EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
ROCKY MOUNTAIN INTERNET, INC.
D/B/A XXX.XXX
AND
NOVO MEDIAGROUP, INC.,
AND
XXXXXXX XXXXXXXXX, XXXXX XXXXXXXXX,
XXXXX XXXXXXXX, AND XXXXX XXXXXX
XXXXXX 30, 1999
TABLE OF CONTENTS
1. Definitions .....................................................................1
2. Basic Transaction ...............................................................5
(a) Purchase and Sale of Acquired Assets .......................................5
(b) Purchase Price .............................................................5
(c) Adjustments to Purchase Price ..............................................7
(d) The Closing ................................................................7
(e) Deliveries at the Closing ..................................................7
(f) Allocation .................................................................7
(g) No Assumption of Liabilities ...............................................7
3. Representations and Warranties of the Seller ....................................7
(a) Organization of the Seller .................................................8
(b) Authorization of Transaction ...............................................8
(c) Noncontravention ...........................................................8
(d) Brokers' Fees ..............................................................8
(e) Title to Acquired Assets ...................................................8
(f) Financial Statements .......................................................9
(g) Events Subsequent to Most Recent Month End .................................9
(h) Undisclosed Liabilities ....................................................9
(i) Legal Compliance ...........................................................9
(j) Tax Matters ................................................................9
(k) Real Property ..............................................................9
(l) Intellectual Property .....................................................11
(m) Tangible Assets ...........................................................11
(n) Contracts .................................................................11
(o) Insurance ..................................................................11
(p) Litigation .................................................................11
(q) Warranties .................................................................11
(r) State PUC Authorizations and FCC Authorizations ............................11
(s) Investment .................................................................11
(t) Disclosure .................................................................12
4. Representations and Warranties of the Buyer .....................................12
(a) Organization of the Buyer ..................................................12
(b) Authorization of Transaction ...............................................12
(c) Noncontravention ...........................................................12
(d) SEC Filings ................................................................13
(e) Buyer Shares ...............................................................13
(f) Brokers' Fees ..............................................................13
(g) Disclosure .................................................................13
5. Pre-Closing Covenants ...........................................................13
(a) General ....................................................................13
(b) Notices and Consents .......................................................14
(c) Operation of ..............................................................14
(d) Preservation of Business ...................................................14
(e) Full Access ................................................................14
(f) Notice of Developments .....................................................14
(g) Exclusivity ................................................................14
(h) Legend .....................................................................15
(j) Data Center Sublease Agreement .............................................15
ii
6. Conditions to Obligation to Close ...............................................15
(a) Conditions to Obligation of the Buyer ......................................15
(b) Conditions to Obligation of the Seller .....................................17
7. Termination .....................................................................18
(a) Termination of Agreement ...................................................18
(b) Effect of Termination ......................................................18
8. Post-Closing Covenants ..........................................................18
(a) General ....................................................................18
(b) Litigation Support .........................................................19
(c) Transition .................................................................19
(d) Confidentiality ............................................................19
(e) Covenant Not to Compete ....................................................20
(f) Survival of Representations and Warranties .................................20
(g) Third Party Consents .......................................................20
(h) Indemnification Provisions for Benefit of the Buyer ........................21
(i) Indemnification Provisions for Benefit of the Seller .......................21
(j) Matters Involving Third Parties ............................................22
(k) Limitations on Indemnification Obligations .................................23
9. Escrow Agreement ................................................................23
10. Miscellaneous ..................................................................24
(a) Press Releases and Public Announcements ....................................24
(b) No Third-Party Beneficiaries ...............................................24
(c) Entire Agreement ...........................................................24
(d) Succession and Assignment ..................................................24
iii
(e) Counterparts ...............................................................25
(f) Headings ...................................................................25
(g) Notices ....................................................................25
(h) Governing Law ..............................................................26
(i) Arbitration ................................................................26
(j) Amendments and Waivers .....................................................27
(k) Severability ...............................................................27
(l) Expenses ...................................................................27
(m) Construction ...............................................................27
(n) Incorporation of Exhibits and Schedules ....................................28
(o) Specific Performance .......................................................28
Exhibit A - Acquired Assets
Exhibit A-1 - Fixed Assets
Exhibit A-2 - Capital Leases
Exhibit A-3 - Customer List
Exhibit B - Lockup Agreement
Exhibit C - Xxxx of Sale
Exhibit D - Assignment and Assumption Agreement
Exhibit E - Financial Statements
Exhibit F - PUC and FCC Authorizations
Exhibit G - Opinion of Counsel to Seller
Exhibit H - Opinion of Counsel to Buyer
Exhibit I - Escrow Agreement
iv
Disclosure Schedules
v
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT entered into effective as of August 30,
1999, by and between ROCKY MOUNTAIN INTERNET, INC., a Delaware corporation d/b/a
XXX.XXX (the "Buyer"), NOVO MEDIAGROUP, INC., a California corporation (the
"Seller"), and Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, and Xxxxx
Xxxxxx (collectively, the "Seller Principals"). The Buyer, the Seller, and the
Seller Principals are sometimes referred to collectively herein as the
"Parties".
