SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
APRIL 14, 2000
Date of Report (Date of earliest event reported)
MEGAMEDIA NETWORKS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 000-26801 87-0633630
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
57 WEST PINE STREET
ORLANDO, FLORIDA 32801
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(Address of principal executive offices) (Zip Code)
(407) 245-3636
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Registrant's telephone number, including area code
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CURRENT REPORT ON FORM 8-K
MEGAMEDIA NETWORKS, INC.
APRIL 14, 2000
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 14, 2000, MegaMedia Networks, Inc., a Delaware corporation
("MegaMedia"), through its wholly-owned subsidiary Titan Hosting, Inc., a
Delaware corporation ("Titan"), acquired certain assets of City-Guide ISP, Inc.,
a Florida corporation ("City-Guide"), pursuant to that certain Purchase and Sale
of Assets Agreement, dated April 14, 2000 (the "Purchase Agreement"), among
City-Guide, David Marshlack, Dan Marshlack, Bruce C. Hammil and Mark Dolan, as
shareholders of City-Guide (the "Shareholders" and, collectively with
City-Guide, the "Seller"), and MegaMedia and Titan (collectively, the "Buyer").
The Purchase Agreement is attached hereto as Exhibit 10.1 and is incorporated
herein by reference for all purposes.
Pursuant to the Purchase Agreement, as consideration for the
acquisition of the assets described below, the Buyer delivered the following to
the Seller on April 14, 2000: (i) $1,000,000 cash, which the Buyer paid out of
its working capital, (ii) a convertible promissory note issued by Titan in favor
of City-Guide in the principal amount of $720,000, bearing interest at the
lowest rate per annum imputed by the Internal Revenue Service for a note of this
nature, payable at $30,000 per month including interest, and the outstanding
principal balance of which shall be convertible at any time by the Seller into
shares of common stock of MegaMedia at a conversion rate of $3.00 per share (the
"Note"), and (iii) 200,000 restricted shares of common stock of MegaMedia.
Titan's obligations under the Note are secured by (a) a security agreement
entered into between Titan and City-Guide, pursuant to which Titan grants
City-Guide a security interest in certain of the assets acquired under the
Purchase Agreement, and (b) an unconditional corporate guaranty of MegaMedia,
pursuant to which MegaMedia guarantees the obligations of Titan under the Note.
MegaMedia also entered into a registration rights agreement with the
Shareholders providing for certain piggy-back registration rights for the
200,000 shares of common stock referred to in clause (iii) above.
In addition, pursuant to the Purchase Agreement, as further
consideration for the acquisition of the assets, the Buyer (i) subleased from
the Seller an office lease comprised of approximately 3,586 square feet of
office space, with such lease expiring October 31, 2001 and having monthly lease
payments of $3,828, and (ii) assumed certain obligations of the Seller with
respect to certain equipment leases.
The assets acquired by the Buyer are comprised of customer contracts
and computer and related equipment, the value of which were determined by mutual
agreement of the Buyer and the Seller with reliance on, among other
considerations, an independent appraisal of the assets effective March 27, 2000.
Mark. R. Dolan, General Counsel and Secretary of MegaMedia, is the
Secretary of City-Guide and, as of the date of the Purchase Agreement, was a
principal shareholder of City-Guide. He is no longer a principal shareholder of
City-Guide.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
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10.1 Purchase and Sale of Assets Agreement, dated April 14, 2000, among
City-Guide ISP, Inc., David Marshlack, Dan Marshlack, Bruce C.
Hammil, Mark Dolan and Titan Hosting, Inc. and MegaMedia
Networks, Inc.
10.2 Convertible Promissory Note, dated April 14, 2000, issued by Titan
Hosting, Inc. in favor of City-Guide ISP, Inc. in the principal
amount of $720,000.
10.3 Security Agreement, dated April 14, 2000, between Titan Hosting,
Inc. and City-Guide ISP, Inc.
10.4 Unconditional Corporate Guaranty, dated April 14, 2000, executed
by MegaMedia Networks, Inc.
10.5 Subscription and Registration Rights Agreement, dated April 14,
2000, between MegaMedia Networks, Inc. and City-Guide ISP, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: April 25, 2000
MEGAMEDIA NETWORKS, INC.
By: /s/ Stephen F. Noble, III
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Stephen H. Noble, III
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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10.1 Purchase and Sale of Assets Agreement, dated April 14, 2000, among
City-Guide ISP, Inc., David Marshlack, Dan Marshlack, Bruce C.
Hammil, Mark Dolan and Titan Hosting, Inc. and MegaMedia
Networks, Inc.
10.2 Convertible Promissory Note, dated April 14, 2000, issued by Titan
Hosting, Inc. in favor of City-Guide ISP, Inc. in the principal
amount of $720,000.
10.3 Security Agreement, dated April 14, 2000, between Titan Hosting,
Inc. and City-Guide ISP, Inc.
10.4 Unconditional Corporate Guaranty, dated April 14, 2000, executed
by MegaMedia Networks, Inc.
10.5 Subscription and Registration Rights Agreement, dated April 14,
2000, between MegaMedia Networks, Inc. and City-Guide ISP, Inc.
EXHIBIT 10.1
PURCHASE AND SALE OF ASSETS AGREEMENT
BETWEEN
CITY-GUIDE ISP, INC.
DAVID MARSHLACK
DAN MARSHLACK
BRUCE C. HAMMIL
MARK DOLAN
AND
TITAN HOSTING, INC.
MEGAMEDIA NETWORKS, INC.
APRIL 14, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE 1. SALE OF ASSETS.......................................... 1
Section 1.1. Assets................................................ 1
Section 1.2. Sublease.............................................. 2
Section 1.3. Non-Assignment of Certain Contracts................... 2
Section 1.4. Permitted Liens....................................... 2
ARTICLE 2. PURCHASE PRICE.......................................... 2
Section 2.1. Consideration......................................... 2
ARTICLE 3. NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION.......... 3
Section 3.1. Non-Assumption of Liabilities......................... 3
Section 3.2. Assumption of Certain Obligations..................... 3
Section 3.3. Indemnification by Seller and Stockholders............ 4
Section 3.4. Indemnification by Buyer.............................. 5
Section 3.5. Procedure for Indemnification of Third Party Claims... 5
ARTICLE 4. CLOSING................................................. 6
Section 4.1. Time and Place of Closing............................. 6
Section 4.2. Deliveries by Seller and Stockholders................. 6
Section 4.3. Deliveries by Buyer................................... 7
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLERS AND
STOCKHOLDER............................................. 7
Section 5.1. Representations and Warranties........................ 7
Section 5.2. Survival.............................................. 10
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER................. 10
Section 6.1. Representations and Warranties........................ 10
Section 6.2. Representations Related to the MegaMedia Stock........ 10
Section 6.3. Governmental Authorization............................ 10
Section 6.4. Survival.............................................. 10
ARTICLE 7. CERTAIN POST-CLOSING COVENANTS OF SELLER AND BUYER..... 11
Section 7.1. Payment of Taxes; Filing of Returns................... 11
Section 7.2. Provision of Bandwidth to Seller...................... 11
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING......................... 11
Section 8.1. Conditions Precedent to Buyer's Performance........... 11
Section 8.2. Conditions Precedent to the Seller's and the
Shareholders' Performance............................. 12
ARTICLE 9. GENERAL................................................ 13
Section 9.1. Further Assurance..................................... 13
Section 9.2. Notices............................................... 13
Section 9.3. Entire Agreement...................................... 14
Section 9.4. Broker's Commission................................... 14
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Section 9.5. Modification; Remedies Cumulative..................... 14
Section 9.6. Severability.......................................... 14
Section 9.7. Availability of Records............................... 14
Section 9.8. Construction.......................................... 14
Section 9.9. Attorney's Fees....................................... 15
Section 9.10. Waiver................................................ 15
Section 9.11. Counterparts.......................................... 15
Section 9.12. Time is of the Essence................................ 15
Section 9.13. Governing Law......................................... 15
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PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is
executed and effective as of the 14th day of April, 2000, between MegaMedia
Networks, Inc., a Delaware corporation ("MegaMedia"), Titan Hosting, Inc., a
Delaware corporation ("Titan" or "Buyer") and City-Guide ISP, Inc., a Florida
corporation ("City-Guide" or "Seller"), and David Marshlack, Dan Marshlack,
Bruce C. Hammil and Mark Dolan (each a "Shareholder" and collectively the
"Shareholders").
