EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
Dated September 30 , 1997
by and among
QWEST COMMUNICATIONS CORPORATION,
a Delaware corporation
and
NEWSUPERNET
TABLE OF CONTENTS
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Page
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SECTION 1. Certain Definitions............................................. 1
SECTION 2. Transfer of Shares, Issuance of New Shares and Payment of
Purchase Price and Issuance Price............................... 5
2.1 Shares to be Transferred by the Shareholder..................... 5
2.2 New Shares to be Issued by the Corporation...................... 5
2.3 Amount of Purchase Price and Issuance Price..................... 5
2.4 Payment of Purchase Price and Issuance Price.................... 5
2.5 Purchase Price Adjustment....................................... 6
SECTION 3. Representations and Warranties of the Shareholder............... 7
3.1 Good Standing................................................... 7
3.2 Articles of Incorporation; By-Laws; Minute Books................ 7
3.3 Authorization - No Liens........................................ 8
3.4 Authorized Capitalization....................................... 9
3.5 Subsidiaries; Investments; Affiliate Notes...................... 9
3.6 Financial Statements............................................ 9
3.7 Records and Books of Account....................................10
3.8 Liabilities.....................................................10
3.9 Title to Assets; Liens and Encumbrances.........................11
3.10 Equipment; Real Property........................................11
3.11 Leased Premises.................................................12
3.12 Intellectual Property...........................................12
3.13 Contracts.......................................................15
3.14 Purchase and Sales Commitments and Orders;
Principal Customers.............................................17
3.15 Labor Relations; Employees......................................17
3.16 Legal Proceedings...............................................18
3.17 Orders, Decrees, Etc............................................18
3.18 Compliance With Law; Permits and Licenses.......................18
3.19 Changes Since the Balance Sheet Date; No Material Adverse
Change..........................................................20
3.20 No Change.......................................................21
3.21 Capital Projects and Expenditures...............................21
3.22 Employee Benefits...............................................22
3.23 Governmental Approvals..........................................24
3.24 Tax Matters.....................................................24
3.25 Insurance Coverage..............................................26
SECTION 4. Representations and Warranties of Buyer.........................26
4.1 Good Standing...................................................26
4.2 Authorization...................................................26
4.3 Investment Representations......................................27
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SECTION 5. Conditions of Buyer's Obligations to Close......................27
5.1 Agreements and Conditions.......................................28
5.2 Representations and Warranties..................................28
5.3 No Legal Proceeding.............................................28
5.4 Deliveries......................................................28
5.5 Legal Opinion...................................................28
SECTION 6. Conditions of the Shareholder's Obligation to Close.............29
6.1 Agreements and Conditions.......................................29
6.2 Representations and Warranties..................................29
6.3 Deliveries......................................................29
6.4 Ratification....................................................29
6.5 Fairness Opinion................................................29
6.6 Contribution Agreements.........................................29
SECTION 7. Deliveries of the Shareholder on the Closing Date...............29
7.1 Stock Certificates..............................................30
7.2 Corporate Records...............................................30
7.3 Resignations....................................................30
7.4 Employment Agreements...........................................30
7.5 Consents........................................................30
7.6 Possession of Assets............................................30
7.7 Escrow Agreement................................................30
7.8 Stock Option Agreements.........................................30
7.9 Shareholder's Consent...........................................31
SECTION 8. Deliveries of Buyer on the Closing Date.........................31
SECTION 9. Additional Covenants............................................31
9.1 Information and Access..........................................31
9.2 Cooperation.....................................................32
9.3 Further Assurances of the Shareholder...........................32
9.4 Further Assurances of Buyer.....................................32
9.5 Non-Competition Covenants.......................................33
SECTION 10. Indemnification.................................................34
10.1 Indemnification by the Shareholder..............................34
10.2 Indemnification by Buyer........................................36
10.3 Procedures for Third Party Indemnification......................36
SECTION 11. Survival of Representations.....................................37
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SECTION 12. Brokerage Indemnity.............................................37
SECTION 13. Notices.........................................................38
SECTION 14. Termination.....................................................39
SECTION 15. Miscellaneous...................................................40
15.1 Entire Agreement................................................40
15.2 Taxes...........................................................40
15.3 Governing Law...................................................41
15.4 Representation by Counsel.......................................41
15.5 Benefit of Parties; Assignment..................................42
15.6 Pronouns........................................................42
15.7 Headings........................................................42
15.8 Expenses........................................................42
15.9 Counterparts....................................................43
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated September 30, 1997 (this "Agreement"),
is by and among QWEST COMMUNICATIONS CORPORATION, a Delaware corporation
("Buyer"), and NEWSUPERNET, a Colorado nonprofit corporation (the
"Shareholder"), the sole shareholder of SuperNet, Inc., a Colorado corporation
(the "Corporation").
RECITALS:
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A. The Shareholder owns all of the issued and outstanding shares of
capital stock of the Corporation.
B. Buyer desires to purchase from the Shareholder, and the Shareholder
desires to sell to Buyer, on the terms and conditions set forth herein, all of
the issued and outstanding shares of capital stock of the Corporation, and Buyer
further desires to purchase from the Corporation 28,000 shares of the common
stock, $.01 par value, of the Corporation to be issued at the Closing (defined
below).
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements, representations, warranties and covenants contained herein, and for
other good and valuable consideration set forth herein, the parties hereto agree
as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
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following terms shall have the respective meanings set forth below:
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"Actions" mean any claims, actions, suits, proceedings and investigations,
whether at law or in equity, before any court, arbitrator, arbitration panel or
Governmental Authority.
"Affiliate" of a party means any Person that, directly or indirectly,
controls, is controlled by, or is under common control with, such party.
"Balance Sheet" has the meaning specified in Section 3.6 below.
"Balance Sheet Date" means June 30, 1997.
"Balance Sheet Stockholders' Equity" means the "Projected June 97" Ending
Equity line item shown on Schedule 2.5.
"Closing" means the closing of the transactions contemplated hereby, which
shall take place at the offices of Holme Xxxxxxx & Xxxx LLP, Denver, Colorado,
on the Closing Date commencing at 10:00 A.M., or at such other time or place as
the parties may agree upon in writing, and shall be effective as of the close of
business on the Closing Date.
"Closing Date" means October 22, 1997 or such other date as the parties may
agree upon in writing.
"Closing Stockholders' Equity" means the stockholders' equity of the
Corporation determined in accordance with GAAP as of the Closing Date, exclusive
of the Issuance Price.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" mean all contracts, agreements, indentures, licenses, leases,
commitments, plans, arrangements, sales orders and purchase orders of every
kind, whether written or oral.
"Damages" mean losses, liabilities, obligations, penalties, costs, damages,
claims and expenses (including reasonable costs of investigation and attorneys'
fees and disbursements).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"ERISA Affiliate" means the Corporation and each corporation, partnership
or other trade or business, whether or not incorporated, which is or has been
treated as a single employer or controlled group member with the Corporation
pursuant to Code Section 414 or ERISA Section 4001.
"GAAP" means generally accepted accounting principles in the United States.
"Governing Boards" means the Board of Regents of the University of
Colorado, the Colorado State Board of Agriculture, the Board of Trustees of the
Colorado School of Mines and the Colorado Advanced Technology Institute
Commission.
"Governmental Authority" means any agency, instrumentality, department,
commission, court, tribunal or board of any government, whether foreign or
domestic and whether national, Federal, state, provincial or local.
"Intellectual Property" and "Intellectual Property Rights" have the
meanings ascribed to them in Section 3.12.
"Issuance Price" has the meaning specified in Section 2.3 below.
"Laws" mean laws, rules, regulations, codes, orders, ordinances, judgments,
injunctions and decrees.
"Liabilities" mean debts (including interest thereon and any prepayment
penalties applicable thereto), liabilities, claims, obligations, duties and
responsibilities of any kind and description, whether absolute or contingent,
monetary or non-monetary, direct or indirect, known or unknown or matured or
unmatured, or of any other nature.
"Lien" means any security interest, lien, mortgage, claim, charge, pledge,
restriction, equitable interest or encumbrance of any nature.
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"Material" with respect to the Corporation means an event, change or
circumstance that substantially affects the condition (financial or otherwise),
assets, business as currently conducted, or operations of the Corporation.
"Material Adverse Effect" means an event, change or circumstance that
substantially and adversely affects the condition (financial or otherwise),
assets, business as currently conducted, or operations of the Corporation.
"New Shares" means with respect to the Corporation 28,000 shares of its
common stock, $.01 par value, to be issued at the Closing.
