Document:

Annex II
	 	 to
	 	 Subscription
	 	 Agreement
	 	 

NEITHER THIS WARRANT NOR ISSUANCE OF THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF TO THE HOLDER HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.

THIS WARRANT MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 24.

 

	No.PF-D-1	Right to Purchase ______ Shares of Common Stock of Dwango North America Corp.

 

 

DWANGO NORTH AMERICA CORP.

Common Stock Purchase Warrant

DWANGO NORTH AMERICA CORP., a Nevada corporation, hereby certifies that, for value received, ______________ or registered assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5:00 p.m., New York City time, on the Expiration Date (such capitalized term and all other capitalized terms used herein having the respective meanings provided herein), ___________ fully paid and nonassessable shares of Common Stock at a purchase price per share equal to the Purchase Price. The Purchase Price is subject to adjustment as provided in
this Warrant.

As used herein the following capitalized terms, unless the context otherwise requires, have the following respective meanings:

“Aggregate Purchase Price” means at any time an amount equal to the product obtained by multiplying (x) the Purchase Price times (y) the number of shares of Common Stock for which this Warrant may be exercised at such time.

“Aggregation Parties” shall have the meaning provided in Section 1(b).

“AMEX” means the American Stock Exchange, Inc.

	 
	 	 	 
	

	 

“Board of Directors” means the Board of Directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to remain closed.

“Certificate of Designations” shall mean the Certificate of Designations of Series D Convertible Preferred Stock.

“Common Stock” includes the Company's Common Stock, par value $.001 per share, (and any purchase rights issued with respect to the Common Stock in the future) as authorized on the date hereof, and any other securities into which or for which the Common Stock (and any such rights issued with respect to the Common Stock) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise and any stock (other than Common Stock) and other securities of the Company or any other Person which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock.

“Common Stock Equivalents” means any warrant, option, subscription or purchase right with respect to shares of Common Stock, any security convertible into, exchangeable for, or otherwise entitling the holder thereof to acquire, shares of Common Stock or any warrant, option, subscription or purchase right with respect to any such convertible, exchangeable or other security.

“Company” shall include Dwango North America Corp., a Nevada corporation, and any corporation that shall succeed to or assume the obligations of Dwango North America Corp. hereunder in accordance with the terms hereof.

“Current Fair Market Value” means when used with respect to the Common Stock as of a specified date with respect to each share of Common Stock, the average of the closing prices of the Common Stock sold on all securities exchanges (including the Nasdaq and the Nasdaq SmallCap) on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on such day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 p.m., New York City time, or, if on such day the Common Stock is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked price on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of five Trading Days consisting of the day as of which the Current Fair Market Value of Common Stock is being determined (or if such day is not a Trading Day, the Trading Day next preceding such day) and the four consecutive Trading Days prior to such day. If on the date for which Current Fair Market Value is to be determined the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Current Fair Market Value of Common Stock shall be the highest price per share which the Company could then obtain from a willing buyer (not an employee or director of the Company at the time of determination) in an arms'-length transaction for shares of Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by the Board of Directors.

	 
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“Excluded Shares” shall have the meaning provided in Section 1(b).

“Expiration Date” means February 1, 2010.

“Issuance Date” means the date of original issuance of this Warrant.

“Nasdaq” means the Nasdaq National Market.

“Nasdaq SmallCap” means the Nasdaq SmallCap Market.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“1933 Act” means the Securities Act of 1933, as amended.

“NYSE” means the New York Stock Exchange, Inc.

“Other Securities” means any stock (other than Common Stock) and other securities of the Company or any other Person which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4.

“Person” means an individual, partnership, corporation, limited liability company, trust, unincorporated organization, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, governmental agency or any other form of entity not specifically listed herein.

“Purchase Price” means $1.68, subject to adjustment as provided in this Warrant.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Registration Period” shall have the meaning provided in the Subscription Agreement.

“Registration Statement” shall have the meaning provided in the Subscription Agreement.

“Restricted Ownership Percentage” shall have the meaning provided in Section 1(b).

	 
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“Restricted Securities” means securities that are not eligible for resale pursuant to Rule 144(k) under the 1933 Act (or any successor provision).

“Reorganization Event” means the occurrence of any one or more of the following events: 

(i)    any consolidation, merger or similar transaction of the Company or any Subsidiary with or into another entity (other than a merger or consolidation or similar transaction of a Subsidiary into the Company or a wholly-owned Subsidiary); or the sale or transfer of all or substantially all of the assets of the Company and the Subsidiaries in a single transaction or a series of related transactions; or

(ii)    the occurrence of any transaction or event in connection with which all or substantially all the Common Stock shall be exchanged for, converted into, acquired for or constitute the right to receive securities of any other Person (whether by means of a Tender Offer, liquidation, consolidation, merger, share exchange, combination, reclassification, recapitalization, or otherwise); or

(iii)    the acquisition by a Person or group of Persons acting in concert as a partnership, limited partnership, syndicate or group, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, of beneficial ownership of securities of the Company representing 50% or more of the combined voting power of the outstanding voting securities of the Company ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors.

“Rule 144A” means Rule 144A as promulgated under the 1933 Act.

“SEC” means the Securities and Exchange Commission.

“SEC Effective Date” shall have the meaning provided in the Subscription Agreement.

“Series D Preferred Stock” means the Series D Convertible Preferred Stock, $0.001 par value, of the Company issued pursuant to the Subscription Agreement.

“Subscription Agreement” means the Subscription Agreement, dated as of February 1, 2005, by and between the Company and the original Holder of this Warrant.

“Subsidiary” means any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by the Company.

“Tender Offer” means a tender offer, exchange offer or other offer by the Company to repurchase outstanding shares of its capital stock.

	 
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“Trading Day” means at any time a day on which any of a national securities exchange, Nasdaq or such other securities market as at such time constitutes the principal securities market for the Common Stock is open for general trading of securities.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of this Warrant.

1.    Exercise of Warrant.

(a)    Exercise. This Warrant may be exercised by the Holder in whole at any time or in part from time to time on or before the Expiration Date by (x) surrendering this Warrant to the Company, (y) giving a subscription form in the form of Exhibit 1 to this Warrant (duly
executed by the Holder) to the Company, and (z) making payment, in cash or by certified or official bank check payable to the order of the Company, or by wire transfer of funds to the account of the Company, in any such case, in the amount obtained by multiplying (a) the number of shares of Common Stock designated by the Holder in the subscription form by (b) the Purchase Price then in effect. On any partial exercise the Company will forthwith issue and deliver to or upon the order of the Holder a new Warrant or Warrants of like tenor, in the name of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, providing in the aggregate on the face or faces thereof for the purchase of the number of shares of Common Stock for which such Warrant or Warrants may still be exercised. The subscription form may be surrendered by telephone line facsimile transmission to such telephone number for the Company as shall have been specified in writing to the Holder by the
Company; provided, however, that if the subscription form is given to the Company by telephone line facsimile transmission the Holder shall send an original of such subscription form to the Company within ten Business Days after such subscription form is so given to the Company; provided further, however, that any failure or delay on the part of the Holder in giving such original of any subscription form shall not affect the validity or the date on which such subscription form is
so given by telephone line facsimile transmission.

(b)    9.9% Limitation. (1) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon exercise pursuant to the terms hereof at any time shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by the Holder (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the
Holder's right to convert, exercise or purchase similar to the limitation set forth herein (the “Excluded Shares”), together with all shares of Common Stock deemed beneficially owned at such time (other than by virtue of the ownership of the Excluded Shares) by Persons whose beneficial ownership of Common Stock would be aggregated with the beneficial ownership by the Holder for purposes of determining whether a group exists or for purposes of determining the Holder’s beneficial ownership (the “Aggregation Parties”), in either such case for purposes of Section 13(d) of the 1934 Act and Regulation 13D-G thereunder (including, without limitation, as the 

 

	 
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same is made applicable to Section 16 of the 1934 Act and the rules promulgated thereunder), would result in beneficial ownership by the Holder or such group of more than 9.9% of the shares of Common Stock for purposes of Section 13(d) or Section 16 of the 1934 Act and the rules promulgated thereunder (as the same may be modified by the Holder as provided herein, the “Restricted Ownership Percentage”). The Holder shall have the right at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company in the event and only to the extent that Section 16 of the 1934 Act or the rules promulgated thereunder (or any successor statute or rules) is changed to reduce the beneficial ownership percentage threshold thereunder to a percentage less than 9.9%. If at
any time the limits in this Section 1(b) make this Warrant unexercisable in whole or in part, the Company shall not by reason thereof be relieved of its obligation to issue shares of Common Stock at any time or from time to time thereafter upon exercise of this Warrant as and when shares of Common Stock may be issued in compliance with such restrictions.

(2)    For purposes of this Section 1(b), in determining the number of outstanding shares of Common Stock at any time the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's then most recent Form 10-Q, Form 10-K or other public filing with the SEC, as the case may be, (2) a public announcement by the Company that is later than any such filing referred to in the preceding clause (1) or (3) any other notice by the Company or its transfer agent setting forth the number shares of Common Stock outstanding and knowledge the
Holder may have about the number of shares of Common Stock issued upon conversion or exercise of Common Stock Equivalents by any Person, including the Holder, which are not reflected in the preceding clauses (1) through (3). Upon the written request of the Holder, the Company shall within three Business Days confirm in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of Common Stock Equivalents, by the Holder or its affiliates, in each such case subsequent to, the date as of which such number of outstanding shares of Common Stock was reported.

2.    Delivery of Stock Certificates, etc., on Exercise. As soon as practicable after the exercise of this Warrant and in any event within five Trading Days thereafter, upon the terms and subject to the conditions of this Warrant, the Company at its expense (including the payment by it of any applicable issue or stamp taxes) will cause to be issued in the name of and delivered to the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock (or Other Securities) to which the Holder shall be entitled on such exercise, in such denominations as may be requested by the Holder, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Current Fair Market Value of one full share, together with any other stock or Other Securities or any property (including cash, where applicable) to which the Holder is entitled upon such exercise pursuant to Section 1 or otherwise. The Company shall pay any taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery of shares of Common Stock (or Other Securities) or payment of cash upon exercise of this Warrant (other than income taxes imposed on the Holder).
The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock (or Other Securities) issuable upon exercise of this Warrant or payment of cash to any Person other than the Holder, and in case of such transfer or 

 

	 
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payment the Company shall not be required to deliver any certificate for shares of Common Stock (or Other Securities) upon such exercise or pay any cash until such tax or charge has been paid or it has been established to the Company's reasonable satisfaction that no such tax or charge is due. Upon exercise of this Warrant as provided herein, the Company’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the Holder, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with such exercise. If the Company fails to issue and deliver the certificates for the Common Stock to the Holder pursuant to the first sentence of this paragraph as and when required to do so, in addition to any other liabilities the Company may have hereunder and under applicable law, the Company shall pay or reimburse the Holder on demand for all out-of-pocket expenses, including, without limitation, fees and expenses of legal counsel, incurred by the Holder as a result of such failure.

3.    Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case at any time or from time to time on or after the Issuance Date, all the holders of Common Stock (or Other Securities) shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor,

(a)    other or additional stock, rights, warrants or other securities or property (other than cash) by way of dividend, or

(b)    any cash (excluding cash dividends payable solely out of earnings or earned surplus of the Company), or

(c)    other or additional stock, rights, warrants or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement,

other than (i) additional shares of Common Stock (or Other Securities) issued as a stock dividend or in a stock-split (adjustments in respect of which are provided for in Section 5) and (ii) rights or warrants to subscribe for Common Stock at less than the Current Fair Market Value (adjustments in respect of which are provided in Section 6), then and in each such case the Holder, on the exercise hereof as provided in Section 1, shall be entitled to receive the amount of stock, rights, warrants and Other Securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 3) which the Holder would hold on the date of such exercise if on the date thereof the Holder had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant
and had thereafter, during the period from the date thereof to and including the date of such exercise, retained such shares and all such other or additional stock, rights, warrants and Other Securities and property (including cash in the case referred to in subdivisions (b) and (c) of this Section 3) receivable by the Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 4.

	 
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4.    Exercise upon a Reorganization Event. In case of any Reorganization Event the Company shall, as a condition precedent to the consummation of the transactions constituting, or announced as, such Reorganization Event, cause effective provisions to be made so that the Holder shall have the right thereafter, by exercising this Warrant (in lieu of the shares of Common Stock of the Company and Other Securities or property purchasable and receivable upon
exercise of the rights represented hereby immediately prior to such transaction) to purchase the kind and amount of shares of stock and Other Securities and property (including cash) receivable upon such Reorganization Event by a holder of the number of shares of Common Stock that might have been received upon exercise of this Warrant immediately prior to such Reorganization Event. Any such provision shall include provisions for adjustments in respect of such shares of stock and Other Securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The provisions of this Section 4 shall apply to successive Reorganization Events.

5.    Adjustment for Certain Extraordinary Events. In the event that on or after the Issuance Date the Company shall (i) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the Purchase Price in effect immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 5. The Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive that number of shares of Common Stock determined by multiplying the number of shares of Common Stock which would be issuable on such exercise immediately prior to such issuance by a fraction of which (i) the numerator is the Purchase Price in effect immediately prior to such issuance
and (ii) the denominator is the Purchase Price in effect on the date of such exercise.

