee or commission from
the as a result of the transactions contemplated hereunder.
C. TAXES. NIC shall be solely responsible for all taxes which may be
incurred by NIC resulting from the receipt of consideration by NIC pursuant to
this Agreement.
3. EXPENSES. Each of the parties hereto shall pay its own expense in
connection with this Agreement and the transactions contemplated hereby,
including the fees and expenses of its counsel and its certified public
accountants and other experts.
4. CLOSING DELIVERIES. At the Closing, the deliveries hereinafter specified
shall be made by the respective parties hereto, in order to consummate the
transactions contemplated hereby. Best efforts shall be made by both parties
regarding deliveries by the Closing date or such reasonable time thereafter.
A. DELIVERIES BY XXXXXX. XXXXXX shall deliver or caused to be delivered to
NIC:
i. Stock certificates, and any and all other instruments of conveyance and
transfer as required by Section 1(a) of this Agreement; and
ii. copies of all third party consents necessary to consummate the
transaction contemplated herein.
B. DELIVERIES BY NIC. NIC shall deliver or caused to be delivered to XXXXXX:
i. the Exchange Price of this Agreement; and Stock certificates, and any and
all other instruments of conveyance and transfer as required by Section 1(b) of
this Agreement; and
ii. copies of all third party consents necessary to consummate the
transaction contemplated herein.
6. INDEMNIFICATION.
In consideration of XXXXXX'x execution and delivery of the this
Agreement in addition to all of NIC's other obligations under this Agreement,
NIC shall defend, protect, indemnify and hold harmless XXXXXX and all of its
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "XXXXXX INDEMNITEES") from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "XXXXXX INDEMNIFIED LIABILITIES'), incurred by any
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by NIC in
this Agreement or any other certificate, instrument or document contemplated
hereby or thereby (ii) any breach of any covenant, agreement or obligation of
NIC contained in this Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (iii) any cause of action, suit or claim brought
or made against such Indemnitee by a third party and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other certificate, instrument or document contemplated hereby or thereby,
except insofar as any such misrepresentation, breach or any untrue statement,
alleged untrue statement, omission or alleged omission is made in reliance upon
and in conformity with written information furnished to XXXXXX by NIC. To the
extent that the foregoing undertaking by NIC may be unenforceable for any
reason, NIC shall make the maximum contribution to the payment and satisfaction
of each of XXXXXX Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights XXXXXX may have, and any liabilities XXXXXX may be
subject to.
NIC further agrees that NIC shall indemnify XXXXXX and their heirs, executors,
administrators, successors, and assigns, from and against any and all loss and
expense, including amounts paid in settlement before or after suit is commenced,
and reasonable attorney's fees,actually and necessarily incurred as a result of
any claim, demand, action, proceeding, or judgment that may be asserted by a
third-party or shareholders against any such persons, or in which these persons
are made parties by such third-party or shareholders by reason of their being or
having been officers, directors or shareholders of NIC.
(b) In consideration of NIC's execution and delivery of the this
Agreement and in addition to all of XXXXXX'x other obligations under this
Agreement, XXXXXX shall defend, protect, indemnify and hold harmless NIC and all
of its subsidiaries, shareholders, officers, directors and employees and any of
the foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "NIC INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such NIC Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "NIC INDEMNIFIED LIABILITIES'), incurred by any NIC
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by XXXXXX in
the Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (ii) any breach of any covenant, agreement or obligation of
XXXXXX contained in the Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (iii) any cause of action, suit or
claim brought or made against such NIC Indemnitee by a third party and arising
out of or resulting from the execution, delivery, performance or enforcement of
the Agreement or any other certificate, instrument or document contemplated
hereby or thereby, and except insofar as any such misrepresentation, breach or
any untrue statement, alleged untrue statement, omission or alleged omission is
made in reliance upon and in conformity with written information furnished to
NIC by XXXXXX. To the extent that the foregoing undertaking by XXXXXX may be
unenforceable for any reason, XXXXXX shall make the maximum contribution to the
payment and satisfaction of each of NIC Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights NIC may have, and
any liabilities NIC may be subject to.
(c) Indemnification Procedure. Any party entitled to indemnification under
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this Section (an "INDEMNIFIED PARTY") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section except to the extent that the indemnifying party
is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of counsel to the
indemnified party a conflict of interest between it and the indemnifying party
may exist with respect to such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or fails, within thirty
(30) days of receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole cost and
expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any settlement negotiations or defense of
any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the indemnified party
which relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding affected without its prior written consent.
Notwithstanding anything in this Section to the contrary, the indemnifying party
shall not, without the indemnified party's prior written consent, settle or
compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Section shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Business Days of written notice thereof to the
indemnifying party so long as the indemnified party irrevocably agrees to refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to.