P R E M I S E S:
Seller currently owns and operates an internet service provider
business at 412 East Madison Street, Suite 1207, Tampa, Florida 33602
(collectively, the "Business"). Seller desires to sell to Buyer, and Buyer
desires to acquire from Seller, certain of Seller's assets pertaining to the
Business and the assumption of specified liabilities related to the assets being
acquired, in accordance with and subject to the terms set forth in this
Agreement.
Shareholders own 100% of the outstanding capital stock of Seller, and
join in this Agreement for the purposes of making certain representations and
warranties to, and entering into certain covenants with, Buyer in connection
with the transactions set forth herein.
In consideration of the mutual promises and covenants herein contained
and other good and valuable consideration, received to the full satisfaction of
each of them, the parties hereby agree as follows:
A G R E E M E N T:
ARTICLE 1.
SALE OF ASSETS
SECTION 1.1. ASSETS. Subject to and upon the terms and conditions set
forth in this Agreement, at the Closing (as hereinafter defined), Seller will
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer will
purchase or acquire from the Seller free and clear of all Liens (other than
Permitted Liens (as hereinafter defined)), all of the right, title and interest
of Seller in and to the following properties, assets and rights of Seller
(collectively referred to as the "Assets"):
(a) the property set forth on SCHEDULE 1.1(A) hereto; and
(b) the dial-up contracts set forth on SCHEDULE 1.1(B) hereto
(the "Customer Contracts").
All of the Assets shall be delivered free and clear of any liens,
claims, pledges, security interests, mortgages or encumbrances of any kind
("Liens") other than the Permitted Liens (as hereinafter defined). The sale,
conveyance, assignment, transfer and delivery of the Assets shall be effected by
bills of sale, endorsements, assignments, or other instruments in such
reasonable
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or customary form as shall be requested by Buyer and its counsel. Seller shall
at any time from and after the Closing Date, upon the reasonable request of
Buyer and at Seller's expense, execute, acknowledge and deliver such additional
conveyances, assignments, transfers or other instruments, as may be reasonably
required to assign, transfer or convey the Assets to Buyer, or vest ownership of
such Assets in Buyer, as contemplated by this Agreement.
SECTION 1.2. SUBLEASE. In addition to the acquisition of the Assets,
Seller shall sublease to Buyer the premises located commonly known as 412 East
Madison Street, Suite 1207, Tampa, Florida 33602, and comprising approximately
3,586 square feet (the "Premises"), and shall deliver to Buyer prior to Closing
(i) a sublease in form and substance satisfactory to Buyer and MegaMedia (the
"Sublease") and (ii) the consent of lessor under the Master Lease (defined in
Section 5.1(d) hereof) to Seller's subletting of the Premises.
SECTION 1.3. NON-ASSIGNMENT OF CERTAIN CONTRACTS. Notwithstanding
anything to the contrary in this Agreement, to the extent that the Sublease or
the assignment hereunder of any Customer Contracts or furniture and equipment
leases pertaining to the Assets and referenced on SCHEDULE 3.2 hereto (each a
"Contract" and collectively the "Contracts") shall require the consent of any
third party, neither this Agreement nor any action taken pursuant to its
provisions shall constitute an assignment or an agreement to assign if such
assignment or attempted assignment would constitute a breach thereof or result
in the termination, loss or diminution thereof; PROVIDED, HOWEVER, that in each
such case, Seller shall use its commercially reasonable efforts to obtain the
consent of such other party to such assignment to Buyer. Attached hereto as
SCHEDULE 1.3 hereto is a list of all Contracts requiring consent to their
assignment.
SECTION 1.4. PERMITTED LIENS. "Permitted Liens" for purposes of this
Agreement means the liens set forth on SCHEDULE 1.4 hereto, which represent the
only Liens on the Assets.
ARTICLE 2.
PURCHASE PRICE
SECTION 2.1. CONSIDERATION.
(a) In consideration of the sale, conveyance, transfer and delivery of
the Assets and entering into the Sublease, Buyer shall, on the Closing Date:
(i) deliver to Seller a certified check for immediately
available funds in the amount of $1,000,000 (the "Cash Payment"); and
(ii) deliver to Seller a convertible promissory note in the
principal amount of $720,000, bearing interest at the lowest interest
rate per annum imputed by the Internal Revenue Service for a note of
this nature, payable at $30,000 per month, including interest, and the
outstanding principal balance of which shall be convertible at any time
at the discretion of Seller into shares of common stock of MegaMedia at
a conversion rate of $3.00 per share (the "Note"); and
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(iii) deliver to Seller 200,000 shares of common stock of
MegaMedia (the "MegaMedia Stock").
The Cash Payment, the Note, the MegaMedia Stock and Buyer's assumption of the
Assumed Liabilities, constitutes the entire consideration payable by Buyer in
connection with its acquisition of the Assets (the "Purchase Price").
ARTICLE 3.
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
SECTION 3.1. NON-ASSUMPTION OF LIABILITIES. Except as explicitly set
forth in Section 3.2 below, Buyer shall not, by the execution and performance of
this Agreement or otherwise, assume, become responsible for or incur any
liability or obligation of any nature of Seller, whether legal or equitable,
matured or contingent, known or unknown, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to, at
or after the date of this Agreement including, any liability or obligation
arising out of or relating to:
(a) an occurrence or circumstance (whether known or unknown)
which occurs or exists on or prior to the date of this Agreement and
which constitutes, or which by the lapse of time or giving notice (or
both) would constitute, a breach or default under any lease, contract,
or other instrument or agreement (whether written or oral);
(b) a violation of the requirements of any governmental
authority or of the rights of any third person, including, without
limitation, any requirements relating to the reporting and payment of
federal, state, local or other income, sales, use, franchise, excise or
property tax liabilities of Seller;
(c) any indebtedness, accounts payable or other obligations,
including without limitation obligations in respect of federal, state
or local taxes, of Seller; or
(d) any other liability arising out of or attributable to the
operation of the Business by Seller (including, without limitation, any
obligations in respect of taxes and accounts payable), except to the
extent expressly assumed by Buyer pursuant to Section 3.2 hereof.