6.    Issuance of Rights or Warrants to Common Stockholders at less than Current Fair Market Value. In case the Company shall on or after the Issuance Date issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Fair Market Value on the record date fixed for the determination of stockholders entitled to receive such rights or warrants, then the Purchase Price shall
be adjusted so that the same shall equal the price determined by multiplying the Purchase Price in effect at the opening of business on the day after such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such record date plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Current Fair Market Value, and the denominator shall be the number of shares of Common Stock outstanding on the close of business on such record date plus the total number of additional shares of Common Stock so offered for subscription or purchase.

	 
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Such adjustment shall become effective immediately after the opening of business on the day following the record date fixed for determination of stockholders entitled to receive such rights or warrants. No adjustment shall be required to be made to the number of shares of Common Stock which may be issued upon exercise of this Warrant by virtue of the application of this Section 6. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants, the Purchase Price shall be readjusted to the Purchase Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. In the event that such rights or warrants are not so
issued, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. In determining whether any rights or warrants entitle the holder to subscribe for or purchase shares of Common Stock at less than such Current Fair Market Value, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, the value of such consideration, if other than cash, to be determined by the Board of Directors.

7.    Issuance at Less than Current Fair Market Value. (a) In case at any time on or after the Issuance Date the Company shall issue shares of its Common Stock or Common Stock Equivalents (collectively, the “Newly Issued Shares”), other than an issuance pro rata to all holders of its outstanding Common Stock (adjustments for which are provided in Sections 5 and 6) and other than an issuance in respect of which Section 9 is applicable, at a
price below the Current Fair Market Value of the Common Stock at the time of such issuance, then following such issuance of Newly Issued Shares the Purchase Price shall be reduced as provided in clause (b) of this Section 7. No adjustment shall be required to be made to the number of shares of Common Stock which may be issued upon exercise of this Warrant by virtue of the application of this Section 7.

(b)    The reduction in the Purchase Price following any such adjustment shall be determined by multiplying the Purchase Price immediately prior to such adjustment by a fraction, of which the numerator shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to the issuance of the Newly Issued Shares (calculated on a fully-diluted basis assuming the exercise or conversion of all options, warrants, purchase rights or convertible securities which are exercisable or convertible at the time of the issuance of the Newly Issued Shares)
plus (2) the number of shares of Common Stock which the aggregate consideration, if any, received by the Company for the number of Newly Issued Shares would purchase at a price equal to the Current Fair Market Value of the Common Stock at the time of such issuance, and the denominator shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to the issuance of the Newly Issued Shares (calculated on a fully-diluted basis assuming the exercise or conversion of all options, warrants, purchase rights or convertible securities which are exercisable or convertible at the time of the issuance of the Newly Issued Shares) plus (Y)
the number of Newly Issued Shares. The adjustment provided for in this Section 7(b) may be expressed as the following mathematical formula: 

	
 NPP    =
	
  ( O +(C / FMV))  
	
x PP

		
( O + N )
	 

	 
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where,

		C	=	aggregate consideration received by the Company for the Newly Issued Shares

		N	=	number of Newly Issued Shares

		O	=	number of shares of Common Stock outstanding (on a fully diluted basis, as described above) immediately prior to the issuance of the Newly Issued Shares

		FMV	=	Current Fair Market Value of the Common Stock at the time of issuance of the Newly Issued Shares

		PP	=	Purchase Price immediately prior to the issuance of the Newly Issued Shares

		NPP	=	Purchase Price immediately after the issuance of the Newly Issued Shares

(c)    Notwithstanding the foregoing, no adjustment shall be made under this Section 7 by reason of:

(1)    the issuance by the Company of shares of Common Stock pro rata to all holders of the Common Stock so long as (i) any adjustment required by Section 5 is made and (ii) the Company shall have given notice thereof to the Holder pursuant to Section 14;

(2)    the issuance by the Company of shares of Series D Preferred Stock or shares of Common Stock upon conversion of the Series D Preferred Stock or upon exercise of this Warrant or other Warrants issued in connection with the issuance of the Series D Preferred Stock in accordance with the terms hereof and thereof or any other issuance of securities solely to the Holder occurring on or before July 1, 2005; 

(3)    the issuance by the Company of shares of Newly Issued Shares in payment of dividends on the Series D Preferred Stock in accordance with the terms thereof; 

(4)    the issuance of Common Stock upon conversion, exercise or exchange of, and in payment of interest or dividends on, Common Stock Equivalents outstanding on the Issuance Date in accordance with the terms thereof existing on the Issuance Date; or

(5)    the issuance by the Company of Newly Issued Shares upon grant or exercise of options for employees, directors and consultants under a stock option, equity compensation or similar plan duly adopted by the Board of Directors.

 

8.    Adjustment For Certain Issuances. (a) If at any time on or after the Issuance Date the Company issues shares of Common Stock or Common Stock Equivalents that are not registered for sale by the Company in such offering under the 1933 Act or issues shares of Common Stock or Common Stock Equivalents in an offering of a type commonly known as a PIPE or an equity line, in any such case in an amount which, together with all other offerings by the Company
that would be integrated with such offering for purposes of Regulation D under the 1933 Act, results in gross proceeds to the Company of at least $250,000, and where 120% of the price per 

 

	 
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share at which the Company sells such shares of Common Stock or where 120% of the price per share at which the holders of such Common Stock Equivalents are entitled to acquire shares of Common Stock upon conversion or exercise thereof is less than the Purchase Price in effect at the time of such issuance, then following such issuance the Purchase Price shall be reduced to 120% of the lowest price per share at which such shares of Common Stock are issued or at which such Common Stock Equivalents may be exercised, if the same is lower than the Purchase Price in effect immediately prior to such issuance. No adjustment shall be required to be made to the number of shares of Common Stock which may be issued upon exercise of this Warrant by virtue of the application of this Section 8.

(b)    If any adjustment in the Purchase Price is made pursuant to this Section 8 in respect of any issuance of shares of Common Stock or Common Stock Equivalents, no adjustment in the Purchase Price shall be made by reason of such issuance pursuant to Section 8.

(c)    Notwithstanding the foregoing, no adjustment shall be made under this Section 8 by reason of:

(1)    the issuance by the Company of shares of Common Stock pro rata to all holders of the Common Stock so long as (i) any adjustment required by Section 5 is made and (ii) the Company shall have given notice thereof to the Holder pursuant to Section 14;

(2)    the issuance by the Company of shares of Series D Preferred Stock or shares of Common Stock upon conversion of the Series D Preferred Stock or upon exercise of this Warrant or other Warrants issued in connection with the issuance of the Series D Preferred Stock in accordance with the terms hereof and thereof or any other issuance of securities solely to the Holder occurring on or before July 1, 2005; 

(3)    the issuance by the Company of shares of Newly Issued Shares in payment of dividends on the Series D Preferred Stock in accordance with the terms thereof; 

(4)    the issuance of Common Stock upon conversion, exercise or exchange of, and in payment of interest or dividends on, Common Stock Equivalents outstanding on the Issuance Date in accordance with the terms thereof existing on the Issuance Date; or

(5)    the issuance by the Company of Newly Issued Shares upon grant or exercise of options for employees, directors and consultants under a stock option, equity compensation or similar plan duly adopted by the Board of Directors.

9.    Effect of Reclassification, Consolidation, Merger or Sale. (a) If any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation,
merger or combination of the Company with another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, or (iii) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) 

 

	 
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with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing Person, as the case may be, shall execute with the Holder a written agreement providing that (x) this Warrant shall thereafter entitle the Holder to purchase the kind and amount of shares of stock and Other Securities or property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance by the holder of a number of shares of Common Stock issuable upon exercise of this Warrant (assuming, for such purposes, a sufficient number of authorized shares of Common Stock available to exercise this Warrant) immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise such holder's rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance (provided that, if the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“non-electing share”), then for the purposes of this Section 9 the kind and amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares), (y)
in the case of any such successor or purchasing Person, upon such consolidation, merger, combination, sale or conveyance such successor or purchasing Person shall be jointly and severally liable with the Company for the performance of all of the Company's obligations under this Warrant and the Subscription Agreement and (z) if registration or qualification is required under the 1933 Act or applicable state law for the public resale by the Holder of such shares of stock and Other Securities so issuable upon exercise of this Warrant, such registration or qualification shall be completed prior to such reclassification, change, consolidation, merger, combination or sale. Such written agreement shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. If, in the case of any such reclassification, change, consolidation, merger, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, combination, sale or conveyance, then such written agreement shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holder as the Board of Directors shall reasonably consider necessary by reason of the foregoing.

               (b)    The above provisions of this Section 9 shall similarly apply to successive reclassifications, changes, consolidations, mergers, combinations, sales and conveyances.

                (c)    If this Section 9 applies to any event or occurrence, Section 4 shall not apply to such event or occurrence.

10.    Tax Adjustments. The Company may make such reductions in the Purchase Price, in addition to those required by Sections 3, 4, 5, 6, 7 and 8, as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.

11.    Minimum Adjustment. (a) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11 are not required to be
made shall be carried forward and taken into account in any subsequent adjustment. All such calculations under this Warrant shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be.

(b)    No adjustment need be made for a change in the par value of the Common Stock or from par value to no par value or from no par value to par value.

12.    Notice of Adjustments. Whenever the Purchase Price is adjusted as herein provided, the Company shall promptly, but in no event later than five Trading Days thereafter, give a notice to the Holder setting forth the Purchase Price and number of shares of Common Stock which may be purchased upon exercise of this Warrant after such adjustment and setting forth a brief statement of the facts requiring such adjustment but which such statement shall not
include any information which would be material non-public information for purposes of the 1934 Act. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

13.    Further Assurances. The Company will take all action that may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock, free from all taxes, liens and charges with respect to the issue thereof, on the exercise of all or any portion of this Warrant from time to time outstanding.

14.    Notice to Holder Prior to Certain Actions. In case on or after the Issuance Date:

(a)    the Company shall declare a dividend (or any other distribution) on its Common Stock (other than in cash out of retained earnings); or

(b)    the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any share of any class or any other rights or warrants; or

(c)    the Board of Directors shall authorize any reclassification of the Common Stock (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or any consolidation or merger or other business combination transaction to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all of the assets of the Company; or

(d)    there shall be pending the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

	 
	 	-12-	 
	

	 

the Company shall give the Holder, as promptly as possible but in any event at least ten Trading Days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, other business combination transaction, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record who shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, other business combination transaction, sale, transfer, dissolution, liquidation or winding-up shall be determined. Such notice shall not include any information which would be material non-public information for purposes of the 1934 Act. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. In the case of any such action of which the Company gives such notice to the Holder or is required to give such notice to the Holder, the Holder shall be entitled to give a subscription form to exercise this Warrant in whole or in part that is contingent on the completion of such action.

15.    Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company will at all times reserve and keep available out of its authorized but unissued shares of capital stock, solely for issuance and delivery on the exercise of this Warrant, a sufficient number of shares of Common Stock (or Other Securities) to effect the full exercise of this Warrant and the exercise, conversion or exchange of any other warrant or security of the Company
exercisable for, convertible into, exchangeable for or otherwise entitling the holder to acquire shares of Common Stock (or Other Securities), and if at any time the number of authorized but unissued shares of Common Stock (or Other Securities) shall not be sufficient to effect such exercise, conversion or exchange, the Company shall take such action as may be necessary to increase its authorized but unissued shares of Common Stock (or Other Securities) to such number as shall be sufficient for such purposes.

16.    Transfer of Warrant. This Warrant shall inure to the benefit of the successors to and assigns of the Holder. This Warrant and all rights hereunder, in whole or in part, are registrable at the office or agency of the Company referred to below by the Holder in Person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed accompanied by an assignment form in the form attached to this Warrant, or other customary form, duly executed by the transferring Holder.

17.    Register of Warrants. The Company shall maintain, at the principal office of the Company (or such other office as it may designate by notice to the Holder), a register in which the Company shall record the name and address of the Person in whose name this Warrant has been issued, as well as the name and address of each successor and prior owner of such Warrant. The Company shall be entitled to treat the Person in whose name this Warrant is so
registered as the sole and absolute owner of this Warrant for all purposes.

	 
	 	-13-	 
	

	 

18.    Exchange of Warrant. This Warrant is exchangeable, upon the surrender hereof by the Holder at the office or agency of the Company referred to in Section 16, for one or more new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number
of shares as shall be designated by the Holder at the time of such surrender.

19.    Replacement of Warrant. On receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and (a) in the case of loss, theft or destruction, of indemnity from the Holder reasonably satisfactory in form to the Company (and without the requirement to post any bond or other security), or (b) in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company will execute and deliver to the Holder a new Warrant of like tenor without charge to the Holder.

20.    Warrant Agent. The Company may, by written notice to the Holder, appoint the transfer agent and registrar for the Common Stock as the Company's agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, and the Company may, by written notice to the Holder, appoint an agent having an office in the United States of America for the purpose of exchanging this Warrant pursuant to Section
18, and replacing this Warrant pursuant to Section 19, or any of the foregoing, and thereafter any such exchange or replacement, as the case may be, shall be made at such office by such agent.

21.    Remedies. The Company stipulates that the remedies at law of the Holder in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or
otherwise.