This Agreement contemplates a transaction in which the Buyer will
purchase certain of the assets of the Seller in return for the consideration
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to the
assets of the Seller set forth on Exhibit A hereto.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorney's fees and expenses
involving or relating to the Acquired Assets.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"ASSIGNMENT AND ASSUMPTION OF CUSTOMER CONTRACTS" has the meaning set
forth in Section 2(e) below.
"ASSIGNMENT AND ASSUMPTION OF SUPPLIER CONTRACTS" has the meaning set
forth in Section 2(e) below.
"BUYER" has the meaning set forth in the preface above.
"BUYER SHARE" means any share of the common stock, $0.001 par value per
share, of the Buyer.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(d) below.
"CLOSING DATE" has the meaning set forth in Section 2(d) below.
"CLOSING PRICE" has the meaning set forth in Section 2(d)(i) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Parties that is not already generally available to
the public.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"DISTRIBUTEES" has the meaning set forth in Section 2(b)(ii) below.
"ESCROW AGENT" has the meaning set forth in Section 2(b)(iv) below.
"ESCROW AGREEMENT" has the meaning set forth in Section 9(a) below.
"ESCROW FUND" has the meaning set forth in Section 9(a) below.
"ESCROW PERIOD" has the meaning set forth in Section 2(b)(iv) below.
"ESCROW SHARES" has the meaning set forth in Section 2(b)(iv) below.
"EXCLUDED ASSETS" means the assets of the Seller not purchased by the
Buyer hereunder.
"FCC AUTHORIZATIONS" means all approvals, consents, permits, licenses,
certificates, and authorizations given by the Federal Communications Commission
or similar federal governmental agency to provide the telecommunications
services currently provided by the Seller and to conduct its business as it is
currently conducted.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f) below.
"FIXED ASSETS" has the meaning set forth in Section 3(m) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
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"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LOCK-UP AGREEMENT" has the meaning set forth in Section 2(b)(v) below.
"LOCK-UP PERIODS" has the meaning set forth in Section 2(b)(v) below.
"LOCK-UP SHARES" has the meaning set forth in Section 2(b)(v) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
3(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3(f) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 3(f)
below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
3
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"RECURRING REVENUE RATE" has the meaning set forth in Section 2(c)
below.
"REFERRAL FEE AGREEMENT" has the meaning set forth in Section 8(c)
below.
"REGISTERED SHARES" has the meaning set forth in Section 2(b)(iii)
below.
"SEC" means the United States Securities and Exchange Commission.
"SEC FILINGS" has the meaning set forth in set forth in Section 4(d)
below.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, OTHER THAN (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and, (c) purchase money liens
and liens securing rental payments under capital lease arrangements, and (d)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLER PRINCIPALS" has the meaning set forth in the preface above.
"STATE PUC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by any state or local
regulatory authority to provide the telecommunications services currently
provided by the Seller and to conduct its business as it is currently conducted.
"SUBLEASE AGREEMENT" has the meaning set forth in Section 5(j) below.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
4
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ACQUIRED ASSETS. On and subject to the
terms and conditions of this Agreement, the Buyer agrees to purchase
from the Seller, and the Seller agrees to sell, transfer, convey, and
deliver to the Buyer, all of the Acquired Assets at the Closing, for
the consideration specified below in this Section 2, free and clear of
any and all Liabilities and other debts, obligations, claims,
limitations, liens, and/or any other encumbrances whatsoever on
Acquired Assets delivered.
(b) PURCHASE PRICE. The Buyer agrees to pay to the Seller at the
Closing:
i. In exchange for the Acquired Assets, the Buyer will
issue to the Seller that number of the Buyer Shares equal to
$1,455,632.20 (the "Purchase Price") divided by the average
closing price per share of the Buyer Shares for the fifteen (15)
day period ending on the day prior to the Closing Date (the
"Closing Price"). The Purchase Price set forth herein is subject
to adjustments in accordance with Section 2(c) below.
ii. The number of shares of Buyer Shares to be issued
pursuant to Section 2(b)(i) above shall be allocated among and
distributed by the Seller to itself and its shareholders, officers
and directors (the "Distributees") as determined by the Seller in
its sole and absolute discretion.
iii. At the Closing Date, forty percent (40%) of the
Buyer's Shares issued pursuant to Section 2(b)(i) above will be
registered under the Securities Act (the "Registered Shares"). The
Distributees shall be allowed to sell, trade and otherwise
transfer the Registered Shares; PROVIDED, HOWEVER, that the
Distributees may not sell, trade, or otherwise transfer more than
the greater of (i) 4,000 of such Registered Shares in any one
trading day, or (ii) an amount of such Registered Shares equal to
five percent (5%) of the average daily trading volume of Buyer
Shares for the previous fifteen (15) day trading period for a
period of one (1) year after the Closing Date.
