Execution Copy
CONTRIBUTION, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS
CONTRIBUTION, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement")
is made and entered into as of April 9, 2007 by and among Kelley
Communication
Company, Inc., a Nevada corporation ("Kelley"), MC SERVICES LLC, a
Nevada
limited-liability company ("MCS") (each a "Member" and
collectively, the
"Members") and Tuscany Services LLC, a Nevada limited-liability
company (the
"Company") with reference to the following circumstances.
RECITALS
A.
The Members are all of the Members of the Company.
B.
The Members are concurrently entering into an Operating Agreement
(as
defined below) governing the operations of the Company.
C.
The Members desire to capitalize the Company in order for the
Company to
begin business operations related to the installation of systems to
provide high
speed internet and basic cable services to the homeowners in the
community
located in Henderson, Nevada known as Tuscany and the provision of
such services
(the "Business").
D.
MCS desires to contribute to the Company $400,000.00 in
immediately
available funds (the "MCS Contribution") in exchange for a fifty
percent (50%)
membership interest in the Company. E. Kelley desires to contribute
to the
Company all of its rights, titles and interests in, to and under
the assets
described on Exhibit A attached hereto (the "Kelley Contribution")
in exchange
for a fifty percent (50%) membership interest in the Company and
the
Distribution (as defined below) to Kelley of $375,000.00 from the
Company
immediately following Closing (as defined below).
NOW,
THEREFORE, in consideration of the covenants and representations
set
forth herein, and for other good and valuable consideration, the
Members agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Definitions. As used in this Agreement, the
following
terms have the following meanings (terms defined in the singular to
have a
correlative meaning when used in the plural and vice versa).
Certain other terms
are defined in the text of this Agreement.
(a)
"Affiliate" means a corporation or any other entity that directly,
or
indirectly through one or more intermediaries, controls, is
controlled by, or is
under common control with, the designated Member. As used in this
definition
only, "control" shall mean ownership of shares of stock having at
least fifty
percent (50%) of the voting power entitled to vote for the election
of directors
in the case of a corporation (or, in the case of an entity that is
not a
corporation, in the election of the corresponding managing
authority), or
otherwise having the power to directly or indirectly control the
management of
such entity.
(b)
"Assumed Liabilities" shall mean all liabilities of Kelley relating
to
the Business or the Kelley Contribution that are set forth on
Schedule 2.02.
(c)
"Business" shall have the meaning set forth in the recitals.
(d)
"Excluded Liabilities" shall mean all liabilities of Kelley other
than
the Assumed Liabilities shown on Schedule 2.02. Schedule 1.01(d)
lists certain
specific Excluded Liabilities for the purpose of clarity with
respect to those
specific Excluded Liabilities. The list of Excluded Liabilities on
Schedule
1.01(d) does not, and is not intended to, include every Excluded
Liability.
(e)
"Governmental Body" shall mean any:
(i) nation, province, state, county, city, town, village, district,
or
other jurisdiction of any nature;
(ii) federal, provincial, state, local, municipal, foreign, or
other
government;
(iii) governmental or quasi-governmental authority of any
nature
(including any governmental agency, branch, department, official,
or entity
and
any court or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority
or
power of any nature.
(f)
"Lien" shall mean any mortgage, pledge, lien, charge, security
interest, adverse claims of ownership or use, restrictions on
transfer, defect
of title or other encumbrance of any sort, other than (a)
mechanic's,
materialmen's, and similar liens with respect to any amounts not
yet due and
payable, and (b) liens for taxes not yet due and payable.
(g)
"Permits" means all of the licenses, permits and other
authorizations
issued by any Governmental Body to Kelley in connection with and
which are
material to the conduct of the Business.
(h)
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability
company, joint venture, estate, trust, association, organization,
labor union,
Governmental Body or other entity.
(i)
"WilTel Assets" shall mean the Retail Master Services Agreement
dated
June 6, 2005 by and between the Kelley and WilTel Communications,
LLC and those
assets listed on Schedule 1.01(i).
ARTICLE II ASSIGNMENT, ASSUMPTION AND CLOSING
Section 2.01 Assignments and Conveyances.
(a)
Kelley hereby grants, bargains, sells, assigns, conveys and
contributes
to the Company all of its rights, titles and interests in, to and
under the
Kelley Contribution.
(b)
MCS hereby grants, bargains, sells, assigns, conveys and
contributes to
the Company all of its rights, titles and interests in, to and
under the MCS
Contribution.