"Optionholders" means the holders of options to purchase shares of common
stock of the Corporation granted pursuant to the Corporation's 1995 Performance
Stock Option Plan.
"Person" means any natural person, corporation, trust, business trust,
joint venture, association, company, firm, partnership or other entity or
government or Governmental Authority.
"Purchase Price" has the meaning specified in Section 2.3 below.
"Returns" mean all returns, declarations, reports, forms, estimates,
information returns and statements required to be filed with or supplied to any
Governmental Authority in connection with any Taxes.
"Shares" means with respect to the Corporation all of the issued and
outstanding shares of capital stock of that corporation.
"Taxes" mean all taxes, charges, fees, levies, customs, duties or other
assessments, including, without limitation, income, gross receipts, excise, real
and personal property, sales, transfer, license, payroll and franchise taxes
imposed by any Governmental Authority and shall include any interest, penalties
or additions to tax attributable to any of the foregoing.
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SECTION 2. Transfer of Shares, Issuance of New Shares and Payment of
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Purchase Price and Issuance Price.
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2.1 Shares to be Transferred by the Shareholder. Based upon and subject
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to the terms, agreements, warranties, representations and conditions of this
Agreement, the Shareholder hereby agrees to sell, convey, transfer, assign and
deliver to Buyer on the Closing Date, and Buyer hereby agrees to buy and accept
on the Closing Date, all of the Shares of the Corporation held by the
Shareholder.
2.2 New Shares to be Issued by the Corporation. Based upon and subject to
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the terms, agreements, warranties, representations and conditions of this
Agreement, the Shareholder hereby agrees to cause the Corporation to issue, sell
and deliver to Buyer on the Closing Date, and Buyer hereby agrees to buy and
accept on the Closing Date, all of the New Shares.
2.3 Amount of Purchase Price and Issuance Price. The total consideration
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to be paid by Buyer for the Shares (the "Purchase Price") shall be
$15,900,000.00, minus any Purchase Price adjustment as provided in Section 2.5,
and the total consideration to be paid by the Buyer for the New Shares (the
"Issuance Price") shall be $4,100,000.00.
2.4 Payment of Purchase Price and Issuance Price. On the Closing Date,
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Buyer shall pay: (i) to the Shareholder the Purchase Price described in Section
2.3 less $1,000,000.00 of such amount (which shall be deposited with Norwest
Bank Colorado, N.A., as escrow agent (the "Escrow Agent") under the escrow
agreement attached hereto as Exhibit A (the "Escrow Agreement"), and subject to
the provisions of Section 2.5) and (ii) to the Corporation the Issuance Price,
in each case by means of a wire transfer of immediately available funds to the
account number and depository previously designated by the Shareholder (or
otherwise as directed by the Shareholder).
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2.5 Purchase Price Adjustment. The Purchase Price shall be reduced by the
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amount, if any, by which the Balance Sheet Stockholder's Equity exceeds the
Closing Stockholder's Equity. Promptly following the Closing Date (but in any
event no later than 45 days after the Closing Date) the Corporation shall
prepare, in accordance with GAAP, a balance sheet showing the Closing
Stockholder's Equity. Buyer shall review the balance sheet and the Closing
Stockholder's Equity shown thereon and propose any adjustments it considers
appropriate. Notice of the amount of the Closing Stockholder's Equity with such
proposed adjustments, if any, shall be given to the Shareholder. The
Shareholder shall have a period of 30 days after receipt of such notice to give
to Buyer a notice (an "Objection Notice") specifying in reasonable detail any
objections it may have to Buyer's proposed adjustments to the Closing
Stockholder's Equity to the extent of any proposed adjustments that have the
effect of reducing the Closing Stockholder's Equity. If an Objection Notice is
not given by the Shareholder within such 30-day period or if Buyer proposed no
adjustments to the Closing Stockholder's Equity, then the Closing Stockholder's
Equity, as adjusted by Buyer's proposed adjustments (if applicable), shall be
accepted as final, binding and conclusive on the parties hereto. If an
Objection Notice is given by the Shareholder within such 30-day period, the
Shareholder and Buyer shall attempt to reconcile such items as are in dispute.
If the Shareholder and Buyer are unable to reconcile all such items within 30
days after the date on which the Objection Notice is given, then a
representative of the Shareholder and a representative of Buyer each will
designate a firm of independent public accountants, and such firms will
designate a third firm of independent public certified accountants to determine
such items as remain in dispute. The determination of the items in dispute by
the third firm shall be final, binding and conclusive on the parties hereto.
The fees and expenses of the designated accounting firms mentioned above shall
be shared equally by
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the Shareholder and Buyer. If the Closing Stockholder's Equity, as adjusted (if
applicable), is equal to or greater than the Balance Sheet Stockholder's Equity,
Buyer and the Shareholder shall give joint written instruction promptly to the
Escrow Agent to release the entire amount on deposit with the Escrow Agent to
the Shareholder. If the Closing Stockholder's Equity, as adjusted (if
applicable), is less than the Balance Sheet Stockholder's Equity, Buyer and the
Shareholder shall give (i) joint written instructions promptly to the Escrow
Agent to release the amount of such shortfall to Buyer and the remainder on
deposit with the Escrow Agent to the Shareholder or (ii) if the amount withheld
from the Purchase Price at Closing and deposited with the Escrow Agent is
insufficient, give joint written instructions promptly to the Escrow Agent to
release the entire amount on deposit with the Escrow Agent to Buyer and the
Shareholder shall pay to Buyer the remaining amount of such shortfall.
SECTION 3. Representations and Warranties of the Shareholder. The
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Shareholder hereby warrants and represents to and agrees with Buyer as follows:
3.1 Good Standing. The Corporation (i) is a corporation duly organized,
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validly existing and in good standing under the laws of Colorado, (ii) has full
power and authority to own, lease and operate its properties and assets and to
conduct its business as now being conducted and (iii) is duly qualified to do
business in and is in good standing in the jurisdictions where the nature of its
business or the character of properties owned or used by it makes such
qualification necessary, except where the failure to qualify could not
reasonably be expected to have a Material Adverse Effect.
3.2 Articles of Incorporation; By-Laws; Minute Books. True and complete
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copies of the Articles of Incorporation and By-Laws, as amended to and including
the date hereof, of the
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Corporation have been delivered to Buyer. The minute books, stock books and
stock transfer records of the Corporation, true and complete copies of which
have been delivered to Buyer, contain, respectively, true and complete minutes
and records of all issuances and transfers of capital stock of the Corporation
and of all minutes and records of all meetings, consents, proceedings and other
actions of the Shareholder, board of directors and committees of the board of
directors of the Corporation since the date of its incorporation.
3.3 Authorization - No Liens. Subject to obtaining ratification of the
------------------------
Governing Boards as described in this Section 3.3, the Shareholder has the
requisite power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized by
the Shareholder's Board of Directors and constitutes the valid and binding
obligation of the Shareholder, enforceable against it in accordance with its
terms, except that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to creditors' rights
generally and the availability of equitable remedies may be limited by equitable
principles of general applicability, and except that, pursuant to the Articles
of Incorporation of the Shareholder, this Agreement will not be effective or
binding upon the Shareholder unless and until it is ratified by each of the
Governing Boards. Except for ratification of this Agreement by each of the
Governing Boards and as set forth on Schedule 3.3, no consent of any lender,
trustee or other Person is required for the Shareholder to enter into and
deliver this Agreement or to consummate the transactions contemplated hereby,
nor does any Contract, mortgage or other instrument to which such Person or the
Corporation is a party or by which such Person or the Corporation is bound or
affecting any of their respective properties conflict with or restrict the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. The Shares are owned of record and
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beneficially by the Shareholder and are not subject to any Lien, or to any
restriction on their transfer that would prohibit transfer of the Shares to
Buyer hereunder, and upon delivery at the Closing Buyer will have good and
marketable title to the Shares, as well as to the New Shares, free and clear of
any Lien or restriction on transfer, except as set forth in Section 4.3.
3.4 Authorized Capitalization. The authorized capital stock of the
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Corporation consists solely of 10,000,000 shares of common stock, $.01 par
value, of which 100,000 shares are issued and outstanding. All of the issued
and outstanding capital stock of the Corporation is validly issued and
outstanding, fully paid and nonassessable, and is owned beneficially and of
record by the Shareholder. Except as set forth on Schedule 3.4, there are no
outstanding warrants, options or rights (preemptive or otherwise) or other
securities, plans or agreements that give the holder or any other Person the
right to purchase or otherwise acquire (whether from the Corporation, the
Shareholder or an Affiliate of the Shareholder) any shares of capital stock of
the Corporation or any securities convertible into, exchangeable or exercisable
for shares of such capital stock or under which any such warrant, option, right
or security may be issued in the future or under which any Person has a right to
payments measured by reference to the net book value or market value of the
Corporation or any division or subsidiary of the Corporation.
