EXHIBIT 2.1
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MOBILEPRO CORP.,
AFFINITY ACQUISITION CORP.,
C.L.Y.K., INC.,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
DATED AS OF JULY 30, 2004
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 30th, 2004 (this
"AGREEMENT") is made by and among Mobilepro Corp., a Delaware corporation
("BUYER"), Affinity Acquisition Corp., a Michigan corporation and a direct
wholly owned subsidiary of Buyer ("BUYER SUB"), C.L.Y.K., Inc., d/b/a Affinity
Telecom, a Michigan corporation (the "COMPANY"), ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"),
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") (▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ being collectively referred to as the "STOCKHOLDERS"), all being
residents of the State of Michigan and together constituting the only
stockholders of the Company.
WHEREAS, the Board of Directors of Buyer, Buyer Sub and the Company have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the business combination transaction provided
for herein in which Buyer Sub will, subject to the terms and conditions set
forth herein, merge with and into the Company, with the Company being the
surviving entity (the "MERGER"); and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the Michigan Business Corporation Act (the
"MICHIGAN LAW"), upon the execution of this Agreement and concurrent with the
filing of Certificate of Merger (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Michigan (in accordance with the relevant provision of
Michigan Law), Buyer Sub shall merge with and into the Company. The separate
corporate existence of the Buyer Sub will cease upon the filing of the
Certificate of Merger (the "EFFECTIVE TIME"), and the Company will continue as
the surviving corporation (hereinafter sometimes referred to as the "SURVIVING
CORPORATION") in the Merger. The Company, as the surviving corporation after the
Merger, will be governed by the laws of the State of Michigan.
For purposes of this Agreement, the date of the filing of the Certificate
of Merger and the execution of this Agreement shall be known as the "CLOSING
DATE" and the actions taken on such date and at such time, the "Closing."
SECTION 1.2 EFFECT OF THE MERGER; CLOSING. At and after the Effective
Time, the Merger shall have the effects set forth in this Agreement and the
applicable provisions of Michigan Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Buyer Sub will vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Buyer Sub will become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.3 ARTICLES OF INCORPORATION. At the Effective Time, the Articles
of Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
provided however, that Article I of the Articles of Incorporation of the
Surviving Corporation will be amended to reflect that the name of the Surviving
Corporation will be Affinity Telecom, Inc.
SECTION 1.4 BYLAWS. At the Effective Time, the bylaws of the Company, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, provided however, that the bylaws of the Surviving
Corporation will be amended to reflect that the name of the Surviving
Corporation will be Affinity Telecom, Inc.
SECTION 1.5 BOARD OF DIRECTORS AND OFFICERS. ▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇") were the only directors and corporate
officers of Buyer Sub immediately prior to the Effective Time. As of and after
the Effective Time, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ shall be the three
directors and the corporate officers of the Surviving Corporation, with
Kopanakis being appointed as Chief Executive Officer and ▇▇▇▇▇▇ being appointed
as President, and with each of them to continue to hold such officer positions
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation, until their respective successors are duly elected or appointed (as
the case may be) and qualified.
SECTION 1.6 CONVERSION OF CAPITAL STOCK/MERGER CONSIDERATION. At the
Effective Time, by virtue of the Merger and without any action on the part of
the Buyer Sub, the Company or the holder of any shares of capital stock of the
Company or Buyer Sub:
(a) Each share of Company Stock (as defined in Section 2.2(a)) issued and
outstanding immediately prior to the Effective Time shall be converted into and
become the right to receive: (i) Twenty-Two and 33/100 Dollars ($22.33) per
share (for an aggregate cash consideration to the Stockholders of $1,340,000)
(the "CASH CONSIDERATION") and (ii) 83.33 shares of Buyer's restricted $0.001
par value common stock. It is expressly understood by the Parties hereto that
$140,000 of the Cash Consideration shall be retained by Buyer and paid to
Stockholders on January 7, 2005. It is understood that the purpose of this
holdback is directly related to that certain billing dispute between the Company
and SBC, which is reflected in the Footnotes to the Company's Financial
Statements.
(b) Buyer shall issue to the Stockholders a promissory note in the amount
of $300,000 in the form attached hereto as Exhibit "A."
(c) Buyer shall pay to Stockholders twenty-five percent (25%) of the
Company's accounts receivable balance greater than 60 days old but less than 180
days old, as reflected in the Company's Financial Statements and Accounts
Receivable Aging Report; it being understood that this amount shall be a maximum
of $50,000.
(d) Buyer shall issue to the Stockholders a convertible promissory note in
the principal amount of $750,000 (the "EARN OUT NOTE CONSIDERATION" in the form
attached hereto as Exhibit "B" [the "CONVERTIBLE NOTE"], together with (a), (b),
and (c) the "MERGER CONSIDERATION"), such note convertible into shares of
Mobilepro's common stock pursuant to the terms therein.
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(e) Notwithstanding anything to the contrary contained herein, no
fractional shares of Buyer common stock will be issued in the Merger. If the
Stockholder would have been entitled to a fraction of a share of Buyer common
stock, he shall receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to Stockholder would
otherwise be entitled (after taking into account all shares of Company Stock
owned by such holder at the Effective Time) by $0.20.
(f) The shares of Mobilepro's common stock issued upon conversion of the
Convertible Note will not have been registered and will be deemed to be
"restricted securities" under federal securities laws and may not be resold
without registration under or exemption from the Securities Act of 1933, as
amended (the "SECURITIES Act"). Each certificate evidencing shares of
Mobilepro's common stock issuable upon conversion of the Convertible Note will
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT EXEMPTION UNDER THE
SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO
MOBILEPRO CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECTION 1.7 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) At the Closing, Stockholder will surrender Stockholder's
Certificate(s) to Buyer. Until so surrendered, such Certificate(s) will
represent solely the right to receive the Merger Consideration relating thereto.
(b) At the Effective Time, the stock transfer books of the Company will be
closed and there will not be any further registration of transfers of any
Shares, options or warrants thereafter on the records of the Company. If, at or
after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, they will be canceled and exchanged for Merger
Consideration as provided in Section 1.6.
(c) In the event any Certificate that has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, Buyer and Buyer Sub will issue in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration deliverable in respect thereof as determined in accordance with
Section 1.6 if the Person to whom the Merger Consideration is paid will, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as the Surviving Corporation may reasonably direct or otherwise
indemnify the Surviving Corporation in a manner reasonably satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the Certificate claimed to have been lost, stolen or destroyed.
For purposes of this Agreement, the term "PERSON" shall mean any
individual, firm, corporation, partnership, limited liability company, trust,
joint venture, Governmental Entity or other entity.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
Except as set forth in the Company Disclosure Letter attached to this
Agreement (the "COMPANY DISCLOSURE LETTER"), the Company and the Stockholders,
jointly and severally, represent and warrant to the Buyer as follows:
SECTION 2.1 ORGANIZATION, QUALIFICATION AND CORPORATION POWER. The Company
(a) is a corporation duly organized, validly existing and in good standing under
the Laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to own, operate or lease its properties and to
carry on its business as is now being conducted and proposed to be conducted,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect (as defined below)
on the Company, and (b) is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify or to be in good standing would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Company has furnished to Buyer true, correct
and complete copies of its Articles of Incorporation and bylaws.
For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT" when
used in connection with an entity means any change, event, circumstance or
effect whether or not such change, event, circumstance or effect is caused by or
arises in connection with a breach of a representation, warranty, covenant or
agreement of such entity in this Agreement that is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations,
employees or prospects of such entity taken as a whole with its subsidiaries,
except to the extent that any such change, event, circumstance or effect is
caused by results from (i) changes in general economic conditions, (ii) changes
affecting the industry generally in which such entity operates or (iii) changes
in the trading prices for such entity's capital stock.
SECTION 2.2 CAPITALIZATION; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of 60,000 shares
of common stock, no par value, of which 60,000 shares are issued and outstanding
(the "COMPANY STOCK") as follows: (i) 28,500 shares issued to Kopanakis; (ii)
28,500 shares issued to ▇▇▇▇▇▇; and (iii) 3,000 shares issued to ▇▇▇▇▇▇▇. Other
than common stock, there are no other classes, series or types of stock for the
Company. The Stockholders hold good and marketable title to such Company Stock,
free and clear of all liens, agreements, voting trusts, proxies and other
arrangements or restrictions of any kind whatsoever (other than normal
restrictions on transfer under applicable federal and state securities laws).