Section 2.02 Assumption. The Company hereby accepts the
foregoing
contributions of the Kelley Contribution and the MCS Contribution
and does
hereby assume and promise to satisfy all Assumed Liabilities
thereunder to the
extent the same shall be applicable and accrue with respect to the
period
subsequent to the Closing Date.
Section 2.03 Establishment of Values. The initial value ("Initial
Value")
of the Kelley Contribution is $775,000, which the Members have
determined to be
the fair market of the Kelley Contribution as of the date hereof.
The Initial
Value of the MCS Contribution is $400,000.00.
Section 2.04 Capital Accounts. The capital account of each
Member's
interest in the Company shall first be equal to their Initial
Value, as set
forth in Section 2.03 above and after paying the "Distribution" as
set forth in
Section 5.01 below, and thereafter shall be as provided in the
Operating
Agreement.
Section 2.05 Accounts Receivable and Accounts Payable. Kelley shall
be
entitled to collect for its account all accounts receivable related
to the
Business for periods prior to the Closing Date. With respect to any
accounts
receivable that are collected related to a period that contains
dates both
before and after the Closing Date, Kelley and the Company shall
each be entitled
to their pro rata portion of those accounts receivable based upon
the number of
days in the applicable period that each owned the Business. The
party that
collects such account receivable shall promptly remit the other
parties' pro
rata portion of such account receivable along with a statement
detailing the
amount of such account receivable belonging to each party. Kelley
shall be
responsible for all accounts payable related to or arising out of
the Business
prior to the Closing Date and the Company shall be responsible for
all accounts
payable related to or arising out of the Business on or after the
Closing Date.
The party that pays such account payable shall deliver the invoice
to the other
party, who shall promptly reimburse the paying party for their
pro-rata share of
the account payable.
Section 2.06 Closing, Closing Place, Time and Date. The closing of
the
transactions contemplated by this Agreement (the "Closing") shall
be held at the
offices of Kelley, 5625 South Arville Street, Suite E, Las Vegas,
Nevada 89118,
at 11:00 a.m., local time, on the date hereof or at such other
place and such
other time and/or date as the Members hereto shall mutually agree
(the actual
date on which the Closing shall occur being referred to herein as
the "Closing
Date").
ARTICLE III REPRESENTATIONS AND WARRANTIES OF KELLEY
Kelley hereby represents and warrants to the Company that the
statements
contained in this Article III are true and correct.
Section 3.01 Organization, Qualification, and Corporate Power.
Kelley
hereby represents, warrants and covenants to the Company that it
(i) is a
corporation duly organized, validly existing, and in good standing
under the
laws of the State of Nevada, (ii) has obtained all necessary
corporate approvals
to enter into and execute this Agreement and (iii) has the full
right, power,
and authority to enter into this Agreement.
Section 3.02 Authorization.
(a)
Kelley has full power and authority to execute and deliver this
Agreement and the Exhibits attached hereto, and to consummate the
transactions
contemplated hereunder and to perform its obligations hereunder,
and no other
proceedings on the part of Kelley are necessary to authorize the
execution,
delivery and performance of this Agreement.
(b)
This Agreement constitutes the valid and legally binding
obligations of
Kelley, enforceable against Kelley in accordance with its
respective terms and
conditions, except as such enforceability may be limited by
principles of public
policy and subject to the laws of general application relating to
bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific
performance, injunctive relief or other equitable remedies.
(c)
Except as set forth in Schedule 3.02, and the execution and
delivery by
Kelley of this Agreement and the Exhibits attached hereto, and the
consummation
of the transactions contemplated hereby and thereby, will not
conflict with or
result in any violation of, or default under, or give rise to the
loss of any
benefit under: (i) any provision of the certificate of
incorporation or bylaws
of Kelley; (ii) any contract or other agreement to which Kelley or
the Kelley
Contribution are subject; or (iii) any judgment, order, decree,
statute, law,
ordinance, rule or regulation applicable to Kelley or the Kelley
Contribution.
Section 3.03 Kelley Contribution.
(a)
Kelley has good and transferable title to all of the Kelley
Contribution, free and clear of any Liens.