3.5 Subsidiaries; Investments; Affiliate Notes. Except as set forth on
------------------------------------------
Schedule 3.5, the Corporation has no direct or indirect subsidiaries and has
made no advances to or investments in, and does not own any securities of or
other interests in, any Person. Schedule 3.5 contains a list of all notes held
by the Corporation issued by the Shareholder or any Affiliate of the
Shareholder.
3.6 Financial Statements. Annexed hereto as Schedule 3.6 are (a) an
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audited balance sheet for the Corporation as of the Balance Sheet Date and the
notes thereto (the "Balance
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Sheet"), (b) audited statements of operations, Stockholder's equity and cash
flows and the notes thereto for the fiscal year ended on the Balance Sheet Date,
(c) audited financial statements for the Corporation comparable to those
described in clauses (a) and (b) above, but as of and for the fiscal year ended
June 30, 1996 and (d) the reports of the independent auditor on the foregoing
financial statements. The Balance Sheet and the other financial statements
referred to in the preceding sentence are referred to collectively as the
"Financial Statements." The Financial Statements in each case have been prepared
in accordance with GAAP heretofore adopted by and applied consistently with the
past practices of the Corporation and fairly present the financial condition,
results of operations and cash flow of the Corporation as of, or for the years
or period ended on, their respective dates. Since the Balance Sheet Date, the
Corporation has conducted its business in a consistent manner without change of
policy or procedure including, without limitation, its practices in connection
with the treatment of revenue recognition, capitalization policies, reserves and
expenses.
3.7 Records and Books of Account. Since July 1, 1995, the records and
----------------------------
books of account of the Corporation have been regularly kept and maintained in
conformity with GAAP consistently applied.
3.8 Liabilities. On the Balance Sheet Date, there were no Liabilities of
-----------
the Corporation that would have been required by GAAP to be included on the
Balance Sheet as of such date other than those Liabilities disclosed or provided
for on the Balance Sheet. There are no other Liabilities of the Corporation
except (i) those incurred since the Balance Sheet Date in the ordinary course of
business consistent with past practice and not in violation of or in conflict
with any of the terms, agreements, warranties, representations and conditions of
the Shareholder contained in this Agreement, (ii) those set forth in Schedule
3.8 hereto and (iii) those which
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could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.9 Title to Assets; Liens and Encumbrances. The Corporation is the owner
---------------------------------------
of, and has good and marketable title to, or a valid leasehold interest in, all
of the assets, properties and rights currently used in or required to be used in
the operation of the business of the Corporation, free and clear of all Liens
except for the Liens, if any, set forth on the Balance Sheet or on Schedule 3.9
hereto. The assets, properties and rights referred to in the preceding sentence
include, without limitation, all assets, properties, rights and business of the
Corporation shown or reflected on the Balance Sheet or acquired by the
Corporation since the Balance Sheet Date except only for cash and inventories
and other assets sold and receivables collected in the ordinary course of
business consistent with the past practice of the Corporation since the Balance
Sheet Date. The Corporation owns all of the assets used by it in the operation
and conduct of its business, or required by it for the normal conduct of its
business, except for those assets leased under leases specifically identified on
Schedule 3.11 hereto.
3.10 Equipment; Real Property.
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(a) Schedule 3.10(a) sets forth a list of substantially all the
equipment owned, leased under capitalized leases or operating leases or
otherwise used by the Corporation in the conduct of its business. Except as
described on Schedule 3.10, throughout the last 12 months the Corporation has
consistently maintained the equipment, and all of the equipment necessary for
the conduct of the business of the Corporation is in good working order and
condition, normal wear and tear excepted. All equipment listed on Schedule
3.10(a) is either owned by the Corporation or leased under an agreement
reflected on Schedule 3.11.
(b) The Corporation owns no real property.
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3.11 Leased Premises. Schedule 3.11 sets forth a true and complete list of
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each lease of premises or equipment executed by or binding upon the Corporation
as lessee, sub-lessee, tenant or assignee (the "Leased Premises" and the "Leased
Equipment") setting forth in each case a brief description of the premises or
equipment covered thereby, the rental payable thereunder and the term (including
any extensions available) thereof. Except as set forth on Schedule 3.11, each
such lease is in full force and effect without any Material default or breach
thereof by the Corporation or, to the knowledge of the Shareholder, any other
party thereto. Except as set forth on Schedule 3.11, no consent of any
landlord, lessor or any other party is required under any such lease by reason
of or in connection with the transfer of the Shares to Buyer as provided for in
this Agreement and to keep such lease in full force and effect after the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. True and complete copies of all leases
required to be listed on Schedule 3.11, including all amendments, addenda,
waivers and all other binding documents affecting the tenant's rights
thereunder, have heretofore been made available to Buyer. As used in this
Agreement, the terms "to the knowledge," "known to," and other phrases of like
substance are to be broadly construed (i) to include the knowledge of the
Shareholder in making the representation and (ii) to represent that the
Shareholder in making the representation has caused reasonably due inquiry and
investigation to be made by officers of the Corporation into the matter
represented to be true.
3.12 Intellectual Property.
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(a) The Corporation has the right to use all "Intellectual Property" that
is used in and Material to the conduct of business of the Corporation as
currently conducted. For purposes of this Agreement, "Intellectual Property"
shall mean all tangible or intangible proprietary rights to intellectual
property, including any such rights under any patent, trademark, trade name,
service
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xxxx, copyright, mask work, trade secret, schematic, computer software
source code or object code, know-how, and any application or registration
relating to any such right.
(b) Schedule 3.12 lists all Intellectual Property owned by or licensed to
the Corporation that is (i) Material to the conduct of the Corporation's
business as currently conducted and (ii) the subject of (A) a patent or patent
application, (B) a registered trademark, service xxxx or trade name or an
application for such registration, or (C) a registered copyright (collectively,
the "Intellectual Property Rights"). Schedule 3.12 also identifies those
currently marketed software products of the Corporation that embody any of the
works of authorship that are the subject of any of the copyrights listed in such
Schedule.
(c) The Corporation is not, nor as a result of the execution and delivery
of this Agreement or the performance of the Shareholder's obligations hereunder
will be, in violation of, or lose any rights pursuant to any license, sublicense
or agreement described in Schedule 3.12.
(d) Except as set forth in Schedule 3.12, the Intellectual Property Rights
owned by the Corporation are owned free and clear of any Liens and except for
the rights of licensees under licenses granted by the Corporation in the
ordinary course of its business, no other person has any right, title or
interest in or to any of such Intellectual Property Rights. Except as set forth
in Schedule 3.12, the Intellectual Property Rights licensed by the Corporation
are licensed pursuant to written license agreements that, exclusive of any
related maintenance, support or like agreements, do not obligate any payment of
any license fee to any third party in respect thereof in an amount in excess of
$5,000.00 per annum.
(e) No claims with respect to the Intellectual Property Rights have been
asserted or, to the knowledge of the Shareholder, are threatened by any Person:
(i) to the effect that the manufacture, sale or use of any product as now used
or offered for sale by the Corporation
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infringes any Intellectual Property right of any other Person, (ii) that would
prohibit or restrict the use by the Corporation of any of the Intellectual
Property Rights, or (iii) that challenge the ownership, validity or
enforceability of any of the Intellectual Property Rights.
(f) All patents, registered trademarks or service marks and registered
copyrights listed on Schedule 3.12 are valid and subsisting.
(g) To the knowledge of the Shareholder, and except for such matters
relating to trademarks and service marks as are set forth in subsection 3.12(i)
below, there has not been and there is not now any material unauthorized use,
infringement or misappropriation of any of the Intellectual Property Rights by
any third party, including, without limitation, any employee or former employee
of the Corporation.
(h) No Intellectual Property Right owned by the Corporation is subject to
any outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing thereof by the Corporation. Except for indemnities
related to derivative works prepared by the Corporation that extend an indemnity
to the proprietor of the preexisting work in respect of the works of authorship
contributed by the Corporation to such preexisting work, the Corporation has not
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property Right. The Corporation has not
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Intellectual Property Right. The Corporation has exclusive
right to file, prosecute and maintain all applications and registrations with
respect to the Intellectual Property Rights owned by the Corporation.