iv. At and as of the Closing Date, to secure its
obligations under Section 8 below, and as more fully described in
Section 9 below, the Seller shall deposit with an escrow agent
(the "Escrow Agent") that number of the Buyer Shares equal to ten
percent (10%) of the Buyer Shares issued
5
pursuant to Section 2(b)(i) above (the "Escrow Shares"), which
Escrow Shares shall be held by the Escrow Agent for twelve (12)
months following the Closing Date (the "Escrow Period"). The
Escrow Shares shall be registered under the Securities Act ninety
(90) days prior to the expiration of the Escrow Period. Upon the
termination of the Escrow Period, should the average market price
of the Buyer Shares for the fifteen (15) day trading period ending
on the day prior to the termination of the Escrow Period be below
the Closing Price determined pursuant to Section 2(d)(i) above,
the Buyer will issue to the Seller an additional number of Buyer
Shares such that the value of the Escrow Shares plus such
additional Buyer Shares equals the value of the Escrow Shares as
of the Closing Date. Upon the termination of the Escrow Period,
should the average market price of the Buyer Shares for the
fifteen (15) day trading period ending on the day prior to the
termination of the Escrow Period be above the Closing Price
determined pursuant to Section 2(d)(i) above, the Escrow Agent
shall be instructed to deliver back to the Buyer that number of
the Escrow Shares with an aggregate value equal to ninety four
percent (94%) of such increase in price of the Buyer Shares upon
termination of the Escrow Period.
v. The remaining fifty percent (50%) of the Buyer's
Shares issued pursuant to Section 2(b)(i) above will be issued on
the Closing Date and subject to a lockup agreement (the "Lockup
Shares") from the date of issuance in the form attached hereto as
Exhibit B (the "Lockup Agreement") for the following periods of
time following the Closing Date: twenty-five percent (25%) of the
Buyer's Shares for six (6) months; and twenty-five percent (25%)
of the Buyer's Shares for twelve (12) months (the "Lockup
Periods"). The Lockup Shares shall be registered under the
Securities Act on or prior to the date of the expiration of the
relevant Lockup Periods. Upon the termination of each of the
Lockup Periods, should the average market price of the Buyer
Shares for the fifteen (15) day trading period ending on the day
prior to the termination of the relevant Lockup Period be below
the Closing Price determined pursuant to Section 2(d)(i) above,
the Buyer will issue to the Seller an additional number of Buyer
Shares such that the value of the relevant Lockup Shares plus such
additional Buyer Shares equals the value of the relevant Lockup
Shares as of the Closing Date. Upon the termination of each of the
Lockup Periods, should the average market price of the Buyer
Shares for the fifteen (15) day trading period ending on the day
prior to the termination of the relevant Lockup Period be above
the Closing Price determined pursuant to Section 2(d)(i) above,
the Seller shall deliver back to the Buyer that number of such
Lockup Shares with an aggregate value equal to ninety four percent
(94%) of such increase in price of the Buyer Shares upon
termination of the Escrow Period.
6
(c) ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price set forth
in Section 2(b)(i) above is based upon a combined monthly Recurring
Revenue Rate directly derived from the Acquired Assets for the month
immediately preceding the Closing Date of -$55,075. In the event that
the Recurring Revenue Rate exceeds or is less than $55,075, the
Purchase Price shall be increased or reduced, whichever may be the
case, by $26.43 for each dollar that the Recurring Revenue Rate exceeds
or is less than such amount. For purposes of this Agreement, the
Recurring Revenue Rate shall be determined through accrual based
accounting in accordance with GAAP for revenues that recur each month
on a customer specific and plan type basis;
(d) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place by telephone conference
call, or at the corporate headquarters of the Buyer, 000 00xx Xxxxxx,
Xxxxx Xxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxx 00000, effective 11:59 p.m.
local time on August 30, 1999; PROVIDED, HOWEVER, that the Closing Date
may be extended until September 15, 1999, upon mutual written agreement
of the Parties.
(e) DELIVERIES AT THE CLOSING. At the Closing, (i) the Buyer
will deliver to the Seller (A) the various certificates, instruments,
and documents referred to in Section 6 below, and (B) the Purchase
Price specified in Section 2(b); (ii) the Seller will deliver to the
Buyer (A) the various certificates, instruments, and documents referred
to in Section 6 below, (B) the Xxxx of Sale in the form attached hereto
as Exhibit C, and (C) the Assignment and Assumption Agreement in the
form of Exhibit D; and (iii) each Party shall deliver such other
instruments of sale, transfer, conveyance, and assignment as the other
Party and its counsel reasonably may request.
