ASSET PURCHASE AGREEMENT
among
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation,
and
Simply Internet, Inc.,
a California corporation,
and
Xxx X. Xxxxx
and
Xxxxxxxxxx Xxxxx
TABLE OF CONTENTS
Page
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ARTICLE 1 PURCHASE AND SALE OF ASSETS 1
1.1 Description of Assets 1
1.2 Non-Assignment of Certain Customer Accounts 3
1.3 Accounts Receivable 3
1.4 Proration of April 1999 Net Income 4
1.5 Change of Names 4
1.6 Excluded Assets 4
ARTICLE 2 PURCHASE PRICE AND RETENTION 4
2.1 Purchase Price 4
2.2 Liabilities 5
ARTICLE 3 CLOSING 5
3.1 Time and Place 5
3.2 Deliveries by Seller and the Shareholders 5
3.3 Payment of Purchase Price 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER 6
4.1 Corporate Status 7
4.2 Corporate Power and Authority 7
4.3 Enforceability 7
4.4 No Violation 7
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLERS 7
5.1 Corporate Status 8
5.2 Power and Authority 8
5.3 Enforceability 8
5.4 Y2K 8
5.5 Subsidiaries 8
5.6 No Violation 9
5.7 Taxes 9
5.8 No Commissions 9
5.9 Financial Statements 9
5.10 Changes Since the Current Balance Sheet 9
5.11 Litigation 10
5.12 Liabilities 10
5.13 Indebtedness 10
5.14 Environmental Matters 11
5.15 Real Property, Leases and Significant Personal Property 11
5.16 Good Title, Adequacy and Condition. 11
5.17 Compliance with Laws 12
5.18 Absence of Certain Changes or Events 12
5.19 Intellectual Property 12
5.20 Accounts Receivable 13
5.21 Licenses and Permits 13
5.22 Contracts, Customer Lists and Employment Matters 13
5.23 Predecessor Status, Etc. 14
5.24 Spin-Off by Seller 14
5.25 Records of Seller 14
5.26 Accuracy of Information Furnished by Seller and the
Shareholders 14
5.27 Survival 14
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE CLOSING 14
6.1 Conduct of Business by Seller Pending the Closing 14
ARTICLE 7 CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES 16
7.1 Further Assurances 16
7.2 Confidentiality, Publicity 16
7.3 No Other Discussions 16
7.4 Due Diligence Investigation 17
7.5 Related Party Agreements 17
7.6 Cooperation 17
7.7 Other Actions 17
7.8 Notification of Certain Matters 18
7.9 Payoff and Estoppel Letters 18
7.10 Consulting Services 18
7.11 Accounting Treatment 18
7.12 Covenant Not to Compete 18
7.13 Employment 20
7.14 Pre-Payment Amount 21
7.15 Seller's April Net Income 21
ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF PURCHASER 21
8.1 Accuracy of Representations and Warranties; Compliance
with Obligations 21
8.2 No Material Adverse Change or Destruction of Property 21
8.3 Corporate Certificate 22
8.4 Consent 22
8.5 No Adverse Litigation 22
8.6 Opinion of Counsel 22
ARTICLE 9 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS 22
9.1 Accuracy of Representations and Warranties and Compliance
with Obligations 22
9.2 Other Conditions 23
9.3 Corporate Certificate 23
9.4 No Adverse Litigation 23
ARTICLE 10 NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION 23
10.1 Non-Assumption of Liabilities; Indemnification. 23
10.2 Assumption of Specific Liabilities; Indemnification
of Seller 24
10.3 Survival of Representations and Warranties 25
10.4 Matters Involving Third Parties 25
ARTICLE 11 DEFINITIONS 26
11.1 Defined Terms 26
ARTICLE 12 TERMINATION, AMENDMENT AND WAIVER 27
12.1 Termination 27
12.2 Effect of Termination 27
ARTICLE 13 GENERAL PROVISIONS 28
13.1 Notices 28
13.2 Entire Agreement 29
13.3 Expenses 29
13.4 Amendment; Binding Effect; Assignment 29
13.5 Counterparts 29
13.6 Governing Law: Interpretation 29
13.7 Access to Records 29
13.8 Attorneys' Fees 29
LIST OF SCHEDULES
Schedule 1.1(a) -- Description of Equipment
Schedule 1.1(b) -- Description of Real Property
Schedule 1.1(d) -- Related Documents
Schedule 1.1(e) -- Assumed Contracts
Schedule 1.1(h) -- Approvals and Operating Rights
Schedule 1.1(p) -- Tangible and Intangible Assets
Schedule 1.2 -- Non-Assignment of Certain Customer Accounts
Schedule 1.5 -- Trade Name, Trademark and Service Marks
Schedule 1.6 -- Excluded Assets
Schedule 5.5 -- Subsidiaries
Schedule 5.9 -- Financial Statements
Schedule 5.10 -- Changes Since the Current Balance Sheet
Schedule 5.11 -- Litigation
Schedule 5.12 -- Liabilities
Schedule 5.13 -- Indebtedness
Schedule 5.15 -- Real Property, Leases and Significant Personal
Property
Schedule 5.16 -- Good Title, Adequacy and Condition
Schedule 5.17 -- Compliance With Laws
Schedule 5.18 -- Absence of Certain Changes or Events
Schedule 5.19 -- Intellectual Property
Schedule 5.20 -- Accounts Receivable
Schedule 5.21 -- Licenses and Permits
Schedule 5.22 -- Contracts, Customer Lists and Employment Matters
Schedule 5.24 -- Spin-Off by Seller
Schedule 6.1 -- Conduct of Business Pending Closing
Schedule 7.5 -- Related Party Agreements
Schedule 7.11 -- Accounting Treatment
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into and made
effective as of April 26, 1999 ("Effective Date"), by and between SKYLYNX
COMMUNICATIONS, INC., a Colorado corporation ("Purchaser"), SIMPLY INTERNET,
INC., a California corporation ("Seller"), and each of those persons, jointly
and severally, who are owners of the majority of the outstanding shares of
Seller, namely: Xxx X. Xxxxx and Xxxxxxxxxx Xxxxx (which person(s) are
hereinafter jointly referred to as the "Shareholders". The Shareholders and
Seller are hereinafter collectively referred to as the "Sellers." Certain
other capitalized terms used herein are defined in Article 11 and throughout
this Agreement.
RECITALS
A. Seller is engaged in the business of providing residential and
business dial-up and dedicated phone line and data access to the internet
along with web design, co-location and hosting services (the "Business") with
its headquarters located at 0000 Xxxxxxx Xxxxx, Xxxxx X, Xxx Xxxxx,
Xxxxxxxxxx, 00000 and is qualified to do business in the State of California;
B. Seller has facilities and operations in the State of California;
C. The Shareholders hold all of the outstanding capital stock of
Seller, and Purchaser is unwilling to enter into this Agreement without the
covenants and promises of the Shareholders herein set forth; and
D. Purchaser desires to purchase and acquire certain assets,
properties, and contractual rights of Seller used in connection with the
Business, and Seller desires to sell such assets, properties, and contractual
rights to Purchaser, all on the terms and subject to the conditions
hereinafter set forth.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 DESCRIPTION OF ASSETS. Upon the terms and subject to the conditions
set forth in this Agreement, Seller does hereby grant, convey, sell, transfer
and assign to Purchaser and Purchaser hereby acquires for the consideration
set forth herein, the following assets, properties, and contractual rights of
Seller set forth in the December 31, 1998 balance sheet (collectively, the
"Assets"), and wherever located, subject to the exclusions hereinafter set
forth; provided, however, that the Assets shall not include those assets
identified as "Excluded Assets" pursuant to Section 1.6:
(a) all machinery, leasehold improvements, construction in
progress, furniture and fixtures, computer equipment and monitors, routers,
servers, computer software, and any other fixed assets owned by Seller and
used in the operations of the Business, including, without limitation, the
fixed assets listed on Schedule 1.1(a) attached hereto and made a part hereof
(the "Equipment");
(b) all real property interests (whether owned or leased) used or
for use in the Business (the "Real Property"), as specifically described on
Schedule 1.1(b) attached hereto and made a part hereof, and all improvements
thereon;
(c) all of Seller's interests and rights and benefits under any
leases of machinery, vehicles, equipment, tools, furniture, fixtures or other
fixed assets;
(d) all contractual rights of Seller with Seller's customers
(whether oral or in writing, and including without limitation all ISP Service
Agreements and Customer Agreements to which Seller is a party, and all
accounts receivable relating to services prior to the Closing (the "Accounts
Receivable")), relating to the conduct of the Business and all other rights to
provide services to customers of Seller (the "Customer Accounts"), and all
commitments, lists, leases, permits, licenses, consents, approvals, franchises
and other instruments relating to the Customer Accounts (the "Related
Documents"); a complete and accurate list of the Customer Accounts and the
Related Documents dated as of April 21, 1999 has been provided to Purchaser,
and true and complete copies of all Customer Accounts (or descriptions of
unwritten arrangements) and Related Documents in printed or in electronic
format shall be delivered to Purchaser simultaneously with the execution and
delivery of this Agreement, which documents shall be maintained by Purchaser
in Denver, Colorado or Menlo Park, California which records shall be delivered
to Seller for inspection upon two (2) days prior written notice to Purchaser;
(e) the contracts and other agreements to which Seller is a party
listed on Schedule 1.1(e) (the "Assumed Contracts");
(f) all of Seller's inventory of parts, supplies and accessories of
every kind, nature and description used or for use in connection with the
Business (the "Inventory");
(g) all proprietary rights of Seller, including, without
limitation, all right, title and interest of Seller in and to all trade
secrets, slogans, processes, rights, symbols, trademarks, service marks,
logos, and trade names used in the Business;
(h) all permits, licenses (including Class C licenses), franchises,
consents and other approvals and operating rights relating to the Business
that are assignable or transferable, which are more completely described and
set forth on Schedule 1.1(h), attached hereto and made a part hereof, true and
complete copies of which are attached to Schedule 1.1(h);
(i) all communications equipment (together with any rights to
frequencies related thereto) used in connection with the Business, wherever
located;
(j) all right, title and interest of Seller in and to all telephone
and telecopier numbers used by Seller in the conduct of the Business;
(k) all of Seller's right, title and interest in and to the name
"Simply Internet", and any other names used in connection with the Business
and the rights to use such names (the "Business Names");
(l) all manual and automated routing and billing information and
components thereof, including, without limitation, all routing and billing
computer software and programs containing any customer information;
(m) all operating data and records of Seller, including, without
limitation, all of Seller's existing documents, files and other material
related to all current or past customers of the Business, financial,
accounting and credit records, correspondence, budgets and other similar
documents and records;
(n) all of the good will of the Business;
(o) all cash, securities, investment property, and other such
assets of Seller, including all amounts on deposit with Seller; and
(p) all other tangible and intangible assets used in the Business,
including those set forth on Seller's balance sheet dated as of December 31,
1998 (the "Current Balance Sheet"), a copy of which is attached as Schedule
1.1(p) hereto.