All issued and outstanding shares of Company Stock have been duly authorized and
were validly issued, are fully paid and nonassessable, are not subject to any
right of rescission, are not subject to preemptive rights by statute, the
Articles of Incorporation or Bylaws of Company, or any agreement or document to
which Company is a party or by which it is bound and have been offered, issued,
sold and delivered by Company in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws. The Company is not under any obligation to
register under the Securities Act any of its presently outstanding securities or
any securities that may be subsequently issued. There is no liability for
dividends accrued but unpaid with respect to the Company's outstanding
securities.
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(b) There are no existing (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating the Company to issue, transfer or sell any shares of
capital stock or other equity interest in, the Company or securities convertible
into or exchangeable for such shares or equity interests, (ii) contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company or (iii) voting trusts or similar agreements to
which the Company is a party with respect to the voting of the capital stock of
the Company.
(c) The Company does not have any direct or indirect Subsidiaries or any
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity.
For purposes of this Agreement, the term "SUBSIDIARY" of a Person means
any corporation or other legal entity of which such Person (either alone or
through or together with any other Subsidiary) owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 2.3 OWNERSHIP OF SHARES.
(a) The Stockholders are the record and beneficial owners of, and have
good and valid title to, all of the Company Stock, which Company Stock (i) is
free and clear of all liens, mortgages, encumbrances, pledges, claims, options,
charges, easements, restrictions, covenants, conditions of record,
encroachments, security interests and claims of every kind and character (each,
a "LIEN") and (ii) are free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests).
(b) There are no outstanding existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character to which such Stockholder is a party
obligating the Stockholder to issue, transfer or sell any Company Stock or other
equity interest in the Company or securities convertible into or exchangeable
for such shares or equity interests or (ii) voting trusts, stockholders'
agreements or similar agreements to which such Stockholder is a party with
respect to the voting of the Company Stock owned by such Stockholder.
SECTION 2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
necessary corporate power and authority to enter into this Agreement and,
subject to the filing of the Certificate of Merger as required by Michigan Law,
to carry out its obligations hereunder. The Stockholders have the necessary
competency, power and authority to enter into this Agreement and carry out the
obligations hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and the Stockholders and, subject to the filing of the
Certificate of Merger as required by Michigan Law, no other corporate proceeding
is necessary for the execution and delivery of this Agreement by the Company,
the performance by the Company of its obligations hereunder and the consummation
by the Company of the transactions contemplated hereby. As of the Closing Date,
this Agreement has been duly executed and delivered by the Company and the
Stockholders and, assuming the due authorization, execution and delivery of this
Agreement by Buyer and Buyer Sub, constitutes a legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except that (a) the enforceability hereof may be subject to applicable
bankruptcy, insolvency or other similar Laws, now or hereinafter in effect,
affecting creditors' rights generally, and (b) the general principles of equity
(regardless of whether enforceability is considered at a proceeding at Law or in
equity).
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SECTION 2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company and the
Stockholders does not, and the consummation by the Company and the Stockholders
of the transactions contemplated hereby will not, (i) conflict with or violate
any Law, court order, judgment or decree applicable to the Company, its
Subsidiaries or the Stockholders or by which any of their property is bound,
(ii) violate or conflict with the Articles of Incorporation or Bylaws (or
comparable organizational documents) of the Company or its Subsidiaries, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time of both would become a default) under, or give to others
any rights of termination or cancellation of, or result in the creation of a
Lien on any of the properties or assets of the Company or its Subsidiaries
pursuant to, any contract, instrument, Permit or license to which the Company or
its Subsidiaries is a party or by which the Company or its Subsidiaries or any
of their property is bound, except in the case of clauses (i) and (iii) for
conflicts, violations, breaches or defaults which, individually or in the
aggregate, would not have or result in a Material Adverse Effect on the Company.
(b) Except for the filing of the Certificate of Merger as required by
Michigan Law and applicable requirements, if any, under "takeover" or "blue sky"
Laws of various states, neither the Company nor any of its subsidiaries is
required to submit any notice, report or other filing with any federal, state or
local or foreign government, political subdivision thereof, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental United States or foreign self-regulatory agency,
commission or authority or any arbitral tribunal (each, a "GOVERNMENTAL ENTITY")
in connection with the execution, delivery or performance of this Agreement or
the consummation of the transactions contemplated hereby the failure of which to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on the Company. No waiver, consent, approval or authorization of
any Governmental Entity or any third party is required to be obtained or made by
the Company or its Subsidiaries in connection with its execution, delivery or
performance of this Agreement the failure of which to obtain or make,
individually or in the aggregate, would have or result in a Material Adverse
Effect on the Company.
SECTION 2.6 INVESTMENT. Each Stockholder:
(a) Is acquiring the shares of Buyer common stock pursuant to the Merger
for investment for his own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof;
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(b) Understands that the shares of Mobilepro common stock to be issued
pursuant to Section 1.6 will not have been registered and will be deemed
"restricted securities" under federal securities laws and may not be sold
without registration under or exemption from the Securities Act;
(c) Has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its investment in Buyer
and has the capacity to protect its own interests; and
(d) Acknowledges that his investment in shares of Mobilepro common stock
by way of the Merger is highly speculative and entails a substantial degree of
risk, and Stockholder has the ability to bear the economic risk of its
investment.
SECTION 2.7 FINANCIAL STATEMENTS; DEBT.
(a) Attached as Section 2.7(a) of the Company Disclosure Letter are the
Company's (i) audited balance sheet dated as of December 31, 2003 (the "COMPANY
BALANCE SHEET"), and income statement for the year then ended and (ii) the
Company's unaudited balance sheet (the "CLOSING BALANCE SHEET"), statement of
cash flows and income statement each dated as of the Closing Date (the "BALANCE
SHEET DATE") and (iii) the Company's Accounts Receivable Aging Report
(collectively, the "COMPANY FINANCIAL STATEMENTS"). The Company Financial
Statements (a) are in accordance with the books and records of the Company, (b)
fairly present the financial condition of the Company at the date therein
indicated and the results of operation for the period therein specified and (c)
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis ("GAAP").
(b) The Company has no material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Company
Financial Statements and Footnotes in the ordinary course of its business,
consistent with past practice and that are not material in amount either
individually or collectively.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Since the date of the Company
Financial Statements, there has not been with respect to the Company or any
Subsidiary:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations thereof which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had or will have a material adverse effect thereon;
(b) any material loss of customers. Set forth on Section 2.8(b) of the
Company Disclosure Letter is a true, correct and complete list of all customers
lost in the preceding twelve (12) months;
(c) no notice of impending cancellation, or a material price increase,
from any Incumbent Local Exchange Carrier or other provider of data transmission
and/or telecommunication services;
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(d) any contingent liability incurred thereby as guarantor or otherwise
with respect to the obligations of others;
(e) any mortgage, encumbrance or lien placed on any of the properties
thereof;
t 6 0 (f) any material obligation or liability incurred thereby other than
obligations and liabilities incurred in the ordinary course of business;
(g) any purchase or sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets thereof other than in the ordinary course of business;
(h) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, assets or business thereof;
(i) any declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock thereof, any
split, combination or recapitalization of the capital stock thereof or any
direct or indirect redemption, purchase or other acquisition of the capital
stock thereof;
(j) any labor dispute or claim of unfair labor practices, any change in
the compensation payable or to become payable to any of its officers, employees
or agents, or any bonus payment or arrangement made to or with any of such
officers, employees or agents;
(k) any change with respect to the management, supervisory or other key
personnel thereof;
(l) any payment or discharge of a material lien or liability thereof which
lien was not either shown on the Company Balance Sheet or incurred in the
ordinary course of business thereafter; or
(m) any obligation or liability incurred thereby to any of its officers,
directors or stockholders or any loans or advances made thereby to any of its
officers, directors or stockholders except normal compensation and expense
allowances payable to officers.
SECTION 2.9 TAX MATTERS.