7. GENERAL.
A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the parties to this
Agreement covenants and agrees that its respective representations, warranties,
covenants and statements and agreements contained in this Agreement and the
exhibits hereto, and in any documents delivered in connection herewith, shall
survive the Closing Date indefinitely. Except agreements between NIC and
certain individual members of SPECTRUM, and as set forth in this Agreement, the
exhibits hereto or in the documents and papers delivered in connection herewith,
there are no other agreements, representations, warranties or covenants by or
among the parties hereto with respect to the subject matter hereof.
B. WAIVERS. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action or compliance with any representation,
warranty, covenant or agreement contained herein, therein and in any documents
delivered in connection herewith or therewith. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
VOTING. NIC officers and XXXXXX mutually agree;
i. to vote all of their shares of NIC Stock in favor of the other
party's candidates for NIC Board of Directors for a period of two (2) years from
the Closing Date ("Vote Period").
ii. that during the Vote Period, under no circumstance will either
party vote any of their shares, in favor of the removal of any member of NIC
Board of Directors unless either or both parties voluntarily waive this right or
any board member has committed an action deemed by a majority vote of the board
to be detrimental to NIC.
D. NOTICES. All notices, requests, demands and other communications, which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered or mailed, first class mail,
postage prepaid:
To XXXXXX:
Xxxxxx Xxxxxx and/or Xxxxxx Xxxxx Xxxxxx
000 X. Xxxxxxx Xxx.
Xxxxxx, XX 00000
ph (951) 371-0549
fx (000) 000-0000
To NIC:
Network Installation Corp.
ATT/Xxxxxxx X. Xxxxxxx, CEO
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
ph (949) 753-7551
fx (000) 000-0000
or to such other address as such party shall have specified by notice in writing
through Certified Mail to the other party.
E. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and all
documents and papers delivered pursuant hereto and any written amendments hereof
executed by the parties hereto) constitutes the entire agreement and supersedes
all prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.
F. SECTIONS AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
G. GOVERNING LAW. This Agreement and all transactions contemplated hereby,
shall be governed by, construed and enforced in accordance with the laws of the
State of California. The parties herein waive trial by jury and agree to submit
to the personal jurisdiction and venue of a court of subject matter jurisdiction
located in Orange County, State of California. In the event that litigation
results from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party's reasonable attorney's fees,
court costs, and all other expenses, whether or not taxable by the court as
costs, in addition to any other relief to which, the prevailing party may be
entitled.
H. CONTRACTUAL PROCEDURES. Unless specifically disallowed by law, should
litigation arise hereunder, service of process therefore, may be obtained
through certified mail, return receipt requested; the parties hereto waiving any
and all rights they may have to object to the method by which service was
perfected.
I. CONFIDENTIALITY AND NON-DISCLOSURE: Except to the extent required by
law, without the prior written consent, the undersigned will not make, and will
each direct its representatives not to make, directly or indirectly, any public
comment, statement, or communication with respect to, or to disclose or permit
the disclosure of the existence of this transaction prior to closing.
J. AMENDMENT AND WAIVER. The parties may by mutual agreement amend this
Agreement in any respect, and any party, as to such party, may (a) extend the
time for the performance of any of the obligations of any other party, and (b)
waive (i) any inaccuracies in representations by any other party, (ii)
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (iii) the fulfillment of
any condition that is precedent to the performance by such party of any of its
obligations under this Agreement. To be effective, any such amendment or waiver
must be in writing and be signed by the party against whom enforcement of the
same is sought.
K. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed an original and all
of which shall constitute one instrument.
IN WITNESS WHEREOF, this Agreement has been executed by each of the individual
parties hereto, all on the date first above written.
NIC
NETWORK INSTALLATION CORP.
/s/ Xxxxxxx X. Xxxxxxx
_____________________________________
Xxxxxxx X. Xxxxxxx, President & CEO
XXXXXX XXXXXX
XXXXXX XXXXXX XXXXXX XXXXX XXXXXX
/s/ Xxxxxx Xxxxxx /s/Xxxxxx Xxxxx Xxxxxx
_____________________________________ ______________________________
An Individual An Individual
SPECTRUM
SPECTRUM COMMUNICATION CABLING SERVICES, INC.
/S/ XXXXXX XXXXXX
_____________________________________
Xxxxxx Xxxxxx, President & CEO
EXHIBIT A
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LITIGATION RECEIVABLES
(1) Lynwood Unified School District (to recover approximately one-million
two-hundred thousand dollars in accounts receivable and interest owed to
SPECTRUM);
(2) The Inland Valley Daily Bulletin and others (to recover unknown damages for
injuries to SPECTRUM and XXXXXX); and
(3) California Network Cabling and others (to recover unknown damages for
injuries to SPECTRUM and to defend claims against SPECTRUM and XXXXXX)
(4) Former Executive employees of SPECTRUM as designated by Xxxxxx Xxxxxx
(5) Any counter claim against SPECTRUM and XXXXXX which may rise in
pursuing such claims.