1.2 NON-ASSIGNMENT OF CERTAIN CUSTOMER ACCOUNTS. Notwithstanding
anything to the contrary in this Agreement, to the extent that the assignment
hereunder of any Customer Account shall require the consent of any third
party, neither this Agreement nor any action taken pursuant to its provisions
shall constitute an assignment or an agreement to assign if such assignment or
attempted assignment would constitute a breach thereof or result in the loss
or diminution thereof; provided, however, that in each such case, Seller shall
use its best efforts to obtain the consent of such other party to such
assignment to Purchaser. If such consent is not obtained, Seller shall
cooperate with Purchaser in any reasonable arrangement designed to provide for
Purchaser the benefits under any such Customer Account, including, without
limitation, an adjustment of the Purchase Price set forth in Section 2.1
hereof and enforcement for the account and benefit of Purchaser, of any and
all rights of Seller against any other person arising out of the breach or
cancellation of any such Customer Account by such other person, or otherwise.
Attached hereto as Schedule 1.2 is a list of all Customer Accounts requiring
consent to their assignment.
1.3 ACCOUNTS RECEIVABLE. As described in Section 1.1(d) above, the
Accounts Receivable, if any, are to be conveyed to Purchaser at the Closing.
However, if Seller receives any payments after the Closing in connection with
the Accounts Receivable, then Seller shall forward such payments to Purchaser
on a regular basis (but at least monthly), together with an itemized list of
the sources thereof. Seller has no Accounts Receivable as of March 31, 1999.
1.4 PRORATION OF APRIL 1999 NET INCOME. As of the date which is sixty
(60) days after the Closing Date, Purchaser and Seller shall meet to account
for amounts paid in respect of Accounts Receivable relating to services
performed for customers in the month of April 1999 ("April 1999 Revenues"),
and the amount of expenses incurred or paid in respect of April 1999 ("April
1999 Expenses"). To the extent that April 1999 Revenues exceed April 1999
Expenses (with the difference being "April 1999 Net Income"), Seller shall be
entitled to a portion thereof equal to April 1999 Net Income times a fraction,
the numerator of which equals the number of days prior to the Closing Date in
April, 1999, and the denominator of which is 30.
1.5 CHANGE OF NAMES. On the Closing Date, Seller shall cease doing
business under Seller's current Business Names and any other symbol,
trademark, service xxxx, logo or trade name currently used by Seller. Seller
shall, on the Closing Date, deliver to Purchaser, in form suitable for filing,
such certificates, consents and other documents as are necessary to effect the
transfer of the registration of the Business Names conveyed by Seller pursuant
to this Agreement in the State of California and in any other relevant
jurisdiction. Notwithstanding anything contained herein to the contrary, the
Shareholders shall be permitted to use the names, trademark and or service
marks for the names identified on Schedule 1.5, without violating the
provisions of this Section 1.5.
1.6 EXCLUDED ASSETS. Notwithstanding anything contained in Section 1.1,
Sellers shall not sell and Purchaser shall not acquire any right, title or
interest in or to the assets identified in Schedule 1.6 (the "Excluded
Assets").
ARTICLE 2
PURCHASE PRICE AND RETENTION
2.1 PURCHASE PRICE. The Purchase Price shall be equal to four (4) times
the product of one and four-tenths (1.4) of the recurring revenue (excluding
equipment, programming or software sales or consulting fees) of Seller for the
quarter ending March 31, 1999 (which amount is approximately Two Million One
Hundred Twenty-Three Thousand Seven Hundred Seventy-Five Dollars
($2,123,775)). On the Closing Date, Purchaser shall: (a) deliver to Seller
in consideration for the Assets and the restrictive covenants set forth herein
in immediately available funds, an aggregate of ninety percent (90%) of the
Purchase Price, less Fifty Thousand Dollars ($50,000) previously deposited by
Purchaser with Seller (the "Pre-Payment Amount"), as more fully described in
Section 7.14; and (b) pay into an escrow account (all of the costs of which
shall be paid for by the Seller) pursuant to an escrow agreement in
substantially the form attached hereto as Annex I (the "Escrow Agreement") in
consideration for the Assets and restrictive covenants set forth herein an
amount equal to ten percent (10%) of the Purchase Price (the "Hold Back
Amount") which shall be retained by the escrow agent (the "Escrow Agent") for
a period of ninety (90) days from the Closing Date (the "Hold Back Period") as
security for the obligations of the Sellers, and the Shareholders acknowledge
that forfeiture of the Hold Back Amount may be required pursuant to Article 10
hereof. In addition to all other rights and remedies which Purchaser may have
with respect to the Hold Back Amount, Purchaser shall have all rights and
remedies of a secured party under the California Uniform Commercial Code and
other applicable law with respect to the Hold Back Amount. The consideration
set forth in this Section 2.1 shall be allocated in the manner as set forth in
Section 7.11 hereof.
2.2 LIABILITIES. Purchaser is not assuming any liabilities of Seller
except those liabilities in connection with the following: (i) obligations
which arise, accrue or are incurred specifically by Purchaser after the
Closing in connection with contracts assumed by Purchaser hereunder, or (ii)
obligations (other than out-of-pocket payment obligations) which exist as of
the Closing in connection with contracts assumed by the Purchaser hereunder,
which relate to services or goods to be received by the Purchaser after the
Closing; provided, however, that in no event shall Purchaser be obligated in
any manner with respect to any liabilities, claims or demands made against
Purchaser for liabilities (of any kind) which arose or accrued prior to the
Closing during Seller's conduct of the Business, even though such liabilities,
claims or demands are made after the Closing.
ARTICLE 3
CLOSING
3.1 TIME AND PLACE. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Assets (the "Closing")
shall take place on April 26, 1999, 10:00 a.m., P.D.T., or such other time
mutually agreed by both parties, at the offices of XxXxxxxxx, Will & Xxxxx,
0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000. The date on which the
Closing occurs shall be referred to as the "Closing Date."
3.2 DELIVERIES BY SELLER AND THE SHAREHOLDERS. At the Closing, Seller
and the Shareholders shall deliver to Purchaser the following executed
documents:
(a) a General Conveyance, Assignment and Xxxx of Sale, in form and
substance satisfactory to Purchaser, and Sellers, conveying, selling,
transferring, and assigning to Purchaser all of the Assets (the "Xxxx of
Sale");
(b) a receipt acknowledging payment by Purchaser of the Purchase
Price;
(c) fully executed consents to the assignment of the Customer
Accounts, if any, in form and substance satisfactory to Purchaser;
(d) the documents evidencing Seller's change of Business Names as
required by Section 1.5;
(e) a certified copy of the resolutions of the directors of Seller
authorizing the execution, delivery and performance of this Agreement, the
sale of the Assets to Purchaser, and the consummation of the transactions
contemplated herein, and a certificate of secretary of Seller, dated the
Closing Date, that such resolutions were duly adopted and are in full force
and effect, along with an incumbency certificate of Seller;
(f) required consents for assignment of leases, if any;
(g) the assignment of the Permits described on Schedule 5.21;
(h) an opinion of counsel to Seller, in form and substance
reasonably satisfactory to Purchaser;
(i) a signed copy of the Escrow Agreement;
(j) a Consulting Agreement in form as more fully described in
Section 7.10 executed by Xxx X. Xxxxx;
(k) consents to the assignment of Assumed Contracts, if any; and
(l) such other documents or separate instruments of sale,
assignment or transfer reasonably required by Purchaser.