(i) The Intellectual Property Rights include the registered trademark
"Colorado SuperNet" and certain common law rights in the expression "SuperNet",
and the Corporation has
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filed an application for federal trademark registration of the "SuperNet"
expression. Notwithstanding any other provision in this Agreement, the
Shareholder makes no representation or warranty concerning any exclusive rights
in the "SuperNet" expression nor concerning its registrability under the Xxxxxx
Act, other than the representations that: (i) the Corporation has used the
expression, both alone and as part of the composite "Colorado SuperNet" xxxx,
(ii) the Corporation has a good faith belief that it has a reasonable basis for
asserting trademark or service xxxx rights in the expression, and (iii) with the
knowledge that there are other users of expressions including "super net" and
other similar designations, the Corporation has undertaken what the Shareholder
believes in good faith to be commercially reasonable steps to protect its
"SuperNet" expression from such unauthorized use, infringement or
misappropriation as would have a Material Adverse Effect.
3.13 Contracts. Except for the leases described in Schedule 3.11 hereto,
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purchase and sales commitments entered into in the ordinary course of business
consistent with past practice and except as set forth on Schedule 3.13, the
Corporation is not a party to, or subject to or bound by, any (i) lease; (ii)
royalty, distribution, agency, territorial or license agreement; (iii) Contract
(for employment or otherwise) with any officer, employee, director or the
Shareholder (or any Affiliate of any such officer, employee, director or the
Shareholder) or any professional person or firm, consultant, independent
contractor or advertising firm or agency; (iv) Contract or collective bargaining
agreement with any labor union or representative of employees; (v) Contract
guaranteeing the payment or performance of the obligations of others (vi)
Contract pursuant to which indebtedness may be incurred or is outstanding; (vii)
"employee benefit plan" (as defined in Section 3(3) of ERISA) or any stock
option plan, stock purchase plan or Material fringe benefit plan, agreement,
policy or understanding (whether written or oral, qualified or
-15-
nonqualified) that provides benefits, or describes policies or procedures
applicable, to any officer, employee, director, former officer, former employee
or former director (or any dependent of any of the foregoing) of the Corporation
or any ERISA Affiliate thereof; (viii) Contract limiting the freedom of the
Corporation to engage in any line of business or to compete with, solicit or
hire any Person; (ix) Contract not entered into in the ordinary course of
business that involves $5,000 or more and is not cancelable without penalty
within 90 days; (x) any joint venture agreement or other Contract with respect
to the operation or management of any entity; or (xi) any other Contract that
involves payments by or to the Corporation at a rate of $5,000 or more per
annum. Schedule 3.13 hereto contains a true and complete description of the
terms and conditions of each Contract (other than employment arrangements in the
ordinary course with employees) to which the Corporation is a party or to which
it is subject or by which it is bound that involves an annualized rate of $5,000
or more and that is not in writing. True and complete copies of all written
Contracts listed on Schedule 3.13 have heretofore been made available to Buyer
by the Corporation. Except as set forth on Schedule 3.13, no Contract to which
the Corporation is a party or to which it is subject or by which it is bound
conflicts with, would be terminated by, would be breached as a result of, would
be materially modified or changed by, or requires the consent of any other
Person by reason of, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, other than such Contracts
the loss of which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, or the loss of which would involve a
loss of less than $5,000 ("Immaterial Contracts"). Each of the Contracts to
which the Corporation is a party or to which it is subject or by which it is
bound (including, without limitation, those set forth on Schedules 3.13 and 3.14
hereto) is a valid and subsisting Contract of all of the parties thereto in
-16-
full force and effect without modification, other than Immaterial Contracts. The
Corporation has performed all obligations required to be performed by it and is
not in default under any Contract, instrument or other document to which it is a
party or to which it is subject or by which it is bound, and no event has
occurred thereunder which, with or without the lapse of time or the giving of
notice, or both, would constitute a default by it thereunder, other than
Immaterial Contracts.
3.14 Purchase and Sales Commitments and Orders; Principal Customers. The
--------------------------------------------------------------
Corporation has not, since June 30, 1997 to the date hereof, entered into any
purchase or sales commitment or order except in the ordinary course of business
consistent with past practice. Schedule 3.14 sets forth the customers the
Corporation serves on an ongoing basis, including name, location and current
billing rate. None of such customers has canceled or substantially reduced
service or have given notice that it intends to cancel or substantially reduce
service, except cancellations in the ordinary course of business that are not
Material in number or amount of revenue affected.
3.15 Labor Relations; Employees. There are no labor strikes, disputes,
--------------------------
slow downs, work stoppages or other labor troubles or grievances pending or, to
the knowledge of the Shareholder, threatened against or involving the
Corporation. No unfair labor practice complaint before the National Labor
Relations Board, no charges pending before the Equal Employment Opportunity
Commission and no complaint, charge or grievance of any nature before any
similar or comparable Governmental Authority, in any case relating to the
Corporation or the conduct of its business, is pending or, to the knowledge of
the Shareholder, threatened. The Corporation has not received notice, nor has
any knowledge, of the intent of any Governmental Authority responsible for the
enforcement of labor or employment laws to conduct any investigation of or
-17-
relating to the Corporation or the conduct of its business. To the knowledge of
the Shareholder, no officer or key employee of the Corporation has any plans to
terminate his or her employment with the Corporation. Schedule 3.15 is a true
and correct list of all employees of the Corporation by job classification, and
their respective rates of compensation.
3.16 Legal Proceedings. Except as set forth on Schedule 3.16 hereto, there
-----------------
are no Actions (whether or not purportedly on behalf of the Corporation) pending
or, to the knowledge of the Shareholder, threatened against or affecting the
Corporation or any of its properties, rights or business. No Action involving
negligence or strict liability has ever been instituted or, to the knowledge of
the Shareholder, threatened against the Corporation. The Corporation is not in
default with respect to any order, writ, injunction or decree of any
Governmental Authority. None of the Actions referred to on Schedule 3.16,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
3.17 Orders, Decrees, Etc. There are no orders, decrees, injunctions,
--------------------
rulings, publications, decisions, directives, consents, pronouncements or
regulations of any court or any Governmental Authority issued against, or
binding on, the Corporation that do or may affect, limit or control the
Corporation's method or manner of doing business.
3.18 Compliance With Law; Permits and Licenses.
-----------------------------------------
(a) The Corporation has complied and is in compliance with all Laws of
any Governmental Authority applicable to the Corporation, its assets or property
or its operations, including, without limitation, Laws relating to zoning,
building codes, licensing, permits, antitrust, occupational safety and health,
consumer product safety, product liability, hiring, wages, hours, employee
benefit plans and programs, collective bargaining and withholding and
-18-
social security taxes, other than any failure to comply that, individually or in
the aggregate, could not reasonably be expected to result in any Material
liability or have a Material Adverse Effect.
(b) The Corporation presently holds all the permits, licenses and
franchises that are necessary for or Material to its current and future use,
occupancy or operation of its assets or properties or the conduct of its
business; and no notice of violation of any applicable zoning regulations,
ordinance or other similar Law binding on the Corporation with respect to its
assets, properties or business has been received. Schedule 3.18(b) lists all
permits, licenses and franchises held by the Corporation.
(c) Except in circumstances that would not constitute or result in a
Material Adverse Effect, the Corporation has not violated nor is alleged to have
violated, or is in violation of, any Environmental Law, or has released,
treated, stored, disposed of or transported any Hazardous Substance in violation
of any Environmental Law. To the knowledge of the Shareholder, there are no
Hazardous Substances located at, in, on, within or under the surface of either
of the Corporation's assets, properties or facilities in Material violation of
applicable Environmental Laws. Other than as set forth on Schedule 3.18(c)
hereto, neither the Shareholder nor the Corporation has received, or has
knowledge of, any requests for information, notice of claim, demand, lawsuit,
action or other notification from any Governmental Authority or any third party
that the Corporation may be potentially responsible for any threatened or actual
release of Hazardous Substances, or in violation of or in noncompliance with any
Environmental Law, and neither the Corporation nor the Shareholder is subject to
any agreement, consent, decree, administrative order, notice or enforcement
action brought under any Environmental Laws. For purposes of this Section
3.18(c), "Environmental Laws" means any applicable Federal, state or local law,
rule, regulation, ordinance, program, permit, guidance, order, consent,
-19-
decree or notice of violation pertaining to the protection of natural resources,
the environment and the health and safety of employees and the general public;
and "Hazardous Substances" means any substances or any wastes, materials or
pollutants defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances" or words of similar import
under any Environmental Law, any substance the presence of which requires
remediation pursuant to any Environmental Laws, or any substance disposed of in
a manner not in compliance with Environmental Laws.