(b)
Except as set forth in Schedule 3.03(b), there are no
contracts,
licenses or agreements to which Kelley is obligated with respect
thereto, and
there are no consents required from any other Person to permit the
Company to
fully exploit, any of the Kelley Contribution. Except for the
WilTel Assets, the
Kelley Contribution owned by the Company immediately following the
Closing Date
and the rights possessed by the Company immediately following the
Closing Date
(including the rights acquired by the Company under the Transferred
Contracts
(defined in Section 3.05 below)) include all assets, tangible or
intangible, of
any nature whatsoever, of Kelley that: (i) are used or held for use
by Kelley in
the operation or conduct of the Business, or (ii) are necessary for
the
operation or conduct of the Business by the Company in
substantially the same
manner as currently conducted.
Section 3.04 Condition of Tangible Personal Property. Each item of
the
tangible personal property that constitutes part of the Kelley
Contribution is
in good operating condition and repair, ordinary wear and tear
excepted, is
suitable for immediate use by the Company in the ordinary course of
business
and, to Kelley's knowledge, is free from latent or patent defects.
No item of
the tangible personal property constituting part of the Kelly
Contribution is in
need of maintenance, repair or replacement, except for ordinary,
routine
maintenance and repairs that are not material in nature or
cost.
Section 3.05 Transferred Contracts. Each contract to be transferred
to the
Company pursuant to this Agreement is set forth on Schedule 3.05
(the
"Transferred Contracts"). Each Transferred Contract is in full
force and effect
and Kelley is not subject to any default thereunder, nor to the
knowledge of
Kelley is any other party to such Transferred Contract subject to
any default
thereunder. Kelley has neither breached, violated or defaulted
under, nor
received notice that Kelley has breached, violated or defaulted
under, any of
the terms or conditions of any Transferred Contract.
Section 3.06 Brokers' Fees. Except as set forth on Schedule 3.06,
Kelley
has no liability for any fee, commission or payment to any broker,
finder or
agent with respect to the contribution of the Kelley Contribution
or the
consummation of the transactions contemplated by this Agreement.
The brokers'
fees listed on Schedule 3.06 shall be paid by Kelley and shall not
be an Assumed
Liability of the Company.
Section 3.07 Permits. Schedule 3.07 includes a true and complete
list of
the Permits held by Kelley in the operation of the Business or
ownership of the
Kelley Contribution. The Permits listed on Schedule 3.07 are
validly issued, and
are in full force and effect. The Business is being conducted in
all material
respects in accordance with the Permits.
Section 3.08 Taxes. Except for its 2005 corporate income tax
return, Kelley
has filed or caused to be filed on a timely basis all tax returns
and all
reports with respect to taxes that are or were required to be filed
for the
Business pursuant to applicable legal requirements. All tax returns
and reports
filed by Kelley are true, correct and complete. Kelley has paid, or
made
provision for the payment of, all taxes that have or may have
become due for all
periods covered by the tax returns or otherwise, or pursuant to any
assessment
received by Kelley. There are no Liens on the Kelley Contribution
that arose in
connection with any failure (or alleged failure) to pay any tax,
and no
assertion of any Claims (as defined below) attributable to taxes
which, if
adversely determined, would result in any such Lien.
Section 3.09 No Proceeding. There is no pending or, threatened
proceeding
by or against Kelley or that otherwise relates to or may affect the
Business of,
or the Kelley Contribution or that challenges, or that may have the
effect of
preventing, delaying, making illegal or otherwise interfering with,
any of the
transactions contemplated by this Agreement.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MCS
MCS
hereby represents and warrants to the Company that the
statements
contained in this Article IV are true and correct.
Section 4.01 Organization, Qualification, and Corporate Power. MCS
hereby
represents, warrants and covenants to the Company that it (i) is a
limited
liability company duly formed, validly existing, and in good
standing under the
laws of the State of Nevada, (ii) has obtained all necessary
limited liability
company approvals to enter into and execute this Agreement and
(iii) has the
full right, power, and authority to enter into this Agreement.
Section 4.02 Authorization.
(a)
MCS has full power and authority to execute and deliver this
Agreement,
and to consummate the transactions contemplated hereunder and to
perform its
obligations hereunder, and no other proceedings on the part of MCS
are necessary
to authorize the execution, delivery and performance of this
Agreement.
(b)
This Agreement constitutes the valid and legally binding
obligations of
MCS, enforceable against MCS in accordance with its respective
terms and
conditions, except as such enforceability may be limited by
principles of public
policy and subject to the laws of general application relating to
bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific
performance, injunctive relief or other equitable remedies.