3.3 PAYMENT OF PURCHASE PRICE. At Closing, Purchaser shall deliver the
following:
(a) Two (2) separate wire transfers as payment of the Purchaser
Price, as more fully set forth in Section 2.1;
(b) certified resolution of the board of directors of Purchaser
authorizing the transaction contemplated by the Agreement;
(c) an executed counterpart to the Consulting Agreement as more
fully described in Section 7.10; and
(d) such other documents or separate instruments of sale,
assignment or transfer reasonably required by Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Sellers that the statements contained in this Article 4, except as
set forth in any schedules to the subsections of this Article 4 delivered by
Purchaser to the Sellers on the date hereof (such schedules hereinafter
collectively referred to as the "Disclosure Schedules" and, individually, as a
"Disclosure Schedule"), if any; which Disclosure Schedules may be supplemented
prior to the Closing: (i) are correct and complete as of the date of this
Agreement; (ii) will be correct as of the Effective Date and the Closing Date
(as though made then and as though the Effective Date and the Closing Date,
respectively, were substituted for the date of this Agreement throughout this
Article 4); and (iii) shall survive the Closing as provided in Section 10.3.
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 a document or
other item itself). Nothing in this paragraph shall require the disclosure of
an exception to a representation or warranty on more than one (1) Disclosure
Schedule; provided that in all such instances the Disclosure Schedule on which
the information is requested must be cross-referenced on the appropriate
Disclosure Schedule. Nothing in the Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with reasonably
particularity and describes the relevant facts in reasonable detail.
4.1 CORPORATE STATUS. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado
and has the requisite power and authority to own or lease its properties and
to carry on its business as now being conducted.
4.2 CORPORATE POWER AND AUTHORITY. Purchaser has the corporate power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Purchaser has taken all action necessary to authorize the execution and
delivery of this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated hereby.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by Purchaser and constitutes a legal, valid, and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
4.4 NO VIOLATION. The execution and consummation of this Agreement by
Purchaser will not: (i) contravene any provision of the certificate of
incorporation or bylaws of Purchaser; (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment, or
order of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon, or enforceable against Purchaser; or
(iii) require the consent, approval, authorization, or permit of, or filing
with or notification to, any Governmental Authority, any court or tribunal or
any other Person.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Sellers, jointly and
severally, represent and warrant to Purchaser that the statements contained in
this Article 5, except as set forth in the Disclosure Schedules to the
subsections of this Article 5 delivered by the Sellers to Purchaser on the
date hereof, if any, which Disclosure Schedules may be supplemented by the
Sellers prior to Closing: (i) are correct and complete as of the date of this
Agreement; (ii) will be correct as of the Effective Date and the Closing Date
(as though made then and as though the Effective Date and the Closing Date,
respectively, were substituted for the date of this Agreement throughout this
Article 5, except where such representations and warranties are expressly made
as of a specific date in which case they must be correct as of such date); and
(iii) shall survive the Closing as provided in Section 10.3. 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 a document or other item itself).
Nothing in this paragraph shall require the disclosure of an exception to a
representation or warranty on more than one (1) Disclosure Schedule; provided
that in all such instances the Disclosure Schedule on which the information is
requested must be cross-referenced on the appropriate Disclosure Schedule.
Nothing in the Disclosure Schedules shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonably particularity and describes
the relevant facts in reasonable detail.
5.1 CORPORATE STATUS. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and is
in good standing and is qualified to conduct business under all applicable
laws, regulations, ordinances, and orders of Governmental Authorities to carry
on its business, including but not limited to, the laws of the State of
California and has the requisite power and authority to own or lease its
properties and to carry on the Business as now being conducted. Seller is
duly authorized and qualified, under all applicable laws, regulations,
ordinances, and orders of Governmental Authorities, to carry on the Business
in the places and in the manner as now conducted except where the failure to
be so authorized or qualified would not have a Material Adverse Effect on the
Business.
5.2 POWER AND AUTHORITY. Each of the Sellers has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of his, her, or its obligations hereunder and the consummation of
the transactions contemplated hereby. Each Seller has the requisite
competence and authority to execute and deliver this Agreement, to perform
his, her, or its respective obligations hereunder and to consummate the
transactions contemplated hereby.
5.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each Seller, and constitutes the legal, valid and binding obligation of
each Seller, enforceable against each Seller in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
5.4 Y2K. To the knowledge of the Sellers, the Assets will process dates
through January 2000 without an error or interruption that would have a
Material Adverse Effect on the Business.
5.5 SUBSIDIARIES. Seller does not presently own of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock, or any other equity interest in any
corporation, association or business entity, nor is Seller, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity, except as provided in Schedule 5.5.
5.6 NO VIOLATION. The execution and consummation of this Agreement will
not: (i) contravene any provision of the articles of incorporation or bylaws
of Seller (the "Charter Documents"); (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award, which is
either applicable to, binding upon or enforceable against Seller, its assets
or securities, or any Seller; (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against any Seller or the assets or
securities of Seller; (iv) result in or require the creation or imposition of
any Lien upon or with respect to any of the assets or securities of Seller; or
(v) to the best of each of the Shareholder's or Seller's knowledge, require
the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any
other Person.
5.7 TAXES. Sellers acknowledge and agree that the Purchaser has made no
representations to Sellers regarding the tax consequences of any amounts
received by Sellers pursuant to this Agreement. Sellers agree to pay federal
or state taxes which are required by law to be paid with respect to the sale
of the Assets to Purchaser.
5.8 NO COMMISSIONS. None of the Shareholders or Seller has incurred any
obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
5.9 FINANCIAL STATEMENTS. The Sellers have delivered to Purchaser the
financial statements of Seller for the years ending December 31, 1997, and
December 31, 1998, and a balance sheet dated March 31, 1999, including the
notes thereto, (collectively, the "Financial Statements"), a copy of which is
attached hereto as Schedule 5.9. The balance sheet dated as of December 31,
1998, of Seller included in the Financial Statements is referred to herein as
the "Current Balance Sheet." The Financial Statements fairly present the
financial position of Seller pertaining to the Assets at each of the balance
sheet dates and the results of operations for the periods covered thereby, and
have been prepared in accordance with generally accepted accounting principles
consistently applied in respect of cash basis accounting except for the lack
of footnotes accompanying Financial Statements, throughout the periods
indicated. The books and records of Seller fully and fairly reflect all
transactions, properties, assets, and liabilities of Seller. There are no
material special or non-recurring items of income or expense during the
periods covered by the Financial Statements, and the Current Balance Sheet
does not reflect any write-up or revaluation increasing the book value of any
assets, except as specifically disclosed in the notes thereto, and except as
permitted by GAAP. The Financial Statements reflect all adjustments necessary
for a fair presentation of the financial information contained therein.
5.10 CHANGES SINCE THE CURRENT BALANCE SHEET. Except as provided in
Schedule 5.10, since the date of the Current Balance Sheet, Seller has not:
(i) sold, leased or transferred any of its properties or assets except in the
ordinary course of business consistent with past practices; (ii) made or
obligated itself to make capital expenditures inconsistent with past practice;
(iii) incurred any obligations or liabilities (including any indebtedness) or
entered into any transaction or series of transactions other than in the
ordinary course of business consistent with past practices and other than this
Agreement and the transactions contemplated hereby; (iv) waived, cancelled,
compromised or released any rights except in the ordinary course of business
consistent with past practices; (v) made or adopted any change in its
accounting practice or policies; (vi) made any adjustment to its books and
records; (vii) entered into any transaction with any Affiliate other than
transactions in the ordinary course of business consistent with past practice;
(viii) terminated, amended, or modified any agreement except in the ordinary
course of business consistent with past practices; (ix) imposed any security
interest or other Lien on any of its assets except in the ordinary course of
business consistent with past practices; (x) entered into any other
transaction or was subject to any event which had or may have a Material
Adverse Effect on Seller or the Business; (xi) except as contemplated in this
section, engaged in any other transaction out of the ordinary course of the
Business consistent with past practices; (xii) paid any dividends or made any
distribution of cash or property to the Shareholders (except for payment of
their regular salaries); or (xiii) agreed to do or authorized any of the
foregoing.
5.11 LITIGATION. Except as provided in Schedule 5.11, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending or to any Seller's knowledge threatened against, by or
affecting any Shareholder, Seller, the Business, or the assets of Seller, or
which questions the validity or enforceability of this Agreement or the
transactions contemplated hereby, and to any Seller's knowledge there is no
basis for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
the Shareholders or Seller is or was a party which have not been complied with
in full or which continue to impose any material obligations on the Assets.