3.19 Changes Since the Balance Sheet Date; No Material Adverse Change.
----------------------------------------------------------------
Except as set forth on Schedule 3.19 hereto, since the Balance Sheet Date the
Corporation has not (i) incurred any Liability, except current liabilities in
the ordinary course of business consistent with past practice and Liabilities
incurred under Contracts entered into in the ordinary course of business
consistent with past practice; (ii) discharged or satisfied any Lien or paid any
Liability, other than current liabilities shown on the Balance Sheet, and
current liabilities incurred since the Balance Sheet Date in the ordinary course
of business consistent with past practice; (iii) sold or transferred any
Material assets or written off any receivables, except for the collection of
receivables in the ordinary course of business; (iv) mortgaged, pledged or
subjected to any other Lien any of its assets or properties, other than Liens
reflected on the Balance Sheet; (v) suffered any losses or waived any rights of
substantial value; (vi) granted any bonuses or commissions or increased the
compensation payable to any of its employees, directors or officers or increased
the aggregate payment of any fees except for customary bonuses and regular
salary increases made in accordance with the Corporation's past practices as
summarized on Schedule 3.19 or in accordance with the benefit plans described in
Schedule 3.22; (vii) made any loans to any
-20-
individuals, firms, corporations or other entities; (viii) declared, made, set
aside or paid any dividend, distribution, or payment on, or any purchase or
redemption of, any shares of any class of its capital stock, or any commitment
therefor (other than as described on Schedule 3.19); (ix) made any Material
change in any method of accounting (for book or tax purposes) or auditing
practice; or (x) entered into any transaction not in the ordinary course of
business or agreed (whether or not in writing) to do any of the foregoing. Since
the Balance Sheet Date, the business of the Corporation has been operated only
in the regular and ordinary course consistent with past practice. Since the
Balance Sheet Date, there has not been a Material adverse change in the
condition (financial or otherwise), business, prospects of the business as
currently conducted, or operations of the Corporation.
3.20 No Change. Since the Balance Sheet Date, there has not been any
---------
damage, destruction or loss, whether or not covered by insurance, that,
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect.
3.21 Capital Projects and Expenditures. All capital projects and capital
---------------------------------
expenditures (including any leases capitalized in accordance with GAAP)
committed for or undertaken by the Corporation and not fully paid for on the
date hereof, as well as the terms of any and all financing arranged in
connection therewith and details for payments, if any, made with respect
thereto, are set forth on Schedule 3.21 hereto, which also describes all capital
commitments of the Corporation that will survive the Closing. Except as set
forth on such Schedule 3.21, from the Balance Sheet Date to the date hereof the
Corporation has not made any additional expenditures or additional commitments
for capital expenditures, other than in the ordinary course of business and not
involving individual expenditures in excess of $5,000.00.
-21-
3.22 Employee Benefits.
-----------------
(a) Except for the plans of the Corporation set forth on Schedule 3.22
hereto (the "Plans"), neither the Corporation nor any ERISA Affiliate maintains
or contributes to or has any liability with respect to any "employee benefit
plan" as that term is defined in Section 3(3) of ERISA, or any other bonus,
incentive, compensation, profit sharing, stock, severance, retirement, health,
life, disability, group insurance, vacation, holiday, fringe benefit,
employment, stock option, stock purchase, stock appreciation right, supplemental
unemployment, layoff, or consulting plan, agreement, policy or understanding
(whether written or oral, qualified or nonqualified, currently effective or
terminated). True and complete copies of all the Plan documents and summary
plan descriptions have been furnished to Buyer (along with all related trust
agreements, insurance contracts or other funding agreements which implement each
Plan, and all other documents, records or other materials related thereto
reasonably requested by Buyer).
(b) With respect to each Plan, the requirements of ERISA, the Code
(including, without limitation Part 6 of Subtitle B of Title I of ERISA and
Sections 105(h) and 4980B of the Code) and all other applicable laws have been
fulfilled in all Material respects and copies of all filings with the Internal
Revenue Service and the Department of Labor or other applicable Governmental
Authority for the three most recent plan years for the Plans have been furnished
to Buyer. Except as described in Schedule 3.22(b), no written or oral
representations have been made to any employee or former employee of the
Corporation promising or guaranteeing any employer payment or funding for the
continuation of medical, dental, life or disability coverage for any period of
time beyond the end of the current plan year (except to the extent of coverage
required under Section 4980B of the Code).
-22-
(c) Neither the Corporation nor any ERISA Affiliate has ever (i)
maintained or contributed to any plan subject to Section 412 of the Code and
Section 302 of ERISA or (ii) contributed to any "multiemployer plan," as such
term is defined in Section 3(37) of ERISA, and neither the Corporation nor any
ERISA Affiliate has effected either a "complete withdrawal" or a "partial
withdrawal," as those terms are defined in Sections 4203 and 4205, respectively,
of ERISA, from any such multiemployer plan.
(d) Except as set forth on Schedule 3.22 hereto, at the Balance Sheet
Date there were and at the date hereof there are, no bonus, profit sharing,
incentives, commissions or other compensation of any kind with respect to work
done prior to the Balance Sheet Date or the date hereof, due to or expected by
present or former employees of the Corporation not paid prior to such date or,
with respect to compensation for work done prior to the Balance Sheet Date, not
fully accrued on the Balance Sheet.
(e) Each Plan that is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) meets the requirements of a "qualified plan" under
Section 401(a) of the Code in form and in operation, and such Plan, and each
trust (if any) forming a part thereof, has received a favorable determination
letter, or a favorable determination letter has been applied for, from the
Internal Revenue Service as to the qualification under the Code of such Plan and
the tax-exempt status of such related trust, and nothing has occurred since the
date of such determination letter, or request therefor, that could reasonably be
expected to adversely affect the qualification of such Plan or the tax-exempt
status of such related trust.
(f) There are no unfunded liabilities existing under any Plan, and
each Plan could be terminated as of the Closing Date with no liability to Buyer,
the Corporation, any
-23-
ERISA Affiliate or any Person that is under common control, or is treated as a
single employer, with Buyer under Section 414 of the Code or ERISA Section 4001.
(g) With respect to each Plan (i) there have been no non-exempt
prohibited transactions as defined in Section 406 of ERISA or Section 4975 of
the Code, (ii) no fiduciary (as defined in Section 3(21) of ERISA) has liability
for breaching of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of assets in such Plan, and
(iii) no actions, investigations, suits or claims with respect to the assets
thereof (other than routine claims for benefits) are pending or, to the
knowledge of the Shareholder, threatened, and the Shareholder has no knowledge
of any facts that would give rise to or could reasonably be expected to give
rise to any such actions, suits or claims.
3.23 Governmental Approvals. No governmental authorization, approval,
----------------------
order, license, permit, franchise or consent and no registration, declaration or
filing by the Corporation or the Shareholder with any Governmental Authority is
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.24 Tax Matters.
-----------
(a) The Corporation (individually, the "Taxpayer") has duly and timely
filed all Returns required to be filed by it. The Corporation is not currently
the beneficiary of any extension of time within which to file any Return, except
for the federal and state income tax Returns for the fiscal year ended June 30,
1997. No claim has ever been made by an authority in a jurisdiction where the
Corporation does not file Returns that the Corporation is or may be subject to
taxation by that jurisdiction. All Returns filed by the Taxpayer were correct
and complete in all Material respects. The Taxpayer has paid in full all Taxes
(whether or not shown on a Return) required to be paid by the Taxpayer before
such payment became delinquent. The
-24-
Corporation has made adequate provision in the Financial Statements, in
conformity with GAAP, for the payment of all accrued Taxes not yet payable as of
the respective dates of such Financial Statements. All Taxes that the Taxpayer
has been required to collect or withhold have been duly collected or withheld
and, to the extent required when due, have been or will be duly and timely paid
to the proper taxing authority.
(b) There are no audits, inquiries, investigations or examinations
relating to any of the Taxpayer's Returns pending or threatened, and there are
no claims that have been asserted relating to any of the Taxpayer's Returns
filed for any year that if determined adversely would result in the assertion by
any Governmental Authority of any Tax deficiency against the Taxpayer. There
have been no waivers or extensions of statutes of limitations with respect to
Taxes by the Taxpayer, or any agreements to extend the time with respect to a
Tax assessment or deficiency.