(f) ALLOCATION. The Parties agree that the Buyer may allocate
the Purchase Price (and all other capitalizable costs) among the
Acquired Assets for all purposes (including financial accounting and
tax purposes) in the most tax-efficient manner available to the Buyer.
(g) NO ASSUMPTION OF LIABILITIES. The Parties agree and
acknowledge that, except as expressly provided in this Agreement, the
Buyer is not assuming any Liability or other obligation of the Seller
pursuant to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SELLER
PRINCIPALS. The Seller and the Seller Principals represent and warrant to the
Buyer that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3), except
as set forth in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule
will be
7
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3:
(a) ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of California-.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder.
Without limiting the generality of the foregoing, all individuals who
are signatories to this Agreement have been duly authorized to execute,
deliver, and cause the Seller to perform this Agreement. This Agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject or any provision of the articles of
incorporation or bylaws of the Seller or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement with respect to the Acquired
Assets to which the Seller is a party or by which it is bound or to
which the Acquired Assets are subject (or result in the imposition of
any Security Interest upon any the Acquired Assets). The Seller is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated, and the Buyer shall have
no Liability whatsoever to such broker.
(e) TITLE TO ACQUIRED ASSETS. As of the date of Closing, the
Seller shall convey to the Buyer good and marketable title to all of
the Acquired Assets, free and clear of any Liabilities, including all
debts, obligations, claims, limitations, liens, Security Interests,
restrictions on transfer, and/or any other encumbrances whatsoever.
8
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit E are
the following financial statements of the Seller (collectively, the
"Financial Statements"): (i) audited balance sheets and statements
of income, changes in stockholders' equity, and cash flow relating
to the Acquired Assets as of and for the calendar year ending
December 31, 1998 (the "Most Recent Fiscal Year End"); and (ii)
unaudited balance sheet and statements of income, changes in
shareholders' equity, and cash flow relating to the Acquired Assets
as of and for the period ended May 31, 1999 (the "Most Recent Month
End") (collectively, the "Most Recent Financial Statements"). The
Most Recent Financial Statements have been prepared in accordance
with GAAP on a consistent basis throughout the periods covered
thereby, and are true, correct, and complete.
(g) EVENTS SUBSEQUENT TO MOST RECENT MONTH END. Since the
Most Recent Month End, there has not been any material adverse
change in the business, financial condition, operations, results of
operations, or future prospects of or relating to the Acquired
Assets.
(h) UNDISCLOSED LIABILITIES. The Seller has no Liability with
respect to the Acquired Assets (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise
to any Liability), except for Liabilities set forth in the Most
Recent Financial Statements and (ii) Liabilities which have arisen
after the Most Recent Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law.
(i) LEGAL COMPLIANCE. The Seller has complied with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state,local, and foreign governments (and
all agencies thereof), with respectto the Acquired Assets, including
all State PUC Authorizations and the FCC Authorizations, and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(j) TAX MATTERS. The Seller has timely filed all Tax Returns
with respect to the ownership and operation of the Acquired Assets
and paid all Taxes due thereunder, and no Liability exists for any
unpaid Taxes relative to the Acquired Assets prior to the Closing.
(k) REAL PROPERTY. Section 3(k) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to
the Seller related to the Acquired Assets. The Seller has delivered
to the Buyer correct and complete copies of the leases and subleases
listed in Section 3(k) of the Disclosure
9
Schedule (as amended to date). Other than such leases or subleases,
the Acquired Assets do not include any real property or any interest
therein. With respect to each lease and sublease listed in Section
3(k) of the Disclosure Schedule:
i. the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, except where the
illegality, invalidity, non-binding natural unenforceability or
ineffectiveness would not have a material adverse effect on the
Acquired Assets;
ii. the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby, except where the illegality, invalidity,
non-binding nature, unenforceability or ineffectiveness would not
have a material adverse effect on the financial condition of the
Company;
iii. the Seller is not, and to the Seller's actual
knowledge, no other party to the lease or sublease is in
breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
iv. the Seller is not, and to the Seller's actual
knowledge, no other party to the lease or sublease has repudiated
any provision thereof;
v. to the Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or
sublease;
vi. with respect to each sublease, to the Seller's
Knowledge, the representations and warranties set forth in
subsections (i) through (v) above are true and correct with
respect to the underlying lease;
vii. the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
viii. all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities in connection with the business
related to the Acquired Assets.
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(l) INTELLECTUAL PROPERTY. The Seller owns or has the right
to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the Acquired
Assets as presently operated, free and clear of any Security
Interests, Liabilities or other restrictions.
(m) FIXED ASSETS. The Seller owns all fixed assets set forth
in Exhibit A-1 (the "Fixed Assets"). Each such Fixed Asset is free
from material defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(n) CONTRACTS. Except as set forth in Section 3(n) of the
Disclosure Schedule, no material contracts or other agreements exist
relating to the Acquired Assets to which the Seller is a party.