5.12 LIABILITIES. Schedule 5.12 sets forth all liabilities or
obligations which individually exceed Five Thousand Dollar ($5,000), whether
accrued, absolute, contingent or otherwise, of Seller not reflected on the
Current Balance Sheet, including: (i) liabilities and obligations existing on
the date hereof that were incurred in the ordinary course of business
consistent with past practice since the date of the Current Balance Sheet; and
(ii) liabilities incurred in the ordinary course of Business prior to the date
of the Current Balance Sheet which were not required to be recorded thereon,
including but not limited to liabilities arising out of guarantees,
repurchases of any of Seller's securities, and indemnification agreements (the
liabilities and obligations referenced in (i) and (ii) above are referred to
as the "Designated Liabilities"). None of the Designated Liabilities relates
to any breach of contract, breach of warranty, tort infringement, or violation
of law, and none arose out of any action, suit, claim, governmental
investigation, or arbitration proceeding.
5.13 INDEBTEDNESS. Schedule 5.13 sets forth the outstanding principal
amount of and outstanding interest on (as of the date set forth in the
Schedule) all indebtedness for borrowed money and capitalized lease
obligations (including the outstanding principal amount and accrued but unpaid
interest and the name of the lender) owed to a bank or any other Person by
Seller which individually exceed Five Thousand Dollar ($5,000) and the name
and telephone number of Seller's contact at such bank or other Person.
5.14 ENVIRONMENTAL MATTERS. To the best of each of the Sellers'
knowledge, Seller has not received any notice (nor would there be any basis
for such a notice) from any local, state or federal agency having jurisdiction
over the Business, Seller's operations, properties, or assets or
responsibility for the enforcement of local, state, or federal environmental,
health, and safety laws of any violation of any environmental, health and
safety laws by Seller or its officers or employees, in connection with the
Assets.
5.15 Real Property, Leases and Significant Personal Property. Seller
does not own any real property. Schedule 5.15 sets forth:
(a) All real property owned by Seller;
(b) All personal property owned by Seller or used by the Business
as of the Current Balance Sheet date, included on the Current Balance Sheet,
all of which is included in the accounts reflected on the Current Balance
Sheet;
(c) All other personal property of Seller acquired since the
Current Balance Sheet date in each case with a cost to Seller in excess of
Five Thousand Dollars ($5,000); and
(d) All leases for real and personal property to which Seller is a
party involving real or personal property, including in each case true,
complete and correct copies of all such leases and including an indication as
to which real and personal property is currently owned, or was formerly owned,
by any of the Shareholders or Seller. All of the material machinery and
equipment and all other tangible assets of Seller are in good working order
and condition, ordinary wear and tear excepted, and have been maintained in
accordance with industry practice. All leases set forth in Schedule 5.15, are
in full force and effect and constitute valid and binding agreements of Seller
and to Sellers' best knowledge, constitute valid and binding agreements of the
other parties thereto in accordance with their respective terms, and all fixed
assets used by Seller are either owned by Seller or leased under a valid
agreement. Schedule 5.15 also sets forth a summary description of all plans
or projects involving the opening of new operations or the acquisition of any
real property or existing business, with respect to which Seller has made any
material expenditure in the one-year period prior to the date of the
Agreement, or entered into a written commitment therefor, which if pursued by
Seller would require additional expenditures of capital.
5.16 Good Title, Adequacy and Condition.
(a) Seller has, and at Closing will have, good and marketable title
to the Assets with full power to sell, transfer and assign the same. Except
as disclosed in Schedule 5.16, the Assets are free and clear of any Lien, and
by virtue of the grant, conveyance, sale, transfer, and assignment of Assets
hereunder, Purchaser shall receive good and marketable title to all of the
Assets, free and clear of all Liens.
(b) The Assets constitute, in the aggregate, all of the assets and
properties necessary for the conduct of the Business in the manner in which
and to the extent to which such business is currently being conducted and,
except as provided in Schedule 5.16, include, without limitation, all tangible
and intangible assets owned by Seller including all vehicles, equipment and
inventory, and all Contracts, customer lists, intellectual property, cash and
accounts receivable, and licenses and permits of Seller.
5.17 COMPLIANCE WITH LAWS. Except as provided in Schedule 5.17 and to
the best of Seller's and the Shareholders' knowledge, Seller is in compliance
with all laws and regulations and is not in violation of any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
Seller and there are no claims, actions, suits or proceedings pending or, to
the knowledge of Seller or any of the Shareholders, threatened, against or
affecting Seller or the Business, at law or in equity, before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of them, and no
notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received.
5.18 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1999, except
as provided in Schedule 5.18, there has not been: (i) any Material Adverse
Change in the Business; or (ii) any material loss, damage, or other casualty
to the Assets. Since January 1, 1999, the Seller has operated the Business in
the ordinary course of business consistent with past practice and has not:
(i) incurred or failed to pay or satisfy any material obligation or liability
(whether accrued, contingent or otherwise) relating to the operations of the
Business except in the ordinary course of business consistent with past
practice; (ii) incurred or failed to discharge or satisfy any Lien other than
Liens arising in the ordinary course of business that do not, individually or
in the aggregate, interfere with the use, operation, enjoyment or
marketability of any of the Assets, all of which shall be released as of the
Closing Date; (iii) sold or transferred any of the Assets of the Business or
canceled any debts or claims or waived any rights material to the Business
relating to the operations of the Business, except in the ordinary course of
business consistent with past practices; (iv) defaulted on any material
obligation relating to the Business; (v) entered into any transaction material
to the Business, or materially amended or terminated any arrangement material
to the Business, except in the ordinary course of business consistent with
past practice; or (vi) entered into any agreement or made any commitment to do
any of the foregoing.
5.19 INTELLECTUAL PROPERTY. Schedule 5.19 hereto sets forth a true and
complete list of all of the Sellers' patents, patent applications, licenses,
copyrights, copyright registrations, copyright registration applications,
trade names, trademarks, trademark registrations, trademark applications,
domain names, service marks, service xxxx registrations, trade secrets (which
shall mean for purposes of this section only, vendor lists, Customer Accounts,
and internet portal agreements) and service xxxx applications, domain names
and any applications in respect thereto (the "Intellectual Property") used by
the Sellers in whole or in part for the conduct of the Business as now
conducted. All the Intellectual Property is owned by the Sellers free and
clear of any and all Liens, and no licenses for the use of any of such rights
have been granted by the Shareholders or Seller to any third parties. All of
such rights are valid, enforceable and are adequate for the Business as now
conducted. Except as listed on Schedule 5.19, all of such rights will be
acquired by Purchaser at the Closing, and the transfer of and use by Purchaser
of such rights will not require the consent of any other person. Seller has
not been notified by a third party of any claim of, nor does Seller have
knowledge of, any conflict with or infringement of any registered or
unregistered patent, trademark, trade name, copyright, license or other right,
of any person, and the Sellers do not license any such right from others
except as disclosed on Schedule 5.19 and except for shrink-wrap license
agreements. The Sellers do not know of any person who has wrongfully used, or
threatened to use, any of the Intellectual Property. No claim is pending or,
to the Sellers' best knowledge, threatened or has been made within the past
five (5) years, to the effect that any such infringement or conflict has
occurred. To the knowledge of the Sellers, the Intellectual Property is
adequate and appropriate for the Business as now conducted, and the Sellers'
rights in the same are valid and subsisting. The Seller has the full right to
use their name in every jurisdiction where they do business. Further, the
Seller has not engaged in any business whatsoever or conducted the Business
under the domain name "xxxxxxxxxxxxxx.xxx" and the Sellers are not aware of
any of its customers utilizing or accessing the internet or any account with
Seller under the domain name "xxxxxxxxxxxxxx.xxx". Notwithstanding anything
contained herein to the contrary, in the event that Purchaser is required to
transfer customers accounts from the "xxxxxxxxxxxxxx.xxx" to another account,
and Purchaser loses customers due to such account transfer, then in such an
event, Xxx Xxxxx shall indemnify Purchaser in the amount of Three Hundred
Fifty Dollars ($350) for each customer lost by Purchaser as a result of such
account transfer.
5.20 ACCOUNTS RECEIVABLE. Seller has no accounts receivable.
5.21 LICENSES AND PERMITS. Except as provided in Schedule 5.21, and to
the best of Seller's and Shareholders' knowledge, Seller possesses all
licenses and required governmental or official approvals, permits or
authorizations (collectively, the "Permits") for its Business and operations.
All Permits are valid and in full force and effect, Seller is in compliance in
all material respects with their requirements, and no proceeding is pending or
to Seller's or any Shareholder's knowledge threatened to revoke or amend any
of the Permits. Except as disclosed on Schedule 5.21, none of the Permits is
or will be impaired or in any way affected by the execution and delivery of
this Agreement or the transactions contemplated hereby.
5.22 CONTRACTS, CUSTOMER LISTS AND EMPLOYMENT MATTERS. Schedule 5.22
lists all customers and contracts of Seller that account for more than 1% of
Seller's annual gross revenue, all contracts of Seller requiring payment or
performance involving Ten Thousand Dollars ($10,000) or more, and all
contracts and obligations with a term longer than one (1) year (collectively,
the "Material Contracts"). All of the Material Contracts: (i) are valid and
binding obligations of the parties; (ii) are not in default and will not
become in default solely upon notice or the passage of time without curative
action; and (iii) will remain in full force and effect following the Closing,
without requiring the consent of the other parties thereto and without causing
a default, right to terminate or right to modify any terms under any such
Material Contracts, notwithstanding any provisions in any such Material
Contracts which may set forth a restriction on change in control of Seller.