(c) The Corporation is not a party to any tax-sharing Contract or
similar arrangement with any Person. The Taxpayer has not made a disclosure on
a Return pursuant to Code Section 6662(d)(2)(B)(ii) and the Regulations
thereunder.
(d) The Taxpayer has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(e) The Corporation has no liability for Taxes of any other person
under Treasury Regulation section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
(f) The Corporation has not filed a consent under Code Section 341(f)
concerning collapsible corporations.
-25-
(g) The Corporation is not obligated to make any payments or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 280G.
3.25 Insurance Coverage. Schedule 3.25 hereto describes each insurance
------------------
policy (specifying the insured, the insurer, the amount of coverage, the type of
insurance, the policy number, the expiration date, the annual premium, and any
pending claims thereunder) maintained by the Corporation. The Corporation is
not in default in any Material respect with respect to any provisions contained
in any such insurance policy or has failed to give any notice or present any
presently existing Material claims under any such insurance policy in due and
timely fashion.
3.26 Representations and Warranties. The representations and warranties
------------------------------
contained in this Section 3 do not contain any untrue statement of a Material
fact or omit to state a Material fact necessary in order to make the statements
made not misleading.
SECTION 4. Representations and Warranties of Buyer. Buyer warrants and
---------------------------------------
represents to and agrees with the Shareholder as follows:
4.1 Good Standing. Buyer is a corporation duly organized, validly
-------------
existing and in good standing under the laws of Delaware.
4.2 Authorization. The execution and delivery of this Agreement and the
-------------
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Buyer, and all other corporate action of Buyer,
including all authorizations and ratifications, necessary to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been taken. This Agreement constitutes a
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
-26-
No consent of any lender, trustee, security holder of Buyer or other Person is
required for Buyer to enter into and deliver this Agreement and to consummate
the transactions contemplated hereby.
4.3 Investment Representations.
--------------------------
(a) Buyer is acquiring the Shares for its own account for investment
and not for distribution, assignment or resale to others;
(b) Buyer understands that the Shares have not been registered under
the Securities Act of 1933 (the "Act") in reliance upon an exemption therefrom
for nonpublic offerings, and understands that the Shares may not be sold or
otherwise transferred unless such sale or other transfer is registered under the
Act or an exemption from registration is available, and a legend evidencing such
restrictions will be placed on the Shares;
(c) Buyer either by itself or with the assistance of financial
advisors employed by it have sufficient knowledge and experience to evaluate the
merits and bear the economic risks of an investment in the Shares; and
(d) Buyer has been given the opportunity to ask questions about the
Corporation's business and has had any such questions answered to its
satisfaction.
4.4 Representations and Warranties. The representations and warranties of
------------------------------
Buyer contained in this Agreement do not contain any untrue statement of a
Material fact or omit to state a Material fact necessary in order to make the
statements made not misleading.
SECTION 5. Conditions of Buyer's Obligations to Close. The obligations
------------------------------------------
of Buyer under this Agreement are, at the option of Buyer, subject to the
conditions set forth below, which conditions may be waived by Buyer without
releasing or waiving any of its rights hereunder.
-27-
5.1 Agreements and Conditions. On or before the Closing Date, the
-------------------------
Shareholder shall have complied with and duly performed all agreements and
conditions on their part to be complied with and performed pursuant to or in
connection with this Agreement on or before the Closing Date.
5.2 Representations and Warranties. The representations and warranties of
------------------------------
the Shareholder contained in this Agreement, or otherwise made in writing in
connection with the transactions contemplated hereby, shall be true and correct
in all Material respects on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date (except for such changes as result from actions or events
expressly contemplated by the terms of this Agreement).
5.3 No Legal Proceeding. No Action shall have been instituted or
-------------------
threatened to restrain or prohibit the acquisition by Buyer, or the conveyance
by the Shareholder, of the Shares, and on the Closing Date there are no Actions
pending or threatened against or affecting the Shareholder or the Corporation
that involve a demand for any judgment or liability, whether or not covered by
insurance, and which may result in any Material Adverse Effect.
5.4 Deliveries. Buyer shall have received the deliveries to be made by
----------
the Shareholder pursuant to Section 7.
5.5 Legal Opinion. Buyer shall have received: (i) a favorable opinion of
-------------
Bennington Xxxxxxx & Xxxxx, dated the Closing Date and in form and substance
reasonably satisfactory to Buyer, with respect to the matters referred to in
Sections 3.1, 3.4, 3.16 (to its knowledge and except the last sentence) and
3.23, and (ii) a favorable opinion of Xxxxx, Xxxxxx & Xxxxxx LLC, dated the
Closing Date and in form and substance reasonably satisfactory to Buyer, with
respect to the matters referred to in Section 3.3.
-28-
SECTION 6. Conditions of the Shareholder's Obligation to Close. The
---------------------------------------------------
obligation of the Shareholder under this Agreement is, at the option of the
Shareholder, subject to the following express conditions, which conditions may
be waived by the Shareholder without releasing or waiving any of their rights
hereunder.
6.1 Agreements and Conditions. On or before the Closing Date, Buyer shall
-------------------------
have complied with and duly performed all of the agreements and conditions on
its part required to be complied with or performed pursuant to this Agreement on
or before the Closing Date.
6.2 Representations and Warranties. The representations and warranties of
------------------------------
Buyer contained in this Agreement shall be true and correct in all Material
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties and had been made on and as of the Closing
Date.
6.3 Deliveries. The Shareholder shall have received the deliveries to be
----------
made by Buyer pursuant to Section 8.
6.4 Ratification. This Agreement and the transactions contemplated hereby
------------
shall have been ratified by all of the Governing Boards.
6.5 Fairness Opinion. Shareholder shall have received from Xxxxxxx &
----------------
Associates its opinion that the transactions contemplated hereby are fair to the
Shareholder from a financial point of view.
6.6 Contribution Agreements. The option holders under the Option
-----------------------
Agreements (defined below) shall have entered into a Contribution Agreement with
the Shareholder.
SECTION 7. Deliveries of the Shareholder on the Closing Date. The
-------------------------------------------------
Shareholder agrees to deliver to Buyer the following on the Closing Date:
-29-
7.1 Stock Certificates. Certificates representing all of the Shares being
------------------
purchased by Buyer hereunder, duly endorsed in blank for transfer or with
appropriate stock powers duly executed in blank, and certificates representing
all of the New Shares being purchased by Buyer hereunder.
7.2 Corporate Records. The stock books, minute books and corporate seal
-----------------
of the Corporation.
7.3 Resignations. Written resignations of the Corporation's directors.
------------
7.4 Employment Agreements. Employment agreements reasonably satisfactory
---------------------
to Buyer between the Corporation and each of the individuals listed on Schedule
7.4.
7.5 Consents. All consents required in connection with the execution and
--------
delivery of this Agreement and the transactions contemplated hereby.
7.6 Possession of Assets. Possession of any assets and properties of the
--------------------
Corporation held by the Shareholder.
7.7 Escrow Agreement. The Escrow Agreement executed by the Shareholder
----------------
and the Escrow Agent.
7.8 Stock Option Agreements. Stock option agreements (the "Option
-----------------------
Agreements") executed by each of the individuals listed on Schedule 3.4, which
Option Agreements shall contain provisions, reasonably satisfactory to Buyer in
form and substance, for: (i) the right of the option holder to require the
Corporation to purchase (a "Put"), at any time after the Closing Date, the
underlying options covered by the applicable Option Agreement for an amount in
cash equal to the aggregate spread identified in that Option Agreement; (ii) the
right of the Corporation to require each option holder to sell (a "Call"), at
any time after the Closing Date, his or her underlying option covered by the
applicable Option Agreement to the Corporation for an amount
-30-
in cash equal to the aggregate spread identified in that Option Agreement; (iii)
accrual of interest from the Closing Date on the amount payable under each Call
at a rate of 8.0% per annum, computed on the basis of a year of 365 days and the
actual number of days elapsed; and (iv) termination of each Option Agreement,
and extinguishment of all claims and rights of the option holder thereunder,
upon exercise of the applicable Put or Call.
7.9 Shareholder's Consent. The Shareholder's written consent, in its
---------------------
capacity as the sole shareholder of the Corporation, to the payment to Xxx Xxxx
of the consideration provided for under the Put and Call in his Option Agreement
as payment in lieu of stock options and in settlement of his rights under the
Option Agreement.