22.    No Rights or Liabilities as a Stockholder. This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder of the Company on any matters or with respect to any rights whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby or the Common Stock (or Other Securities) purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised in accordance with its terms.

23.    Notices, etc. All notices and other communications from the Company to the Holder shall either be by hand delivery or be mailed by first class certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by the Holder or at the address shown for the Holder on the register of Warrants referred to in Section 17.

24.    Transfer Restrictions. This Warrant has not been and is not being registered under the provisions of the 1933 Act or any state securities laws and this Warrant may not be transferred unless (1) the transferee is an “accredited investor” (as defined in Regulation D under the 1933 Act) or a QIB in a transfer that meets the requirements of Rule 144A and (2) the Holder shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that this Warrant may be sold or transferred without registration under the 1933 Act. Prior to any such transfer, such transferee shall have 

 

	 
	 	-14-	 
	

	 

represented in writing to the Company that such transferee has requested and received from the Company all information relating to the business, properties, operations, condition (financial or other), results of operations or prospects of the Company deemed relevant by such transferee; that such transferee has been afforded the opportunity to ask questions of the Company concerning the foregoing and has had the opportunity to obtain and review the Registration Statement (as defined in the Subscription Agreement) and the prospectus included therein, each as amended or supplemented to the date of transfer to such transferee, and the reports and other information concerning the Company which at the time of such transfer have been filed by the Company with the SEC pursuant to the 1934 Act and which are incorporated
by reference in such prospectus as of the date of such transfer. If such transfer is intended to assign the rights and obligations under Sections 5, 8, 9 and 10 of the Subscription Agreement, such transfer shall otherwise be made in compliance with Section 10(j) of the Subscription Agreement. 

25.    Rule 144A Information Requirement. Within the period prior to the expiration of the holding period applicable to sales hereof under Rule 144(k) under the 1933 Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the 1934 Act, make available to the Holder and the holder of any shares of Common Stock issued upon exercise of this Warrant which
continue to be Restricted Securities in connection with any sale thereof and any prospective purchaser of this Warrant from the Holder, the information required pursuant to Rule 144A(d)(4) under the 1933 Act upon the request of the Holder and it will take such further action as the Holder may reasonably request, all to the extent required from time to time to enable the Holder to sell this Warrant without registration under the 1933 Act within the limitation of the exemption provided by Rule 144A, as Rule 144A may be amended from time to time. Upon the request of the Holder, the Company will deliver to the Holder a written statement as to whether it has complied with such requirements. 

26.    Legend. Unless theretofore registered for resale under the 1933 Act, each certificate for shares issued upon exercise of this Warrant shall bear the following legend:

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The securities have been acquired for investment and may not be resold, transferred or assigned in the absence of an effective registration statement for the securities under the 1933 Act, or an opinion of counsel that registration is not required under the 1933 Act.

27.    Amendment; Waiver. This Warrant and any terms hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Notwithstanding anything to the contrary contained herein, no amendment or waiver shall increase or eliminate the Restricted Ownership Percentage, whether permanently or temporarily, unless, in addition to
complying with the other requirements of this Warrant, such amendment or waiver shall have been approved in accordance with the General Corporation Law of the State of Nevada and the Company's By-laws by holders of the outstanding shares of Common Stock entitled to vote at a meeting or by written consent in lieu of such meeting.

	 
	 	-15-	 
	

	 

28.    Miscellaneous. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of New York. The headings, captions and footers in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

29.    Attorneys' Fees. In any litigation, arbitration or court proceeding between the Company and Holder relating hereto, the prevailing party shall be entitled to attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Warrant.

[Remainder of Page Intentionally Left Blank]

 

	 
	 	-16-	 
	

	 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed on its behalf by one of its officers thereunto duly authorized.

 

	 	 	 
	 	DWANGO NORTH AMERICA CORP.
	 
 	 
 	 
 
	Dated: February 1, 2005	By:  	
	 	

Name:
	 	Title 

	 
	 	-17-	 
	

	 

ASSIGNMENT

For value                                 hereby sell(s), assign(s) and transfer(s) unto                                 (Please insert social security or other Taxpayer Identification Number of assignee:                                ) the attached original, executed Warrant to purchase                           share of Common Stock of Dwango North America Corp., a Nevada corporation (the “Company”), and hereby irrevocably constitutes
and appoints                                 attorney to transfer the Warrant on the books of the Company, with full power of substitution in the premises.

In connection with any transfer of the Warrant within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the 1933 Act (or any successor provision) (other than any transfer pursuant to a registration statement that has been declared effective under the 1933 Act), the undersigned confirms that such Warrant is being transferred:

	 	 o	 	To the Company or a subsidiary thereof; or
	 	 	 	 
	 	 o	 	To a QIB pursuant to and in compliance with Rule 144A; or
	 	 	 	 
	 	 o	 	To an “accredited investor” (as defined in Regulation D under the 1933 Act) pursuant to and in compliance with the 1933 Act; or
	 	 	 	 
	 	 o	 	Pursuant to and in compliance with Rule 144 under the 1933 Act;
	 	 	 	 

and unless the box below is checked, the undersigned confirms that, to the knowledge of the undersigned, such Warrant is not being transferred to an “affiliate” (as defined in Rule 144 under the 1933 Act) of the Company.    

 

	 	 o	 	The transferee is an affiliate of the Company.
	 	 	 	 

Capitalized terms used in this Assignment and not defined in this Assignment shall have the respective meanings provided in the Warrant.

	Dated: ________________________________	NAME: ________________________________
	 	 
	 	
	 	 Signature(s)

	 
	 	-18-	 
	

	 

Exhibit 1

FORM OF SUBSCRIPTION

DWANGO NORTH AMERICA CORP.

(To be signed only on exercise of Warrant)

 

	TO: 	Dwango North America Corp.
	 	200 West Mercer Street
	 	Suite 501
	 	Seattle, Washington 98119
	 	 
	 	Attention: Chief Executive Officer
	 	 
	 	Facsimile No.: (206) 832-0601
	 	 

1.    The undersigned Holder of the attached original, executed Warrant hereby elects to exercise its purchase right under such Warrant with respect to                              shares (the “Exercise Shares”) of Common Stock, as defined in the Warrant, of Dwango North America Corp., a Nevada
corporation (the “Company”).

2.    The undersigned Holder elects to pay the Aggregate Purchase Price for such shares of Common Stock (i) in lawful money of the United States or by the enclosed certified or official bank check payable in United States dollars to the order of the Company in the amount of $                          , or (ii) by
wire transfer of United States funds to the account of the Company in the amount of $                            , which transfer has been made before or simultaneously with the delivery of this Form of Subscription pursuant to the instructions of the Company;

3.    Please issue a stock certificate or certificates representing the appropriate number of shares of Common Stock in the name of the undersigned or in such other name(s) as is specified below:

Name: 

  Address: 

                            

 

Social Security or Tax Identification Number (if any):      

                             

 

	 
	 	 I-1	 
	

	 

 

	 Dated: ________________________________________________________________________________________________________________________________________________________________________	 
	 	 (Signature must conform to name of Holder as specified on the face of the Warrant)	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	
 (Address)
	 

                

	 
	 	I-2Exhibit 10.1

                            ASSET PURCHASE AGREEMENT

      THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of April
15, 2004, by and among Sanswire Technologies, Inc., a Delaware corporation (the
"Seller"), Sanswire, Inc., a Delaware corporation and wholly-owned subsidiary of
the Seller (the "Seller Subsidiary"), Michael Molen, a principal shareholder of
the Seller (the "Principal Shareholder"), GlobeTel Communications Corp., a
Delaware corporation ( the "Parent") and GlobeTel Subsidiary, Inc. a Delaware
corporation and wholly-owned subsidiary of the Purchaser ("Purchaser"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.

                                 R E C I T A L S

      A. The Boards of Directors of each of the Purchaser and Seller believe it
is in the best interests of each company and their respective stockholders that
the Purchaser, in consideration for the purchase price as set forth herein,
acquire substantially all of the assets (the "Asset Sale") of the Seller
Subsidiary on the terms and conditions set forth in this Agreement;

      B. The Seller and the Seller Subsidiary (collectively, the "Seller
Corporations") and the Principal Shareholder, on the one hand, and Purchaser and
the Parent, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the Asset Sale.

      C. NOW THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and the representations, warranties, covenants, agreements,
conditions and promises contained herein and therein, the parties hereby agree
as follows:

                                A G R E E M E N T

ARTICLE I         Sale of Specified Assets; Related Transactions.

      Section 1.01 Sale of Specified Assets. The Seller shall cause to be sold,
assigned, transferred, conveyed and delivered to the Purchaser, at the Closing
(as defined in Section 1.6), good and valid title to the Specified Assets (as
defined below), free and clear of any Encumbrances, on the terms and subject to
the conditions set forth in this Agreement. For purposes of this Agreement, the
term "Specified Assets" shall mean and include all of the properties, rights,
interests and other tangible and intangible assets (wherever located and whether
or not required to be reflected on the Balance Sheet described in Section 2.3,
below, including any such assets acquired by the Seller Corporations during the
Pre-Closing Period, that are or were used in, needed for the conduct of or
material to, or that otherwise directly or indirectly relate to, the business of
the Seller Corporations (the "Telecommunications Business") as more particularly
described in Exhibit B; provided, however, that the Specified Assets shall not
include any Excluded Assets. Without limiting the generality of the foregoing,
the Specified Assets shall include the following:

            (a) Patents and Patent Applications; Trademarks. All intellectual
property including the patents, patent applications, trademarks, trademark
applications, trade names, service marks and service mark applications of the
Seller Corporations, and any counterparts, reissues, extensions, continuations
and continuations in part related to the foregoing;
<PAGE>

            (b) Other Proprietary Assets: All Proprietary Assets and goodwill of
the Seller Corporations (including the right to use the names "Sanswire
Technologies," "Sanswire" and "Stratellites") and variations thereof, all of the
copyrights, trade secrets, know-how, computer software, inventions, designs,
drawings, existing and in-development chip designs and related specifications,
source codes, verification and validation environments, manufacturing
specifications and databases, in process research and development, and product
reviews and other Proprietary Assets identified on Exhibit B;

            (c) Inventory; Equipment; Other Tangible Assets: The inventories
(including raw materials, work-in-progress and finished goods), equipment,
materials, prototypes, tools, supplies, vehicles, furniture, fixtures,
improvements and other tangible assets of the Seller Corporations;

            (d) Contracts: All rights of the Seller Corporations under the
Seller Contracts;

            (e) Governmental Authorizations: All Governmental Authorizations
held by the Seller Corporations (including the Governmental Authorizations
identified in Part 2.7 of the Disclosure Schedule);

            (f) Claims: All claims (including claims for past infringement) and
causes of action of the Seller Corporations against other Persons relating to
the Business (regardless of whether or not such claims and causes of action have
been asserted by the Seller Corporations), and all rights of indemnity, warranty
rights, rights of contribution, rights to refunds, rights of reimbursement and
other rights of recovery possessed by the Seller Corporations relating to the
Business (regardless of whether such rights are currently exercisable);

            (g) Other Assets: All of the Seller Corporations' existing and in-
development designs and related specifications, source codes, verification and
validation environments, manufacturing specifications and databases and customer
lists;

            (h) Books and Records: All books, records, files and data of the
Seller Corporations relating directly or indirectly to the Telecommunications
Business; and

            (i) Proceeds: Without limiting any restriction contained herein on
any such sale or other disposition, an amount of cash and receivables equal to
the gross proceeds from the sale or other disposition of any of the foregoing
after the date hereof.

      Section 1.02 Stock Consideration and Escrow of Shares

            (a) As consideration for the sale of the Specified Assets to the
Purchaser, the Purchaser has agreed to issue 28 million shares ("Shares") of the
Parent's common stock ("Common Stock") to the Seller at the Closing. The Parent
will issue 28 million shares (the "Closing Shares"), which Closing Shares shall
be held in escrow pending delivery of the audited Financial Statements, defined
in and in accordance with Section 1.2(d) below to the Seller on the Closing
Date. An additional 200 million shares (the "Escrowed Shares") will be issued
pursuant to the terms and conditions of the "successful commercial launch" of a
commercial communications platform aboard an airship by the December 31, 2005
Closing Date. For purposes of the Agreement a "successful commercial launch"
will be deemed to have occurred if all the conditions described in this
paragraph have been satisfied and all other conditions deemed material by GTEL
are satisfied, as determined by GTEL in its sole discretion. A "successful
commercial launch" will occur if (i) an airship (dirigible) is flown for a
period of 90 consecutive days at an approximate altitude of 70,000 feet, without
technical difficulty , (ii) a customer is able to receive both voice and
Internet services at the same time when it uses the "Stratellite service", at a
CPE cost of approximately $100, and (iii) at least 250,000 paying customers must
be able to use the Stratellite service based on agreed upon engineering
specifications. For purposes hereof, it is also assumed that the cost of each
airship used in the Stratellite service will not exceed $3 million, the cost of
each tracking earth station will not exceed $7 million and that each earth
station (if more than one) will have the ability to cover several deployed
airships at one time. If the cost of any airship or earth station exceeds $3
million or $7 million respectively at the time that the "commercial launch" is
being implemented, the project will not be deemed to be commercially viable and
a "successful commercial launch" will not have occurred.
<PAGE>

            (b) The Release of the Closing Shares. The Closing Shares shall be
released from Escrow when the Sellers delivers to the Purchaser the consolidated
audited financial statements for the Sellers Corporations for the fiscal year
ending December 31, 2003 and interim financial statements for the applicable
interim periods (collectively, the "Financial Statements") and the Purchaser in
its sole discretion determines that these Financial Statements are acceptable to
it.