Seller has delivered to Purchaser true, complete and correct copies of all
Material Contracts prior to Closing. None of the parties to the Material
Contracts (which include all of Seller's significant Customers) has cancelled
or substantially reduced or, to the knowledge of Seller or any of the
Shareholders, is currently attempting or threatening to cancel any Material
Contract or substantially reduce utilization of the services provided by
Seller, and Seller has complied with all commitments and obligations
pertaining to any Material Contract, and is not in default under any such
Material Contract, and no notice of default has been received.
5.23 PREDECESSOR STATUS, ETC. There have been no predecessor
corporations of Seller for the past five (5) years. Seller has not been a
subsidiary or division of another corporation or part of an acquisition which
was later rescinded.
5.24 SPIN-OFF BY SELLER. Except as disclosed on Schedule 5.24, within
the preceding two (2) years, there has not been any sale, spin-off or split-up
of material assets of Seller or any other person or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, Seller.
5.25 RECORDS OF SELLER. All material corporate actions taken by Seller
have been duly authorized or ratified. All accounts, books, ledgers and
official and other records of Seller have been fully, properly and accurately
kept and completed in all material respects, and there are no material
inaccuracies or discrepancies of any kind contained therein.
5.26 ACCURACY OF INFORMATION FURNISHED BY SELLER AND THE
SHAREHOLDERS. No statement or information contained in this Agreement and the
various Schedules and Annex attached hereto or in any certificate furnished to
Purchaser pursuant hereto, contains or shall contain any untrue statement of a
fact or omits or shall omit any fact necessary to make the information
contained therein not misleading. The Sellers have provided Purchaser with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto that were requested by the Purchaser. If
prior to the Closing, the Sellers become aware of any fact or circumstance
which would change a representation or warranty of Sellers in this Agreement,
the party with such knowledge shall immediately give notice of such fact or
circumstance to Purchaser. However, such notification shall not relieve the
Sellers of their obligation under this Agreement. At the option of the
Purchaser, the Purchaser shall not be obligated to proceed with the close if
the Seller's representations and warranties are not true and accurate in all
material respects as of the date hereof.
5.27 SURVIVAL. Each of the representations and warranties set forth in
this Article 5 shall survive the Closing as provided in Section 10.3.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 CONDUCT OF BUSINESS BY SELLER PENDING THE CLOSING. Except as
provided in Schedule 6.1, Seller and the Shareholders, jointly and severally,
covenant and agree that, except as otherwise expressly required or permitted
by the terms of this Agreement, between the date of this Agreement and the
Closing, the Business shall be conducted only in, and Seller shall not take
any action except in, the ordinary course of business consistent with past
practice. Seller and the Shareholders shall use its or their reasonable best
efforts to preserve intact Seller's business organizations, to keep available
the services of its current officers, employees and consultants, and to
preserve its present relationships with customers, suppliers and other Persons
with which it has business relations. By way of amplification and not
limitation, Seller shall not, except as expressly required or permitted by the
terms of this Agreement, and except for any actions taken with respect to the
Excluded Assets, between the date of this Agreement and the Closing, directly
or indirectly, do or propose or agree to do any of the following without the
prior written consent of Purchaser:
(a) amend or otherwise change its Charter Documents;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice; or any shares of its capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of such capital stock;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock or other securities;
(d) sell, lease or transfer any of its properties or assets (other
than in the ordinary course of business consistent with past practice), or
acquire (including, without limitation, for cash or shares of stock, by
merger, consolidation or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof or
any assets; or make any investment either by purchase of stock or securities,
contributions of capital or property transfer, or purchase any property or
assets of any other Person (except in the ordinary course of business
consistent with past practice); make or obligate itself to make capital
expenditures out of the ordinary course of business consistent with past
practice; other than in the ordinary course of business consistent with past
practice, incur any obligations or liabilities including, without limitation,
any indebtedness for borrowed money, issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans or advances, modify,
terminate, amend or enter into any Contract other than as expressly required
or permitted herein or in the ordinary course of business consistent with past
practice, or impose any security interest or other Lien on any of its assets
other than in the ordinary course of business consistent with past practice;
(e) pay any bonus to its officers or employees, or increase the
compensation payable or to become payable to its officers or employees or,
except as presently bound to do, grant any severance or termination pay to, or
enter into any employment or severance agreement with, any of its directors,
officers or employees, or establish, adopt, enter into or amend or take any
action to accelerate any rights or benefits which any collective bargaining,
bonus, profit sharing trust, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(f) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a manner
consistent with past practices;
(g) pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in the Financial Statements, as
appropriate, or liabilities incurred after the date thereof in the ordinary
course of business and consistent with past practice or delay paying any
amount payable beyond forty-five (45) days following the date on which it is
due, except to the extent being contested in good faith;
(h) enter into any transaction or agreement with any of the Sellers
or an Affiliate thereof except for such transactions or agreements expressly
permitted herein; or
(i) agree, in writing or otherwise, to take or authorize any of the
foregoing actions or any action which would make any representation or
warranty in Article V untrue or incorrect in any material respect.
ARTICLE 7
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with
all of the terms of this Agreement and the transactions contemplated hereby
and to satisfy the conditions set forth in Articles 8 and 9. The Sellers
shall cause Seller to comply with all of the covenants of Seller under this
Agreement. The Sellers covenant and agree to deliver to Purchaser at the
Closing the certificates, opinions and other documents required to be
delivered to Purchaser pursuant to Article 8, and Purchaser covenants and
agrees to deliver to the Sellers the certificates and other documents required
to be delivered to the Sellers pursuant to Article 9.
7.2 CONFIDENTIALITY, PUBLICITY. Except as required by law, neither
party shall disclose the terms of this transaction to any third party nor make
any public announcement related to this Agreement or the transactions
contemplated hereby without the prior written notification of the other party
hereto; provided, however, that Seller may disclose the transaction
contemplated by this Agreement to third parties to the extent such disclosure
is necessary to obtain consents to transfer any of the Assets to Purchaser.
The disclosing party shall provide the other party with a copy of all public
announcements proposed to be made by such party which relate to this Agreement
or the transactions contemplated hereby prior to the release of such
announcements to the public.
7.3 NO OTHER DISCUSSIONS. Until this Agreement is terminated as herein
provided, none of the Shareholders, Seller, or its Affiliates, employees,
agents, and representatives will: (i) initiate, encourage the initiation by
others of discussions or negotiations with third parties or respond to
solicitations by third persons relating to any merger, sale, or other
disposition of any substantial part of the assets, the Business or the
properties of Seller (whether by merger, consolidation, sale of stock, sale of
assets, or otherwise); or (ii) enter into any agreement or commitment (whether
or not binding) with respect to any of the foregoing transactions. The
Sellers will immediately notify Purchaser if any third party attempts to
initiate any solicitation, discussion, or negotiation with respect to any of
the foregoing transactions.
7.4 DUE DILIGENCE INVESTIGATION. Purchaser and Seller shall be entitled
to conduct, prior to Closing, a due diligence investigation of the other
party, its assets and business. Each party shall provide the other party, its
designated agents and consultants with reasonable access during normal
business hours to their respective business and the assets and all books,
records, documents, correspondence and other materials ("Proprietary
Documents") related thereto which either party, its agents and consultants
reasonably require to conduct such due diligence review; provided, however,
that such investigation shall not unduly interfere with the normal day-to-day
operations of either party; and provided further, that without the prior
consent of the disclosing party, neither party shall contact, interview, meet,
solicit or otherwise discuss the transactions contemplated by this Agreement
with any customers, employees, or suppliers of the disclosing party.
Purchaser and Seller agree to keep strictly confidential and not to disclose
to third parties all or any portion of Proprietary Documents. Upon
termination of this Agreement, both parties shall return all Proprietary
Documents, copies, extracts, and summaries thereof, in any form or medium, in
its possession to the disclosing party.
7.5 RELATED PARTY AGREEMENTS. Set forth in Schedule 7.5 are all of the
existing agreements between Seller and its Affiliates and between the Seller
and the Shareholders affecting the Assets, the Business, or the Sellers'
ability to perform their respective obligations hereunder, and unless
otherwise stated, such agreements shall continue to survive after the Closing.
7.6 COOPERATION. Each of the parties agrees to cooperate with the
others in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by
this Agreement and to use their respective best efforts to agree jointly on a
method to overcome any objections by any Governmental Authority to any such
transactions.
7.7 OTHER ACTIONS. Prior to the Closing, each of the parties hereto
shall take all appropriate actions, and do, or cause to be done, all things
necessary, proper or advisable under any applicable laws, regulations, and
contracts to consummate and make effective the transactions contemplated
herein, including, without limitation, obtaining all licenses, permits,
consents, approvals, authorizations, qualifications, and orders of any
Governmental Authority and parties to Contracts with Seller as are necessary
for the consummation of the transactions contemplated hereby. Each of the
parties shall make on a prompt and timely basis all governmental or regulatory
notifications and filings required to be made by it for the consummation of
the transactions contemplated hereby. The parties also agree to use best
efforts to defend all lawsuits or other legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby and to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby.