(a) The Company and its Subsidiaries have timely filed or will file all
Tax Returns that it was required to file, and all such Tax Returns were correct
and complete in all material respects. All Tax liabilities of the Company and
its Subsidiaries for all taxable periods or portions thereof ending on or prior
to the Effective Time have been, or will be prior to the Effective Time, timely
paid or are adequately reserved for in the Company Financial Statements, other
than such Tax liabilities as are being contested in good faith by the Company or
its Subsidiaries. There are no ongoing federal, state, local or foreign audits
or examination of any Tax Return of the Company or its Subsidiaries. Neither the
Company nor its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time, nor has any such waiver or extension
been required with respect to a Tax assessment or deficiency. No claim has ever
been made by an authority in a jurisdiction where the Company and its
Subsidiaries do not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no Liens on any of the assets of the Company or its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
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(b) The Company and its Subsidiaries have withheld or collected and paid
or deposited in accordance with law all Taxes required to have been withheld or
collected and paid or deposited by the Company or its Subsidiaries in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax liability of the
Company or its Subsidiaries either (i) claimed or raised by any authority in
writing or (ii) as to which the Company has Knowledge.
(d) The Shareholders expressly acknowledge and agree that any Taxes owed
pursuant to the 2003 Company tax return shall be the personally liability of
Shareholders and shall not be paid out of funds of the Surviving Entity.
(e) For purposes of this Agreement:
(i) "KNOWLEDGE" or words of similar import means all information
that is actually known, and in the case of the Company, by the Shareholders.
(ii) "TAXES" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll and franchise taxes imposed by a
Governmental Entity, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection with
any tax or any contest or dispute thereof; and
(iii) "TAX RETURNS" means all reports, returns, declarations,
statements or other information supplied or required to be supplied to a taxing
authority in connection with Taxes including any schedules, attachments or
amendments thereto.
SECTION 2.10 TITLE TO PROPERTIES. The Company has good and marketable
title to all of its assets as shown on the Company Balance Sheet, free and clear
of all liens, charges, restrictions or encumbrances (other than for taxes not
yet due and payable). All machinery and equipment included in such properties is
in good condition and repair, normal wear and tear excepted. Otherwise, the
machinery and equipment is being sold "as is, where is." All leases of real or
personal property to which Company or any its Subsidiaries is a party are fully
effective and afford Company or its Subsidiaries peaceful and undisturbed
possession of the subject matter of the lease. Neither Company nor any of its
Subsidiaries is in violation of any zoning, building, safety or environmental
ordinance, regulation or requirement or other law or regulation applicable to
the operation of owned or leased properties (the violation of which would have a
material adverse effect on its business), or has received any notice of
violation with which it has not complied.
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SECTION 2.11 ENVIRONMENTAL MATTERS.
(a) During the period that the Company has leased or owned its properties
or owned or operated any facilities, to the Knowledge of the Company, there have
been no disposals, releases or threatened releases of Hazardous Materials (as
defined below) on, from or under such properties or facilities. The Company has
no knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to the Company having taken possession of any of
such properties or facilities. For the purposes of this Agreement, the terms
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended ("CERCLA"). For
the purposes of this Agreement "HAZARDOUS MATERIALS" shall mean any hazardous or
toxic substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance" or
"hazardous chemical" under (1) CERCLA; (2) any similar federal, state or local
law; or (3) regulations promulgated under any of the above laws or statutes.
(b) None of the properties or facilities of the Company is in violation of
any federal, state or local law, ordinance, regulation or order relating to
industrial hygiene or to the environmental conditions on, under or about such
properties or facilities, including, but not limited to, soil and ground water
condition. During the time that the Company has owned or leased its properties
and facilities, to the Company's knowledge, no third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous Materials.
(c) During the time that the Company has owned or leased its properties
and facilities, there has been no litigation brought or threatened against the
Company by, or any settlement reached by the Company with, any party or parties
alleging the presence, disposal, release or threatened release of any Hazardous
Materials on, from or under any of such properties or facilities.
SECTION 2.12 INTELLECTUAL PROPERTY.
(a) The term "INTELLECTUAL PROPERTY" means any (i) patents, (ii)
trademarks, service marks, trade names, brand names, trade dress, slogans, logos
and internet domain names, (iii) inventions, discoveries, ideas, processes,
formulae, designs, models, industrial designs, know-how, proprietary
information, trade secrets, and confidential information (including customer
lists, training materials and related matters, research and marketing and sales
plans), whether or not patented or patentable, (iv) copyrights, writings and
other copyrightable works and works in progress, databases and software, (v) all
other intellectual property rights and foreign equivalent or counterpart rights
and forms of protection of a similar or analogous nature or having similar
effect in any jurisdiction throughout the world, (vi) all registrations and
applications for registration of any of the foregoing, (vii) all common law
trademarks and service marks used by the Company or its Subsidiaries and (viii)
any renewals, extensions, continuations, divisionals, reexaminations or reissues
or equivalent or counterpart of any of the foregoing in any jurisdiction
throughout the world. The term "COMPANY IP" means any Intellectual Property used
or held for use by the Company or its Subsidiaries, in the conduct of their
businesses as currently conducted and currently proposed to be conducted.
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(b) Section 2.12(b) of the Company Disclosure Letter sets forth a true,
correct and complete list (including, the owner, title, registration or
application number and country of registration or application, as applicable) of
all of the following Company IP: (i) registered trademarks, (ii) applications
for trademark registration, (iii) domain names, (iv) patents, (v) applications
for patents, (vi) registered copyrights (vii) applications for copyright
registration and (viii) licenses of all Intellectual Property (other than
off-the-shelf business productivity software that is the subject of a shrink
wrap or click wrap software license agreement ("DESKTOP SOFTWARE")) to or from
the Company. The Company has delivered or made available to Buyer prior to the
execution of this Agreement true, complete and correct copies of all licenses of
Company IP both to and from the Company and its Subsidiaries, except Desktop
Software.
(c) The Company IP set forth on Section 2.12(b) of the Company Disclosure
Letter constitutes all of the Intellectual Property used by and necessary for
the Company and its Subsidiaries to operate their respective business as
currently conducted and currently proposed to be conducted. The Company or its
Subsidiaries owns all legal and beneficial right, title and interests in the
Company IP, and the Company or its Subsidiaries has the valid, sole and
exclusive right to use, assign, transfer and license all such Company IP for the
life thereof for any purpose, free from (i) any Liens, and (ii) any requirement
of any past, present or future royalty payments, license fees, charges or other
payments, or conditions or restrictions whatsoever.
(d) All patent, trademark, service ▇▇▇▇, copyright, patent and domain name
registrations or applications set forth on Section 2.12(b) of the Company
Disclosure Letter are in full force and effect and have not been abandoned,
dedicated, disclaimed or allowed to lapse for non-payment of fees or taxes or
for any other reason.
(e) None of the Company IP owned by the Company or its Subsidiaries has
been declared or adjudicated invalid, null or void, unpatentable or
unregistrable in any judicial or administrative proceeding. To the Knowledge of
the Company, none of the Company IP used (but not owned) by the Company or its
Subsidiaries has been declared or adjudicated invalid, null or void,
unpatentable or unregistrable in any judicial or administrative proceeding.
(f) Neither the Company nor its Subsidiaries has received any written
notices of, or has Knowledge of, any infringement or misappropriation by or of,
or conflict with, any third party with respect to the Company IP or Intellectual
Property owned by any third party. Neither the Company nor its Subsidiaries has
infringed, misappropriated or otherwise violated or conflicted with any
Intellectual Property of any third party. The operation of the Company and its
Subsidiaries does not, as currently conducted and currently proposed to be
conducted, infringe, misappropriate or otherwise violate or conflict with the
Intellectual Property of any third party.
(g) The transactions contemplated by this Agreement will not affect the
right, title and interest of the Company or its Subsidiaries in and to the
Company IP, and each of the Company and its Subsidiaries has taken all necessary
action to maintain and protect the Company IP set forth on Section 2.12(b) of
the Company Disclosure Letter and, until the Effective Time, will continue to
maintain and protect such Company IP so as to not materially adversely affect
the validity or enforceability of such Company IP.