Seller agrees to indemnify Buyer, and its respective successors and
assigns from and against all the above non-assumed liabilities and obligations
in accordance with Section 3.3.
SECTION 3.2. ASSUMPTION OF CERTAIN OBLIGATIONS. Pursuant to this
Agreement, and as part of the consideration paid by Buyer hereunder, Buyer
assumes and undertakes to discharge and perform the obligations of Seller (a)
only as set forth on SCHEDULE 3.2 hereto; and PROVIDED that Buyer shall have no
liability in connection any such obligation in any amount in excess of the
amount of such obligation shown on SCHEDULE 3.2 hereto; and (b) pursuant to the
express terms of those Customer Contracts set forth on SCHEDULE 1.1(B) hereto.
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SECTION 3.3. INDEMNIFICATION BY SELLER AND SHAREHOLDERS.
Notwithstanding any investigation at any time made by or on behalf of Buyer or
MegaMedia, Seller and each Shareholder agrees to defend, indemnify and hold
harmless, MegaMedia, Buyer, their respective officers, shareholders, directors,
divisions, subdivisions, affiliates, parent, employees, agents, successors and
assigns from and against all losses, claims, actions, causes of action, damages,
liabilities, expenses and other costs of any kind or amount whatsoever
(including, without limitation, reasonable attorneys' fees), whether equitable
or legal, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, which result, either before or
after the date of this Agreement (any and all of the foregoing collectively
referred to herein as "Losses"), from or in connection with any:
(a) inaccuracy in or breach of any representation or warranty
made by Seller in this Agreement;
(b) failure of Seller or any Shareholder to duly perform and
observe any term, provision, covenant, agreement or condition under
this Agreement;
(c) material misrepresentation in or omission from any
Schedule to this Agreement;
(d) failure of Seller to use commercially reasonable efforts
to obtain any required consent to a Contract requiring such consent as
listed in SCHEDULE 1.2 hereto (including, without limitation,
reimbursement to Buyer of the value of such nonassigned Contract);
(e) liability of Seller resulting from one or more pending or
threatened lawsuits whether or not listed on SCHEDULE 5.1(E) hereto;
(f) liability of Seller to creditors of Seller which is
imposed on Buyer whether as a result of bankruptcy proceedings or
otherwise and whether as an account payable by Seller, (other than
those included in the Assumed Liabilities) or as a claim of alleged
preferential payments within the meaning of the United States
Bankruptcy Code or otherwise;
(g) liability of Seller or any or all Shareholders, including
liabilities for taxes, of any type other than the Assumed Liabilities
whether or not disclosed herein;
(h) any of the matters set forth in Section 3.1(a) - (d)
hereof.
Buyer shall be deemed to have suffered such Loss or to have paid or to have
become obligated to pay any sum or amount with respect to the matters referred
to in subparagraphs (a) - (h) of this Section 3.3 if the same shall be suffered,
paid or incurred by Buyer or any parent, subsidiary, affiliate, or successor of
Buyer. The amount of the Loss deemed to be suffered, paid or incurred by Buyer
shall be an amount equal to the Loss, suffered, paid or incurred by such parent,
subsidiary, affiliate, or successor. The foregoing indemnity shall fully apply
to any claim or action that seeks or results in any injunction or other
direction or restriction on the free and
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unfettered use of the Assets by Buyer, and Seller and the Shareholders shall
jointly and severally indemnify and hold harmless Buyer from all Losses,
directly or indirectly related to, or caused by, Buyer's compliance with any
such injunction, direction or restriction. In the event Buyer, in its sole
discretion, elects to seek recovery from an insurance company or other third
party with respect to any claim for indemnification hereunder, to the extent
Buyer actually receives payment with respect to such claim from such third
party, the amount of the Loss shall be reduced by the amount of such insurance
payment received, net of any increase in premiums for such insurance related to
such claim that are payable within two years of the date such claim is made.
SECTION 3.4. INDEMNIFICATION BY BUYER. Buyer agrees to defend,
indemnify and hold harmless Seller, Shareholders, their respective officers,
directors, divisions, affiliates, employees, agents, successors and assigns from
and against all Losses from or in connection with any:
(a) inaccuracy in, or material breach of, any representation
or warranty made by Buyer in this Agreement;
(b) failure of Buyer in any material respect to perform and
observe any term, provision, covenant, agreement or condition under
this Agreement; and
(c) failure of Buyer to perform or pay any Assumed Liability.
In the event such Seller or any Shareholder elects to seek recovery
from an insurance company or other third party with respect to claim for
indemnification under this Section 3.4, to the extent Seller or any Shareholder
actually receives payment with respect to such claim from such third party, the
amount of any Loss shall be reduced by the amount of such insurance payment
received, net of any increase in premiums for such insurance related to such
claim that are payable within two years of the date such claim is made.
SECTION 3.5. PROCEDURE FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. After
a party hereto (hereinafter the "Indemnified Party") has received notice of or
has knowledge of any claim by a person not a party to this Agreement ("Third
Person") or the commencement of any action or proceeding by a Third Person, the
Indemnified Party shall, in connection with making a claim with respect thereto
against any party obligated to provide indemnification pursuant to this
Agreement (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding
(the "Notice"). The Notice shall state the nature and the specific basis of such
claim and a reasonable estimate of the amount thereof. The Indemnified Party's
failure to give notice pursuant to this Section to the Indemnifying Party shall
not relieve the Indemnifying Party of any liability the Indemnifying Party may
have to the Indemnified Party pursuant hereto. The Indemnifying Party, after
receipt of the Notice, shall defend and settle, at its own expense and by its
own counsel, each such matter; provided, however, that the Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the third party claim without the prior written consent of the
Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to participate in any matter through counsel of its own choosing.
Such separate representation shall be at the cost and expense of
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the Indemnified Party as long as the Indemnifying Party is pursuing the defense
of such matter diligently, reasonably and in good faith. If the Indemnifying
Party within fifteen (15) days fails to acknowledge in writing to the
Indemnified Party its obligation to defend any such matter or does not assume
the defense hereunder within fifteen (15) days diligently, reasonably and in
good faith, the Indemnified Party may undertake such defense through counsel of
its choice and at the Indemnifying Party's expense. Notwithstanding the
foregoing, if a claim relates to any environmental condition, or to an
injunction or other equitable relief with respect to the operation or condition
of the Business, or in Buyer's opinion would affect the operation or condition
of the Business, Buyer shall nevertheless notify the Indemnified Party but Buyer
may take all such actions as it deems advisable in respect of such matter, and
may defend such claim with Buyer's own personnel and counsel, consultants and
other parties of its own choosing. Seller and Shareholders shall reimburse Buyer
for such defense by Buyer for all losses, damages and liabilities, including but
not limited to, fees of attorneys, consultants or other third parties engaged by
Seller, and Shareholders or Buyer in respect of any such claim or proceeding or
litigation or settlements resulting therefrom.