7.8 NOTIFICATION OF CERTAIN MATTERS. The Sellers shall give prompt
notice to Purchaser of the occurrence or non-occurrence of any event which
would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained
herein not to be complied with or satisfied.
7.9 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Sellers
shall request and deliver to Purchaser, with respect to any Indebtedness
affecting the Assets, the Business, or the Sellers' ability to perform their
respective obligations hereunder, payoff and estoppel letters from such
holders of any Indebtedness, which letters shall contain payoff amounts, per
diem interest, wire transfer instructions and an agreement to deliver to
Purchaser, upon full payment of any such Indebtedness, UCC-3 termination
statements, satisfactions of mortgage or other appropriate releases and any
original promissory notes or other evidences of indebtedness marked canceled;
provided, however, that such payoff and estoppel letters shall not be required
with respect to any liabilities under contracts being assumed by the Purchaser
pursuant to this Agreement, including but not limited to lease agreements for
certain Assets.
7.10 CONSULTING SERVICES. As set forth more fully in the consulting
agreement between Xxx X. Xxxxx and the Purchaser, substantially in the form
attached hereto as Annex II (the "Consulting Agreement"), Xxx Xxxxx agrees to
provide consulting services to the Purchaser for up to one (1) year following
the Closing, to be performed during normal business hours, not to exceed fifty
(50) hours in any one month. His standard compensation will be Four Thousand
One Hundred Sixty-six and sixty-seven Cents ($4,166.67) per month, and certain
additional amounts may be payable if certain operating landmarks are attained,
as set forth more fully in the Consulting Agreement.
7.11 ACCOUNTING TREATMENT. Sellers and Purchaser agree to follow tax
accounting treatment and allocations in respect of the sale of the Assets
consistent with the treatment and allocations described in Schedule 7.11.
7.12 COVENANT NOT TO COMPETE. In order to ensure that Purchaser will
realize the benefits of the transactions contemplated hereby, the Sellers
agree with Purchaser that the Sellers will not, directly or indirectly, alone
or as a partner, joint venturer, officer, director, employee, consultant,
agent, independent contractor, trustee, custodian, fiduciary, lender, or
security holder of any company, business, or entity, or otherwise:
(a) for a period of three (3) years following the Closing Date,
engage in, or finance or provide financial assistance with respect to the
Business currently conducted by the Seller, except for the business currently
conducted by Xxxxxxxxxxxx.xxx, a California corporation, in the Restricted
Territory; provided, however, that, the beneficial ownership of less than five
percent (5%) of the shares of stock of any corporation having a class of
equity securities actively traded on a national securities exchange or over-
the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this section;
(b) for a period of three (3) years following the Closing Date,
directly or indirectly: (i) induce any Person which is a customer of Seller
to patronize any business directly or indirectly in competition with the
Business in the Restricted Territory; (ii) canvass, solicit, or accept from
any Person which is a customer of the Business in the Restricted Territory,
any such competitive business; or (iii) request or advise any Person which has
a business relationship with the Business in the Restricted Territory to
withdraw, curtail, or cancel any such Person's business with the Business;
(c) for a period of three (3) years following the Closing Date,
directly or indirectly employ, or solicit the employment of, any person (other
than the Shareholders) who was employed by Seller or the Purchaser Companies
at or within the prior six (6) months, or in any manner seek to induce any
such person to leave his or her employment; provided, however, that the
Shareholders may hire any employee that is terminated by Purchaser; and
(d) at any time following the Closing Date, directly or indirectly,
in any way utilize, disclose, copy, reproduce, or retain in its or their
possession Seller's proprietary rights or records, included in the Assets,
including, but not limited to, any of its customer lists.
Seller expressly agrees that Purchaser has a legitimate business interest
justifying the existence of this Section 7.12. Seller acknowledges that
Seller may be exposed to: (i) certain information and document of Purchaser
that derive independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable, by proper means, by
other persons who can obtain economic value from its disclosure or use which
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy (the "Trade Secrets"); and (ii) valuable confidential
business and professional information of Purchaser that does not otherwise
qualify as Trade Secrets of Purchaser; and (iii) substantial relationships of
Purchaser with specific prospective or existing customers, and clients of
Purchaser; and (iv) the customer, and client goodwill associated with
Purchaser's businesses.
Purchaser and the Sellers have carefully considered the nature and extent
of the restrictions imposed by this Section 7.12 (collectively, the
"Restrictive Covenant") and the rights and remedies conferred upon Purchaser
under the Restrictive Covenant and hereby expressly acknowledge and agree
that: (i) any restricted period and the Restricted Territory and all other
restrictions contained in the Restrictive Covenant are designed to eliminate
competition which would otherwise be unfair to Purchaser; (ii) the Restrictive
Covenant is reasonable and necessary and fully required to protect the
legitimate business interests of Purchaser; (iii) Purchaser's legitimate
business interests extend throughout the State of California and Purchaser
currently has, customers, arrangements, and relationships throughout the State
of California; (iv) the Restrictive Covenant imposes a reasonable restraint
upon the Sellers; (v) any violation of the terms of the Restrictive Covenant
could have a substantial detrimental effect on Purchaser's business; (vi) the
Restrictive Covenant does not stifle the Sellers' inherent skill and
experience; (vii) the Restrictive Covenant does not confer a benefit upon
Purchaser disproportionate to the detriment to Seller; and (viii) the Sellers
expressly acknowledge that the Sellers shall have the ability to practice the
Sellers' profession outside of the Restricted Territory and that the
Restrictive Covenant shall not inhibit the Sellers' ability to practice the
Sellers' profession.
The Sellers agree and acknowledge that any damages resulting from any
violation of the Restrictive Covenant would be difficult to ascertain and, for
that reason, the Sellers expressly agree that, in the event of any violation
of the Restrictive Covenant, Purchaser shall be entitled to preliminary and
permanent injunctive relief restraining any such violation of any or all of
the Restrictive Covenant either directly or indirectly, from any court of
competent jurisdiction, without proof of actual damages and without posting
bond, and such right of Purchaser shall be cumulative and shall in no way
limit any other remedies which the Purchaser Companies may have (including,
without limitation, the right to seek monetary damages). Purchaser and each
of the Sellers hereby agrees that Purchaser may assign, without limitation,
the foregoing restrictive covenants to any successor to Purchaser's business
or any of Purchaser's Companies.
The Sellers hereby agree and acknowledge that Purchaser would suffer
irreparable harm if any Seller violates the Restrictive Covenant, and
Purchaser shall be entitled to equitable relief in the enforcement thereof,
including without limitation injunctive relief. The Sellers acknowledge that
the Restrictive Covenant has been called to the attention of Seller and Seller
understands that the Restrictive Covenant is a material covenant of this
Agreement and that Purchaser would not have entered into this Agreement
without the existence of the Restrictive Covenant. Purchaser and Seller
further agree that, in the event of any litigation at law or at equity with
regard to the enforcement or interpretation of the Restrictive Covenant,
Purchaser shall be entitled to be reimbursed by the Sellers for all reasonable
attorneys' fees and costs which Purchaser and Purchaser's Affiliates incur, at
all levels of all such litigation, including without limitation, pre trial and
appellate levels, if the Purchaser receives a final and binding judgment of a
court of competent jurisdiction in favor of Purchaser.
If a court having jurisdiction over this Agreement shall determine that
any restricted period or the Restricted Territory or any other restriction
contained in the Restrictive Covenant is over broad or is unenforceable for
any reason whatsoever, it is the intention of Purchaser and Seller that the
Restrictive Covenant shall not thereby be terminated or void, but shall be
deemed amended to the extent required by such court to render it valid and
enforceable to the greatest extent permissible by such court and the
applicable law and public policy.
If any Seller violates the Restrictive Covenant, and Purchaser's
successors and assigns or any of Purchaser's Affiliates bring legal action for
injunctive or other relief, such party bringing the action shall not, as a
result of the time involved in obtaining the relief, be deprived of the
benefit of the full period of the Restrictive Covenant. Accordingly, for any
time period any Seller is judged by a court of competent jurisdiction to be in
violation of the Restrictive Covenant, such time period shall not be included
in calculating the Restricted Period.
7.13 EMPLOYMENT. Purchaser agrees to hire Xxxxxxxxxx Xxxxx at weekly
gross salary of Nine Hundred Twenty-Three Dollars and Eight Cents ($923.08),
less applicable tax withholdings or other deductions required by law following
the Closing. Xxxxxxxxxx Xxxxx will work for Purchaser on an "at will" basis,
terminable at any time by Purchaser and terminable by Xxxxxxxxxx Xxxxx after
ninety (90) days of the Closing. Seller has agreed to and has expressly
represented to Purchaser that Seller will be terminating the employment of the
foregoing individual effective as of the Closing Date. Purchaser shall
provide Xxxxxxxxxx Xxxxx with employment benefits customarily offered by
Purchaser to its employees in comparable position. Notwithstanding anything
contained herein to the contrary, Seller will remain responsible for all
salary, benefit, and tax matters pertaining to such individual's former
employment with Seller.