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(h) To the Knowledge of the Company, no officer, employee or director or
the Company or its Subsidiaries is obligated under any contract (including any
license, covenant or commitment of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative agency, that would
conflict or interfere with the performance of such person's duties as an
officer, employee or director of the Company or its Subsidiaries, the use of
such person's best efforts to promote the interests of the Company and its
Subsidiaries or the Company's or its Subsidiary's business as conducted or as
currently proposed to be conducted by the Company and its Subsidiaries. No prior
employer of any current or former employee of the Company or its Subsidiaries
has any right, title or interest in the Company IP and to the Knowledge of the
Company, no person or entity has any right, title or interest in any Company IP.
It is not and will not be with respect to the business as currently proposed to
be conducted necessary for the Company or its Subsidiaries to use any inventions
of any of its employees made prior to their employment by the Company or its
Subsidiaries.
SECTION 2.13 MATERIAL AGREEMENTS.
(a) Section 2.13 of the Company Disclosure Letter sets forth a true,
correct and complete list of the following agreements (whether written or oral
and including all amendments thereto) to which the Company or its Subsidiaries
is a party or a beneficiary or by which the Company or its Subsidiaries or any
of their respective assets are bound (collectively, the "MATERIAL AGREEMENTS"):
(i) any real estate leases;
(ii) any other agreement for the provision of services by the
Company or its Subsidiaries that have accounted for revenues of more than
$5,000.00 per annum during any month since the Balance Sheet Date;
(iii) any agreement creating, evidencing, securing, assuming,
guaranteeing or otherwise relating to any debt for which the Company or its
Subsidiaries is liable or under which it has imposed (or may impose) a Lien on
any of the assets, tangible or intangible, of the Company or its Subsidiaries;
(iv) any capital or operating leases or conditional sales agreements
relating to personal property of the Company or its Subsidiaries;
(v) any supply or manufacturing agreements or arrangements pursuant
to which the Company or its Subsidiaries is entitled or obligated to acquire any
assets from a third party with a fair market value in excess of $5,000;
(vi) any insurance policies;
(vii) any employment, consulting, noncompetition, or separation
agreements or arrangements;
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(viii) any agreement with or for the benefit of any Stockholder,
officer, director or employee of the Company, or any Affiliate of the Company,
or any Person controlled by such individual or family member thereof;
(ix) any license to which the Company or its Subsidiaries is a
party;
(x) any agreement in which the Company or its Subsidiaries has
granted rights to license, sublicense or copy, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
(xi) any written arrangement establishing a partnership or joint
venture;
(xii) a list of all parties to any written arrangement concerning
confidentiality, non-disclosure or noncompetition;
(xiii) any written arrangement under which the consequences of a
default or termination could have a Material Adverse Effect on the Company; and
(xiv) any other agreement or arrangement pursuant to which the
Company or its Subsidiaries could be required to make or entitled to receive
aggregate payments in excess of $5,000.00 or entered into outside of the
ordinary course of business.
For purposes of this Agreement, "AFFILIATE" means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, any Person.
(b) The Company has delivered to or made available to Buyer a true,
correct and complete copy of each Material Agreement and a written summary of
each oral Material Agreement. With respect to each Material Agreement:
(i) each Material Agreement is legal, valid, binding and enforceable
and in full force and effect with respect to the Company or its Subsidiaries
and, to the Knowledge of the Company, the written arrangement is legal, valid,
binding and is enforceable and in full force and effect with respect to each
other party thereto (in each case except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting the enforcement of creditor's rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought);
(ii) each Material Agreement will continue to be legal, valid,
binding and enforceable and in full force and effect against the Company, and to
the Knowledge of the Company against each other party thereto, immediately
following the Closing in accordance with the terms thereof (in each case except
as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting the
enforcement of creditor's rights generally, and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought) as in effect
prior to the Closing; and
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(iii) neither the Company nor its Subsidiaries is in breach or
default, and, to the Knowledge of the Company, no other party thereto is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement.
SECTION 2.14 INSURANCE.
(a) Section 2.14 of the Company Disclosure Letter sets forth a true,
correct and complete list of each insurance policy (including fire, theft,
casualty, general liability, director and officer, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company is a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past year. Section 2.14 of the Company Disclosure Letter sets forth a true,
correct and complete list of each person or entity required to be listed as an
additional insured under each such policy. Each such policy is in full force and
effect and by its terms and with the payment of the requisite premiums thereon
will continue to be in full force and effect following the Closing.
(b) The Company is not in breach or default, and does not anticipate being
in breach or default after Closing (including with respect to the payment of
premiums or the giving of notices) under any such policy, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration, under such
policy; and the Company has not received any written notice or, to the Knowledge
of the Company, oral notice, from the insurer disclaiming coverage or reserving
rights with respect to a particular claim or such policy in general. The Company
has not incurred any material loss, damage, expense or liability covered by any
such insurance policy for which it has not properly asserted a claim under such
policy.
SECTION 2.15 LITIGATION.
(a) There are no claims, actions, suits, proceedings or investigations of
any nature pending or, to the Knowledge of the Company, threatened against the
Company or any properties or rights of the Company, before any court,
administrative, governmental or regulatory authority or body, except as
reflected in the Footnotes of the Company Financial Statements. The Company is
not subject to any order, judgment, injunction or decree.
(b) There are no agreements or other documents or instruments settling any
material claim, complaint, action, suit or other proceeding against the Company.
SECTION 2.16 EMPLOYEES.
(a) Set forth on Section 2.16(a) of the Company Disclosure Letter is a
true, correct and complete list of all current employees of Company and its
Subsidiaries, including date of employment, current title and compensation
(including commissions, bonus and other compensation), and date and amount of
last increase in compensation. None of the Company's employees are members of a
labor union. The Company is not a party to any collective bargaining, union or
labor agreements, contracts or other arrangements with any group of employees,
labor union or employee representative and to the Knowledge of the Company,
there is no organization effort currently being made by or on behalf of any
labor union with respect to employees of the Company or its Subsidiaries. The
Company has not experienced, and to the Knowledge of the Company, there is no
basis for, any strike, grievances, claims of unfair labor practices, material
labor trouble, work stoppage, slow down or other interference with or impairment
of the business of Company.
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(b) To the Knowledge of the Company, no employee has any plans to
terminate employment with the Company.
(c) The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting wages, hours, occupational
safety, or health, fair employment practices, and discrimination in employment
terms and conditions, and is not engaged in any unfair labor practice. There are
no pending claims against the Company under any workers compensation plan or
policy or for long term disability. There are no proceedings pending or, to the
Knowledge of the Company, threatened, between the Company and its employees.
(d) Section 2.16(a) of the Company Disclosure Letter sets forth a true,
correct and complete list of Persons whose employment has been terminated by the
Company in the 90 days prior to Closing.
SECTION 2.17 EMPLOYEE BENEFITS.
(a) Neither the Company, its Subsidiaries nor any predecessor in interest
thereof has maintained, or currently maintains, any Employee Benefit Plan. At no
time has the Company, its Subsidiaries or any ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA). Neither the Company, its Subsidiaries nor any predecessor in interest
thereof has any liabilities or obligations with respect to any Employee Benefit
Plan.
(b) Section 2.17(b) of the Company Disclosure Letter discloses each: (i)
agreement with any director, executive officer or other key employee of the
Company or its Subsidiaries, including (A) the benefits of which are contingent,
or the terms of which are altered, upon the occurrence of a transaction
involving the Company or its Subsidiaries of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Company or its Subsidiaries that may be
subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G(b)(1) of
the Code; and (iii) agreement or plan binding the Company or its Subsidiaries,
including any option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan, or any Employee Benefit Plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
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(c) For purposes of this Agreement:
(i) "EMPLOYEE BENEFIT PLAN" means any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended), any "employee welfare benefit plan" (as defined in Section
3(1) of ERISA), and any other written or oral plan, agreement or arrangement
involving direct or indirect compensation, including insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses,
options, or other forms of incentive compensation or post-retirement
compensation; and
(ii) "ERISA AFFILIATE" means any entity which is a member of (i) a
controlled group of corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades or businesses under common control (as defined in Section
414(c) of the Code), or (iii) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes the Company or its Subsidiaries.