ARTICLE 4.
CLOSING
SECTION 4.1. TIME AND PLACE OF CLOSING. The closing of the purchase and
sale of the Assets (the "Closing") shall take place at 3:00 p.m. on April 14,
2000 (the "Closing Date") at the offices of Seller, 412 East Madison Street,
Suite 1000, Tampa, Florida 33602, unless an alternative time and place is
mutually agreed to by Buyer and Seller. All documents may be exchanged by mail,
carrier, or other means.
SECTION 4.2. DELIVERIES BY SELLER AND SHAREHOLDERS. On the Closing
Date, Seller will deliver the following:
(a) a Bill of Sale, Assignment and Assumption of Liabilities
Agreement, in form and substance satisfactory to Buyer and MegaMedia,
conveying, selling, transferring and assigning to Buyer all of the
Assets (the "Bill of Sale");
(b) a certificate confirming that the representations and
warranties of Seller set forth herein were true and correct on and as
of the Closing Date and that all covenants to be performed by Seller as
of such date had been fully performed and complied with;
(c) certified resolutions of the Board of Directors and the
Shareholders of Seller, in form reasonably satisfactory to counsel for
Buyer, authorizing the Seller's execution, delivery and performance of
this Agreement, and all actions to be taken by Seller hereunder;
(d) good standing certificate evidencing active corporate
status of Seller in Florida as of a date not more than five (5)
calendar days prior to the Closing Date;
(e) the Sublease, in form and substance satisfactory to Buyer
and MegaMedia;
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(f) a subscription agreement (contained in the Registration
Rights Agreement defined in Section 4.3(c), below);
(g) an opinion of Seller's counsel in form and substance
satisfactory to Buyer; and
(h) such other additional instruments of sale, assignment or
transfer as may be reasonably required by Buyer.
SECTION 4.3. DELIVERIES BY BUYER. On the Closing Date, Buyer will
deliver to Seller the following:
(a) the Cash Payment, the Note and the MegaMedia Stock;
(b) a security agreement securing the payment of the Note in
form and substance satisfactory to the parties hereto (the "Security
Agreement");
(c) a subscription and registration rights agreement providing
for certain piggy-back registration rights for the MegaMedia Stock and
the securities underlying the Note, in form and substance satisfactory
to the parties hereto (the "Registration Rights Agreement");
(d) a guaranty of the Note in form and substance satisfactory
to MegaMedia and Seller (the "Guaranty");
(e) a certificate confirming that the representations and
warranties of Buyer set forth herein were true and correct on and as of
the Closing Date and that all covenants to be performed by Buyer as of
such date have been fully performed and complied with;
(f) certified resolutions of the Board of Directors of Buyer
and MegaMedia in form reasonably satisfactory to counsel for Seller and
Shareholders, authorizing Buyer's and MegaMedia's execution, delivery
and performance of this Agreement, and all actions to be taken by Buyer
and MegaMedia hereunder; and
(g) an opinion of Buyer's counsel on form and substance
satisfactory to Seller's counsel.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 5.1. REPRESENTATIONS AND WARRANTIES. Seller and Shareholders
jointly and severally represent and warrant to Buyer that:
(a) EXISTENCE AND GOOD STANDING; CONFLICTS; AUTHORITY. Seller
has full power and capacity, is under no legal restraint, and has all
necessary authority to enter into this Agreement, perform Seller's
obligations hereunder and consummate the transactions contemplated
hereby. Seller is a corporation duly organized and constituted
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and in good standing under the laws of the State of Florida. The
execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the compliance by Seller with the
terms of this Agreement do not and will not conflict with or result in
a breach of any terms of, or constitute a default under, Seller's
Certificate of Incorporation or Bylaws or, any material agreement or
instrument to which Seller is a party or by which it is bound. The
execution and delivery of this Agreement by the Seller, the performance
and compliance with all the terms and conditions hereof to be performed
and complied with by the Seller, and the consummation by the Seller of
the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Seller. This Agreement
constitutes a valid obligation of Seller enforceable in accordance with
its terms except as limited by (i) bankruptcy, insolvency,
reorganization or other such laws concerning the rights of creditors
and (ii) general principles of equity.
(b) CONTRACTS.
(i) CONTRACTS. A complete and accurate set of all
Contracts have been delivered to Buyer prior to the execution
of this Agreement. Seller has in all material respects
performed all obligations required to be performed by it under
the Contracts prior to the Closing Date, and to the best of
Seller's knowledge, no other party to such Contracts has in
any material respect breached any such Contract or is in any
material respect in default thereunder.
(ii) CUSTOMER CONTRACTS. Except as set forth on
SCHEDULE 1.2 hereto, Seller is currently providing services
pursuant to each Customer Contract; and all Customer Contracts
are (and will be immediately following the Closing Date) in
existence and in full force and effect and are valid, binding
and enforceable against the respective parties thereto in
accordance with their respective provisions.
(c) TITLE TO THE ASSETS. Seller has good and marketable title
to its Assets, free and clear of all Liens (other than Permitted
Liens). By virtue of the grant, conveyance, sale, transfer, and
assignment of the Assets hereunder, Buyer shall receive good and
marketable title to the Assets, free and clear of all Liens other than
Permitted Liens. The Assets include all of the permits, licenses,
franchises, consents and other approvals necessary or desirable to
conduct the Business. The Assets that are tangible Assets are in good
working condition, ordinary wear and tear excepted.
(d) MASTER LEASE; SUBLEASE. Attached as SCHEDULE 5.1(D) hereto
is a true and correct copy of the master lease between Seller and
Madison Building, Inc. (the "Landlord") regarding the Premises (the
"Master Lease"). Neither Seller nor the Landlord is in default under
the Master Lease. Seller has authority to enter into the Sublease for
the Premises, has obtained all consents necessary to enter into the
Sublease, and the Sublease will constitute an agreement of Seller
enforceable in accordance with its
8
<PAGE>
terms except as limited by (i) bankruptcy, insolvency, reorganization
or other such laws concerning the rights of creditors and (ii) general
principles of equity.
(e) LITIGATION. Except as set forth on SCHEDULE 5.1(E) hereto,
there is no claim, litigation, action, suit or proceeding,
administrative or judicial, pending or threatened against Seller
involving the Assets, the Premises or the transactions set forth
herein, at law or in equity, before any federal, state or local court
or regulatory agency, or other governmental authority. Seller has
received no notice of any of the above and no facts or circumstances
exist which would, with the passage of time or giving of notice (or
both), give rise to any of the above.
(f) EMPLOYEE RELATIONS AND BENEFIT PLANS. Seller has no
employee benefit plans or arrangements that are subject to the
provisions of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA").
(g) SCHEDULES INCORPORATED BY REFERENCE. The making of any
recitation in any Schedule hereto shall be deemed to constitute a
representation and warranty that such recitation is an accurate
statement and disclosure of the information required by the
corresponding Section(s) of this Agreement, as, to the extent, and
subject to the qualifications and limitations, set forth in such
corresponding Section(s).