(o) INSURANCE. The Acquired Assets have been, and will be
until the Closing Date, covered by an insurance policy (providing
property, casualty, and liability coverage) adequately insuring the
Acquired Assets.
(p) LITIGATION. The Seller (i) is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge,
directly related to the Acquired Assets, nor (ii) is it a party or,
to the actual knowledge of the Seller, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator with respect to the Acquired Assets. The Seller does not
have any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against the
Seller relative to the Acquired Assets.
(q) WARRANTIES. No product or service sold, leased, or
delivered by the Seller with respect to the Acquired Assets is
subject to any guaranty, warranty, or other indemnity.
(r) STATE PUC AUTHORIZATIONS AND FCC AUTHORIZATIONS. Exhibit
F hereto identifies each of the State PUC Authorizations and the FCC
Authorizations which has been issued to the Seller with respect to
the Acquired Assets. None of the State PUC Authorizations or the FCC
Authorizations has been modified, amended, or otherwise altered, and
each remains legal, valid, binding, in full force and effect, and
unaffected by the transactions contemplated by this Agreement.
(s) INVESTMENT. Each of the Buyer and the Seller understands
that (i) certain of the Buyer Shares have not been registered, and
will not be registered, under the Securities Act, or under any state
securities laws, until after the Closing
11
Date, and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public
offering; (ii) the Seller is acquiring the Buyer Shares solely for its
own account for investment purposes, and not with a view to the
distribution thereof (except to the Distributees); (iii) the Seller
is a sophisticated investor with knowledge and experience in
business and financial matters; (iv) the Seller has received certain
information concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Buyer Shares; (v) the
Seller is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Shares; (vi) the Seller together with
its legal, tax and financial advisers have investigated the Buyer
and its business and have negotiated transactions contemplated
herein and have independently determined to enter into such
transactions; (vii) notwithstanding the foregoing, the Seller shall
be entitled to rely on the representations and warranties made by
the Buyer as set forth herein and nothing herein shall limit or
diminish the Seller's rights to such representations and warranties;
and (viii) the Seller is an Accredited Investor.
(t) DISCLOSURE. The representations and warranties contained
in this Section 3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the statements and information contained in this Section 3 not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4).
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Delaware.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms
and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental
agency, or court to which the Buyer is subject or any provision of
its charter or
12
bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Buyer is a party or by which it is bound
or to which any of its assets is subject. The Buyer does not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in
Section 2 above).
(d) SEC FILINGS. The Buyer has filed all required reports,
schedules, forms, statement and other documents with the SEC since
January 1, 1998 (the "SEC Filings"). As of their respective dates, the
SEC Filings complied in all material respects with the requirements of
the Securities Act or the Securities Exchange Act, as the case may be,
the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Filings , and none of the SEC Filings when filed contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) BUYER SHARES. The Buyer Shares will be, when issued, duly
issued and validly existing, fully paid and non-assessable free and
clear of any Liabilities and other encumbrances and restrictions,
except as set forth herein.
(f) BROKERS' FEES. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(g) DISCLOSURE. The representations and warranties contained
in this Section 4 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the statements and information contained in this Section 4 not
misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary,proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver,
of the Closing conditions set forth in Section 6 below).
13
(b) NOTICES AND CONSENTS. The Seller will give any notices to
third parties, and the Seller will use its reasonable best efforts to
obtain any third party consents, that the Buyer reasonably may request
in connection with the matters referred to in Section 3 above. Each of
the Parties will give any notices to, make any filings with, and use
its reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with
the matters referred to in Section 3 and Section 4 above. Without
limiting the generality of the foregoing, each of the Parties will any
further filings that may be necessary, proper, or advisable in
connection therewith.
(c) OPERATION OF THE ACQUIRED ASSETS. The Seller will not
engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business, with respect to the Acquired
Assets.
(d) PRESERVATION OF BUSINESS. The Seller will keep the
Acquired Assets substantially intact, including its present use and
operation thereof, and its relationships with licensors, suppliers,
customers, and employees related to the Acquired Assets.
(e) FULL ACCESS. The Seller will permit representatives of
the Buyer to have full access at all reasonable times and upon
reasonable notice, and in a manner so as not to interfere with the
normal business operations of the Seller, to all of the Seller's
premises, properties, personnel, books, records (including Tax
records), contracts, and documents of, or pertaining to, the
Acquired Assets.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other Party of any material adverse development
causing a breach of any of its own representations and warranties in
Section 3 and Section 4 above. No disclosure by any Party pursuant to
this Section 5(f), however, shall be deemed to amend or supplement this
Agreement or the Exhibits hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Until the Closing Date, as it may be extended
pursuant to Section 2(d) above, the Seller will not (i) solicit,
initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of the Acquired Assets or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or seek any
of the foregoing. The Seller will notify the Buyer immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to
any of the foregoing.