      Section 1.03 No Assumed Liabilities.

            (a) Subject to Section 1.3(b), neither Parent nor the Purchaser
shall assume any Liabilities of the Seller Corporations whatsoever, whether
relating to the Specified Assets, the Telecommunications Business or otherwise.

            (b) Notwithstanding Section 1.3(a), pursuant to the Assignment and
Assumption Agreement, at and following the Closing the Purchaser will become
obligated to perform the obligations of the Seller under any Assumed Contracts,
but only to the extent such obligations: (i) arise after the Closing Date; (ii)
do not arise from or relate to any Breach by the Seller of any provision of any
of the Assumed Contracts; (iii) do not arise from or relate to any event,
circumstance or condition occurring or existing on or prior to the Closing Date
that, with notice or lapse of time, would constitute or result in a Breach of
any of the Assumed Contracts; and (iv) are ascertainable (in nature and amount)
solely by reference to the express terms of the Assumed Contracts (the
Designated Contractual Obligations); provided, however, that notwithstanding the
foregoing, and notwithstanding anything to the contrary contained in this
Agreement, the "Designated Contractual Obligations" shall not include, and
neither Parent nor the Purchaser shall be required to assume or to perform or
discharge:

                  (A) any Liability of any Person under the Assumed Contracts,
except for the Seller Corporations;

                  (B) any Liability of the Seller Corporations arising from or
relating to any action taken by the Seller Corporations, or any failure on the
part of the Seller Corporations to take any action, at any time prior to the
Closing Date;

                  (C) any Liability of the Seller Corporations for the payment
of any Tax;

                  (D) any Liability of the Seller Corporations to any Related
Party;

                  (E) any Liability under any Assumed Contract, if the Seller
shall not have obtained, prior to the Closing Date, any Consent required to be
obtained from any Person with respect to the assignment or delegation to the
Purchaser of any rights or obligations under such Assumed Contract;

                  (F) any Liability that is inconsistent with or constitutes an
inaccuracy in, or that arises or exists by virtue of any Breach of, (x) any
representation or warranty made by the Seller Corporations in any of the
Transactional Agreements, or (y) any covenant or obligation of the Seller
Corporation's contained in any of the Transactional Agreements; or
<PAGE>

                  (G) any other Liability of the Seller Corporations not
expressly assumed by the Purchaser pursuant to the provisions of any of the
Transactional Agreements.

      Section 1.04 Taxes. The Seller shall bear and pay, and shall reimburse the
Purchaser and the Purchaser's affiliates for, any sales taxes, use taxes,
transfer taxes, income taxes, documentary charges, filing fees, recording fees
or similar taxes, charges, fees or expenses that may become payable in
connection with the sale of the Specified Assets to the Purchaser or in
connection with any of the other Transactions.

      Section 1.05 Allocation. The Seller and the Purchaser acknowledge that the
Transactions shall constitute a reorganization described in Section 368 of the
Code. At or prior to the Closing, the Purchaser shall deliver to the Seller a
statement setting forth the Purchaser's good faith determination of the manner
in which the consideration referred to in Section 1.2 is to be allocated among
the Specified Assets. The allocation prescribed by such statement shall be
conclusive and binding upon the Seller for all purposes. The Seller shall not
file any Tax Return or other document with, or make any statement or declaration
to, any Governmental Body that is inconsistent with such allocation or that is
inconsistent with the Transactions not constituting a reorganization.

      Section 1.06 Closing.

            (a) The closing of the sale of the Specified Assets and the other
Transactions to be consummated contemporaneously therewith to the Purchaser (the
"Closing") shall take place at the offices of GlobeTel Communications Corp. in
Miami, Florida, at 10:00 a.m. on such date (after the satisfaction or waiver of
the other conditions to the Closing set forth herein) as the Purchaser may
designate in a written notice delivered to the Seller; provided, however, that
if any condition set forth in Section 6 has not been satisfied as of the date
designated by the Purchaser, then the Purchaser may, at its election,
unilaterally postpone the Closing to such other date prior to the Termination
Date as it reasonably deems appropriate.

            (b) At the Closing, without limiting any of the conditions to the
Closing set forth in Section 6 or Section 7:

                  (A) the Seller shall execute and deliver, or shall cause to be
executed and delivered, to the Purchaser such bills of sale, endorsements,
assignments (including patent assignments) and other documents as may (in the
reasonable judgment of the Purchaser or its counsel) be necessary or appropriate
to assign, convey, transfer and deliver to the Purchaser good and valid title to
the Specified Assets free of any Encumbrances;

                  (B) the Purchaser shall pay to the Seller the consideration,
pursuant to the terms and conditions set forth in Section 1.2 hereof;

                  (C) the Seller shall execute and deliver to the Purchaser a
certificate (the "Seller Closing Certificate"), executed by the Chief Executive
Officer or the Chief Financial Officer of the Seller, certifying that (A) , each
of the representations and warranties made by the Seller in this Agreement is
accurate in all material respects as of the Closing Date as if made on the
Closing Date, (B) each of the covenants and obligations that the Seller is
required to have complied with or performed pursuant to this Agreement at or
prior to the Closing has been duly complied with and performed in all material
respects, and (C) except as expressly set forth in the Seller Closing
Certificate, each of the conditions set forth in Sections 6.3 and 6.4 has been
satisfied in all material respects;
<PAGE>

                  (D) the Purchaser and Parent shall execute and deliver to the
Seller a certificate (the "Purchaser Closing Certificate"), executed by the
Chief Executive Officer or the Chief Financial Officer of the Purchaser and
Parent, certifying that (A) each of the representations and warranties made by
the Purchaser and Parent in this Agreement is accurate in all material respects
as of the Closing Date as if made on the Closing Date, and (B) each of the
covenants and obligations that the Purchaser and Parent are required to have
complied with or performed pursuant to this Agreement at or prior to the Closing
has been duly complied with and performed in all material respects; and

      Section 1.07 Further Action. If, at any time after the Closing Date, any
further action is reasonably determined by Parent or the Purchaser to be
necessary or desirable to carry out the purposes of this Agreement or to vest
the Purchaser with full right, title and possession of and to all of the
Specified Assets and the Assumed Contracts, the officers and directors of Parent
and the Purchaser shall be fully authorized (in the name of the Seller and
otherwise) to take such action.

ARTICLE II Representations and Warranties of the Seller, the Seller Subsidiary
and the Principal Shareholder.

      The Seller, Seller Subsidiary and the Principal Shareholder, each jointly
and severally, represent and warrant, to and for the benefit of Parent and the
Purchaser, as follows:

      Section 2.01 Subsidiaries; Due Organization; Etc.

            (a) The Seller has no subsidiaries, except for the Seller
Subsidiary; and neither the Seller, now the Seller Subsidiary, owns any capital
stock of, or any equity interest of any nature in, any other Entity. .

            (b) Each of the Seller Corporations is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Neither is required to be qualified, authorized, registered or licensed to do
business as foreign corporations in any jurisdiction other than Georgia, and in
good standing as foreign corporations in Georgia. The Seller Corporations have
never conducted any business under or otherwise used, for any purpose or in any
jurisdiction, any fictitious name, assumed name, trade name or other name, other
than "Sanswire" or "Sanswire Technologies."

            Section 2.02 Articles of Incorporation and Bylaws; Records. The
Seller has delivered to Parent accurate and complete copies of: (a) the articles
of incorporation and bylaws of the Seller Corporations, including all amendments
thereto; (b) the stock records of the Seller Corporations; and (c) the minutes
and other records of the meetings and other proceedings (including any actions
taken by written consent or otherwise without a meeting) of the shareholders of
the Seller Corporations, the boards of directors of the Seller Corporations and
all committees of the board of directors of the Seller Corporations. There have
been no meetings or other proceedings of the shareholders of the Seller
Corporations, the board of directors of the Seller Corporations or any committee
of the board of directors of the Seller Corporations that are not fully
reflected in such minutes or other records, other than the meeting of the board
of directors of Seller held immediately prior to the execution of, and to
approve, this Agreement. The books of account, stock records, minute books and
other records of the Seller Corporations are accurate, up-to-date and complete,
and have been maintained in accordance with sound and prudent business
practices. All of the records of the Seller Corporations are in the actual
possession and direct control of the Seller.
<PAGE>

      Section 2.03 Financial Statements. The Seller has furnished its unaudited
balance sheet ("Balance Sheet") at December 31, 2003 to the Purchaser. The
Sellers represents and warrants that the Balance Sheet and, when delivered, the
Financial Statements are true and complete and fairly present the financial
position of the Seller Corporations as of the dates thereof and their results of
operations for the years then ended, [in conformity with GAAP consistently
applied for such period]. From December-31, 2003, there have been no material
changes in the Seller Corporations financial position that may adversely affect
any of the Telecommunications Business or generally the Seller's operations,
prospects or financial condition.

      Section 2.04 Absence Of Changes. Since December 31, 2003, there has not
been any adverse change in, and no event has occurred that could reasonably be
expected to have an adverse effect on, the Telecommunications Businesses.

      Section 2.05 Title To Specified Assets. The Seller owns (and will own as
of the Closing Date), and has (and will have as of the Closing Date) good and
valid title to, all of the Specified Assets, all of which are free and clear of
any Encumbrances. [The Specified Assets collectively constitute, as of the date
hereof, and will collectively constitute, as of the Closing Date, all of the
properties, rights, interests and other tangible and intangible assets necessary
to enable the Seller to conduct the Telecommunications Business in the manner in
which such business is currently being conducted and in the manner in which such
business is proposed to be conducted [cross reference Business Plan].]

      Section 2.06 [Contracts. The Disclosure Schedule identifies each Contract
directly or indirectly relating to the Specified Assets or the Business (the
"Seller Contracts"). The Seller has delivered to Parent accurate and complete
copies of all Seller Contracts, including all amendments thereto. Each Seller
Contract is valid and in full force and effect, with no existing violation,
breach or default.]

      Section 2.07 Governmental Authorizations. The Governmental Authorizations
identified in the Disclosure Schedule constitute all of the Governmental
Authorizations necessary (i) to enable the Seller Corporations to conduct the
Telecommunications Business in the manner in which such business is currently
being conducted and in the manner in which such business is proposed to be
conducted, and (ii) to permit the Seller Corporations to own and use the
Specified Assets in the manner in which they are currently owned and used.]

      Section 2.08 Tax Matters. Seller Corporations have filed all applicable
Tax Returns, as and when required and each Tax required to have been paid, or
claimed by any Governmental Body to be payable, by the Seller Corporations has
been duly paid in full on a timely basis. No claim or other Proceeding is
pending or has been threatened against or with respect to the Seller
Corporations in respect of any Tax.

      Section 2.09 Proceedings; Orders. There is no pending Proceeding, and, to
the knowledge of the Seller, no Person has threatened in writing to commence any
Proceeding: (i) that involves the Seller Corporations or that otherwise relates
to or could reasonably be expected to affect any of the Specified Assets or the
Business (whether or not any Seller Corporation is named as a party thereto); or
(ii) that challenges, or that could reasonably be expected to have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions, and no event has occurred, and no claim, dispute or other
condition or circumstance exists, that could reasonably be expected to directly
or indirectly give rise to or serve as a basis for the commencement of any such
Proceeding.

      Section 2.10 Authority; Binding Nature Of Agreements.
<PAGE>

            (a.) Each of the Seller Corporations has the absolute and
unrestricted right, power and authority to enter (as defined in this
subsection), into and (subject to the approval of the Asset Sale by the Required
Shareholder Approval) to perform its obligations under any agreement to which it
is or may become a party; and, subject to the approval of the execution,
delivery and performance by the Seller of the Transactional Agreements to which
it is or may become a party have been duly authorized by all necessary action on
the part of the Seller and its board of directors and officers. This Agreement
constitutes the legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. Upon the execution of each of the other Transactional
Agreements at the Closing, each of such other Transactional Agreements to which
the Seller Corporations is a party will constitute the legal, valid and binding
obligation of the Seller and will be enforceable against each of the Seller
Corporations in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.

            (b.) The affirmative vote or written consent of the holders of a
majority of the shares of capital stock of the Seller outstanding at the time of
such action are the only votes of the holders of any class or series of the
Seller's capital stock necessary to approve the Asset Sale (the "Required
Shareholder Approval.")

      Section 2.11 Non-Contravention; Consents. Neither the execution and
delivery by the Seller of any of the Transactional Agreements, nor the
consummation or performance by the Seller of any of the Transactions, will
directly or indirectly (with or without notice or lapse of time):

            (a) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Seller, or any of the assets of the
Seller, is subject;

            (b) cause the Purchaser or any affiliate of the Purchaser to become
subject to, or to become liable for the payment of, any Tax;

            (c) cause any of the Specified Assets to be reassessed or revalued
by any taxing authority or other Governmental Body;

            (d) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is to be included in the Specified Assets or is held by the Seller
Corporations or any employee of the Seller Corporations;

            (e) [contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Contract or except as set
forth on Part {2.9(b)] of the Disclosure Schedule, give any Person the right to
(i) declare a default or exercise any remedy under any Contract, (ii) accelerate
the maturity or performance of any Contract, or (iii) cancel, terminate or
modify any Contract; or

            (f) result in the imposition or creation of any Encumbrance upon or
with respect to any of the Specified Assets.