(c)
The execution and delivery by MCS of this Agreement and the
Exhibits
attached hereto, and the consummation of the transactions
contemplated hereby
and thereby, will not conflict with or result in any violation of,
or default
under, or give rise to the loss of any benefit under: (i) any
provision of the
articles of organization of MCS; (ii) any contract or other
agreement to which
MCS is subject; or (iii) any judgment, order, decree, statute, law,
ordinance,
rule or regulation applicable to MCS or the MCS Contribution.
Section 4.03 Brokers' Fees. MCS has no liability for any fee,
commission or
payment to any broker, finder or agent with respect to the
contribution of the
MCS Contribution or the consummation of the transactions
contemplated by this
Agreement.
ARTICLE V OTHER AGREEMENTS AND COVENANTS
Section 5.01 Distribution to Kelley. At Closing, the Company
shall
distribute $375,000.00 to Kelley (the "Distribution"). For
convenience of the
Members, MCS shall pay the Distribution to Kelley on behalf of the
Company and
such amounts shall be deemed to be a part of the MCS Contribution.
Kelley's
capital account shall be reduced by the amount of the
Distribution.
Section 5.02 Additional Head-End Expenses. At Closing, MCS shall
pay Kelley
$15,000 (the "Estimated Head-End Expense Payment"), which is equal
to 50% of the
estimated expenses in excess of $47,500 that Kelley incurred in
connection with
the installation of the digital head-end at the Tuscany Community
(the
"Additional Head-End Expenses") prior to Closing. Within 10
business days,
Kelley shall deliver to MCS an invoice setting forth in reasonable
detail the
Additional Head-End Expenses. If 50% of the Additional Head-End
Expenses exceed
the Estimated Head-End Expense Payment, then MCS shall promptly pay
the amount
of such excess to Kelley. If the Estimated Head-End Expenses exceed
50% of the
Additional Head-End Expenses, the Kelley shall promptly pay the
amount of such
excess to MCS. If the Estimated Head-End Expense Payment is equal
to 50% of the
Additional Head-End Expenses, then no further payments are required
under this
Section.
Section 5.03 Additional Documents and Further Assurances. Each
Member
hereto, at the request of another Member hereto, shall execute and
deliver such
other instruments and do and perform such other acts and things as
may be
necessary or desirable for effecting completely the consummation of
the
transactions contemplated hereby. Each of the Parties will use
their reasonable
efforts to take all action and to do all things necessary, proper,
or advisable
in order to consummate and make effective the transactions
contemplated by this
Agreement.
Section 5.04 Consents. If Kelley does not obtain consent to the
assignment
of the contracts set forth on Schedule 3.03(b) as of the Closing,
then, in the
case of each contract as to which such consent was not obtained (or
otherwise is
not in full force and effect) (the "Non-Consent Contracts"),
notwithstanding
anything to the contrary in this Agreement, neither this Agreement
nor any other
document related to the consummation of the transactions
contemplated hereby
shall constitute a sale, assignment, assumption, transfer,
conveyance or
delivery or an attempted sale, assignment, assumption, transfer,
conveyance or
delivery of the Non-Consent Contracts, and, following the Closing,
the parties
shall cooperate with each other to obtain the consent, approval or
waiver
relating to each Non-Consent Contract as promptly as practicable
following the
Closing. Pending the obtaining of such consent, approval or waiver
relating to
any Non-Consent Contract, Kelley will continue to perform its
obligations
pursuant to the Non-Consent Contracts and shall require the other
parties to the
Non-Consent Contracts to continue to perform their obligations
under the
Non-Consent Contracts in order to provide to the Company the
benefits and
burdens of use of each Non-Consent Contract for its term (or any
right, benefit,
obligation or duty arising thereunder, including the enforcement
for the benefit
of the Company of any and all rights of Kelley against a third
party thereunder)
(the "Non-Consent Services"). The Company shall be responsible for
all
liabilities and expenses arising out of the Non-Consent Contracts
or the
provision of the Non-Consent Services following Closing, except to
the extent
that such liabilities or expenses arose solely out of Kelley's
failure to obtain
consent to the assignment of any Non-Consent Contract prior to
Closing. The
Non-Consent Services shall continue until the earlier of (A) such
time as the
applicable consent, approval or waiver has been obtained and such
Non-Consent
Contract has been duly assigned to the Company or (B) the
expiration of the term
of such Non-Consent Contract, as such term may be extended or
renewed. After the
consent, approval or waiver for the sale, assignment, assumption,
transfer,
conveyance and delivery of a Non-Consent Contract is obtained,
Kelley shall
promptly assign, transfer, convey and deliver such Non-Consent
Contract to the
Company, and the Company shall assume the obligations under such
Non-Consent
Contract assigned to the Company from and after the date of this
Agreement to
Company assignment and assumption agreement in a form reasonably
satisfactory to
the parties.