SECTION 2.18 PERMITS / TARIFFS. Section 2.18 of the Company Disclosure
Letter sets forth a true, correct and complete list of all material permits,
licenses, registrations, certificates, orders or approvals from any Governmental
Entity (including those issued or required under applicable export laws or
regulations) ("PERMITS") issued to or held by the Company and its subsidiaries.
Such listed Permits are the only Permits that are required for the Company and
its subsidiaries to conduct their business as presently conducted. Each such
Permit is in full force and effect and to the Knowledge of the Company, no
suspension or cancellation of such Permit is threatened and there is no basis
for believing that such Permit will not be renewable upon expiration. Each such
Permit will continue in full force and effect following the Closing. The Company
has filed all appropriate tariffs, price lists or other regulatory filings
("TARIFFS") required to be submitted by the Company to the Federal
Communications Commission ("FCC") or any other governmental authority (including
pending submissions for any of the foregoing) for the conduct of the business of
Company as currently conducted. Each of these Tariffs are in full force and
effect and the Company is in compliance with the terms and requirements thereof.
There is not pending any action by the FCC or any other governmental authority
to revoke, cancel, suspend, modify or refuse to renew any of such permits
licenses, franchises, facility certifications or Tariffs.
SECTION 2.19 BROKER'S FEES. Neither the Company nor any of its
subsidiaries has any liability or obligation to pay any fees or commissions to
any broker, investment banking firm, finder or agent with respect to the
transactions contemplated by this Agreement, except for Santa Fe Capital which
is the sole and exclusive responsibility of Stockholders.
SECTION 2.20 BOOKS AND RECORDS.
(a) To the Knowledge of the Company, the books, records and accounts of
the Company (a) are in all material respects true, complete and correct, (b)
have been maintained in accordance with good business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of the
Company, and (d) accurately and fairly reflect the basis for the Financial
Statements.
17
(b) The Company has devised and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements, and (ii) to maintain
accountability for assets, and (c) the amount recorded for assets on the books
and records of the Company is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
SECTION 2.21 BANKING RELATIONSHIPS AND INVESTMENTS. Section 2.21 of the
Company Disclosure Letter sets forth sets forth a true, correct and complete
list of all banks and financial institutions in which the Company has an
account, deposit, safe-deposit box or borrowing relationship, factoring
arrangement or other loan facility or relationship, including the names of all
persons authorized to draw on those accounts or deposits, or to borrow under
loan facilities, or to obtain access to such boxes. Section 2.21 of the Company
Disclosure Letter sets forth a true, correct and complete list of all
certificates of deposit, debt or equity securities and other investments owned,
beneficially or of record, by the Company (the "INVESTMENTS"). The Company has
good and legal title to all Investments.
SECTION 2.22 TELECOMMUNICATION FACILITIES. All telecommunication
facilities, including, without limitation, circuits and other transmission
facilities related to the Company whether owned, leased or to which Company
otherwise has the right to use or have access to are listed in Section 2.23 of
the Company Disclosure Letter. The Company is in compliance with the terms and
requirements of the FCC or any other governmental authority with respect to its
ownership, lease or other rights in and to such telecommunication facilities.
None of the telecommunication facilities set forth in Section 2.23 of the
Company Disclosure Letter contains any material defect. No present or former
officer, director, employee or agent of Company nor any Stockholder owns any
interest in any of the telecommunication facilities so listed.
SECTION 2.23 DISCLOSURE. No representation or warranty by the Company
contained in this Agreement, including any statement contained in the Company
Disclosure Letter or any document delivered in connection herewith, contains any
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein not misleading.
SECTION 2.24 ACCOUNT RECEIVABLE/ACCOUNTS PAYABLE/DEBT. The total Accounts
Receivable 0-60 days old reflected on the Closing Balance Sheet shall be greater
than or equal to the Accounts Payable as of the Closing Date. In addition, it is
expressly understood that any and all debt, including notes payable to
Shareholders will be extinguished as of Closing and paid out of the Cash
Consideration; thus the Closing Balance Sheet shall reflect no short or long
term debt but for current liabilities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUB
Except as set forth in the Buyer Disclosure Letter attached to this
Agreement (the "BUYER DISCLOSURE LETTER"), Buyer and Buyer Sub, jointly and
severally, represent and warrant to the Company and the Stockholders as follows:
18
SECTION 3.1 ORGANIZATION, QUALIFICATION AND CORPORATION POWER. Each of
Buyer and Buyer Sub as of the Effective Time (a) is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority and any necessary governmental authority to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted and proposed to be conducted, and (b) is
duly qualified as a foreign corporation to do business, and is in good standing,
in each other jurisdiction where the character of its properties owned, operated
or leased or the nature of its activities makes such qualification necessary,
except in the case of clause (b) for failures which, when taken together with
all other such failures, would not have a Material Adverse Effect on Buyer.
Buyer Sub is a wholly owned Subsidiary of Buyer.
SECTION 3.2 CAPITALIZATION.
(a) The authorized capital stock of Buyer consists of 600,000,000 shares
of common stock, $0.001 par value (the "BUYER COMMON STOCK"), 5,000,000 shares
of preferred stock, $0.001 par value (the "BUYER PREFERRED STOCK") and 35,425
shares of Series A Convertible Preferred Stock, $0.001 par value (the "SERIES A
CONVERTIBLE PREFERRED STOCK"). As of December 24, 2003, (i) 255,914,196 shares
of Buyer Common Stock were issued and outstanding or placed in escrow with
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP for the benefit of Cornell Capital Partners, LLP, and no
shares of Buyer Preferred Stock and 35,425 shares of Series A Convertible
Preferred Stock were issued and outstanding, (ii) no shares of Buyer Common
Stock, Buyer Preferred Stock or Series A Convertible Preferred Stock were held
in the treasury of Buyer, and (iii) approximately 6,000,000 shares of Buyer
Common Stock were reserved for issuance under the option plans listed on Section
3.2(b) of the Buyer Disclosure Schedule in the amounts stated in such section.
All of the issued and outstanding shares of Buyer Common Stock and Series A
Convertible Preferred Stock (i) have been duly authorized and validly issued;
(ii) are fully paid and nonassessable; (iii) are free and clear of all Liens;
and (iv) are free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). The certificates representing the Buyer Common Stock are
in proper form for the enforcement of the rights and limitations of rights
pertaining to such Shares which are set forth in Buyer's certificate of
incorporation, as amended, and bylaws. There are no declared or accrued but
unpaid dividends with respect to any Buyer Common Stock. All shares of Buyer
Common Stock were issued in compliance with applicable Law.
(b) Except as disclosed on Section 3.2(b) of the Buyer Disclosure Letter,
there are no existing (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating Buyer or any of its Subsidiaries to issue, transfer
or sell any shares of capital stock or other equity interest in, Buyer or any of
its Subsidiaries or securities convertible into or exchangeable for such shares
or equity interests, (ii) contractual obligations of Buyer or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of
Buyer or any of its Subsidiaries or (iii) voting trusts or similar agreements to
which Buyer or any of its Subsidiaries is a party with respect to the voting of
the capital stock of Buyer or any of its Subsidiaries.
(c) The authorized capital stock of Buyer Sub consists of 1,000 shares of
common stock, $0.001 par value (the "BUYER SUB COMMON STOCK"), of which 1,000
shares were issued and outstanding. Buyer owns all of the issued and outstanding
shares of Buyer Sub Common Stock. All of the issued and outstanding shares of
Buyer Sub Common Stock (i) have been duly authorized and validly issued; (ii)
are fully paid and nonassessable; (iii) are free and clear of all Liens; and
(iv) are free of any other restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests). All shares of Buyer Sub Common Stock were issued in compliance with
applicable Law.