Except for the Shareholder approval described in subsection 2.10(a), above, and
applicable Delaware Law, the Seller neither was, is or will be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
<PAGE>

      Section 2.12 No Discussions. Neither the Seller Corporations nor any
Representative of the Seller Corporations is engaged, directly or indirectly, in
any discussions or negotiations with any other Person relating to any
Acquisition Proposal. The Seller Corporations have not waived, and will not
waive, any rights under any confidentiality, "standstill", non-solicitation or
similar agreement with any third party to which any of the Seller Corporations
is a party or under which the Seller Corporations have any rights.

      Section 2.13 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of any of the Seller
Corporations or any of their Representatives.

      Section 2.14 Full Disclosure. None of the Transactional Agreements
contains or will contain any untrue statement of material fact; and none of the
Transactional Agreements omits or will omit to state any material fact necessary
to make any of the representations, warranties or other statements or
information contained therein not misleading. All of the information set forth
in the Disclosure Schedule, and all other information regarding the Seller
Corporations and their respective businesses, condition, assets, liabilities,
operations, financial performance, net income and prospects that has been
furnished to Parent or any of Parent's Representatives by or on behalf of the
Seller or by any Representative of the Seller, is accurate and complete in all
material respects.

ARTICLE III       Representations and Warranties of Parent and the Purchaser.

      Parent and the Purchaser represent and warrant, to and for the benefit of
the Seller, as follows:

      Section 3.01 Due Organization; Etc. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.

      Section 3.02 Authority; Binding Nature Of Agreements. Each of Parent and
the Purchaser has the absolute and unrestricted right, power and authority to
enter into and to perform its obligations under each of the Transactional
Agreements to which it is or may become a party; and the execution, delivery and
performance by each of Parent and the Purchaser of the Transactional Agreements
to which it is or may become a party have been duly authorized by all necessary
action on the part of Parent and the Purchaser and their respective boards of
directors and officers. This Agreement constitutes the legal, valid and binding
obligation of each of Parent and the Purchaser, enforceable against Parent and
the Purchaser in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. Upon the execution of each of the other Transactional
Agreements at the Closing, each of such other Transactional Agreements to which
each of Parent and the Purchaser is a party will constitute the legal, valid and
binding obligation of Parent or the Purchaser (as the case may be) and will be
enforceable against Parent or the Purchaser (as the case may be) in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.

      Section 3.03 Non-Contravention; Consents. Neither the execution and
delivery by Parent and the Purchaser of any of the Transactional Agreements, nor
the consummation or performance by Parent and the Purchaser of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time) conflict with or result in any breach of any provision of the certificate
<PAGE>

of incorporation or bylaws of Parent or the Purchaser. Except as may be required
by the Exchange Act, Delaware Law, and the NASD Bylaws (as they relate to the
Registration Statement and the Prospectus/Proxy Statement as defined in Section
5, below), neither Parent nor the Purchaser was, is or will be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.

      Section 3.04 Valid Issuance. The Parent common stock to be issued in
connection with the Transactions will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable
[subject term of Escrow?].

      Section 3.05 Brokers. Neither Parent nor the Purchaser has become
obligated to pay, and has not taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions.

ARTICLE IV        Pre-Closing Covenants of the Seller.

      Section 4.01 Access And Investigation. The Seller shall ensure that, at
all times during the Pre-Closing Period: (a) the Seller and its Representatives
provide Parent, the Purchaser and their Representatives with free and complete
access to the Seller's Representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to the Seller Corporations, the Telecommunications Business, the
Specified Assets and such other information as Parent or the Purchaser may
reasonably request; (b) the Seller and its Representatives provide the Purchaser
and its Representatives with such copies of existing books, records, Tax
Returns, work papers and other documents and information relating to the Seller
and its business as Parent or the Purchaser may request in good faith; and (c)
the Seller and its Representatives compile and provide the Purchaser and its
Representatives with such additional financial, operating and other data and
information relating to the Seller and its business as Parent or the Purchaser
may request in good faith.

      Section 4.02 Operation Of Business. The Seller shall ensure that, except
as otherwise expressly contemplated by the Transactional Agreements, during the
Pre-Closing Period:

            (a) the Seller Corporations conduct their respective businesses and
operations in the ordinary course and in accordance with prudent practices and
in compliance with all applicable Legal Requirements and the requirements of all
Seller Contracts, and except as expressly contemplated by this Agreement, they
(i) preserve intact the current business organization relating to the Specified
Assets and the Telecommunications Business, (ii) keep available the services of
the current officers and employees relating to the Specified Assets and the
Telecommunications Business, (iii) maintain good relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees,
independent contractors and other Persons having business relationships with
them relating to the Specified Assets and the Telecommunications Business, and
(iv) promptly repair, restore or replace any Specified Assets that are destroyed
or damaged;

            (b) the officers of the Seller confer regularly with the Purchaser
concerning operational matters and otherwise report regularly to the Purchaser
concerning the status of the Seller's business, condition, assets, liabilities,
operations, financial performance and prospects;
<PAGE>

            (c) the Seller Corporations do not enter into any transaction or
take any other action that causes or constitutes a Breach of any representation,
warranty or covenant made by the Seller in this Agreement or in the Seller
Closing Certificate;

            (d) the Seller Corporations do not enter into any transaction or
take any other action outside the Ordinary Course of Business;

            (e) the Seller Corporations pay in full all indebtedness,
liabilities, obligations and other amounts when due; and

            (f) none of the Seller Corporations shall (i) make a general
assignment for the benefit of creditors, (ii) file, or consent to the filing
against it, any bankruptcy or insolvency petition or similar filing, (iii)
suffer the attachment or other judicial seizure of all or a substantial portion
of its assets, (iv) admit in writing its inability to pay its debts as they
become due, (v) become convicted of, or plead guilty or no contest to, any
felony, or (vi) take or become the subject of any action that may have an
adverse effect on its ability to comply with or perform any of its covenants or
obligations under any of the Transactional Agreements.

      Section 4.03 Filings and Consents. The Seller shall ensure that: as soon
as possible after the date of this Agreement and from time-to-time during the
Pre-closing period (a) all filings, notices and Consents required to be made,
given and obtained in order to consummate the Transactions are made, given and
obtained on a timely basis; and (b) shall cooperate with the Purchaser and
prepare and make available such documents and take such other actions as the
Purchaser may request in good faith, in connection with any filing, notice or
Consent that Parent or the Purchaser is required or elects to make, give or
obtain.

      Section 4.04 Notification; Updates to Disclosure Schedule. During the
Pre-Closing Period, the Seller shall promptly notify Parent and the Purchaser in
writing of: (a) the discovery by the Seller of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that causes or constitutes a Breach of any representation or warranty made
by the Seller in this Agreement; (b) any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement and that would
cause or constitute a Breach of any representation or warranty made by the
Seller in this Agreement if (i) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (ii) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; (c) any
Breach of any covenant or obligation of the Seller; and (d) any event,
condition, fact or circumstance that may make the timely satisfaction of any of
the conditions set forth in Section 6 or Section 7 impossible or unlikely. If
any event, condition, fact or circumstance that is required to be disclosed
pursuant to this Section 4.4 requires any change in the Disclosure Schedule, or
if any such event, condition, fact or circumstance would require such a change
assuming the Disclosure Schedule were dated as of the date of the occurrence,
existence or discovery of such event, condition, fact or circumstance, then the
Seller shall promptly deliver to Parent and the Purchaser an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any representation or warranty made by the Seller in this
Agreement or in the Seller Closing Certificate, or (ii) determining whether any
of the conditions set forth in Section 6 has been satisfied.

      Section 4.05 No Solicitation.
<PAGE>

            (a) None of the Seller Corporations shall, directly or indirectly,
authorize or permit any of their Representatives directly or indirectly to, (i)
solicit, initiate, encourage, induce or facilitate the making, submission or
announcement of any Acquisition Proposal or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any
information regarding any of the Seller Corporations to any Person in connection
with or in response to an Acquisition Proposal or an inquiry or indication of
interest that could lead to an Acquisition Proposal, (iii) engage in discussions
or negotiations with any Person with respect to any Acquisition Proposal, (iv)
approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Acquisition Transaction;

            [The Seller shall promptly (and in no event later than 48 hours
after receipt of any Acquisition Proposal, any inquiry or indication of interest
that could reasonably be expected to lead to an Acquisition Proposal or any
request for nonpublic information) advise the Purchaser orally and in writing of
any Acquisition Proposal, any inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal or any request for
nonpublic information relating to the Seller (including the identity of the
Person making or submitting such Acquisition Proposal, inquiry, indication of
interest or request, and the terms thereof) that is made or submitted by any
Person during the Pre-Closing Period. The Seller shall keep Parent and the
Purchaser fully informed with respect to the status of any such Acquisition
Proposal, inquiry, indication of interest or request and any modification or
proposed modification thereto.]

            (b.) The Seller agrees not to release or permit the release of any
Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill", nonsolicitation or similar agreement to which the
Seller is a party or under which the Seller has any rights, and will use its
best efforts to enforce or cause to be enforced each such agreement at the
request of Parent or the Purchaser. The Seller also will promptly request each
Person that has executed a confidentiality agreement in connection with its
consideration of a possible Acquisition Transaction or equity investment to
return all confidential information heretofore furnished to such Person by or on
behalf of the Seller.

      Section 4.06 Shareholders' Meeting.

            (a) The Seller shall, in accordance with its certificate of
incorporation and bylaws and the applicable provisions of Delaware law, call and
hold a special meeting of its shareholders (on a date selected by the Seller in
consultation with the Purchaser) as promptly as reasonably practicable after the
Registration Statement is declared effective under the Securities Act for the
purpose of permitting them to consider and to vote upon and approve the
Agreement and the Asset Sale (the "Shareholders' Meeting"). The Seller shall
ensure that all proxies solicited in connection with the Shareholders' Meeting
are solicited in compliance with all applicable Legal Requirements.

            (b) Subject to Section 4.6(c): (i) the Prospectus/Proxy Statement
shall include a statement to the effect that the board of directors of the
Seller unanimously recommends that the Seller's shareholders vote to approve the
Agreement and the Asset Sale at the Shareholders' Meeting (the recommendation of
the Seller's board of directors that the Seller's shareholders vote to approve
the Agreement and the Asset Sale being referred to as the "Seller Board
Recommendation"); and (ii) the Seller Board Recommendation shall not be
withdrawn or modified in a manner adverse to Parent or the Purchaser, and no
resolution by the board of directors of the Seller or any committee thereof to
withdraw or modify the Seller Board Recommendation in a manner adverse to Parent
or the Purchaser shall be adopted or proposed.
<PAGE>

            (c) [Notwithstanding anything to the contrary contained in Section
4.6(b), at any time prior to the approval of the Agreement and the Asset Sale by
the Required Shareholder Approval, the Seller Board Recommendation may be
withdrawn or modified in a manner adverse to Parent or the Purchaser if: (i) an
unsolicited, bona fide written offer to purchase all of the outstanding shares
of Seller Common Stock or substantially of the assets of the Seller is made to
the Seller and is not withdrawn; (ii) the Seller provides Parent and the
Purchaser with at least two business days' prior notice of any meeting of the
Seller's board of directors at which such board of directors will consider and
determine whether such offer is a Superior Offer; (iii) the Seller's board of
directors determines in good faith (based upon a written opinion of an
independent financial advisor of nationally recognized reputation) that such
offer constitutes a Superior Offer; (iv) the Seller's board of directors
determines in good faith, after having taken into account the written advice of
the Seller's outside legal counsel, that, in light of such Superior Offer, and
taking into account any offer made by Parent or the Purchaser pursuant to clause
(vii) below, the withdrawal or modification of the Seller Board Recommendation
is required in order for the Seller's board of directors to comply with its
fiduciary obligations to the Seller's shareholders under applicable law; (v) the
Seller Board Recommendation is not withdrawn or modified in a manner adverse to
Parent or the Purchaser at any time within two business days after Parent or the
Purchaser receives written notice from the Seller confirming that the Seller's
board of directors has determined that such offer is a Superior Offer; (vi)
neither the Seller nor any of its affiliates or Representatives shall have
breached or taken any action inconsistent with any of the provisions set forth
in this Section 4.6; and (vii) prior to the withdrawal or modification of the
Seller Board Recommendation, neither Parent nor the Purchaser submits a written
proposal to the Seller's board of directors that is at least as favorable to the
Seller in the aggregate as such Superior Offer.

            (d) The Seller's obligation to call, give notice of and hold the
Shareholders' Meeting in accordance with Section 4.6(a) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
of any Superior Offer or other Acquisition Proposal, or by any withdrawal or
modification of the Seller Board Recommendation.