(h) INVESTMENT. All shares of MegaMedia Stock which the Seller
shall acquire pursuant to this Agreement will be acquired by the Seller
for its own account, for investment purposes only, and not with a view
to the resale or distribution thereof, except soley to the Shareholders
in a liquidating distribution or similar event. The Seller and
Shareholders hereby acknowledge that (A) they have received information
about MegaMedia or have been provided access to such information and
have been provided opportunities to ask questions of and receive
answers from MegaMedia's management regarding such information; (B) the
MegaMedia Stock is restricted and may not be sold or otherwise
transferred except pursuant to registration under federal and state
securities laws or an exemption therefrom and the certificates
representing the MegaMedia Stock will bear a legend accordingly.
(i) DISCLOSURE AND DUTY OF INQUIRY. Neither MegaMedia nor
Buyer will be required to undertake any independent investigation to
determine the truth, accuracy and completeness of the representations
and warranties made by the Seller and Shareholders in this Agreement.
(j) DISCLOSURE. The representations and warranties contained
in this Section 5.1 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 5.1 not
misleading. If Seller becomes aware of any fact or circumstance which
would change a representation or warranty of Seller in this Agreement,
it shall immediately give notice of such fact or circumstance to Buyer.
However, such notification shall not relieve Seller of its obligations
under this Agreement, and at the sole
9
<PAGE>
option of Buyer, the truth and accuracy of any and all warranties and
representations of Seller at the date of this Agreement and on the
Closing Date, shall be a precondition to the consummation of this
transaction. All information or materials provided by Seller (or its
respective agents or employees) to Buyer or its agents or employees in
connection with Buyer's examination of the business, assets and
prospects of Seller have, in each case, been true and correct.
SECTION 5.2. SURVIVAL. Each of the covenants, representations and
warranties set forth in this Article 5 or elsewhere in this Agreement
shall survive the Closing Date and the transfer of the Assets and shall
remain in effect forever without any limitation as to time.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 6.1. REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
(a) CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) AUTHORIZATION. Buyer has all requisite corporate power and
corporate authority to enter into this agreement, perform its
respective obligations hereunder and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the compliance
by Buyer with the terms of this Agreement do not and will not conflict
with or result in a breach of any terms of, or constitute a default
under, its Articles of Incorporation or Bylaws or, in any material
respect, any material agreement or instrument to which Buyer is a party
or by which it is bound. All necessary corporate action has been taken
by Buyer with respect to the execution and delivery of this Agreement,
and this Agreement constitutes a valid obligation of Buyer enforceable
in accordance with its terms except as limited by bankruptcy,
insolvency, reorganization or other such laws concerning the rights of
creditors.
SECTION 6.2. REPRESENTATIONS RELATED TO THE MEGAMEDIA STOCK. The shares
of MegaMedia Stock to be received by Seller pursuant to this Agreement will,
when issued and delivered to Seller, be duly and validly issued, fully paid,
nonassessable shares of common stock of MegaMedia.
SECTION 6.3. GOVERNMENTAL AUTHORIZATION. Neither the execution,
delivery or performance by Buyer of this Agreement requires any action by or in
respect of, or filing with, any governmental body, agency, official or
authority.
SECTION 6.4. SURVIVAL. Each of the covenants, representations and
warranties set forth in this Article 6 or elsewhere in this Agreement shall
survive the Closing Date and the transfer of the Assets and shall remain in
effect forever without any limitation as to time.
10
<PAGE>
ARTICLE 7.
CERTAIN POST-CLOSING COVENANTS OF SELLER AND BUYER
SECTION 7.1. PAYMENT OF TAXES; FILING OF RETURNS. (a) Seller shall
remain liable for the filing of all tax returns and reports and for the payment
of all federal, state and local taxes of Seller relating to the operation of its
Business and the sale of the Assets and Seller and Shareholders shall remain
jointly and severally liable for the payment of all taxes attributable to or
relating to the consummation of the transactions contemplated herein, and shall
indemnify and hold Buyer harmless from and against all liability in connection
therewith, and (b) Seller and Shareholders shall jointly and severally bear the
responsibility for sales, use or other similar taxes, if any, arising out of the
consummation of the transactions herein provided for and shall be liable for the
filing of all necessary tax returns and reports with respect to such taxes.
SECTION 7.2. PROVISION OF BANDWIDTH TO SELLER. Buyer hereby agrees to
provide bandwidth to Seller, in amounts specified in orders placed by Seller
with Buyer; and, to the extent Seller's orders exceed the amount of bandwidth
that Buyer can then provide, Buyer shall use commercially reasonable efforts to
obtain additional bandwidth for Seller, subject to such additional bandwidth
being available to Buyer. Seller acknowledges that Buyer will be obtaining the
bandwidth from one or more third party providers. The price Buyer shall charge
Seller and the price Seller shall pay to Buyer for such bandwidth shall be equal
to Buyer's cost of obtaining such bandwidth plus fifteen percent (15%). The cost
of all equipment necessary to fulfill Seller's bandwidth orders, and all labor
and installation of equipment, wiring, connections, etc., necessary to deliver
such bandwidth to Buyer shall be borne solely by Seller. As soon as practicable
after Closing, Buyer and Seller shall enter into a definitive agreement
reflecting the foregoing terms and such other terms and provisions as is typical
of agreements between Buyer and its third party providers of bandwidth.
ARTICLE 8.
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.1. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all the following conditions, any one or more of which may be waived in
writing by Buyer:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by Seller and the Shareholders in
this Agreement, in any Schedule(s) hereto, and/or in any written
statement delivered to Buyer under this Agreement shall be true and
correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of that
date.
(b) Performance. The Seller and the Shareholders shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by them on or before the Closing Date.
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<PAGE>
(c) Absence of Litigation or Other Proceeding. No action, suit
or proceeding by or before any court or any governmental body or
authority, against the Seller or pertaining to the transactions
contemplated by this Agreement or their consummation, shall have been
instituted on or before the Closing Date, which action, suit or
proceeding would, if determined adversely, have a material adverse
effect on the Business, operations or prospects of the Seller.
(d) Consents. All necessary disclosures to and agreements and
consents of (a) any parties to any Contracts and/or any licensing
authorities which are material to the Assets and the consummation of
the transactions contemplated by this Agreement, and (b) any
governmental authorities or agencies to the extent required in
connection with the transactions contemplated by this Agreement, shall
have been obtained, shall be in such form as shall be satisfactory to
Buyer and true and complete copies thereof shall be delivered to Buyer
on or before the Closing Date.
(e) Condition of Property. Between the date of the appraisal
of the Assets by WinSpeed, Inc. dated March 27, 2000 (the "Appraisal")
and the Closing Date, Assets of the Seller having an appraised value in
the aggregate of $10,000.00 or more shall not have been lost, destroyed
or irreparably damaged by fire, flood, explosion, theft or any other
cause, unless covered by insurance.
(f) Satisfactory Due Diligence Investigation. Buyer, in its
sole and absolute discretion, shall be satisfied with the results of
its due diligence investigation of, without limitation, the
Shareholders, the Seller, and the Seller's Business.
(g) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incidental thereto,
shall be reasonably satisfactory in form and substance to Buyer and
MegaMedia.