7.14 PRE-PAYMENT AMOUNT. The parties hereby acknowledge that Purchaser
has previously deposited Fifty Thousand Dollars ($50,000) which amount shall
be applied as a partial payment of the Purchase Price described in Section 2.1
hereof as of the Closing Date. Such prepayment shall be refunded to the
Purchase if and only if this Agreement is terminated as a result of the Seller
failing to satisfy the condition to Closing set forth in Section 8.2 and
Section 12.1(b) as applicable, of this Agreement. Such refund, if any, shall
be made to Purchaser within three (3) days of such termination of this
Agreement.
7.15 SELLER'S APRIL NET INCOME. On or before the seventieth (70th) day
following the Closing Date, Purchaser shall pay to Seller, by check or wire
transfer, Seller's April Net Income, as determined in accordance with
Section 1.4, without set-off or counterclaim.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in
part by Purchaser;
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Sellers contained in
Article V of this Agreement shall be true and correct in all material respects
at and as of the Closing Date with the same force and effect as though made at
and as of that time except: (i) for changes specifically permitted by or
disclosed pursuant to this Agreement; and (ii) that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date. The Shareholders and Seller shall have
performed and complied with all of their obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date,
including those obligations set forth in Article 7 herein. The Shareholders
and Seller shall have delivered to Purchaser a certificate, dated as of the
Closing Date, duly signed by an executive officer of Seller, certifying that
all such obligations have been performed and complied with.
8.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between
January 1, 1999 and the Closing Date: (i) there shall have been no Material
Adverse Change in Seller or the Business; (ii) there shall have been no
adverse federal, state, or local legislative or regulatory change affecting in
any material respect the service or products of Seller or the Business; and
(iii) no material portion of the Assets shall have been damaged by fire,
flood, casualty, riot, or other cause (regardless of insurance coverage for
such damage), and there shall have been delivered to Purchaser a certificate
to that effect, dated as of the Closing Date and signed by the Sellers.
8.3 CORPORATE CERTIFICATE. Seller shall have delivered to Purchaser
copies of resolutions adopted by its Board of Directors and the Shareholders
authorizing the transactions contemplated by this Agreement, certified as of
the Closing Date by the Secretary of Seller as being true, correct, and
complete.
8.4 CONSENT. Seller and the Shareholders shall have received consents
to the transactions contemplated hereby and waivers of rights to terminate or
modify any material rights or obligations of Seller and the Shareholders from
any person from whom such consent or waiver is required under any contract to
which the Shareholders, Seller, or the Assets are bound, or who, as a result
of the transactions contemplated hereby, would have such rights to terminate
or modify such contracts, either by the terms thereof or as a matter of law.
Without limiting the foregoing, the Sellers shall have received all necessary
consents to the transactions contemplated by this Agreement including, without
limitation, the transfer and assignment of all operating permits necessary for
the operation of the Business, and shall have provided all proper
notifications to and obtained all necessary consents from such local,
municipal, state or governmental authorities as may be necessary in order to
consummate the transactions contemplated hereunder.
8.5 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of Purchaser,
makes it inadvisable to proceed with the transactions contemplated hereby.
8.6 OPINION OF COUNSEL. Purchaser shall have received an opinion dated
as of the Closing Date from counsel for Seller in substantially the form
attached hereto as Annex III.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in
part by the Sellers:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Purchaser contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date with the same force and effect as though made at and as of
that time except: (i) for changes specifically permitted by or disclosed
pursuant to this Agreement; and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. Purchaser shall have performed and complied in all
material respects with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Purchaser shall
have delivered to the Sellers a certificate, dated as of the Closing Date, and
signed by an executive officer thereof, certifying that such representations
and warranties are true and correct, and that all such obligations have been
performed and complied with, in all material respects.
9.2 OTHER CONDITIONS. At the Closing, Purchaser shall have delivered to
the Sellers and the escrow agent the appropriate portions of the Purchase
Price.
9.3 CORPORATE CERTIFICATE. Purchaser shall have delivered to Seller
copies of resolutions adopted by its Board of Directors authorizing the
transactions contemplated by this Agreement certified as of the Closing Date
by the Secretary of Purchaser as being true, correct, and complete.
9.4 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate, or collect damages arising out
of the transactions contemplated hereby, and which, in the judgment of the
Sellers, makes it inadvisable to proceed with the transactions contemplated
hereby.
ARTICLE 10
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
10.1 NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION.
(a) The Sellers agree, jointly and severally, to indemnify and hold
Purchaser and its Affiliates harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses) incurred
or suffered by Purchaser (collectively, "Indemnifiable Damages") in the
aggregate up to but not exceeding Five Hundred Thousand Dollars ($500,000),
and only to the extent any such Indemnifiable Damages individually exceed Five
Thousand Dollars ($5,000) resulting from or arising out of: (i) any breach of
a representation or warranty, including a breach caused by a misrepresentation
in, or omission from, any of Seller's Disclosure Schedules, made by the
Sellers in or pursuant to this Agreement; (ii) any breach of the covenants or
agreements made by the Sellers in this Agreement; (iii) any inaccuracy in any
certificate delivered by the Seller pursuant to this Agreement; (iv) other
than obligations under any contracts or agreements included among the Assets
and assumed by the Purchaser pursuant to Section 2.2, any liability of the
Seller to creditors of the Seller which is imposed on Purchaser whether as a
result of bankruptcy proceedings or otherwise and whether as an account
payable by the Seller or as a claim of alleged fraudulent conveyance or
preferential payments within the meaning of the United States Bankruptcy Code
or otherwise; (v) any violation by the Seller of the requirements of any
governmental authority relating to the reporting and payment of federal,
state, local or other income, sales, use, franchise, excise, payroll, property
or other tax liabilities of the Seller which occurs or exists prior to the
Closing Date; or (vi) the existence of creditors of the Seller that are not
disclosed to the Purchaser; provided, however, that the indemnity obligation
under this Section 10.1(a) will not be limited in dollar amount to the extent
that Purchaser's Indemnifiable Damages result from or arise out of the (i)
Sellers' fraud or intentional or knowing misrepresentation or omission with
respect to the transaction contemplated hereby; and (ii) any costs, expenses,
claims, awards, damages or payments of any kind and whenever made, with
respect to any claims, damages, injunctions, damages or suits arising out of
and in connection with any action commenced or instigated by shareholders of
Seller in connection with this transaction. The indemnity obligation
contained in this Section 10.1(a) shall continue for a period set forth in
Section 10.3; provided, however, that the indemnity obligations hereunder
shall continue with respect to any claim arising from or relating to matters
for which Purchaser shall have provided written notice to the Seller of
Purchaser's request for indemnification for such claims prior to the
expiration of such period.
(b) The Sellers agree, jointly and severally, to indemnify and hold
Purchaser and its Affiliates harmless from and against the aggregate of all
Indemnifiable Damages resulting from or arising out of any occurrence or
circumstance (whether known or unknown) which occurs or exists on or prior to
the Closing Date and which constitutes, or which by the lapse of time or
giving notice (or both) would constitute, a breach or default by the Sellers
under any lease, Contract or other instrument or agreement whether written or
oral to the extent such Indemnifiable Damages individually exceed five
thousand dollars ($5,000) and in the aggregate do not exceed Five Hundred
Thousand Dollars ($500,000). The indemnity obligation contained in this
Section 10.1(b) shall continue for a period of one (1) year from and after the
Closing Date. Notwithstanding the foregoing time limitation, the obligation
of the Sellers to indemnify Purchaser hereunder shall continue indefinitely
with respect to any claim arising from or relating to matters for which
Purchaser shall have received a formal demand or allegation from a third party
and provided notice thereof to the Sellers of Purchaser's intent to seek
indemnification for such claims hereunder within one (1) year of the Closing
Date.
(c) Purchaser shall first set off the amount of any claim for
indemnification against any amounts held by the Escrow Agent in accordance
with the Escrow Agreement.