      Section 4.07 Confidentiality. The Seller shall ensure that, except with
respect to the press release announcing the execution of this Agreement, during
the Pre-Closing Period: (a) neither the Seller Corporations nor any
Representative of the Seller Corporations, issues or disseminates any press
release or other publicity or otherwise makes any disclosure of any nature (to
any supplier, customer, landlord, creditor or employee of the Seller
Corporations or to any other Person) regarding any of the Transactions or the
existence or terms of this Agreement, except to the extent that the Seller is
required by law to make any such disclosure; and (b) if the Seller is required
by law to make any such disclosure, the Seller shall advise Parent and the
Purchaser, at least two business days (or such shorter notice as necessary to
comply with applicable law requiring such disclosure) before making such
disclosure, of the nature and content of the intended disclosure.

ARTICLE V         Additional Covenants of the Parties.

      Section 5.01 Registration Statement; Prospectus/Proxy Statement. As
promptly as practicable after the date of this Agreement, Parent and the Seller
shall prepare and cause to be filed with the SEC a prospectus/proxy statement
with respect to the Transactions (the "Prospectus/Proxy Statement") and Parent
shall prepare and cause to be filed with the SEC a (or similar) registration
statement with respect to the registration of the Stock Consideration (the
"Registration Statement"), in which the Prospectus/Proxy Statement will be
included as a prospectus. Each of Parent and the Seller shall use all reasonable
efforts to cause the Registration Statement and the Prospectus/Proxy Statement
<PAGE>

to comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after it is filed with the SEC. The Seller will use all reasonable efforts to
cause the Prospectus/Proxy Statement to be mailed to the Seller's shareholders
as promptly as practicable after the Registration Statement is declared
effective under the Securities Act. The Seller shall promptly furnish to Parent
all information concerning the Seller Corporations and the Seller's shareholders
that may be required or reasonably requested in connection with any action
contemplated hereto. The Seller shall ensure that none of the information
supplied or to be supplied by or on behalf of the Seller for inclusion or
incorporation by reference in the Registration Statement or in the
Prospectus/Proxy statement will, at the time the Registration Statement is filed
with the SEC or at the time it becomes effective under the Securities Act, or
with respect to the Prospectus/Proxy Statement at the time of the mailing
thereof to the Shareholders of the Seller or at the time of the Shareholders'
meeting contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. If any event relating to any of the Seller Corporations or
Parent occurs, or if either the Seller or Parent becomes aware of any
information, that should be disclosed in an amendment or supplement to the
Registration Statement or the Prospectus/Proxy Statement, then the Seller or
Parent shall promptly inform the other party thereof and the parties shall
cooperate with each other in filing such amendment or supplement with the SEC
and, if appropriate, in mailing such amendment or supplement to the shareholders
of Seller.

      Section 5.02 Regulatory Approvals. Each party shall (i) use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed by such party with any
Governmental Body with respect to the Transactions, and to submit promptly any
additional information requested by any such Governmental Body and (ii)
cooperate with the other parties hereto and, subject to Section 5.3, use its
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Legal Requirements to consummate and make effective the
Transactions.]

      Section 5.03 Voting Agreements. [Michael Molen and each of the
Shareholders set forth on Schedule 5.3 attached hereto] has entered into a
Voting Agreement and Irrevocable Proxy with the Parent and Purchaser in the form
of Exhibit __ attached hereto (collectively, the "Voting Agreements"), providing
among other things that such Shareholders shall vote in favor of or consent to
the Agreement and the Asset Sale contemplated by the Agreement.

      Section 5.04 Additional Agreements. The Seller, Parent and the Purchaser
shall use all reasonable efforts to take, or cause to be taken, all actions
necessary to consummate the Transactions. Each party to this Agreement (i) shall
make all filings (if any) and give all notices (if any) required to be made and
given by such party in connection with the Transactions, (ii) shall use all
reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Transactions, and (iii) shall use all reasonable
efforts to lift any restraint, injunction or other legal bar to the consummation
of the Transactions. Each party shall promptly deliver to the other party a copy
of each such filing made, each such notice given and each such Consent obtained
by the first party during the Pre-Closing Period.

ARTICLE VI Conditions Precedent to the Purchaser's Obligation to Close.

      The Purchaser's obligation to purchase the Specified Assets and the
obligation of Parent and the Purchaser to take the other actions required to be
<PAGE>

taken by them at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Parent and the Purchaser, in whole or in part, in writing or by otherwise
effecting the Closing):

      Section 6.01 Accuracy Of Representations. The representations and
warranties made by each of the Seller Corporations in this Agreement shall have
been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Closing Date as if made on
the Closing Date, without giving effect to any update to the Disclosure
Schedule, except for any such representations and warranties made as of a
specific date, which shall have been accurate in all material respects as of
such date.

      Section 6.02 Performance Of Obligations. All of the covenants and
obligations that the Seller Corporations are required to comply with or to
perform at or prior to the Closing shall have been duly complied with and
performed in all material respects.

      Section 6.03 Shareholder Approval. The Agreement and Asset Sale shall have
been duly approved by the Required Shareholder Approval .

      Section 6.04 Voting Agreements. Michael Molen [and each of the
Shareholders listed on Schedule 5.3]shall have executed and delivered a Voting
Agreement and each Voting Agreement shall be in full force and effect in
accordance with its respective terms.

      Section 6.05 Consents. Each of the Consents identified in [Part 6.4] of
the Disclosure Schedule, and all other Consents required or which Parent or the
Purchaser reasonably determines it appropriate to be obtained in connection with
the Transactions, shall have been obtained and shall be in full force and
effect.

      Section 6.06 No Material Adverse Change. There shall have been no material
adverse change in the Business, or the condition, assets, liabilities,
operations, financial performance, net income or prospects of the Seller
Corporations (taken as a whole) or the Specified Assets and the Business (taken
as a whole) since December 31, 2003, and no event shall have occurred and no
condition or circumstance shall exist that could reasonably be expected to give
rise to any such material adverse change.

      Section 6.07 Due Diligence. The Purchaser determines in its sole
discretion that it is satisfied with the results of its due diligence review of
the Seller Corporations.]

      Section 6.08 Additional Documents. Parent and the Purchaser shall have
received the following documents:

            (a) Assignment and Assumption Agreement in substantially the form of
[Exhibit D], executed by the Seller;

            (b) such bills of sale, endorsements, assignments (including patent
assignments) and other documents as may (in the reasonable judgment of the
Purchaser or its counsel) be necessary or appropriate to assign, convey,
transfer and deliver to the Purchaser good and valid title to the Specified
Assets free of any Encumbrances;

      Section 6.09 No Prohibition. Neither the consummation nor the performance
of any the Transactions will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of, or
cause Parent or the Purchaser or any Person affiliated with either of them to
suffer any adverse consequence under, any applicable Legal Requirement or Order.
<PAGE>

      Section 6.10 Employment Agreement. Michael Molen shall have executed and
delivered an employment agreement ("Employment Agreement") with Parent.

      Section 6.11 Litigation. There shall not be pending or threatened any
Legal Proceeding: (a) challenging or seeking to restrain or prohibit the
consummation of the Transactions; (b) relating to the Transactions and seeking
to obtain from Parent or the Purchaser any damages or other relief that may be
material to the Purchaser; (c) that could materially and adversely affect the
right of the Purchaser to own or use the Specified Assets; or (e) seeking to
compel the Purchaser to dispose of or hold separate any material assets as a
result of the Transactions.

      Section 6.12 Release of Liens. The Purchaser shall have received evidence
satisfactory to it of the release by any Person who held any Encumbrance on the
Specified Assets of all Encumbrances on the Specified Assets.

      Section 6.13 Dissenters. The holders of no more than five percent (5%) of
the issued and outstanding shares of the Seller's common stock immediately prior
to the Closing Date shall have preserved their right to exercise dissenter's
rights under Delaware law.

ARTICLE VII Conditions Precedent to the Seller's Obligation to Close.

      The Seller Corporations' obligation to sell the Specified Assets and to
take the other actions required to be taken by the Seller Corporations at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Seller, in whole or
in part, in writing or by otherwise effecting the Closing):

      Section 7.01 Accuracy of Representations. The representations and
warranties made by Parent and the Purchaser in this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, except for any such representations and warranties made as of a
specific date, which shall have been accurate in all material respects as of
such date, and except that any inaccuracies in such representations and
warranties will be disregarded if, after aggregating all inaccuracies of such
representations and warranties (without duplication), such inaccuracies and the
circumstances giving rise to all such inaccuracies do not constitute a material
adverse effect on Parent.

      Section 7.02 Purchaser's Performance. All of the covenants and obligations
that Parent and the Purchaser is required to comply with or to perform at or
prior to the Closing shall have been duly complied with and performed in all
material respects.

      Section 7.03 Purchaser Closing Certificate. The Seller shall have received
the Purchaser Closing Certificate.

ARTICLE VIII      Termination.

      Section 8.01 Termination Events. This Agreement may be terminated prior to
the Closing:

            (a) by either the Purchaser or the Seller if the Transactions shall
not have been consummated by April 15th (the "Termination Date"); provided,
however, that a party shall not be permitted to terminate this Agreement
pursuant to this Section 8.1 if the failure to consummate the Transactions by
the Termination Date is attributable to a failure on the part of such party to
perform any covenant in this Agreement required to be performed by such party at
or prior to the Closing Date, and the Seller shall not be permitted to terminate
this Agreement pursuant hereto unless the Seller shall have made any payment
required to be made to the Purchaser pursuant to Section 8.4;
<PAGE>

            (b) by either Parent and the Purchaser or the Seller if a court of
competent jurisdiction or other Governmental Body shall have issued a final and
non-appealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transactions;

            (c) by either the Purchaser or the Seller if (the [Agreement and
Asset Sale] shall not have been approved at the Shareholders' Meeting (or at any
adjournment or postponement thereof) by the Required Shareholder Approval;
provided, however, that (i) a party shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(c) if the failure to have the [Agreement
and Asset Sale] approved by the Required Shareholder Approval is attributable to
a failure on the part of such party to perform any covenant in this Agreement
required to be performed by such party at or prior to the Closing Date, and (ii)
the Seller shall not be permitted to terminate this Agreement pursuant to this
Section 8.1(c) unless the Seller shall have made any payment required to be made
to the Purchaser pursuant to Section 8.4;

            (d) by Parent and the Purchaser if a Triggering Event shall have
occurred;

            (e) by the Purchaser if (i) any of the Seller's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 6.1 would not be satisfied, or (ii) any of the
Seller's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 6.2 would not be satisfied; provided,
however, that if an inaccuracy in any of the Seller's representations and
warranties as of a date subsequent to the date of this Agreement or a breach of
a covenant by the Seller is curable by the Seller and the Seller is continuing
to exercise all reasonable efforts to cure such inaccuracy or breach, then
Parent and the Purchaser may not terminate this Agreement under this Section
8.1(e) on account of such inaccuracy or breach; or

            (f) by the Seller if (i) any of the representations and warranties
of Parent and the Purchaser contained in this Agreement shall be inaccurate as
of the date of this Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 7.1 would not be satisfied, or (ii)
if any of the covenants of Parent and the Purchaser contained in this Agreement
shall have been breached such that the condition set forth in Section 7.2 would
not be satisfied; provided, however, that if an inaccuracy in any of the
representations and warranties of Parent and the Purchaser as of a date
subsequent to the date of this Agreement or a breach of a covenant by Parent or
the Purchaser is curable by Parent or the Purchaser and Parent or the Purchaser
is continuing to exercise all reasonable efforts to cure such inaccuracy or
breach, then the Seller may not terminate this Agreement under this Section
8.1(f) on account of such inaccuracy or breach.

            (g) [By the Purchaser if it is not satisfied with the results of its
due diligence investigation.]

      Section 8.02 Termination Procedures. If either the Purchaser or Seller
wishes to terminate this Agreement pursuant as otherwise provided in Section
8.1, such party shall deliver to the non-terminating party a written notice
stating that it is terminating this Agreement and setting forth a brief
description of the basis on which they are terminating this Agreement.
<PAGE>

      Section 8.03 Effect of Termination. Except as expressly provided elsewhere
in this Agreement or in any of the other Transactional Agreements, and subject
to Section 8.4, if this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement shall terminate;
provided, however, that: (a) no party shall be relieved of any obligation or
other Liability arising from any Breach by such party of any provision of this
Agreement; and (b) the parties shall, in all events, remain bound by and
continue to be subject to the provisions set forth in Section 11 that continue
pursuant to their terms.

      Section 8.04 Fees.

            (a) Except as set forth in this Section 8.4, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Transactions are consummated; provided, however, that:

                  (A) The Purchaser (on the one hand) and the Seller shall share
[equally] all fees and expenses, other than attorneys' fees and securities
registration fees, incurred in connection with preparing, filing, printing and
mailing of the Registration Statement and the Prospectus/Proxy Statement and any
amendments or supplements thereto ("Out of Pocket Expenses");

                  (B) if this Agreement is terminated by Parent and the
Purchaser pursuant to Section 8.1(a), 8.1(c), 8.1(d), or 8.1(e) (without
limiting any obligation of the Seller to pay any fee payable pursuant to Section
8.4(b)), the Seller shall make a nonrefundable cash payment to the Purchaser, at
the time specified in Section 8.4(b), in an amount equal to the aggregate amount
of all reasonable fees and expenses (including all reasonable attorneys' fees,
and accountants' fees, filing fees) that have been paid or that may become
payable by or on behalf of Parent or the Purchaser in connection with the
preparation and negotiation of this Agreement and the other Transactional
Agreements and otherwise in connection with the Transactions.