SECTION 8.2. CONDITIONS PRECEDENT TO THE SELLER'S AND THE SHAREHOLDERS'
PERFORMANCE. The obligations of the Seller to consummate the transactions
contemplated hereunder and of the Shareholders to consummate the transactions
contemplated by this Agreement are further subject to the satisfaction, at or
before the Closing Date, of all of the following conditions, any one or more of
which may be waived in writing by, as applicable, the Seller or the
Shareholders:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by Buyer in this Agreement and/or
in any written statement delivered by Buyer under this Agreement shall
be true and correct in all material respects on and as of the Closing
Date as though such representations and warranties were made on and as
of that date.
(b) Performance. Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Buyer on or
before the Closing Date.
12
<PAGE>
(c) Proceedings and Instruments Satisfactory. All proceedings
to be taken in connection with the transactions contemplated by this
Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to Seller and the Shareholders.
ARTICLE 9.
GENERAL
SECTION 9.1. FURTHER ASSURANCE. From time to time after the Closing
Date, Seller will, without further consideration, execute and deliver such other
instruments of conveyance and transfer, and take such other action including,
without limitation, assistance in connection with litigation, as Buyer
reasonably may request to more effectively convey and transfer to and vest in
Buyer and to put Buyer in possession of the Assets to be transferred hereunder.
Seller and Shareholders hereby covenant and agree to use all reasonable efforts
to assist Seller in filing all applicable reports and forms with the Securities
and Exchange Commission (including a Report on Form 8-K, if applicable,
reporting the transactions set forth herein) or any other governmental or
regulatory entity.
SECTION 9.2. NOTICES. All notices or communications required or
permitted under this Agreement shall be given in writing and served either by
personal delivery, overnight courier or by deposit in the United States mail and
sent by first class registered or certified mail, return receipt requested,
postage prepaid:
If to Buyer or c/o MegaMedia Networks, Inc.
MegaMedia: 57 West Pine Street
Orlando, Florida 32801
Attention: Steven Noble
with copy to: Greenberg Traurig, P.A.
111 North Orange Avenue
20th Floor
Orlando, Florida 32801
Attention: Sandra Gordon, Esq.
If to Seller: City-Guide ISP, Inc.
412 E. Madison Street, Suite 1000
Tampa, Florida 33602
Attention: David Marshlack
13
<PAGE>
with copy to: Battaglia, Ross, Dicus & Wein
980 Tyrone Blvd.
St. Petersburg, Florida 33710
Attention: Aubry Dicus, Esq.
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three days after deposit in the U.S.
mail as provided above, or when actually received, if earlier. Any party may
change the address for notices or communications to be given to it by written
notice to the other party given as provided in this Section 9.2.
SECTION 9.3. ENTIRE AGREEMENT. This Agreement, the Schedules hereto and
the other agreements referred to herein constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings, oral or
written, relative to said subject matter.
SECTION 9.4. BROKER'S COMMISSION. If for any reason a commission or fee
shall become due, the party dealing with such dealer, broker or agent shall pay
such commission or fee and agrees to indemnify and save the other party harmless
from all claims for such commission or fee and from all attorneys' fees,
litigation costs and other expense relating to such claim.
SECTION 9.5. MODIFICATION; REMEDIES CUMULATIVE. This Agreement may not
be changed, amended, terminated, augmented, rescinded or otherwise altered, in
whole or in part, except by a writing executed by the parties hereto. No right,
remedy or election given by any term of this Agreement shall be deemed exclusive
but each shall be cumulative with all other rights, remedies and elections
available at law or in equity.
SECTION 9.6. SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable and so as to most
nearly retain the intent of the parties. If such modification is not possible,
such provision shall be severed from this Agreement. In either case the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired hereby.
SECTION 9.7. AVAILABILITY OF RECORDS. Each party shall cooperate in
providing the other party with copies of, or reasonable access to, (a) such
records as may need in connection with any audit, claim, challenge or review of
Seller's tax liabilities and (b) such business records as Buyer may reasonably
deem relevant to its operation of the Business and the Assets.
SECTION 9.8. CONSTRUCTION. Buyer and Seller have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by Buyer and Seller and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word
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<PAGE>
"including" shall mean including without limitation. The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
SECTION 9.9. ATTORNEY'S FEES. In the event any litigation to enforce
the terms of this Agreement or in the event of arbitration, the prevailing party
shall be awarded against the non-prevailing party, its reasonable attorney's
fees and costs, including those incurred at all levels of proceedings.
SECTION 9.10. WAIVER. The waiver of any of the terms or conditions of
this Agreement shall not be construed as a waiver of any other term or condition
hereof.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
SECTION 9.12. TIME IS OF THE ESSENCE. Time is of the essence of each
and every provision of this Agreement and any exhibit, modification, or addendum
hereto.
SECTION 9.13. GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SELLER:
CITY-GUIDE ISP, INC., a Florida corporation
By: /s/ David G. Marshlack
----------------------------------
Name: David G. Marshlack
Title: President
BUYER:
TITAN HOSTING, INC., a Delaware corporation
By: /s/ Steven H. Noble, III
----------------------------------
Name: Stephen H. Noble, III
----------------------------------
(a/k/a Steve Noble and Steven Noble)
Title: Vice President
----------------------------------
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<PAGE>
MEGAMEDIA:
MEGAMEDIA NETWORKS, INC.
By: /s/ Stephen H. Noble, III
----------------------------------
Name: Stephen H. Noble, III
----------------------------------
(a/k/a Steve Noble and Steven Noble)
Title: Chief Financial Officer
----------------------------------
SHAREHOLDERS:
/s/ David Marshlack
----------------------------------
David Marshlack
/s/ DanMarshlack
----------------------------------
Dan Marshlack
/s/ Bruce C. Hammil
----------------------------------
Bruce C. Hammil
/s/ Mark Dolan
----------------------------------
Mark Dolan
16
<PAGE>
SCHEDULE 1.1(A)
(I) FURNITURE, FIXTURES AND EQUIPMENT IDENTIFIED ON EXHIBIT A ATTACHED
HERETO
All items on the attached Exhibit A are free and clear of encumbrances
and not subject to any leases.
(II) THE FOLLOWING EQUIPMENT LEASES/AGREEMENTS:
1. UUNET OC Direct Burstable OC-3C Agreement dated July 30, 1999
2. AT&T Master Agreement dated November 21, 1999 for Internet
Service Contract Management and AT&T Internet Transport
Services Agreement.
3. AT&T Internet Services Contract Management Agreement dated
December 13, 1999, Reference No. MDS991101155342.
4. Time Warner Telecom Agreement dated January 5, 2000 for 3
on-net access facilities for AT&T dedicated Internet
5. Intermedia Communications Business Internet Service Ofder
dated November 21, 1999
6. Sprint Custom Service Agreement dated November 19, 1999,
Reference No. BSG 9910-114R3.