SECTION 8. Deliveries of Buyer on the Closing Date. Buyer agrees on
---------------------------------------
the Closing Date to deliver to the Shareholder the Purchase Price and the
Issuance Price to be delivered pursuant to Section 2.3 hereof and the Escrow
Agreement executed by Buyer and the Escrow Agent.
SECTION 9. Additional Covenants.
--------------------
9.1 Information and Access. Until the Closing, the Shareholder shall
----------------------
cause the Corporation and its independent auditors to afford to the officers,
independent auditors, counsel and other representatives of Buyer reasonable
access to the properties, books, records (including Returns filed and those in
preparation) and personnel of the Corporation in order that the Buyer may have a
full opportunity to make such investigation as it reasonably desires to make of
the Corporation, and to the independent auditors of Buyer reasonable access to
the audit work papers and other records of the independent auditors of the
Corporation. Additionally, until the closing
-31-
the Shareholder shall cause the Corporation to permit the Buyer to make such
reasonable inspections of the Corporation and its operations during normal
business hours as Buyer may reasonably require and furnish Buyer with such
financial and operating data and other information with respect to the business
and properties of the Corporation as Buyer may from time to time reasonably
request.
9.2 Cooperation. After the Closing, the Shareholder will cooperate with
-----------
Buyer, and will use all reasonable efforts to have the officers, directors and
other employees of the Corporation cooperate with Buyer, at Buyer's request and
expense, in furnishing information, evidence, testimony and other assistance in
connection with any actions, proceedings, arrangements or disputes involving the
Corporation and based upon Contracts or acts of the Corporation that were in
effect or occurred on or prior to the Closing.
9.3 Further Assurances of the Shareholder. The Shareholder agrees at any
-------------------------------------
time and from time to time after the Closing, upon the request of Buyer, to do,
execute, acknowledge and deliver, or to cause to be done, executed, acknowledged
and delivered, all such further acts, assignments, transfers, powers of attorney
and assurances as may be required for the better assigning, transferring,
conveying, and confirming to Buyer, or to its successors and assigns, of the
Shares and to carry out the terms and conditions of this Agreement, including
without limitation providing Buyer, within 30 days after the Closing Date, with
such financial statements of the Corporation as may be required under Rule 3-05
of Regulation S-X of the U.S. Securities and Exchange Commission.
9.4 Further Assurances of Buyer. Buyer and the Shareholder shall
---------------------------
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with any audit, litigation or Action, or the preparation of
Returns with respect to Taxes or other matters relating to the
-32-
period prior to the Closing Date. Such cooperation shall include the retention
and (upon the other party's reasonable request) the provision of records and
information, including work papers of the Corporation and the Corporation's
independent auditors, but excluding records and information that are protected
by recognized professional privilege, related to tax periods on or prior to the
Closing Date, that are reasonably relevant to any such audit, litigation or
Action, or any Returns, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. Buyer and the Shareholder agree (i) to retain all books and records
with respect to Tax matters pertinent to the Corporation relating to any period
(or portion thereof) prior to the Closing, and (ii) to give the other party
reasonable written notice prior to destroying or discarding any such books and
records and, if the other party so requests, Buyer or the Shareholder, as the
case may be, shall allow the other party to take possession of such books and
records.
9.5 Non-Competition Covenants. The Shareholder covenants that for a
-------------------------
period of five years after the Closing Date it will not engage, directly or
indirectly (whether as owner, partner, stockholder (other than a holder of less
than 5% of the shares of a public company), joint venturer, manager, investor
(which shall include investment as an equity owner, creditor or donor of a
gift), advisor, consultant or otherwise), in the business of providing Internet
connectivity and services in the State of Colorado except as an Affiliate of
Buyer, or such other manner as Buyer shall consent to in writing. The
Shareholder further covenants that for a period of five years from and after the
Closing Date, it will not directly or indirectly induce or solicit, or directly
or indirectly aid or assist any other Person to induce or solicit, any person
who is (or within the prior twelve months had been) an employee, salesman,
agent, consultant, distributor, representative, advisor, customer or supplier of
the Corporation to terminate that person's
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employment or business relations with the Corporation. If any provision of this
covenant is deemed invalid in whole or in part, it shall be curtailed, whether
as to time, geographical area, scope of activity or otherwise, as and to the
extent required for its validity under applicable law and, as so curtailed,
shall be enforceable. The Shareholder acknowledges that this paragraph 9.5 and
the Shareholder's obligations hereunder are a material inducement and condition
to Buyer's entering into this Agreement. In the event of a breach or threatened
breach of this paragraph, Buyer shall be entitled to an injunction restraining
such breach; however, nothing herein shall be construed as prohibiting Buyer
from pursuing any remedy available to Buyer as a result of such breach or
threatened breach.
9.6 No Shop. The Shareholder agrees that, from the date of this Agreement
-------
until the earlier of the Closing or the termination of this Agreement, it will
negotiate solely with Buyer regarding any sale of the Shares or of all or
substantially all of the assets of the Corporation or a merger, consolidation or
reorganization of the Corporation and will not solicit or negotiate, or permit
the Corporation to solicit or negotiate, any offers from third parties with
respect thereto.
SECTION 10. Indemnification.
---------------
10.1 Indemnification by the Shareholder. (a) The Shareholder agrees to
----------------------------------
indemnify Buyer and every Affiliate of Buyer against and hold them harmless from
any and all Damages that Buyer or any such Affiliate of Buyer may sustain at any
time by reason of the breach or inaccuracy (or alleged breach or inaccuracy) of,
or failure to comply with (or alleged failure to comply with), any of the
warranties, representations, conditions, covenants or agreements of the
Shareholder contained in this Agreement or in any agreement, certificate or
document delivered pursuant to or in connection with this Agreement or arising
out of the closing of the transactions contemplated hereby; provided that the
Shareholder shall be obligated under this paragraph (a) of
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Section 10 to indemnify Buyer only for Damages that are, singularly or in the
aggregate, in excess of $100,000. As used in this Agreement, the terms "alleged
breach or inaccuracy," "alleged failure to comply with," "alleged existence," or
"alleged inaccuracy" shall only apply to allegations by parties other than Buyer
or its Affiliates as to such matters.
(b) The Shareholder also agrees to indemnify Buyer and every Affiliate of
Buyer against and hold them harmless from any and all Damages that Buyer or any
such Affiliate of Buyer may sustain by reason of the legal proceedings set forth
on Schedule 3.16.
(c) Any claim for indemnification pursuant to paragraph (a) of this Section
10.1 must be asserted in writing and delivered to the Shareholder no later than
5:00 p.m. (Mountain Time) on the first anniversary of the Closing Date.
(d) The Shareholder agrees that it will not distribute the Purchase Price
to any college or university or to the Colorado Advanced Technology Institute
before the first anniversary of the Closing Date, and thereafter it will not
make any such distribution if the net liquid assets of the Shareholder are less
than 150% of the aggregate amount of any claims asserted against the Shareholder
under this Section that have not been resolved and paid in full.
(e) Nothing contained in this Agreement shall be deemed or interpreted to
impose liability or obligations upon the Governing Boards or any college or
university governed by any of the Governing Boards or upon the Colorado Advanced
Technology Institute Commission or that Institute, nor upon any officer,
employer agent or representative of any of the foregoing, and such Governing
Boards, Commission and institutions and persons shall not be deemed to be
parties to, or bound, by this Agreement. Buyer agrees that neither it nor any
of its Affiliates will make a claim of any kind against any such Board,
Commission, institution or person under this Agreement or related to the
transaction; provided that this shall not prevent Buyer from asserting
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a claim against a Governing Board or the Commission to recover an amount due to
the Buyer from the Shareholder that the Shareholder has insufficient assets to
satisfy because the Shareholder has made a distribution to such Governing Board
or Commission in violation of paragraph (d) of this Section 10.1.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold the
------------------------
Shareholder and every Affiliate of the Shareholder harmless from and against any
and all Damages that the Shareholder or any such Affiliate of the Shareholder
may sustain at any time by reason of the breach or inaccuracy (or alleged breach
or inaccuracy) of, or failure to comply with (or alleged failure to comply with)
any warranties, representations, conditions, covenants or agreements of Buyer
contained in this Agreement or in any agreement, certificate or document
delivered pursuant to or in connection with this Agreement or arising out of the
closing of the transactions contemplated hereby.