10.2 ASSUMPTION OF SPECIFIC LIABILITIES; INDEMNIFICATION OF
SELLER. Purchaser agrees to perform all of the Seller's contractual
obligations related to the Assets and the Business to the extent, and only to
the extent, such obligations have been expressly assumed by Purchaser
hereunder and that they first mature and are required to be performed by
Purchaser after the close of business on the Closing Date. The Purchaser
agrees to indemnify and hold Sellers and their Affiliates harmless from and
against all Indemnifiable Damages resulting from or arising out of: (i) any
breach of a representation or warranty made by the Purchaser in or pursuant to
this Agreement; (ii) any breach of the covenants or agreements made by the
Purchaser in this Agreement; (iii) any inaccuracy in any certificate delivered
by the Purchaser pursuant to this Agreement; (iv) events occurring after the
Closing related to Purchaser's ownership of the Assets or Purchaser's conduct
of the Business, unless otherwise expressly provided to the contrary, herein;
(iv) the failure of the Purchaser to pay any obligation assumed by Purchaser
pursuant to Section 2.2; or (v) any violation by the Purchaser of the
requirements of any governmental authority relating to the reporting and
payment of federal, state, local or other income, sales, use, franchise,
excise, payroll, property or other tax liabilities of the Purchaser which
occurs or exists after the Closing Date, unless such violation is caused by
Sellers' misrepresentation, omission or failure to provide accurate or
sufficient information of same which contributes to Purchaser's violation of
same. The indemnity obligation contained in this Section 10.2 shall continue
for a period set forth in Section 10.3; provided, however, that the indemnity
obligations hereunder shall continue with respect to any claim arising from or
relating to matters for which Seller shall have provided written notice to the
Purchaser of Seller's request for indemnification for such claims prior to the
expiration of such period.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Sellers or Purchaser in this Agreement
or pursuant hereto shall survive for a period of one (1) year following the
Closing Date. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants, and agreements of
the other parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation, warranty,
covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
10.4 CLAIMS FOR INDEMNIFICATION.
(a) NOTICE. In the event that Purchaser or Sellers suffers
Indemnifiable Damages, including Indemnifiable Damages resulting from the
claim of a third party ("Third Party Claims"), the party making a claim for
indemnification ("Indemnitee") shall within sixty (60) days of discovering or
incurring such Indemnifiable Damages give the indemnifying party
("Indemnitor") written notice thereof ("Notice of Claim"). The Purchaser
shall also provide a copy of any Notice of Claim to the Escrow Agent in
accordance with the Escrow Agreement. The Notice of Claim shall state in
reasonable detail the nature of the claim, the specific provisions in this
Agreement alleged to have been breached, and the amount of the claim for
indemnification. Such amount shall represent the Indemnitee's good faith
estimate of the Indemnifiable Damages. The Indemnitor shall have fifteen (15)
days from receipt of the Notice of Claim to accept or reject the claim for
indemnification. The Indemnitee shall be deemed to have waived its right to
indemnification for any Indemnifiable Damages for which notice is not given in
a timely manner as set forth herein if and to the extent that the Indemnitor
can show that such failure to give timely notice has materially prejudiced the
Indemnitor's ability to defend or otherwise respond to such claim. Any claim
for Damages accepted by the Indemnitor or any claim determined as valid under
the claim procedure set forth in Section 10.4(b) below, shall be deemed
"Established Damages" for the purposes of this Agreement.
(b) Claims of Buyer and Seller. If a Notice of Claim is given
pursuant to Section 10.4(a) above, and no rejection is received within the
fifteen (15) day period specified above, then the Indemnitor shall be deemed
to have accepted such claim. If the Indemnitor rejects a claim within such
fifteen (15) day period, the parties shall, in good faith, attempt to
negotiate a resolution of such claim within sixty (60) days thereafter (the
"Resolution Period"). If the parties do not reach resolution during the
Resolution Period, then the Indemnitee may, within fifteen (15) days after the
end of the Resolution Period proceed to submit the controversy to arbitration
under the rules then in effect of the American Arbitration Association. The
determination of the arbitrator(s) shall be binding, final and conclusive on
the Sellers and Purchaser. The expenses in connection with any arbitration
shall be borne equally by the Sellers and Purchaser unless determined
otherwise by the arbitrator(s). If as a result of such arbitration it is
determined that the Indemnitor is obligated for such Indemnifiable Damages,
the amount set by such arbitration shall be the amount of the Established
Damages and the Indemnitor shall owe such amount. If any Seller is the
Indemnitor, the Escrow Agent shall pay such amount to the Purchaser in
accordance with the Escrow Agreement. If as a result of such arbitration it
is determined that the Indemnitor has no obligation to indemnify, the
Indemnitor shall have no further liability on the claim.
(c) Third Party Claims. Both parties will have joint right to
control the defense and settlement of all Third Party Claims with counsel
reasonably satisfactory to both parties, provided that any such defense or
settlement shall be subject to both parties' reasonable approval. Neither
party will consent to the entry of any judgment or enter into any settlement
which: (i) does not include as an unconditional term thereof the grant by the
third party plaintiff or claimant to Indemnitee of a release of all liability
in respect of such Third Party Claim; or (ii) seeks an injunction, specific
performance, or a declaration of rights or other equitable relief that, in the
good faith judgment of Indemnitee, will likely have a material adverse effect
on the Indemnitee's operations without the prior written consent of the
Indemnitee (which shall not to be withheld unreasonably).
ARTICLE 11
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Securities and Exchange Act of
1934, as in effect on the date hereof.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust, commitment,
obligation, or other contract, agreement, or instrument, whether written or
oral.
"Governmental Authority" means any nation or government, any state,
regional, local, or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
"Knowledge" or "to the best knowledge" or similar terms as used in
this Agreement, unless otherwise specifically defined herein, shall mean the
actual knowledge, after due inquiry and investigation, of each of the
Shareholders, the officers and directors of Seller.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien, or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations, operations,
business or prospects.
"Person" means an individual, partnership, corporation, business
trust, joint stock corporation, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"Restricted Territory" means the area in the State of California
that is defined by a region south of Bakersfield, California.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security, and unemployment taxes imposed by any federal,
state, local, or foreign governmental agency, and any interest or penalties
related thereto.
ARTICLE 12
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of all of the parties hereto at any
time prior to Closing; or
(b) by Purchaser in the event of a material breach by the Sellers
of any provision of this Agreement or by any of the Sellers in event of a
material breach by the Purchaser of any provision of this Agreement; or
(c) by either party if the Closing shall not have occurred by
June 30, 1999, notwithstanding the diligent efforts of all parties, and the
parties hereto have not agreed to extend the date to Close.
12.2 EFFECT OF TERMINATION. Except as expressly stated herein, in the
event of termination of this Agreement pursuant to Section 12.1, this
Agreement shall forthwith become void; provided, however, that nothing herein
shall relieve any party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement. Purchaser shall immediately return to the Sellers any and all
documents pursuant to Section 7.4 and Purchaser shall be entitled to a refund
of the Pre-Payment Amount to the extent provided in Section 7.14.
ARTICLE 13
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and shall
be deemed delivered) by certified or registered mail (first class postage pre-
paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery, to the following
addresses and telecopy numbers (or to such other addresses or telecopy numbers
which such party shall designate in writing to the other party):
(a) If to Purchaser or, following the Closing:
SkyLynx Communications, Inc.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: President/CEO
Fax: (000) 000-0000
With a copy to:
XxXxxxxxx, Will & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Esq.
Fax: (000) 000-0000
(b) If to the Sellers prior to the Closing:
0000 Xxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxx
(c) If to the Sellers after the Closing:
00000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxx
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxx White & XxXxxxxxx
0000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
13.2 ENTIRE AGREEMENT. This Agreement (including the Schedules and Annex
attached hereto) and other documents delivered at the Closing pursuant hereto,
contains the entire understanding of the parties in respect of its subject
matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter.
The Schedules and Annex constitute a part hereof as though set forth in full
above.
13.3 EXPENSES. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own accounting and counsel
fees, incurred in connection with the negotiation and preparation of this
Agreement or any transaction contemplated hereby. Sellers shall be liable for
all sales, application, or transfer taxes or other such fees and costs
incurred in connection with this Agreement or any transaction contemplated
hereby.
13.4 AMENDMENT; BINDING EFFECT; ASSIGNMENT. This Agreement may not be
modified, amended, supplemented, canceled or discharged, except by written
instrument executed by all parties. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Except as expressly provided herein, the
rights and obligations of this Agreement may not be assigned by the Sellers
without the prior written consent of Purchaser.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, including by facsimile, each of which shall be an original but
all of which together shall constitute one and the same instrument.
13.6 GOVERNING LAW: INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
California applicable to contracts executed and to be wholly performed within
such State.
13.7 ACCESS TO RECORDS. After the Closing Date, each party shall have
reasonable access during regular business hours to the books and records of
the other parties that are necessary for the parties to exercise their rights
hereunder and to obtain any information necessary for their personal and
corporate tax matters.
13.8 ATTORNEYS' FEES. If either party to this Agreement shall bring any
action for any relief against the other, declaratory or otherwise, arising out
of or in connection with this Agreement or the breach or interpretation
hereof, the losing party shall pay to the prevailing party a reasonable sum
for attorney fees incurred in bringing such suit and/or enforcing any judgment
granted therein, all of which shall be deemed to have accrued upon the
commencement of such action and shall be paid whether or not such action is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorney fees and
costs incurred in enforcing such judgment. For the purposes of this section,
attorney fees shall include, without limitation, fees incurred in the
following: (1) post-judgment motions; (2) contempt proceedings;
(3) garnishment, levy, and debtor and third party examination; (4) collection
proceedings; and (5) discovery.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly made effective as of the day and year first above written.
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation
By:
---------------------------------
Name:
---------------------------------
Title:
SIMPLY INTERNET, INC.
a California corporation
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Xxx X. Xxxxx
---------------------------------
Xxxxxxxxxx Xxxxx
ANNEX I
ESCROW AGREEMENT
ANNEX II
CONSULTING AGREEMENT
ANNEX III
OPINION OF COUNSEL