14
(h) LEGEND. The Buyer and the Seller covenant and agree that
sixty percent (60%) of the Buyer Shares will bear the following legend
until the Buyer Shares are registered pursuant to Sections 2(b)(iv) and
2(b)(v) hereof:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY ACCEPTING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
ISSUER THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE ISSUER, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS, (C) IN ACCORDANCE WITH RULE 144 UNDER
THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR (D) IN ACCORDANCE WITH ANY OTHER EXEMPTION UNDER
THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS UPON THE DELIVERY OF A LEGAL OPINION, REASONABLY
SATISFACTORY TO THE ISSUER, TO THE FOREGOING EFFECT.
(i) DATA CENTER SUBLEASE AGREEMENT. Prior to the Closing, the
Buyer and the Seller shall enter into a sublease agreement (the
"Sublease Agreement") pursuant to which the Buyer shall sublease from
the Seller the office space (including all fixtures and improvements
therein), with an address of 000 Xxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, where the Seller currently locates its
data center (estimated to be 1,250 total square feet) on terms mutually
agreeable to the Parties. The Sublease Agreement shall provide that
the Buyer shall share with the Seller an entrance and lobby to the
subleased office space.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
i. the representations and warranties set forth in
Section 3 above shall be true and correct in all material respects
at and as of the Closing Date;
ii. the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
iii. no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local,
15
or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Buyer to own the Acquired Assets, to
operate the Acquired Assets (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
iv. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Customer Contracts;
v. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Supplier Contracts;
vi. the Seller shall have delivered to the Buyer the Xxxx
of Sale;
vii. the Seller and the Buyer shall have received all other
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3 and Section 4
above;
viii. the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in Section 6(a)(i)-(iii) is satisfied in all respects;
ix. the Buyer shall have received from counsel to the
Seller an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
x. the Buyer shall have completed and shall be satisfied
with its due diligence examination of the Seller;
xi. the Buyer's board of directors shall have approved
this Agreement; and
xii. all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
16
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of
the Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
i. the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects
at and as of the Closing Date;
ii. the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
iii. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, or (B)
cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
iv. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Customer Contracts;
v. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Supplier Contracts;
vi. the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified
above in Section 6(b)(i)-(iii) is satisfied in all respects;
vii. the Seller shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit I
attached hereto, addressed to the Seller, and dated as of the
Closing Date;
viii. the Seller's board of directors shall have approved
this Agreement; and
ix. all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
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7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may terminate
this Agreement as provided below:
i. the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A)
in the event the Seller has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Seller of the breach, and the
breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or (B) if the Closing shall not
have occurred on or before July 31, 1999 (or such later date, if
extended pursuant to Section 2), by reason of the failure of any
condition precedent under Section 6(a) hereof (unless the failure
results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
ii. the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Seller has notified the Buyer of the breach, and the
breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or (B) if the Closing shall not
have occurred on or before July 31, 1999 (or such later date, if
extended pursuant to Section 2), by reason of the failure of any
condition precedent under Section 6(b) hereof (unless the failure
results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this
Agreement).
(b) EFFECT OF TERMINATION. Notwithstanding the termination of
this Agreement, the confidentiality provisions of this Agreement shall
survive indefinitely.
8. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
Agreement, each of the Parties will take such further action (including
the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and
expense of the requesting Party. The Seller acknowledges and agrees
that, from and after the Closing, the Buyer will be entitled to
possession of all documents, books, records (including Tax records),
agreements, directly relating to the Acquired Assets (but not the
Excluded Assets); PROVIDED, HOWEVER,
18
that the Buyer shall provide the Seller and its shareholders with
reasonable access to such documents, books, records, agreements, and
financial data as necessary.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure
to act, or transaction on or prior to the Closing Date involving the
Acquired Assets, each of the other Parties will cooperate with the
contesting or defending Party and his or its counsel in the contest or
defense, make available his or its personnel, and provide such
testimony and access to his or its books and records as shall be
necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor
under Section 8(h), Section 8(i), or Section 8(j) below).
(c) TRANSITION. Neither the Seller nor the Seller Principals
will take any action that is designed or intended to have the effect of
discouraging any carrier, supplier, lessor, licenser, customer, or
other business associate of the Seller from maintaining the same
business relationships with the Buyer after the Closing as it
maintained with the Seller prior to the Closing with respect to the
Acquired Assets. Each of the Seller and the Seller Principals will
refer all customer inquiries relating to the Acquired Assets to the
Buyer from and after the Closing. In addition, each of the Seller and
the Seller Principals shall recommend the Internet access and
web-hosting services of the Buyer to any and all future customers of
the Seller who request such a recommendation; PROVIDED, HOWEVER, that
the Seller reserves the right to recommend to any such customer any
number of other providers of such services in addition to the Buyer.