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SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. As of the Effective Time
each of Buyer and Buyer Sub has the necessary corporate power and authority to
enter into this Agreement and, subject to the filing of the Certificate of
Merger as required by Michigan Law, to carry out its obligations hereunder. The
execution and delivery of this Agreement by Buyer and Buyer Sub and the
consummation by them of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer and Buyer Sub
and, subject to the filing of the filing of the Certificate of Merger as
required by Michigan Law, no other corporate proceeding is necessary for the
execution and delivery of this Agreement by Buyer and Buyer Sub, the performance
by them of their respective obligations hereunder and the consummation by them
of the transactions contemplated hereby. As of the Effective Time this Agreement
has been duly executed and delivered by Buyer and Buyer Sub and, assuming the
due authorization, execution and delivery of this Agreement by the Company and
the Stockholders, constitutes a legal, valid and binding obligation of each of
Buyer and Buyer Sub, enforceable against each in accordance with its terms,
except that (a) the enforceability hereof may be subject to applicable
bankruptcy, insolvency or other similar Laws, now or hereinafter in effect,
affecting creditors' rights generally, and (b) the general principles of equity
(regardless of whether enforceability is considered at a proceeding at Law or in
equity).
SECTION 3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by each of Buyer and
Buyer Sub do not, and the consummation by each of them of the transactions
contemplated hereby will not, (i) conflict with or violate any Law, court order,
judgment or decree applicable to Buyer or Buyer Sub or by which any of their
respective property is bound, (ii) violate or conflict with the certificate of
incorporation or bylaws (or comparable organizational documents) of either Buyer
or Buyer Sub, or (iii) result in any breach of, or constitute a default (or an
event which with notice or lapse of time of both would become a default) under,
or give to others any rights of termination or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Buyer or any of its
Subsidiaries pursuant to, any contract, instrument, Permit or license to which
Buyer or any of its Subsidiaries is a party or by which Buyer or any of its
Subsidiaries or their respective property is bound, except in the case of
clauses (i) and (iii) for conflicts, violations, breaches or defaults which,
individually or in the aggregate, would not have or result in a Material Adverse
Effect on Buyer.
(b) Except for the filing of the Certificate of Merger as required by
Michigan Law, and applicable requirements, if any, under "takeover" or "blue
sky" Laws of various states, neither Buyer nor Buyer Sub is required to submit
any notice, report or other filing with any Governmental Entity in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby the failure of which to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on Buyer. No waiver, consent, approval or authorization of any
Governmental Entity or any third party is required to be obtained or made by
Buyer or Buyer Sub in connection with its execution, delivery or performance of
this Agreement the failure of which to obtain or make, individually or in the
aggregate, would have or result in a Material Adverse Effect on Buyer.
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SECTION 3.5 SEC REPORTS. Buyer has timely filed, considering all proper
extensions, all forms, reports, schedules, registration statements, proxy
statements and other documents (including any document required to be filed as
an exhibit thereto) required to be filed by Buyer with the Securities and
Exchange Commission ("SEC") since June 15, 2001. Buyer has made available to the
Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports, schedules, registration statements, proxy
statements and other documents (including those that Buyer may file subsequent
to the date hereof) are referred to herein as the "SEC REPORTS." As of their
respective dates, the SEC Reports (including any financial statements or
schedules included or incorporated by reference therein) (i) were prepared in
all material respects in accordance with the requirements of the Securities Act
or the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), as the case may be,
and the rules and regulations of the SEC thereunder applicable to such SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of the date hereof, there has not been any Material Adverse
Effect with respect to Buyer that would require disclosure under the Securities
Act.
SECTION 3.6 BUYER SUB. Buyer Sub is not and has never been a party to any
material agreement and has not conducted any activities other than in connection
with the organization of Buyer Sub, the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby. Buyer
Sub has not incurred or assumed any expenses or liabilities prior to the
Closing.
SECTION 3.7 BROKER'S FEES. Neither Buyer nor Buyer Sub has any liability
or obligation to pay any fees or commissions to any broker, investment banking
firm, finder or agent with respect to the transactions contemplated by this
Agreement.
SECTION 3.8 RESTRICTIONS ON TRANSFER. Buyer and Buyer Sub have no
Knowledge of any restrictions on the transfer of Buyer Common Stock received as
Merger Consideration, other than as required by law or as set forth in the
Merger Documents.
SECTION 3.9 DISCLOSURE. No representation or warranty by Buyer or Buyer
Sub contained in this Agreement, including any statement contained in the Buyer
Disclosure Letter or any document delivered in connection herewith, contains any
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein not misleading.
21
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 SECURITIES LAWS.
(a) Buyer, Buyer Sub, and the Company will take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Buyer Common Stock in connection
with the Merger. The Company will use commercially reasonable efforts to assist
Buyer as may be necessary to comply with such securities and blue sky laws.
(b) So long as Buyer or any successor entity has securities registered
under Securities Act or the Exchange Act, Buyer or such successor entity will
file all reports required to be filed by it under the Securities Act and the
Exchange Act, all to the extent required pursuant to Rule 144 to enable
stockholders who exchange Shares for Buyer Common Stock pursuant to the terms of
this Agreement to sell Buyer Common Stock pursuant to Rule 144 adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the Securities and Exchange Commission.
SECTION 4.2 PUBLIC ANNOUNCEMENTS. Buyer and the Company will consult with
each other before holding any press conferences, analyst calls or other meetings
or discussions and before issuing any press release or other public
announcements with respect to the transactions contemplated by this Agreement,
including the Merger. The parties will provide each other the opportunity to
review and comment upon any press release or other public announcement or
statement with respect to the transactions contemplated by this Agreement,
including the Merger, and will not issue any such press release or other public
announcement or statement prior to such consultation, except as may be required
by applicable Law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties agree that the
initial press release or releases to be issued with respect to the transactions
contemplated by this Agreement will be mutually agreed upon prior to the
issuance thereof. In addition, the Company will, and will cause its Subsidiaries
to consult with Buyer regarding communications with customers, stockholders and
employees relating to the transactions contemplated by this Agreement.
SECTION 4.3 SBC DISPUTE I. It is understood that Company currently has a
formal billing dispute with SBC in the approximate amount of $174,000 ("SBC
Dispute I") which liability has not been reserved for on the Company Financial
Statements. In the event the Surviving Entity does not prevail with respect to
SBC Dispute I, then (i) Buyer shall offset against the holdback portion of the
Cash Consideration and (ii) Stockholders, jointly and severally, hereby agree to
pay the balance of all costs and expenses of the same and shall within fifteen
(15) days of receipt of notice from the Surviving Entity transfer funds to
Surviving Entity in an amount necessary to cover the balance of all of the costs
and expenses associated with SBC Dispute I.
SECTION 4.4 SBC DISPUTE II. It is understood that Company currently has an
informal billing dispute with SBC in the approximate amount of $250,000 ("SBC
Dispute II") which such amount has been fully paid by Company. It is
contemplated that in the event the Surviving Entity is successful with respect
to SBC Dispute I, then the Surviving Entity would formally initiate dispute
proceedings with respect to SBC Dispute II. It is agreed by Buyer that in the
event the Surviving Entity is successful with respect to SBC Dispute II that,
upon receipt of a billing credit from SBC, it will issue and deliver to
Shareholders such number of shares of Buyer common stock, at the then current
market price, that will equal the total amount of billing credit received minus
any costs and expenses associated with SBC Dispute II.
22
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 CONDITIONS TO OBLIGATIONS OF BUYER AND BUYER SUB TO EFFECT THE
MERGER. The obligations of Buyer and Buyer Sub to effect the Merger will be
subject to the satisfaction or waiver of the following conditions prior to the
Effective Time:
(a) Representations and Warranties. Those representations and warranties
of the Company set forth in this Agreement which are qualified by materiality or
a Material Adverse Effect or words of similar effect will be true and correct as
of the Closing Date (except to the extent such representations and warranties
expressly relate to a specific date in which case such representations and
warranties will be true and correct as of such date). Those representations and
warranties of the Company set forth in this Agreement which are not so qualified
by materiality or a Material Adverse Effect or words of similar effect will be
true and correct in all material respects as of the Closing Date (except to the
extent such representations and warranties expressly relate to a specific date
in which case such representations and warranties will be true and correct in
all material respects as of such date). Buyer shall receive a certificate to
such effect executed by the Company's Chief Executive Officer.
(b) Agreements and Covenants. The Company shall have performed in all
material respects all obligations and complied in all material respects with all
agreements and covenants of the Company and the Stockholders required to be
performed or complied with by it under this Agreement. The Buyer shall receive a
certificate to such effect executed by the Company's Chief Executive Officer.