Section 5.05 Commerce Associates, LLC. The Company agrees to honor
the
terms and obligations of Kelley to Commerce Associates, LLC as set
forth in
Sections 6.1 and 7.1.1 of the Cable Television Infrastructure and
Services
Agreement between Kelly and Commerce dated April 22, 2002, a copy
of which is
attached hereto as Exhibit D (the "Commerce Agreement"), as if the
Company were
a party to the Commerce Agreement in place of Kelley.
Section 5.06 Kelley's Payment of Taxes and Liabilities. Kelley
shall
promptly after the Closing Date prepare and file all reports and
returns
required by laws relating to the Business to and including the
Closing Date.
Kelley shall pay in a timely manner all taxes resulting from or
payable in
connection with the transfer of the Kelley Contribution pursuant to
this
Agreement, regardless of the Person on whom such taxes are imposed
by laws. In
addition to payment of taxes, Kelley shall pay, or make adequate
provision for
the payment, in full all of the Excluded Liabilities and other
liabilities of
Kelley under this Agreement.
ARTICLE VI INDEMNIFICATION
Section 6.01 Indemnification.
(a)
Indemnification of the Company by Kelley. Kelley shall indemnify
and
hold harmless each of the Company and its Affiliates, and the
directors,
officers, and employees of the Company and each Person that serves
as an agent,
employee, director, officer, partner, executor, manager or member
or trustee of
the Company or such Affiliate (or in a similar capacity), and the
successors and
assigns of any of the foregoing (the "Company Indemnitees"), from
and against
and will reimburse the Company Indemnitees for any and all
liabilities, demands,
settlements, claims, actions, suits, penalties, fines, costs and
expenses
(including, without limitation, costs of investigation and defense
and
reasonable attorneys' fees and other expenses of settlement) (any
of the
foregoing, a "Claim") whether incurred by any Company Indemnitee,
or any
diminution of value, whether or not based upon a Claim of a third
party,
(collectively, "Damages"), arising from or in connection with: (i)
any breach of
any representation or warranty made by Kelley in (A) this Agreement
(B) any
transfer instrument for the Kelley Contribution or (C) any other
certificate,
document, writing or instrument delivered by Kelley pursuant to
this Agreement;
(ii) any breach of any covenant or obligation of Kelley in this
Agreement or in
any other certificate, document, writing or instrument delivered by
Kelley
pursuant to this Agreement; (iii) any liability arising out of the
ownership or
operation of the Kelley Contribution prior to the Closing Date
other than the
Assumed Liabilities; (iv) any brokerage or finder's fees or
commissions or
similar payments based upon any agreement or understanding made, or
alleged to
have been made, by any Person with Kelley in respect of the
assignment,
contribution, conveyance and transfer of the Kelley Contribution to
the Company
or the consummation of the transactions contemplated by this
Agreement; (v) any
noncompliance with any fraudulent transfer law in respect of the
assignment,
contribution, conveyance and transfer of the Kelley Contribution to
the Company;
(vi) any liability under the WARN Act or any similar state or local
law that may
result from an "Employment Loss", as defined by 29 U.S.C. sect.
2101(a)(6),
caused by any action of the Company prior to the Closing Date or by
the
Company's decision not to hire previous employees of Kelley; (vii)
any employee
welfare or benefit plan established or maintained by Kelley or
(viii) any
failure of Kelley to pay, perform or otherwise discharge any
Excluded Liability.
(b)
Indemnification of the Company by MCS. MCS shall indemnify and
hold
harmless the Company Indemnitees from and against and will
reimburse the Company
Indemnitees for any and all Damages costs of investigation and
defense and
arising from or in connection with (i) any breach of any
representation or
warranty made by MCS in (A) this Agreement; (ii) any breach of any
covenant or
obligation of MCS in this Agreement; and (iii) any brokerage or
finder's fees or
commissions or similar payments based upon any agreement or
understanding made,
or alleged to have been made, by any Person with MCS in respect of
the
assignment, contribution, conveyance and transfer of the MCS
Contribution to the
Company or the co