<PAGE>
SCHEDULE 1.1(B)
CUSTOMER CONTRACTS
Dial-Up Accounts
Monthly Monthly
Type of Account Quantity Charge Revenue
- --------------------------------------------------------------------------------
128k ISDN 37 19.95 738.15
128k ISDN Dialup 1 Year Plan 4 19.95 79.80
56k/64k Dialup 1 Year Plan 67 9.95 666.65
56k/64k Dialup 3 Year Plan 1 9.95 9.95
56k/64k Dialup Free-Setup 1,371 9.95 13,641.45
1 Year Plan 32 7.95 254.40
monthly dial-up access Pinellas 905 7.95 7,194.75
Three month plan Pinellas 28 7.95 222.60
Added Services Only 21 7.95 166.95
ADSL Bronze 128/768k 15 15.95 239.25
Custom Dedicated ip 1 45.00 45.00
Employee Discount 1 -- --
Free Month 56k/64k 76 -- --
Personal Webhost Package 1 19.95 19.95
----- ----- -----------
Total 2,560 $ 23,278.90
<PAGE>
SCHEDULE 1.3
CONTRACTS REQUIRING CONSENT TO ASSIGNMENT TO BUYER
1. Consent of Madison Building, Inc., Landlord, to Sublease of Premises by
Seller to Buyer.
2. AT&T Agreements - assignable with prior written consent of the other
party, except that either party may, without the other party's consent,
assign the agreements or any attach- ments to the agreements to a
present or future affiliate or successor, provided that any such
assignment by Customer (City-Guide) shall be contingent upon AT&T
determining the assignee to be creditworthy and in compliance with any
eligibility criteria imposed by AT&T.
<PAGE>
SCHEDULE 1.4
PERMITTED LIENS
None, other than:
(a) Liens of Lessors of Equipment Leases being assumed by
Buyer and identified on Schedule 3.2; and
(b) The lien of Seller on the Assets being acquired hereunder
and evidenced by the Security Agreement, excluding the Customer
Contracts (Dial-Up accounts) set forth on Schedule 1.1(b).
<PAGE>
SCHEDULE 3.2
ASSUMED LIABILITIES
The following amounts payable under applicable Leases, and the other
obligations of such Leases:
Entity Monthly Amount
- -------------------------- --------------
Madison Building, Inc.
Sublease 3,828 (representing amount payable under
Sublease to be entered into by and
between Seller and Buyer)
ATT - OC3* 54,000
ATT - OC3* 18,000
UUNET* 54,520
Time Warner* 6,592
Intermedia* 42,590
Sprint* 52,393
*Referenced under (ii) on
Schedule 1.1(a).
<PAGE>
SCHEDULE 5.1(D)
MASTER LEASE
A copy of the Master Lease is attached.
<PAGE>
SCHEDULE 5.1(E)
LITIGATION
NONE
TO COME
TO COME
TO COME
EXHIBIT 10.5
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of April,
2000 by and between MegaMedia Networks, Inc.,. a Delaware corporation (the
"Company"), and City-Guide ISP, Inc., a Florida corporation (the "Subscriber").
W I T N E S S E T H:
-------------------
WHEREAS, Subscriber is selling certain assets to Titan Hosting, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company ("Buyer")
pursuant to a Purchase and Sale of Assets Agreement between Buyer, Subscriber,
the Company and the shareholders of Subscriber dated of even date herewith (the
"Purchase Agreement"), and as part of the purchase price for such assets, the
Company has agreed to issue to Subscriber 200,000 shares of the Company's common
stock, $.01 par value (the "Purchase Shares"); and
WHEREAS, ; and Buyer will be issuing to Subscriber as part of the
purchase price for the assets being acquired a $720,000 promissory note
convertible into shares of common stock of the Company at a conversion price of
$3.00 per share (the "Conversion Shares", and together with the Purchase Shares,
shall be collectively referred to as the "Shares"); and
WHEREAS, the terms of the Purchase Agreement for the assets provides
for piggy-back registration rights for the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto do hereby agree as follows:
1. Purchase of Stock. Upon closing of the asset purchase as
contemplated in the Purachase Agreement, the Company shall cause to be issued to
Subscriber a stock certificate or stock certificates for an aggregate of 200,000
shares of the Company's Common Stock (the "Purchase Shares") in partial
consideration for the acquisition of certain assets of Subscriber.
2. Conversion Shares: Upon the closing of the asset purchase as
contemplated in the Purchase Agreement, Subscriber will be issued a $720,000
promissory note, convertible at the discretion of Subscriber into shares of
common stock of the Company at a conversion rate of $3.00 per share (the
"Conversion Shares"). Hereinafter the Purchase Shares and the Conversion Shares
shall be collectively referred to as the "Shares."
3. Representations and Warranties. Subscriber hereby represents,
warrants and covenants to the Company that in connection herewith:
<PAGE>
(a) Review and Evaluation of Information regarding the
Company: The shareholders of Subscriber, and as applicable, its officers and
directors, have had an opportunity to examine the governing instruments and the
material documents and records of the Company, to ask questions and receive
answers from the representatives of the Company concerning the Company `s
financial condition and business and to obtain such other information that they
have deemed necessary to make a fully informed decision.
(b) Purchaser's Financial Experience. The shareholders of
Subscriber, and as applicable, its officers and directors, are sufficiently
experienced in financial and business matters to be capable of evaluating the
merits and risks of his investment in the Shares. The shareholders of
Subscriber, and as applicable, its officers and directors, are familiar with the
nature and risks attending investments
(c) Suitability of Investment. Subscriber understands that the
Shares are speculative investments and involve a high degree of risk, including
but not limited to: there is no guarantee of success of the business of the
Company; Subscriber may not receive any return (economic or otherwise) on its
investment, and management and the majority shareholders of the Company have
extreme latitude and generally, the sole discretion, to determine the financial
picture, operations and potential dissolution of the Company. Subscriber, its
shareholders and, as applicable, its officers and directors, have evaluated the
merits and risks of Subscriber's proposed investment in the Shares, including
those risks particular to Subscriber's and its shareholders' respective
financial and personal situation, respectively, and they have determined that
this investment is suitable for Subscriber. Subscriber has adequate financial
resources for an investment of this character, and at this time Subscriber could
bear a complete loss of its investment.
(d) Investment Intent. Subscriber is purchasing the Shares for
investment purposes only and for its own account, and has no present commitment,
agreement or intention to sell, distribute or otherwise dispose of any of them
or to enter into any such commitment or agreement.
(e) Unregistered Securities; Limitations on Disposition.
Subscriber understands that the Shares are being sold without registration under
federal or any state securities laws ("Securities Laws") by reason of specific
exemptions from registration and that the Company is relying on the information
given herein in its determination of whether such specific exemptions are
available. Subscriber understands that because the Shares have not been and will
not be registered under the Securities Laws, they cannot be sold unless and
until they are subsequently registered or an exemption from registration is
available. Subscriber acknowledges and understands that the certificates
evidencing the Shares will bear a restrictive legend to the effect of this
subprovision 3(e). Subscriber represents that he can afford to hold the Shares
for an indefinite period of time.
2
<PAGE>
(f) Non-Reliance. Subscriber is not relying on the Company or
any representation contained herein with respect to the tax or economic effect
of his investment in the Company.