(c) Certificate of Secretary. Buyer will have received from the corporate
secretary of the Company a certificate (i) certifying the Company Articles of
Incorporation, (ii) certifying the bylaws of the Company, (iii) certifying the
resolutions of the board of directors of the Company, (vi) certifying the
resolutions of the stockholders of the Company and (v) attesting to the
incumbency of the officers of the Company.
(d) Required Consents. Any consent, authorization, order or approval of
(or filing or registration with) any third party identified by Buyer on Schedule
5.1(d) will have been obtained or made.
(e) Legal Opinion. Buyer will have received an opinion, dated the Closing
Date, of counsel to the Company, in substantially the form of Exhibit "C"
attached hereto.
(f) Closing Balance Sheet and Income Statement. Buyer will have received
from the Company, a projected closing balance sheet and statement of aged
accounts receivables, dated as of the Closing Date, attached hereto as Exhibit
"D".
23
(g) Employment Agreements. Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ shall have
executed Employment Agreements attached hereto as Exhibits "E" and "F"
respectively.
SECTION 5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
TO EFFECT THE MERGER. The obligations of the Company and the Stockholders to
effect the Merger will be further subject to the satisfaction or waiver of the
following conditions prior to the Effective Time:
(a) Representations and Warranties. Those representations and warranties
of Buyer and Buyer Sub set forth in this Agreement which are qualified by
materiality or a Material Adverse Effect or words of similar effect will be true
and correct as of the Closing Date (except to the extent such representations
and warranties expressly relate to a specific date in which case such
representations will be true and correct as of such date). Those representations
and warranties of Buyer and Buyer Sub set forth in this Agreement which are not
so qualified by materiality or a Material Adverse Effect or words of similar
effect will be true and correct in all material respects as of the Closing Date
(except to the extent such representations and warranties expressly relate to a
specific date in which case such representations and warranties will be true and
correct in all material respects as of such date). The Company shall receive a
certificate to such effect executed by the Buyer's Chief Executive Officer.
(b) Agreements and Covenants. Buyer and Buyer Sub shall have performed in
all material respects all obligations and complied in all material respects with
all agreements and covenants of Buyer and Buyer Sub required to be performed or
complied with by them under this Agreement. The Company shall receive a
certificate to such effect executed by the Buyer's Chief Executive Officer.
(c) Certificate of Secretary. The Company will have received from the
corporate secretary of each of Buyer and Buyer Sub a certificate (i) certifying
Buyer's and Buyer Sub's Certificate of Incorporation and Articles of
Incorporation, respectively, (ii) certifying the bylaws of Buyer and Buyer Sub,
(iii) certifying the resolutions of the board of directors of Buyer and Buyer
Sub, (vi) certifying the resolutions of the stockholder of Buyer Sub and (v)
attesting to the incumbency of the officers of Buyer and Buyer Sub.
(d) Put Agreements. Buyer shall have entered into those certain Put
Agreements with Messrs. Kopanakis, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ attached hereto as
Exhibits "G", "H" and "I" respectively.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
SECTION 6.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties
and covenants of the parties contained in this Agreement will remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of the other parties to this Agreement, until the earlier of the
termination of this Agreement or two (2) years after the Closing Date (the
"SURVIVAL PERIOD"), whereupon such representations, warranties and covenants
will expire (except for covenants that by their terms survive for a longer
period). The parties' post-closing remedies for a breach are not limited by the
pre-closing discovery of a breach.
24
SECTION 6.2 INDEMNIFICATION OF BUYER. Subject to the limitations set forth
in this Article VI, the Company and Stockholders agree to jointly and severally
indemnify and hold harmless Buyer and its officers, directors, agents and
employees, and each person, if any, who controls or may control Acquirer within
the meaning of the Securities Act from and against any and all claims, demands,
actions, causes of actions, losses, costs, damages, liabilities and expenses
including, without limitation, reasonable legal fees (hereinafter referred to as
"DAMAGES"):
(a) Arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants given or
made by the Company in this Agreement or any certificate, document or instrument
delivered by or on behalf of the Company pursuant hereto (other than with
respect to changes in the truth or accuracy of the representations and
warranties of the Company under this Agreement after the date hereof if the
Company has advised Buyer of such changes in an update to the Company's
Disclosure Letter delivered prior to the Closing and Buyer has nonetheless
proceeded with the Closing); or
(b) Resulting from any failure of the Stockholders to have good, valid and
marketable title to the issued and outstanding Company Stock held by them, free
and clear of all liens, claims, pledges, options, adverse claims, assessments or
charges of any nature whatsoever, or to have full right, capacity and authority
to vote such Company Stock in favor of the Merger and the other transactions
contemplated by the Merger Agreement.
The foregoing are collectively referred to as the "BUYER INDEMNITY
CLAIMS."
SECTION 6.3 INDEMNIFICATION OF STOCKHOLDERS AND COMPANY. Subject to the
limitations set forth in this Article VI, the Buyer and Buyer Sub agree to
jointly and severally indemnify and hold harmless the Stockholders and their
respective heirs, successors and assigns, and Company and its officers,
directors, agents and employees, from and against any and all Damages:
(a) Arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants given or
made by the Buyer or Buyer Sub in this Agreement or any certificate, document or
instrument delivered by or on behalf of the Buyer or Buyer Sub pursuant hereto
(other than with respect to changes in the truth or accuracy of the
representations and warranties of the Buyer or Buyer Sub under this Agreement
after the date hereof if the Buyer or Buyer Sub has advised the Stockholders and
Company of such changes in an update to the Buyer Disclosure Letter delivered
prior to the Closing and the Stockholders and Company have nonetheless proceeded
with the Closing); or
(b) Resulting from any failure of Buyer to have good, valid and marketable
title to the full paid nonassessable share of Buyer Common Stock constituting
all or any part of the Merger Consideration, free and clear of all liens,
claims, pledges, options, adverse claims, assessments or charges of any nature
whatsoever, or to have full right, capacity and authority to cause all of the
shares representing such Buyer Common Stock to be issued to the Stockholders in
connection with the conversion of each share of the Company Stock as
contemplated by the Merger Agreement.
25
The foregoing are collectively referred to as the "STOCKHOLDER AND COMPANY
INDEMNITY CLAIMS." The Stockholder and Company Indemnity Claims together with
the Buyer Indemnity Claims are collectively referred to as the "INDEMNITY
CLAIMS."
SECTION 6.4 GENERAL NOTICE AND PROCEDURAL REQUIREMENTS FOR INDEMNITY
CLAIMS. Notwithstanding the foregoing, the party or person having the indemnity
obligation under this Article VI (the "INDEMNIFYING PARTY"), shall be obligated
to indemnify and hold harmless the party or person entitled to indemnity under
this Article VI (the "INDEMNIFIED PARTY"), only with respect to any Indemnity
Claims of which the Indemnified Party notifies with specificity the Indemnifying
Party in accordance with Section 7.1 of this Agreement and, if applicable,
within the following time period: (i) with regard to any representation or
warranty under this Agreement, prior to the end of the Survival Period of such
representation or warranty; or (ii) with regard to any covenant under this
Agreement which by its terms expires, prior to the end of the survival period
relating to such covenant.
SECTION 6.5 NOTICE AND PROCEDURAL REQUIREMENTS FOR THIRD PARTY CLAIMS. If
a complaint, claim or legal action is brought by a third party (a "Third Party
Claim") as to which an Indemnified Party is entitled to indemnification, the
Indemnified Party shall give written notice of such Third Party Claim to the
Indemnifying Party in accordance with Section 7.1 of this Agreement promptly
after the Indemnified Party receives notice thereof, which notice shall include
a copy of any letter, complaint or similar writing received by the Indemnified
Party; provided however, that any failure to provide or delay in providing such
information shall not constitute a bar or defense to indemnification except to
the extent the Indemnifying Party has been prejudiced thereby.