      Section 8.05 Non-exclusivity of Termination Rights. The termination rights
provided in Section 8.1 shall not be deemed to be exclusive. Accordingly, the
exercise by any party of its right to terminate this Agreement pursuant to
Section 8.1 shall not be deemed to be an election of remedies and shall not be
deemed to prejudice, or to constitute or operate as a waiver of, any other right
or remedy that such party may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise).

ARTICLE IX        Survival, Indemnification

      Section 9.01 Survival of Representations and Covenants.

            (a) The representations, warranties, covenants and agreements
contained herein shall survive (without limitation): (i) the Closing and the
sale of the Specified Assets to the Purchaser; (ii) any sale or other
disposition of any or all of the Specified Assets by the Purchaser; and (iii)
the dissolution or liquidation of any party to this Agreement. Except as set
forth in Section 9.1(c), all of said representations, warranties, covenants and
obligations shall survive without limitation as to time, unless the covenant or
agreement specifies a term, in which such covenant or agreement shall survive
until the expiration of such specified term.
<PAGE>

      (b) The representations, warranties, covenants and obligations of the
Seller and the Seller Subsidiary, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or any
knowledge of, any of the Indemnitees or any of their Representatives.

      (c) For purposes of this Agreement, a "Claim Notice" relating to a
particular representation or warranty shall be deemed to have been given if any
Indemnitee, acting in good faith, delivers to the Seller a written notice
stating that such Indemnitee believes that there is or has been a possible
Breach of such representation or warranty and containing (i) a brief description
of the circumstances supporting such Indemnitee's belief that there is or has
been such a possible Breach, and (ii) a non-binding, preliminary estimate of the
aggregate dollar amount of the actual and potential Damages that have arisen and
may arise as a direct or indirect result of such possible Breach.

      (d) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Seller in this Agreement.

      Section 9.02 Indemnification by the Seller Group. The Seller and the
Principal Shareholder (collectively, sometimes referred to as the "Seller
Group")each, jointly and severally, agree to hold harmless and indemnify each of
the Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages that are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third-party claim) and that arise directly or indirectly from or
as a direct or indirect result of, or are directly or indirectly connected with:

                  (A) any Breach of any of the representations or warranties
made by the Seller, the Seller Subsidiary or the Principal Shareholder in this
Agreement (without giving effect to any update to the Disclosure Schedule), both
as of the date of this Agreement and as of the Closing Date as if made on and as
of the Closing Date, or in the Seller Closing Certificate or any of the other
Transactional Agreements;

                  (B) any Breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule or in any other
document delivered or otherwise made available to Parent or the Purchaser or any
of their Representatives by or on behalf of the Seller or any Representative of
the Seller; the Seller Subsidiary or the Principal Shareholder;

                  (C) any Breach of any covenant or obligation of the Seller,
the Seller Subsidiary or the Principal Shareholder contained in any of the
Transactional Agreements;

                  (D) any Liability of the Seller, the Seller Subsidiary or the
Principal Shareholder or of any Related Party, other than the Designated
Contractual Obligations;

                  (E) any Liability (other than the Designated Contractual
Obligations) to which Parent, the Purchaser or any of the other Indemnitees may
become subject and that arises directly or indirectly from or relates directly
or indirectly to (A) any product produced or sold or any services performed by
or on behalf of the Seller of the Seller Subsidiary, (B) the presence of any
Hazardous Material at any site owned, leased, occupied or controlled by the
Seller or the Seller Subsidiary on or at any time prior to the Closing Date, (C)
the generation, manufacture, production, transportation, importation, use,
treatment, refinement, processing, handling, storage, discharge, release or
disposal of any Hazardous Material (whether lawfully or unlawfully) by or on
behalf of the Seller, the Seller Subsidiary or the Principal Shareholder, (D)
the operation by the Seller or the Seller Subsidiary of its business, or (E) any
failure to comply with any bulk transfer law or similar Legal Requirement in
connection with any of the Transactions; or
<PAGE>

                  (F) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in any of
clauses "(i)-(v)" [or "(vi)]" above (including any Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section 9).

      Section 9.03 Setoff. In addition to any rights of setoff or other rights
that Parent, the Purchaser or any of the other Indemnitees may have at common
law or otherwise, Parent and the Purchaser shall have the right to withhold and
deduct any sum that may be owed to any Indemnitee under this Section 9 from any
amount (including all or any portion of the Stock Consideration) otherwise
payable by any Indemnitee to the Seller, the Seller Subsidiary or the Principal
Shareholder. The withholding and deduction of any such sum shall operate for all
purposes as a complete discharge (to the extent of such sum) of the obligation
to pay the amount from which such sum was withheld and deducted and a release of
the Seller, the Seller Subsidiary or the Principal Shareholder from further
liability with respect to such obligation to the extent of such setoff. The
exercise of such right of setoff by Parent or the Purchaser in good faith,
whether or not ultimately determined to be justified, will not constitute an
event of default under this Agreement or any of the other Transactional
Agreements.

      Section 9.04 Non-exclusivity of Indemnification Remedies. The
indemnification remedies and other remedies provided in this Section 9 shall not
be deemed to be exclusive. Accordingly, the exercise by any Person of any of its
rights under this Section 9 shall not be deemed to be an election of remedies
and shall not be deemed to prejudice, or to constitute or operate as a waiver
of, any other right or remedy that such Person may be entitled to exercise
(whether under this Agreement, under any other Contract, under any statute, rule
or other Legal Requirement, at common law, in equity or otherwise).

      Section 9.05 Defense Of Third Party Claims. In the event of the assertion
or commencement by any Person of any claim or Proceeding (whether against Parent
or the Purchaser, against any other Indemnitee or against any other Person) with
respect to which the Seller, the Seller Subsidiary or the Principal Shareholder
may become obligated to indemnify, hold harmless, compensate or reimburse any
Indemnitee pursuant to this Section 9, Parent and the Purchaser shall have the
right, at its election, to designate the Seller to assume the defense of such
claim or Proceeding at the sole expense of the Seller. If Parent or the
Purchaser so elects to designate the Seller, the Seller Subsidiary or the
Principal Shareholder to assume the defense of any such claim or Proceeding:

            (a) the Seller, Seller Subsidiary or Principal Shareholder shall
proceed to defend such claim or Proceeding in a diligent manner with counsel
satisfy, the Seller, the Seller Subsidiary or the Principal Shareholder
satisfactory to Parent and the Purchaser;

            (b) Parent and the Purchaser shall make available to the Seller, the
Seller Subsidiary or the Principal Shareholder any non-privileged documents and
materials in the possession of Parent or the Purchaser that may be necessary to
the defense of such claim or Proceeding;
<PAGE>

            (c) the Seller, Seller Subsidiary or Principal Shareholder shall
keep Parent and the Purchaser informed of all material developments and events
relating to such claim or Proceeding;

            (d) Parent and the Purchaser shall have the right to participate in
the defense of such claim or Proceeding;

            (e) the Seller, Seller Subsidiary or Principal Shareholder shall not
settle, adjust or compromise such claim or Proceeding without the prior written
consent of the Purchaser, which shall not be unreasonably withheld or delayed;
and

            (f) Parent and the Purchaser may at any time (notwithstanding the
prior designation of the Seller, the Seller Subsidiary or Principal Shareholder
to assume the defense of such claim or Proceeding) assume the defense of such
claim or Proceeding.

      If Parent and the Purchaser does not elect to designate the Seller, the
Seller Subsidiary or Principal Shareholder to assume the defense of any such
claim or Proceeding (or if, after initially designating the Seller, the Seller
Subsidiary or Principal Shareholder to assume such defense, Parent or the
Purchaser elects to assume such defense), Parent or the Purchaser may proceed
with the defense of such claim or Proceeding on its own. If Parent or the
Purchaser so proceeds with the defense of any such claim or Proceeding on its
own:

                  (A) all expenses relating to the defense of such claim or
Proceeding (whether or not incurred by Parent or the Purchaser) shall be borne
and paid exclusively by the Seller, the Seller Subsidiary or Principal
Shareholder;

                  (B) the Seller, the Seller Subsidiary or Principal Shareholder
shall make available to Parent or the Purchaser any documents and materials in
the possession or control of the Seller, the Seller Subsidiary or Principal
Shareholder that may be necessary to the defense of such claim or Proceeding;

                  (C) Parent and the Purchaser shall keep the Seller, the Seller
Subsidiary and Principal Shareholder informed of all material developments and
events relating to such claim or Proceeding; and

                  (D) Parent and the Purchaser shall have the right to settle,
adjust or compromise such claim or Proceeding with the consent of the Seller;
the Seller Subsidiary or Principal Shareholder provided, however, that the
Seller, Seller Subsidiary or Principal Shareholder shall not unreasonably
withhold or delay such consent.

      Section 9.06 Exercise Of Remedies By Indemnitees Other Than Parent or the
Purchaser. No Indemnitee (other than Parent or the Purchaser or any successor
thereto or assign thereof) shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Parent or the
Purchaser (or any successor thereto or assign thereof) shall have consented to
the assertion of such indemnification claim or the exercise of such other
remedy.

      Section 9.07 Further Actions. From and after the Closing Date, the Seller
shall cooperate with the Purchaser and their affiliates and Representatives, and
shall execute and deliver such documents and take such other actions as the
Purchaser may reasonably request, for the purpose of evidencing the Transactions
and putting the Purchaser in possession and control of all of the Specified
Assets.
<PAGE>

      Section 9.08 Publicity. Unless otherwise permitted by this Agreement, the
Seller, Parent and the Purchaser shall consult with each other before issuing
any press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the Transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior written consent of the other (which
approval shall not be unreasonably withheld), except as may be required by law.
If either the Seller, Parent or the Purchaser is required to make any such
public disclosure, the party required to make the disclosure shall use its
reasonable efforts to give the other party prior notice and an opportunity to
review the disclosure prior to the public release of information.

ARTICLE X         Miscellaneous Provisions.

      Section 10.01 Further Assurances. Each party hereto shall execute and/or
cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.

      Section 10.02 Fees and Expenses.

            (a) The Seller shall bear and pay all fees, costs and expenses that
have been incurred or that are incurred in the future by, or on behalf of or for
the benefit of the Seller in connection with (i) the negotiation, preparation
and review of any letter of intent or similar document relating to any of the
Transactions; (ii) the investigation and review conducted by Parent and the
Purchaser and their Representatives with respect to the business of the Seller;
(iii) the negotiation, preparation and review of this Agreement, the other
Transactional Agreements and all bills of sale, assignments, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the Transactions; and (iv) the consummation and performance of
the Transactions.

            (b) Subject to the reimbursement and indemnity provisions of
Sections 8 and 9, Parent and the Purchaser shall bear and pay all fees, costs
and expenses that have been incurred or that are in the future incurred by or on
behalf of Parent or the Purchaser in connection with: (i) the negotiation,
preparation and review of any letter of intent or similar document relating to
any of the Transactions; (ii) the investigation and review conducted by Parent
or the Purchaser and their Representatives with respect to the business of the
Seller; (iii) the negotiation, preparation and review of this Agreement, the
other Transactional Agreements and all bills of sale, assignments, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the Transactions; and (iv) the consummation and performance of
the Transactions, (except as otherwise provided in Section 8.4, above).

      Section 10.03 Attorneys' Fees. If any legal action or other legal
proceeding relating to any of the Transactional Agreements or the enforcement of
any provision of any of the Transactional Agreements is brought against any
party to this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
<PAGE>

      Section 10.04 Notices. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto):

         If to the Seller:                  Sanswire Technologies, Inc.
                                            1455 Lincoln Parkway NE, Suite 130
                                            Atlanta, GA  30346
                                            Attn: Chief Executive Officer

         if to Parent or the Purchaser:     GlobeTel Communications Corp.
                                            444 Brickell Avenue, Suite 522
                                            Miami, FL  33131
                                            Attn: Chief Executive Officer

      Section 10.05 Time Of The Essence. Time is of the essence of this
Agreement.

      Section 10.06 Headings. The underlined headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.

      Section 10.07 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

      Section 10.08 Governing Law; Venue.

            (a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Florida (without
giving effect to principles of conflicts of laws).

            (b) In any action between any of the parties arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement, each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the state and federal courts
located in Miami-Dade County, Florida. Each party to this Agreement:

                  (A) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in Miami-Dade County,
Florida (and each appellate court located in the State of Florida) in connection
with any such legal proceeding;

                  (B) agrees that each state and federal court located in
Miami-Dade County, Florida shall be deemed to be a convenient forum; and

                  (C) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in Miami-Dade County, Florida, any claim that such party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.

            (c) Parent, the Purchaser and the Seller agree that, if any
Proceeding is commenced against any Indemnitee by any Person in or before any
court or other tribunal anywhere in the world, then such Indemnitee may proceed
against the Seller in or before such court or other tribunal with respect to any
indemnification claim or other claim arising directly or indirectly from or
relating directly or indirectly to such Proceeding or any of the matters alleged
therein or any of the circumstances giving rise thereto.
<PAGE>

      Section 10.09 Successors And Assigns; Parties In Interest.

            (a) This Agreement shall be binding upon: the Seller and its
successors and assigns (if any) and Parent, the Purchaser and their successors
and assigns (if any). This Agreement shall inure to the benefit of: the Seller;
Parent; the Purchaser; the other Indemnitees (subject to Section 9.6); and the
respective successors and assigns (if any) of the foregoing.