The Buyer and the Seller shall enter into a Referral Fee Agreement
providing for compensation to the Seller for referrals of customers who
purchase services from the Buyer. Further, the Seller agrees to
negotiate in good faith with the Buyer to purchase from the Buyer all
future internet access and web-hosting services associated with the
Seller or its customers.
(d) CONFIDENTIALITY. The Seller shall, and shall cause the
Seller Principals to, treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the
Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are
in his/her or its possession. In the event that the Seller, the Seller
Principals or any of the Seller's shareholders is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar
19
process) to disclose any Confidential Information, that the
Seller will notify the Buyer promptly of the request or requirement so
that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 8(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, the Seller,
the Seller Principals or the Seller's shareholders are, on the advice
of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller, the Seller
Principals or the Seller's shareholders (as the case may be) may
disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, that the Seller, the Seller Principals and the Seller's
shareholders shall use their reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate.
(e) COVENANT NOT TO COMPETE. For a period of two (2) years from
and after the Closing Date, the Seller, its Affiliates and the Seller
Principals agree not to engage directly or indirectly in any business
that offers dial-up internet access, dedicated internet access and
web-hosting to third parties in any geographic area in which the Seller
conducts that business as of the Closing Date; PROVIDED, HOWEVER, that
i. no owner of less than one percent (5%) of the
outstanding stock of any publicly traded corporation shall be
deemed to be engaged solely by reason thereof in any business
activity in contravention hereof; and
ii. if the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section
8(e) is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term
or provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this
Agreement shall survive the Closing and shall continue in full force
and effect for a period of two (2) years thereafter.
(g) THIRD PARTY CONSENTS. The Seller shall use its best efforts
to procure, and assist the Buyer in procuring, all of the consents of
CISCO, MCI,
20
MFS, CRL and any other third party whose consent is required in
connection with the transactions contemplated by this Agreement.
(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
i. In the event the Seller or the Seller Principals
breach any of their representations, warranties, and covenants
contained in this Agreement, and, if there is an applicable
survival period pursuant to Section 8(f) above, provided that the
Buyer makes a written claim for indemnification against the Seller
or Seller Principals within such survival period, then the Seller
agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the
date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach.
ii. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Liability of the Seller.
iii. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Liability of the Seller for Taxes of the
Seller related to the Acquired Assets.
iv. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Liability of the Seller in relation to the
termination by the Seller of any of the Seller's employees who
are not employed by the Buyer.
v. The Seller shall not have any liability to the Buyer
for any Adverse Consequences set forth in this Section 8(h) to the
extent that such Adverse Consequences are covered by insurance of
the Buyer.
vi. Notwithstanding anything contained herein to the
contrary, the Seller shall have no liability to the Buyer as a
result of any breach of any representation, warranty or covenant,
to the extent that the Buyer knew that such representation,
warranty or covenant was incorrect prior to the Closing Date,
except when such breach is the result of fraud or willful
misconduct.
(i) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
21
i. In the event the Buyer breaches any of its
representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant
to Section 8(f) above, provided that the Seller makes a written
claim for indemnification against the Buyer within such survival
period, then the Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller may
suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or
caused by the breach.
ii. The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller and
its shareholders may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Buyer's operation
of the Acquired Assets after the Closing.
iii. The Buyer shall not have any Liability to the Seller
for any Adverse Consequences set forth in this Section 8(i) to the
extent that such Adverse Consequences are covered by insurance of
the Seller.
iv. Notwithstanding anything contained herein to the
contrary, the Buyer shall have no liability to the Seller as a
result of any breach of any representation, warranty or covenant,
to the extent that the Seller knew that such representation,
warranty or covenant was incorrect prior to the Closing Date,
except where such breach is the result of fraud or willful
misconduct.
v. In no event shall the liability of the Buyer pursuant
to this Section 8(i) exceed the current market value of the
Buyer's Shares provided to the Seller at the Closing pursuant to
Section 2 above.
(j) MATTERS INVOLVING THIRD PARTIES.
i. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 8,
then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; PROVIDED, HOWEVER, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
ii. Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so
long as (A) the
22
Indemnifying Party notifies the Indemnified Party in writing
within fifteen (15) days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable
to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to
the continuing business interests of the Indemnified Party, and
(E) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
iii. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(j)
(ii) above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent
of the Indemnified Party (not to be withheld unreasonably).
(k) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. Notwithstanding
the provisions of Section 8(h), through 8(j) above, none of the Parties
shall be obligated to indemnify or pay damages to any other Party or
Parties, as the case may be, from and against any Adverse Consequences
arising from or related to this Agreement to the extent that such
Adverse Consequences arising from or related to this Agreement exceed
the Purchase Price; PROVIDED, HOWEVER, that any claims brought by a
Party against another Party or Parties for fraud or willful misconduct
shall not be subject to the foregoing limitations.