The Indemnifying Party shall have the right to assume the defense of such
Third Party Claim with counsel reasonably satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election so to assume the defense of such Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense of such Third Party Claim except as hereinafter
provided. If the Indemnifying Party elects to assume such defense and select
counsel, the Indemnified Party may participate in such defense through its own
separate counsel, but the fees and expenses of such counsel shall be borne by
the Indemnified Party unless: (i) otherwise specifically agreed by the
Indemnifying Party, or (ii) counsel selected by the Indemnifying Party
determines that because of a conflict of interest between the Indemnifying Party
and the Indemnified Party such counsel for the Indemnifying Party cannot
adequately represent both parties in conducting the defense of such action. In
the event the Indemnified Party maintains separate counsel because counsel
selected by the Indemnifying Party has determined that such counsel cannot
adequately represent both parties because of a conflict of interest between the
Indemnifying Party and the Indemnified Party, then the Indemnifying Party shall
not have the right to direct the defense of such Third Party Claim on behalf of
the Indemnified Party.
The failure of the Indemnifying Party to notify an Indemnified Party of
its election to defend such Third Party Claim within thirty (30) days after
notice thereof was given to the Indemnifying Party shall be deemed a waiver by
the Indemnifying Party of its rights to defend such Third Party Claim.
26
If the Indemnifying Party assumes the defense of a Third Party Claim, the
obligations of the Indemnifying Party shall include taking all steps necessary
in the defense of such Third Party Claim and holding the Indemnified Party
harmless from and against any and all Damages caused or arising out of any
settlement approved by the Indemnified Party or any judgment in connection with
the claim or litigation.
If the Indemnifying Party does not assume the defense of such Third Party
Claim in accordance with this Section, the Indemnified Party may defend against
such claim or litigation in such manner as it deems appropriate; provided,
however, that the Indemnified Party may not settle such Third Party Claim
without the prior written consent of the Indemnifying Party; provided that the
Indemnifying Party may not withhold such consent unless it has provided security
of a type and in an amount reasonably acceptable to the Indemnified Party for
the payment of its indemnification obligations with respect to such Third Party
Claim. The Indemnifying Party shall promptly reimburse the Indemnified Party for
the amount of Damages caused or arising out of any judgment rendered with
respect to such Third Party Claim, and for all costs and expenses incurred by
the Indemnified Party in the defense of such claim.
The Indemnifying Party may settle any Third Party Claim in its sole
discretion without the prior written consent of the Indemnified Party, provided
that such settlement involves only the payment of cash by the Indemnifying Party
to the claimant and does not impose any other obligation on the Indemnifying
Party or any liability or obligation on the Indemnified Party.
SECTION 6.6 NOTICE AND PROCEDURAL REQUIREMENTS FOR DIRECT CLAIMS. Any
claim for indemnification by an Indemnified Party on account of Damages which do
not result from a Third Party Claim (a "DIRECT CLAIM") shall be asserted by
giving the Indemnifying Party reasonably prompt notice thereof in accordance
with Section 7.1 of this Agreement; provided, however, that any failure to
provide, or delay in providing, such notification shall not constitute a bar or
defense to indemnification except to the extent the Indemnifying Party has been
prejudiced thereby. After receiving notice of a Direct Claim, the Indemnifying
Party will have a period of thirty (30) days within which to respond in writing
to such Direct Claim. If the Indemnifying Party rejects such claim or does not
respond within such thirty (30) day period (in which case the Indemnifying Party
will be deemed to have rejected such claim), the Indemnified Party will be free
to pursue such remedies as may be available to the Indemnified Party on the
terms and subject to the provisions of this Article VI.
SECTION 6.7 MAXIMUM LIABILITY. Notwithstanding anything to the contrary
herein, in no event will the Stockholders' indemnity obligations under this
Article VI exceed the aggregate amount of the Cash Consideration and shares of
Buyer's common stock received by the Stockholders.
SECTION 6.8 BASKET. Notwithstanding anything to the contrary herein, in no
event shall an Indemnifying Party have any liability for an indemnity obligation
under this Article VI unless and until the Damages relating to the party's
Indemnity Claims exceed $50,000 in the aggregate. From and after the time the
aggregate Damages for an Indemnified Party's Indemnity Claims exceed $50,000,
the limitation set forth in this Section 6.8 shall be of no further force and
effect and the Indemnifying Party shall be liable for the entire amount of the
Damages, subject to the liability limitations of Section 6.7.
27
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 NOTICES. All notices and other communications given or made
pursuant hereto will be in writing and will be deemed to have been duly given or
made (a) as of the date delivered, if delivered personally or by overnight
courier, (b) on the third Business Day after deposit in the U.S. mail, if mailed
by registered or certified mail (postage prepaid, return receipt requested), or
(c) when successfully transmitted by facsimile (with a confirming copy of such
communication to be sent as provided in clauses (a) or (b) above), and, in each
case to the parties at the following addresses or facsimile number (or at such
other address for a party as will be specified by like notice, except that
notices of changes of address will be effective upon receipt):
(a) If to Buyer: Mobilepro Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
Facsimile:(▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company (prior to the Closing Date): (c)
C.L.Y.K., Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
Facsimile:
With a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇ ▇. Vespa, Esq.
DKW Law Group(R) LLC
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to Kopanakis: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(d) If to ▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(e) If to ▇▇▇▇▇▇▇: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
28
For purposes of this Agreement, a "Business Day" shall mean any day that
is not a Saturday, a Sunday or other day on which banking organizations in
Washington, D.C. are authorized or required by law to close.
SECTION 7.2 EXPENSES. All fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby will be paid by the
party incurring such fees, costs and expenses.
SECTION 7.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 7.4 ENTIRE AGREEMENT. This Agreement and the schedules and
exhibits attached hereto, constitute the entire agreement and supersede any and
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
SECTION 7.5 NO THIRD-PARTY BENEFICIARIES. Except for the parties hereto,
this Agreement is not intended to confer upon any other Person any rights or
remedies hereunder.
SECTION 7.6 ASSIGNMENT. This Agreement will not be assigned by operation
of Law or otherwise, except that Buyer and Buyer Sub may assign all or any of
their rights hereunder to any Affiliate of Buyer; provided, however, that no
such assignment will relieve the assigning party of its obligations hereunder.
This Agreement will be binding upon, and will be enforceable by and inure to the
benefit of the parties hereto and their respective successors and assigns.
SECTION 7.7 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the maximum extent possible.
SECTION 7.8 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the Laws of the State of Michigan applicable to
contracts executed in and to be performed entirely within that State.
SECTION 7.9 HEADINGS; INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "INCLUDE,"
"INCLUDES" or "INCLUDING" are used in this Agreement, they will be understood to
be followed by the words "WITHOUT LIMITATION."
29
SECTION 7.10 CONSTRUCTION. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
SECTION 7.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which will
constitute one and the same agreement.
SECTION 7.12 CONFIDENTIALITY. The Company and Buyer each recognize that
they have received and will receive confidential information concerning the
other during the course of the Merger negotiations and preparations.
Accordingly, the Company and Buyer each agrees (a) to use its respective best
efforts to prevent the unauthorized disclosure of any confidential information
concerning the other that was or is disclosed during the course of such
negotiations and preparations, and is clearly designated in writing as
confidential at the time of disclosure, and (b) to not make use of or permit to
be used any such confidential information other than for the purpose of
effectuating the Merger and related transactions. The obligations of this
section will not apply to information that (i) is or becomes part of the public
domain, (ii) is disclosed by the disclosing party to third parties without
restrictions on disclosure, (iii) is received by the receiving party from a
third party without breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law.
[SIGNATURE PAGE TO FOLLOW]
30
IN WITNESS WHEREOF, Buyer, Buyer Sub, the Company and the Stockholder have
executed this Agreement as of the date first written above.
MOBILEPRO CORP.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------
▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
"Buyer"
AFFINITY ACQUISITION CORP.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Chief Executive Officer
"Buyer Sub"
C.L.Y.K, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Chief Executive Officer
"Company"
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------
` ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
"Stockholders"
31
EXHIBIT INDEX
Exhibit "A" Promissory Note
Exhibit "B" Convertible Note
Exhibit "C" Legal Opinion
Exhibit "D" Closing Balance Sheet and Aged Receivables
Exhibit "E" Kopanakis Employment Agreement
Exhibit "F" ▇▇▇▇▇▇ Employment Agreement
Exhibit "G" Kopanakis Put Agreement
Exhibit "H" ▇▇▇▇▇▇ Put Agreement
Exhibit "I" ▇▇▇▇▇▇▇ Put Agreement