10.3 Procedures for Third Party Indemnification. In those instances in
------------------------------------------
which a third party claim is asserted against any party hereto, or any party
hereto is made a party defendant in any third party action or proceeding, and
such claim, action or proceeding involves a matter which is the subject of this
indemnification, then such party (an "Indemnified Party") shall give written
notice to the other party hereto (the "Indemnifying Party") of such claim,
action or proceeding, and such Indemnifying Party shall have the right to join
in the defense of said claim, action or proceeding at such Indemnifying Party's
cost and expense and, if the Indemnifying Party agrees in writing to be bound by
and to promptly pay the full amount of any final judgment from which no further
appeal may be taken and if the Indemnified Party is reasonably assured of the
Indemnifying Party's ability to satisfy such agreement, then at the option of
the Indemnifying Party, such Indemnifying Party may take over the defense of
such claim, action or proceeding,
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except that, in such case, the Indemnified Party shall have the right to join in
the defense of said claim, action or proceeding at its own cost and expense.
SECTION 11. Survival of Representations.
---------------------------
The parties hereto agree that all representations, warranties, covenants,
conditions and agreements contained herein or in any instrument or other
document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby shall survive the consummation of the
transactions contemplated hereby until the first anniversary of the Closing
Date.
SECTION 12. Brokerage Indemnity. Buyer, on the one hand, and the
-------------------
Shareholder, on the other hand, each represents to the other that no broker or
finder has been involved with any of the transactions relating to this Agreement
other than the involvement of Xxxxxxx & Associates, L.P. ("Xxxxxxx") as the
representative of the Corporation and Xxxxx Xxxxx ("Xxxxx") as consultant on
behalf of the Shareholder. In the event of a claim by any broker or finder that
such broker or finder represented or was retained by the Shareholder (including
Xxxxxxx and Downs), on the one hand, or Buyer, on the other hand, in connection
herewith, the Shareholder or Buyer, as the case may be, agrees to indemnify and
hold the other harmless from and against any and all loss, liability, cost,
damage, claim and expense, including, without limitation, attorneys' fees and
disbursements, that may be incurred in connection with such claim. In
particular, the Shareholder hereby agrees that neither Buyer nor the Corporation
shall have any obligation for payment of compensation to Xxxxxxx or Xxxxx for
its or his involvement with any of the transactions relating to this Agreement.
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SECTION 13. Notices. All notices, requests, demands and other
-------
communications provided for by this Agreement shall be in writing and shall be
deemed to have been given when hand delivered, when received if sent by
telecopier or by same day or overnight recognized commercial courier service or
three business days after being mailed in any general or branch office of the
United States Postal Service, enclosed in a registered or certified postpaid
envelope, addressed to the address of the parties stated below or to such
changed address as such party may have fixed by notice:
To the Shareholder:
Newsupernet
c/o Xxxxxx Xxxxxxx, President
Colorado State University
Academic Computing and Networking Service
Xxxx Xxxxxxx, Xxxxxxxx 00000-0000
Fax: (000) 000-0000
- copy to -
Xxxxxx X. Xxxxxxxx
Xxxxx Xxxxxx & Xxxxxx LLC
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Fax: (000) 000-0000
To Buyer:
Xxxxxx X. Xxxxxxxx
Executive Vice President
Qwest Communications Corporation
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
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- copy to -
Xxxxxx X. Xxxxxxxx, Xx.
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
provided, that any notice of change of address shall be effective only upon
receipt.
SECTION 14. Termination.
-----------
14.1 This Agreement may be terminated at any time prior to the Closing by
any of the following:
(a) By mutual written agreement of Buyer and the Shareholder;
(b) By either Buyer or the Shareholder if the Closing has not occurred
by 12:00 a.m., October 31, 1997 upon written notice by such terminating party,
provided that at the time such notice is given a material breach of this
Agreement by such terminating party shall not be the reason for the Closing's
failure to occur;
(c) Subject to the provisions of Section 14.2, by Buyer, by written
notice to the Shareholder, if there has been a material violation or breach of
any of the Shareholder's covenants or agreements made herein or in connection
herewith or if any representation or warranty of the Shareholder made herein or
in connection herewith proves to be materially inaccurate or misleading with
respect to the Corporation; or
(d) Subject to the provisions of Section 14.2, by the Shareholder, by
written notice to Buyer, if there has been a material violation or breach of any
of Buyer's covenants or agreements made herein or in connection herewith or if
any representation or warranty of Buyer made herein or in connection herewith
proves to be materially inaccurate or misleading.
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14.2 If this Agreement is terminated as provided in Section 14.1, then
there shall be no liability or obligation on the part of any party hereto (or
any of their respective officers, directors or employees) except that if Buyer
terminates this Agreement pursuant to Section 14.1(c) or the Shareholder
terminates this Agreement pursuant to Section 14.1(d), the non-terminating party
shall remain liable for any breach hereof.
SECTION 15. Miscellaneous.
-------------
15.1 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules hereto, sets forth the entire agreement and understanding among the
parties and merges and supersedes all prior discussions, agreements and
understandings of every kind and nature among them as to the subject matter
hereof, and no party shall be bound by any condition, definition, warranty or
representation other than as expressly provided for in this Agreement or as may
be on a date on or subsequent to the date hereof duly set forth in writing
signed by each party which is to be bound thereby. Unless otherwise expressly
defined, terms defined in the Agreement shall have the same meanings when used
in any Exhibit or Schedule and terms defined in any Exhibit or Schedule shall
have the same meanings when used in the Agreement or in any other Schedule. This
Agreement (including the Exhibits and Schedules hereto) shall not be changed,
modified or amended except by a writing signed by each party to be charged and
this Agreement may not be discharged except by performance in accordance with
its terms or by a writing signed by each party to be charged.
15.2 Taxes. The Shareholder represents and warrants that it is a non-profit
-----
tax exempt corporation and as such, it is exempt from federal income and excise
and all state and local taxes. Should the tax exempt status of the Shareholder
change and any taxes become due in the nature
-40-
of a sales or transfer tax payable on the sale or transfer of the Shares or the
consummation of any other transaction contemplated hereby, the Shareholder
agrees to pay on demand or defend at its own cost any claim brought or any
liability or expense related to such taxes or as a direct result of the change
in tax exempt status.
15.3 Governing Law.
-------------
THIS AGREEMENT AND ITS VALIDITY, CONSTRUCTION AND PERFORMANCE SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF COLORADO WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
15.4 Representation by Counsel. Each party hereto represents and agrees
-------------------------
with the other that it has been represented by independent counsel of its own
choosing; it has had the full right and opportunity to consult with its
respective attorneys and other advisors and has availed itself of this right and
opportunity; its authorized officers have carefully read and fully understand
this Agreement in its entirety and have had it fully explained to them by such
party's counsel; it is fully aware of the contents hereof and the meaning,
intent and legal effect thereof; and its authorized officer is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence. Each party and its counsel cooperated in the
drafting and preparation of this Agreement and the documents referred to herein.
Accordingly, any rule of law or any legal decision that would require
interpretation of any ambiguities in this Agreement against the party that
drafted it is of no application and is hereby
-41-
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intentions of the parties and this Agreement.
15.5 Benefit of Parties; Assignment. This Agreement shall be binding upon
------------------------------
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and permitted assigns. The Agreement may not
be assigned by Buyer or the Shareholder except with the prior written consent of
the other party or parties except that Buyer may assign this agreement to an
Affiliate without the consent of the Shareholder, and in such circumstance Buyer
shall remain liable for the fulfillment of all obligations of its assignee
hereunder. Nothing herein contained shall confer or is intended to confer on
any third party or entity which is not a party to this Agreement any rights
under this Agreement.
15.6 Pronouns. Whenever the context requires, the use in this Agreement of
--------
a pronoun of any gender shall be deemed to refer also to any other gender, the
use of the singular shall be deemed to refer also to the plural and the use of
the plural shall be deemed to refer also to the singular.
15.7 Headings. The headings in the sections, Sections and Schedules of
--------
this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof. The words "herein," "hereof," "hereto" and
"hereunder," and other words of similar import refer to this Agreement as a
whole and not to any particular provision of this Agreement.
15.8 Expenses. The parties hereto shall pay all of their own expenses
--------
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel, accountants and
financial advisors.
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15.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first written above.
QWEST COMMUNICATIONS CORPORATION,
a Delaware corporation
By:_____________________________________________
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President - Finance,
Chief Financial Officer and Treasurer
SHAREHOLDER:
NEWSUPERNET,
a Colorado nonprofit corporation
By:_____________________________________________
Name: Xxxxxx Xxxxxxx
Title: Chairman
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