9. ESCROW AGREEMENT. As security for the indemnity of the Buyer by
the Seller provided for in Section 8 above, the Escrow Shares shall be
registered in the name of the Seller, and deposited (with an executed
assignment in blank) with Norwest Bank, N.A. as Escrow Agent such deposit to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth herein and in the Escrow Agreement to be
23
signed by all parties thereto (the "Escrow Agreement"). In the event of any
conflict between the terms of this Agreement and the Escrow Agreement, the
terms of the Escrow Agreement shall govern. All costs and fees of the Escrow
Agent for establishing and administering the Escrow Fund shall be borne
equally by the Parties. Upon compliance with the terms hereof, the Buyer
shall be entitled to obtain indemnity first from the Escrow Fund for all
Adverse Consequences covered by the indemnity provided for in Section 8
above. If the Escrow Fund is not sufficient to cover any such Adverse
Consequences covered by Section 8 above, then the Buyer shall be entitled to
seek payment directly from the Seller and, if the Seller can not or will not
cover such Adverse Consequences, then the Buyer shall be entitled to seek
payment directly from the Seller Principals. The form of the Escrow Agreement
is attached hereto as Exhibit J.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the other Party; PROVIDED, HOWEVER, that any Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use
its reasonable best efforts to advise the other Party prior to making
the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules hereto (including the documents referred to herein)
constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between
the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party;
PROVIDED, HOWEVER, that the Buyer may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations
hereunder).
24
(e) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same
instrument. This Agreement may be executed by facsimile, provided
that the original counterpart is delivered within five (5) days of
such execution.
(f) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given if (and then two business days after) it is sent
by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
IF TO THE SELLER:
NOVO MediaGroup, Inc.
000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
COPY TO:
Xxxxxxx Xxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
IF TO THE BUYER:
Rocky Mountain Internet, Inc.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, Chairman & CEO
COPY TO:
Rocky Mountain Internet, Inc.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx, General Counsel
25
Holland & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000-00000
Attention: Xx. Xxxxx X. Xxxx
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Colorado without giving effect to any choice or conflict of law
provision or rule (whether of the State of Colorado or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
(i) ARBITRATION. The Parties hereby covenant and agree that,
except as otherwise set forth in this Agreement, any suit, dispute,
claim, demand, controversy or cause of action of every kind and
nature whatsoever, known or unknown, fixed or contingent, that the
Parties may now have or at any time in the future claim to have
based in whole or in part, or arising from or that in any way is
related to the negotiations, execution, interpretation or
enforcement of this Agreement (collectively, the "Disputes") shall
be completely and finally settled by submission of any such Disputes
to arbitration under the Rules of Arbitration and Conciliation of
the American Arbitration Association then in effect. If the Parties
to the Dispute are unable to agree on a single arbitrator, then such
binding arbitration shall be conducted before a panel of three (3)
arbitrators that shall be comprised of one (1) arbitrator designated
by each Party to the Dispute and a third arbitrator designated by
the two (2) arbitrators selected by the Parties to the Dispute.
Unless the Parties to the Dispute agree otherwise, the arbitration
proceedings shall take place in Denver, Colorado and the
arbitrator(s) shall apply the law of the State of Colorado, USA, to
all issues in dispute, in accordance with Section 10(h). The
findings of the arbitrator(s) shall be final and binding on the
Parties to the Dispute. Judgment on such award may be entered in any
court of appropriate jurisdiction, or application may be made to
that court for a judicial acceptance of the award and an order of
enforcement, as the party seeking to enforce that award may elect.
Notwithstanding any applicable rules of arbitration, all arbitral
awards shall be in writing and shall set forth in particularity the
findings of fact and conclusions of law of the arbitrator or
26
arbitrators. If the Buyer makes any claim based upon the alleged
intentional fraud or willful misconduct of the Seller or its
shareholders and such claim is not found by the arbitrator(s) to be
valid or proven, the Buyer shall pay the costs of the Seller or its
shareholders incurred in connection with such arbitration proceeding
(including reasonable attorneys fees).
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Seller. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Each of the Buyer and the Seller will bear its
own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated
hereby.
(m) CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including
without limitation. Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or
warranty made herein unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant
facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document
or other item shall not be deemed adequate to disclose an exception
to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation,
warranty, or covenant relating to the
27
same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not detract from
or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Party would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Party shall
be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 9(i) above), in addition to any
other remedy to which it may be entitled, at law or in equity.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ROCKY MOUNTAIN INTERNET, INC.
By:
------------------------------
Xxxxxxx X. Xxxxxx
Title: Chairman and CEO
NOVO MEDIAGROUP, INC.
By:
------------------------------
Title:
---------------------------
SELLER PRINCIPALS
----------------------------------
Xxxxxxx Xxxxxxxxx
----------------------------------
Xxxxx Xxxxxxxxx
----------------------------------
Xxxxx Xxxxxxxx
----------------------------------
Xxxxx Xxxxxx
29