(g) Prohibitions on Cancellation, Termination, Revocation,
Transferability, and Assignment. Subscriber hereby acknowledges and agrees that,
except as may be specifically provided herein or by applicable law, he is not
entitled to cancel, terminate, or revoke this Agreement, and this Agreement
shall survive his death or disability. Subscriber further agrees that he may not
transfer or assign his rights or obligations under this Agreement without the
written consent of the Company.
(h) Authority to Enter into Agreement. The Subscriber has the
full right, power, and authority to execute and deliver this Agreement and
perform its obligations hereunder.
4. Indemnification. Subscriber shall indemnify and hold
harmless the Company and its agents and counsel against any and all loss damage
liability or expense (including attorneys' fees and costs) which may be suffered
by reason of any breach of his representations, warranties or covenants
contained in Section 3 hereof.
5. Registration of Shares.
(a) Between the date of this Agreement and April 14, 2002, if
the Company shall determine to register its Common Stock for its own account or
the account of a security holder or holders pursuant to a registration statement
filed under the Securities Act of 1933, as amended (the "Securities Act") (other
than a registration relating solely to employee benefit plans, or in connection
with a business combination or reorganization on Form S-4 or other appropriate
form, or a registration on any registration statement form which does not permit
secondary sales) the Company will:
(i) promptly give to Subscriber written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Shares specified in a written request or requests,
made by Subscriber within fifteen (15) days after receipt of the written notice
from the Company described in clause (i) above except as set forth in Section
5(b) below. Such written request may specify all or a part of Subscriber's
Shares.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Subscriber as a part of the written notice given
pursuant to Section 5(a)(i). In such event, the right of Subscriber to
registration pursuant to this Section 5 shall be conditioned upon Subscriber's
participation in such underwriting and the inclusion of Subscriber in the
underwriting to the extent provided herein. If Subscriber proposes to distribute
his Shares through such underwriting, he shall (together with the Company and
other shareholders
3
<PAGE>
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 5, if the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the amount of Shares to
be included in the Company's proposed offering that are held by the Subscriber
and all other holders of securities requesting registration shall be reduced by
the amount indicated by the underwriter on a pro rata basis among all of such
holders, with such reduction allocated in proportion to the total number of
securities each of such holders, initially sought to have registered in
connection with the Company's proposed offering. If Subscriber disapproves of
the terms of any such underwriting he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any of Subscriber's Shares excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
Notwithstanding the foregoing, in connection with a registered public offering
involving an underwriting, to the extent that Subscriber's Shares are included
therein, Subscriber shall also enter into such agreements regarding the timing
of the sale of the Shares by Subscriber (i.e., lock-up agreement), as may be
required by the underwriter.
(c) Company Registration Expenses. In the case of any
registration effected pursuant to Section 5(a), the Company shall bear any
additional registration and qualification fees and expenses (not including stock
transfer taxes and underwriters' fees, discounts and commissions, which will be
the sole responsibility of Subscriber) and any additional costs and
disbursements of counsel for the Company that result from inclusion of Shares
held by the Subscriber in such registration.
(d) Registration Procedures. In the case of a registration
effected by the Company pursuant to Section 5(a), the Company will keep
Subscriber advised in writing as to the initiation of the registration and as to
the completion thereof. At its expense, the company will:
i) Keep such registration, qualification or
compliance pursuant to Section 5(a) effective until termination of the offering,
if an underwritten offering, or if not underwritten, for a period of ninety (90)
days or until Subscriber has completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
ii) Furnish such number of prospectuses and other
documents incident thereto as Subscriber from time to time may reasonably
request.
(e) Indemnification.
i) The Company will indemnify Subscriber, with
respect to which registration, qualification or compliance has been effected
pursuant to this Section 5, and each underwriter, if any, its officers,
directors and partners and each person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or amendment or
supplement thereto, or other
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document (including any related registration statement, notification amendment
or the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse Subscriber, each such
underwriter, its officers, directors and partners and each person who controls
any such underwriter, for any legal and any other expense reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by Subscriber or underwriter and stated to
be specifically for use in any of the foregoing documents.
ii) The Subscriber will, if Subscriber's Shares are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act and the rules and regulations
thereunder, each other party covered by the registration statement, and each of
their officers, directors and partners, and each person controlling such other
party, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, amendment or supplement thereto, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such directors,
officers, partners, persons, underwriters, other parties or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by Subscriber and stated to be specifically for use therein.
iii) Each party entitled to indemnification under this
subsection (f) (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
subsection (f). No
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Indemnifying Party, in the defense of any such claim or litigation shall, except
with the consent of each Indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(f) Information by Subscriber. Subscriber shall furnish to the
Company such information regarding Subscriber and the distribution proposed by
Subscriber as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 5.
6. Right to Terminate or Delay Registration. If deemed to be in the
best interests of the Company due pending unpublished material information, the
time necessary to complete financial statements, or other reason deemed
appropriate by the Company and counsel to the Company, the Company shall have
the right to delay, terminate or withdraw any registration initiated by it under
Section prior to the effectiveness of such registration, whether or not
Subscriber has elected to include Shares in such registration.
7. Governing Law; Jurisdiction. This Agreement will be governed by,
construed and enforced in accordance with the laws of the State of Florida.
8. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes and terminates any prior communication, agreement or
understanding, whether written or oral. This Agreement may be modified only by a
writing signed by all parties.
9. Notices. Whenever notice is provided for in this Agreement, it shall
be given in writing and hand delivered, or mailed by registered or certified
mail, return receipt requested, or sent by telecopier to the party or parties to
whom addressed at the addresses or telecopier numbers set forth on the signature
page of this Agreement. The date of delivery shall be the date received if
delivered by hand or sent by telecopier, or within three (3) days of mailing, if
mailed. Any party may change the address to which notice shall be delivered or
mailed by notice duly given.
10. Benefits. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, beneficiaries,
legal representatives, successors, and assigns (including successive as well a
immediate successors to and assigns of said parties).
11. Attorneys' Fees. In the event of suit or other legal proceeding,
including mediation or arbitration, to enforce the terms of this Agreement, the
prevailing party shall be entitled to collect from the non-prevailing party its
reasonable attorneys' fees, reasonable expenses and court costs, which shall
include any appellate proceeding.
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12. Severability. In the event that any of the provisions of this
Agreement, or portions thereof, are held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
13. Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the context
may require.
14. Section Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute but one and the same instrument.
MEGAMEDIA NETWORKS, INC.
By: /s/ Stephen H. Noble, III
------------------------------------
Print Name: Stephen H. Noble, III
(a/k/a Steve Noble and Steven Noble)
Its: Chief Financial Officer
Address: 57 W. Pine Street
Orlando, FL 32801
Telephone: (407) 245-3636
Facsimile: (407) 245-2943
SUBSCRIBER:
CITY-GUIDE ISP, INC.
By: /s/ David G. Marshlack
------------------------------------
Print Name: David G. Marshlack
------------------------------------
Its: President
------------------------------------
Address: 412 E. Madison St.
------------------------------------
Tampa, FL 33602
------------------------------------
Telephone: 813-223-3224
------------------------------------
Facsimile: 813-223-3623
------------------------------------
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