            (b) Parent and the Purchaser may freely assign any or all of their
respective rights under this Agreement (including their indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other Person. The Seller shall not be permitted to
assign any of its rights or delegate any of its obligations under this Agreement
without the prior written consent of Parent and the Purchaser.

            (c) Except for the provisions of Section 9 hereof, none of the
provisions of this Agreement is intended to provide any rights or remedies to
any Person other than the parties to this Agreement and their respective
successors and assigns (if any). Without limiting the generality of the
foregoing, (i) no employee of the Seller shall have any rights under this
Agreement or under any of the other Transactional Agreements, and (ii) no
creditor of the Seller shall have any rights under this Agreement or any of the
other Transactional Agreements.

            Section 10.10 Remedies Cumulative; Specific Performance. The rights
and remedies of the parties hereto shall be cumulative (and not alternative).
The Seller agrees that: (a) in the event of any Breach or threatened Breach by
the Seller of any covenant, obligation or other provision set forth in this
Agreement, Parent and the Purchaser shall be entitled (in addition to any other
remedy that may be available to it) to (i) a decree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining such
Breach or threatened Breach; and (b) neither Parent, the Purchaser nor any other
Indemnitee shall be required to provide any bond or other security in connection
with any such decree, order or injunction or in connection with any related
action or Proceeding.

      Section 10.11 Waiver.

            (a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.

            (b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
<PAGE>

      Section 10.12 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent, the Purchaser and the Seller.

      Section 10.13 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.

      Section 10.14 Entire Agreement. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof, including without limitation
that certain letter regarding confidentiality previously signed, which shall be
deemed to have been terminated as of the date of this Agreement and shall be of
no further force or effect.

      Section 10.15 Knowledge. For purposes of this Agreement, a Person shall be
deemed to have "knowledge" of a particular fact or other matter if any
Representative of such Person has actual knowledge of such fact or other matter.

      Section 10.16 Construction.

            (a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.

            (b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.

            (c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."

            (d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.

      The parties to this Agreement have caused this Agreement to be executed
and delivered as of the date first set forth above.

Seller:

Sanswire Technologies, Inc.
By: /s/  Michael K. Molen
    ----------------------
    Michael K. Molen
    Chairman/ CEO

<PAGE>

Seller Subsidiary:
Sanswire, Inc.

By: /s/  Michael K. Molen
    ----------------------
    Michael K. Molen
    President

                                                  Purchaser

                                                  GlobeTel Communications Corp.

                                                  By: /s/ Timothy M. Huff
                                                      -----------------------
                                                      Timothy M. Huff
                                                      Chief Executive Officer

<PAGE>

Exhibit A

                               CERTAIN DEFINITIONS

      For purposes of the Agreement (including this Exhibit A):

      Acquisition Proposal. "Acquisition Proposal" shall mean any offer,
proposal, inquiry or indication of interest (other than an offer, proposal,
inquiry or indication of interest made or submitted by Parent or the Purchaser)
contemplating or otherwise relating to any Acquisition Transaction.

      Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving: (a) the sale or other disposition of all or a material
portion of the business or assets of the Seller or any direct or indirect
subsidiary or division of the Seller; (b) the issuance, sale or other
disposition of (i) any capital stock or other securities of the Seller other
than as a result of the exercise of stock options previously granted, (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other securities of the Seller, or (iii) any
security, instrument or obligation that is or may become convertible into or
exchangeable for any capital stock or other securities of the Seller; or (c) any
merger, consolidation, business combination, share exchange, reorganization or
similar transaction involving the Seller or any direct or indirect subsidiary of
the Seller.

      Agreement. "Agreement" shall mean the Asset Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.

      Acquisition. "Acquisition" shall mean (a) the sale of the Specified Assets
by the Seller to the Purchaser in accordance with the Agreement; (b) the
assumption of the Designated Contractual Obligations by the Purchaser pursuant
to the Assignment and Assumption Agreement; and (c) the performance by the
Seller and the Purchaser of their respective obligations under the Agreement,
and the exercise by the Seller and the Purchaser of their respective rights
under the Agreement, with respect to the Specified Assets.

      Assumed Contracts. "Assumed Contracts" shall mean the Seller Contracts (if
any) identified during the Pre-Closing Period by the Purchaser, in its sole
discretion, and which the Purchaser agrees in writing to assume at the Closing.

      Average Daily Trading Price shall mean the average of the high and low
sales prices of the Parent's common stock as reported by the Over the Counter
Bulletin Board or other exchange on which the Parent's common stock is trading
as determined at the end of a trading day

      Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach (including any inadvertent or innocent breach) of,
or any failure (including any inadvertent failure) to comply with or perform,
such representation, warranty, covenant, obligation or other provision, or (b)
any claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.

      CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.

      Closing Date. "Closing Date" shall mean the time and date as of which the
Closing actually takes place.
<PAGE>

      Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.

      Comparable Entities. "Comparable Entities" shall mean Entities (other than
the Seller) that are engaged in businesses similar to the business of the
Seller.

      Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).

      Contract. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.

      Damages. "Damages" shall include any loss, damage, injury, decline in
value, Liability, claim, demand, settlement, judgment, award, fine, penalty,
Tax, fee (including any legal fee, expert fee, accounting fee or advisory fee),
charge, cost (including any cost of investigation) or expense of any nature.

      Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent and the Purchaser on behalf
of the Seller, a copy of which is attached to the Agreement and incorporated in
the Agreement by reference.

      Employee Benefit Plan. "Employee Benefit Plan" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, retirement
benefits, performance awards, stock or stock- related awards, fringe benefits or
other employee benefits or remuneration of any kind, whether written or
unwritten or otherwise, funded or unfunded, including each "employee benefit
plan," within the meaning of Section 3(3) of ERISA (whether or not ERISA is
applicable thereto), which is or has been maintained, contributed to, or
required to be contributed to, by the Seller Corporations or any affiliate of
the Seller Corporations for the benefit of any employee of the Seller
Corporations, or with respect to which the Seller Corporations have or may have
any liability or obligation.

      Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
transfer of any asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).

      Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.

      ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.

      ERISA Affiliate. "ERISA Affiliate" shall mean any Person that is, was or
would be treated as a single employer with any of the Specified Entities under
Section 414 of the Code.
<PAGE>

      Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

      Excluded Assets. "Excluded Assets" shall mean the assets identified on
Exhibit C that are (a) owned by the Seller on the Closing Date, and (b) directly
and exclusively related to the Telecommunications Business of the Seller.

      GAAP. "GAAP" shall mean generally accepted accounting principles.

      Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.

      Governmental Body. "Governmental Body" shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.

      Hazardous Material. "Hazardous Material" shall include: (a) any petroleum,
waste oil, crude oil, asbestos, urea formaldehyde or polychlorinated biphenyl;
(b) any waste, gas or other substance or material that is explosive or
radioactive; (c) any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "regulated substance," "hazardous chemical" or "toxic
chemical" as designated, listed or defined (whether expressly or by reference)
in any statute, regulation or other Legal Requirement (including CERCLA and any
other so-called "superfund" or "superlien" law and the respective regulations
promulgated thereunder); (d) any other substance or material (regardless of
physical form) or form of energy that is subject to any Legal Requirement which
regulates or establishes standards of conduct in connection with, or which
otherwise relates to, the protection of human health, plant life, animal life,
natural resources, property or the enjoyment of life or property from the
presence in the environment of any solid, liquid, gas, odor, noise or form of
energy; and (e) any compound, mixture, solution, product or other substance or
material that contains any substance or material referred to in clause "(a)",
"(b)", "(c)" or "(d)" above.

      Indemnitees. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) the Purchaser; (c) Parent's and the Purchaser's current and future
affiliates; (d) the respective Representatives of the Persons referred to in
clauses "(a)", "(b)" and "(c)" above; and (e) the respective successors and
assigns of the Persons referred to in clauses "(a)", "(b)", "(c)" and "(d)"
above.

      Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
<PAGE>

      Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature (including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with GAAP and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.

      Order. "Order" shall mean any: (a) order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence, subpoena, writ or award issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Proceeding.

         Ordinary Course of Business. An action taken by or on behalf of the
Seller shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:

                  (a) such action is recurring in nature, is consistent with the
         past practices of the Seller and is taken in the ordinary course of the
         normal day-to-day operations of the Seller;

                  (b) such action is taken in accordance with sound and prudent
         business practices;

                  (c) such action is not required to be authorized by the
         shareholders of the Seller, the board of directors of the Seller or any
         committee of the board of directors of the Seller and does not require
         any other separate or special authorization of any nature; and

                  (d) such action is similar in nature and magnitude to actions
         customarily taken, without any separate or special authorization, in
         the ordinary course of the normal day-to-day operations of Comparable
         Entities.

      Person. "Person" shall mean any individual, Entity or Governmental Body.

      Pre-Closing Period. "Pre-Closing Period" shall mean the period from the
date of the Agreement through the Closing Date.

      Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or any arbitrator or arbitration panel.

      Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset.

      Related Party. Each of the following shall be deemed to be a "Related
Party": (a) each individual who is, or who since January 1, 1999 has been, an
officer of any of the Seller Corporations; (b) each member of the family of each
<PAGE>

of the individuals referred to in clause "(a)" above; and (c) any Entity (other
than the Seller Corporations) in which any one of the individuals referred to in
clauses "(a)" and "(b)" above holds or held (or in which more than one of such
individuals collectively hold or held), beneficially or otherwise, a controlling
interest or a material voting, proprietary or equity interest.

      Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.

      SEC. "SEC" shall mean the Securities and Exchange Commission.

      Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.

      Seller Common Stock. "Seller Common Stock" shall mean the Common Stock, no
par value, of the Seller.

      Seller Contract. "Seller Contract" shall mean any Contract: (a) to which
any Seller Corporation is a party; (b) by which any Seller Corporation or any of
its assets is or may become bound or under which any Seller Corporation has, or
may become subject to, any obligation; or (c) under which any Seller Corporation
has or may acquire any right or

      Seller Proprietary Asset. "Seller Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Seller or otherwise used by the
Seller Corporations.

      Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase all of the outstanding shares of
common stock of the Seller or substantially all of the assets of the Seller on
terms that the board of directors of the Seller determines, in its reasonable
judgment, based upon a written opinion of an independent financial advisor of
nationally recognized reputation, to be more favorable to the Seller's
shareholders than the terms of the Transactions; provided, however, that any
such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed or is not reasonably capable of being obtained by such third party.

      Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax-sharing
agreement or similar Contract.

      Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
<PAGE>

      Transactional Agreements. "Transactional Agreements" shall mean: (a) the
Agreement; (b) the Assignment and Assumption Agreement; (c) the Voting
Agreements; (d) the Credit Agreement; (e) the Patent License Agreement; (f) the
Patent Standstill Agreement; and (g) the Stay Orders.

      Transactions. "Transactions" shall mean (a) the execution and delivery of
the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including: (i) the sale
of the Specified Assets by the Seller to the Purchaser in accordance with the
Agreement; (ii) the assumption of the Designated Contractual Obligations by the
Purchaser pursuant to the Assignment and Assumption Agreement; and (iii) the
performance by the Seller, Parent and the Purchaser of their respective
obligations under the Transactional Agreements, and the exercise by the Seller,
Parent and the Purchaser of their respective rights under the Transactional
Agreements.

      Triggering Event. "Triggering Event" shall be deemed to have occurred if:
(i) the board of directors of the Seller shall have failed to unanimously
recommend that the Seller's shareholders vote to approve the Agreement and the
Asset Sale, or shall have withdrawn or modified the recommendation of the board
of directors of the Seller, or shall have taken any other action that becomes
generally known to the shareholders of the Seller and that would be reasonably
construed to suggest that the board of directors does not believe that the
Agreement and the Asset Sale is in the best interests of the shareholders of the
Seller; (ii) the Seller shall have failed to include in the Prospectus/Proxy
Statement a statement to the effect that the board of directors of the Seller
has unanimously determined and believes that the Sale of Significant Assets are
in the best interests of the shareholders of the Seller; (iii) the board of
directors of the Seller fails to reaffirm the Seller Board Recommendation, or
fails to reaffirm its determination that the Agreement and the Asset Sale are in
the best interests of the Seller's shareholders, within five business days after
Parent or the Purchaser reasonably requests in writing that such recommendation
or determination be reaffirmed; (iv) the board of directors of the Seller shall
have approved, endorsed or recommended any Acquisition Proposal; (v) the Seller
or Sellers Subsidiary shall have entered into any letter of intent or similar
document or any Contract providing for or otherwise contemplating an Acquisition
Transaction; or (vi) a tender or exchange offer relating to securities of the
Seller shall have been commenced and the Seller shall not have sent to its
shareholders, within ten business days after the commencement of such tender or
exchange offer, a statement disclosing that the Seller recommends rejection of
such tender or exchange offer.

      Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
mean the unaudited consolidated balance sheet of the Seller included in the
Unaudited Interim Financial Statements.

      Unaudited Interim Financial Statements. "Unaudited Interim Financial
Statements" shall mean the unaudited consolidated balance sheet of the Seller as
of December 31, 2003, and the related unaudited consolidated income statement of
the Seller for the three-month period, together with the notes (if any) thereto,
in substantially the form attached as Exhibit E.

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