EXHIBIT 2.1
PLAN OF REORGANIZATION
THIS STOCK FOR STOCK AGREEMENT ("Agreement") is made and entered into this
22nd day of September, 2005, by and between Xxxxxxx Xxxxxx an individual,
(hereinafter referred to as the "XXXXXX"), the owner of the shares of common
stock of Xxxxxx Communication Company, Inc., a Nevada corporation (hereinafter
referred to as "KCCI"), and Network Installation Corp, a Nevada corporation
(hereinafter referred to as the "NIC");
WITNESSETH:
WHEREAS, XXXXXX is the record owner and holder of an aggregate of
five-hundred (500) -----shares (the "Shares") which represents one-hundred
percent (100%) of the issued and outstanding common stock of KCCI.
WHEREAS, NIC desires to exchange for 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 U. S. Tax 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 KCCI's offices on or about September 22, 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 KCCI 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, that number of the Shares of the Corporation's Stock corresponding
to 100% ownership of KCCI on or about the Closing Date.
c. Section 368 Stock for Stock Exchange. The Exchange of Shares shall be
effected as a tax-free exchange pursuant to IRC Sec. 368(a)(1)(B) of the U.S Tax
Code.
d. Amount and Payment of Exchange Shares. The total amount of shares received,
("Exchange Shares") is computed by multiplying KCCI's current estimated 2005
revenues of nine-million five-hundred dollars ($9,500,000) by a factor of one
point five (1.5). The "Net Exchange Shares" shall be defined as the Exchange
Shares less the amount of XXXXXX'x current debt obligations ("Notes") at the
time of Closing. The Notes shall be defined as the aggregate of the payoff
amounts to; the Bank of America (line of credit), Nevada First Bank (revolver),
and Xxxxxxx Xxxxxx (personal loan and associated new origination fees) (Exhibit
A). The amount of Stock XXXXXX shall receive is equal to the Net Exchange Price
divided by the average closing price of NIC Stock for the ten (10) trading days
prior to the Closing Date. The Stock shall be restricted and issued pursuant to
Rule 144 and paid to XXXXXX no later than seven (7) days following the Closing
Date. NIC shall receive 100% of the outstanding shares of KCCI in a tax free
exchange pursuant to IRC Sec. 368(a)(1)(B) of the U.S Tax Code.
e. Appointment of Directors. At Closing, XXXXXX will join the NIC Board as a
Director and have the right to appoint one (12) additional members to NIC's
Board of Directors. The additional member must be reasonably acceptable to NIC.
NIC's current directors, Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxxxxx Xxxxx,
shall resign as directors effective immediately at Closing. NIC's Chief
Executive Officer, Xxxxxxx X. Xxxxxxx, shall remain as a director and assume the
role of Chairman. Additionally, Xxxxxxx X Xxxxxxxxx, NIC's Chief Financial
Officer, shall be appointed to the Board as a Director After the Closing, the
newly formed Board shall appoint a mutually agreed upon independent director.
1. REPRESENTATIONS AND WARRANTIES OF XXXXXX.
XXXXXX hereby warrants and represents:
a. Authority Relative to this Agreement. Except as otherwise stated herein,
XXXXXX and KCCI 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 KCCI to make this Agreement valid and binding upon XXXXXX and KCCI
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 KCCI will not:
(i) constitute a breach or a violation of KCCI'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 such 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 KCCI and were issued in compliance with all applicable laws and
regulations.
C. Revenues. XXXXXX represents and warrants that he expects KCCI will
report gross revenues of approximately seven-million dollars ($7,000,000) for
the fiscal year ended December 31, 2005.
D. Assets & Liabilities. XXXXXX and KCCI represent and warrant that NIC is
entitled to receive all KCCI's assets and shall assume all KCCI's liabilities.
e. Lawsuits, Liens & Taxes. XXXXXX represents that to the best of XXXXXX'x
knowledge, other than those items already discussed that neither XXXXXX nor KCCI
is currently the subject of any other lawsuit threatened or filed. XXXXXX also
represents that KCCI is free from any liens or encumbrances, other than what is
known regarding XXXXXX'x and KCCI's obligations to Bank of America and Nevada
First Bank. 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 KCCI 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.
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 the 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. A best efforts shall be made by both parties
regarding deliveries by the Closing date or such reasonable time thereafter.
a. Deliveries by KCCI. KCCI shall deliver or caused to be delivered to NIC:
i. the restructured Promissory Note due Nevada First Bank which shall be in
the form of a three year term loan.
ii. the restructured Promissory Note due Bank of America which shall be in
the form of a three year term loan.
ii. receipt of seven hundred and fifty thousand dollars ($750,000) from the
"Xxxxx Investment Group" to be used for KCCI's working capital.
iv. Stock certificates, and any and all other instruments of conveyance and
transfer as required by Section 1(a) of this Agreement; and
v. 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
i. copies of all third party consents necessary to consummate the
transaction contemplated herein.
iii. receipt of five hundred thousand dollars ($500,000) to be used for
KCCI's working capital requirements.
6. INDEMNIFICATION.
In consideration of XXXXXX'x and KCCI's 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
KCCI 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 AND KCCI
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 AND KCCI 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 AND KCCI 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 AND KCCI 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 AND KCCI may have, and any
liabilities XXXXXX AND KCCI may be subject to.
(b) In consideration of NIC's execution and delivery of the this
Agreement and in addition to all of XXXXXX AND KCCI' other obligations under
this Agreement, XXXXXX AND KCCI 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 AND KCCI 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 AND KCCI 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 AND KCCI. To the
extent that the foregoing undertaking by XXXXXX AND KCCI may be unenforceable
for any reason, XXXXXX AND KCCI 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 this
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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 effected 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 KCCI, 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's 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 the
NIC'S 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: C/X Xxxxxx Communication Company, Inc.
ATT/Xxxxxxx Xxxxxx, President
0000 Xxxxx Xxxxxxx Xx., Xxxxx X
Xxx Xxxxx. XX 00000
And
0000 Xxxxxx Xxxxx Xxxxxx
Xxx Xxxxx, XX 00000
To KCCI: Xxxxxx Communication Company, Inc.
ATT/Xxxxxxx Xxxxxx, President
0000 Xxxxx Xxxxxxx Xx., Xxxxx X
Xxx Xxxxx. XX 00000
To NIC: Network Installation Corp.
ATT/Xxxxxxx X. Xxxxxxx, CEO
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
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 Nevada. 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 Xxxxx County, State of Nevada. 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 whom shall for all purposes are deemed to be 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
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Xxxxxxx X. Xxxxxxx, President & CEO
XXXXXX
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
--------------------
An Individual
KCCI
Xxxxxx Communication Company, Inc.
/s/ Xxxxxxx Xxxxxx
--------------------
Xxxxxxx Xxxxxx, President
