EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") dated April 9, 2001, by and
between LightFirst, Inc., a Delaware corporation (the "Buyer"), and Xxxxxx.xxx
Inc., a Delaware corporation (the "Seller").
1. DEFINITIONS.
The following capitalized terms as used in this Agreement shall have
the following meanings:
1.1 "Subscriber" (collectively "Subscribers") shall mean an
individual or entity to whom the Seller provides Internet access services
pursuant to an electronic User Agreement.
1.2 "Prepaid Subscriber" (collectively "Prepaid Subscribers")
shall mean a Subscriber or Transferred Subscriber who has paid in advance for a
year's Internet access service prior to the Closing Date as defined herein.
1.3 "Transferred Subscriber" (collectively "Transferred
Subscribers") shall mean an individual or entity to whom the Seller will cease
to provide Internet access services as of the Closing Date and to whom,
subsequent to the Closing Date, the Buyer will provide Internet access services.
1.4 "Payment Credit" shall mean the dollar amount issued as a
credit to the party purchasing or repurchasing Assets. The Payment Credit is
calculated as follows: for each Subscriber or Transferred Subscriber who is also
a Prepaid Subscriber, the full amount of prepayment is divided by twelve (12)
and multiplied by the number of months remaining until the expiration date of
the Prepaid Subscriber's subscription; the sum total of the foregoing
calculation for all Prepaid Subscribers is the Payment Credit.
2. BACKGROUND.
Seller operates an Internet Services Business, which, among other
things, provides dial-up Internet access to consumers and dedicated Internet
access to schools and businesses.
In connection with its Internet service business, Seller has developed
a dial-up Internet access program for educators whereby it provides dial-up
Internet access to individuals working as educators ("Educators") at a
substantially reduced access fee, which is paid by the Educators on an annual
basis in advance. The Seller also provides dial-up Internet access to consumers
according to several different payment and usage plans. The Seller further
provides free dial-up Internet access to various community groups and
disadvantaged families.
Seller has become unable to continue providing Internet access services
and seeks to assign certain rights and obligations with respect to the
Subscribers to the Buyer. The parties acknowledge that a substantial portion of
the Subscriber base consists of Prepaid Subscribers and that billing for access
service charges for each Prepaid Subscriber cannot commence until the end of
that Prepaid Subscriber's individual term.
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Seller desires to sell with an option to repurchase, and Buyer desires to buy,
the right to all Subscribers of the Seller as defined herein at the terms
described hereinafter.
The parties hereto agree that Seller and the key employees of the
Seller shall expressly have the right to compete with the Buyer in any business
segment it operates in now, or chooses to enter in the future.
In consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, hereto agree as follows:
3. TERMS OF PURCHASE AND SALE; CLOSING.
3.1 Purchase and Sale of Certain Assets of the Seller.
Subject to the terms and conditions set forth in this Agreement, Seller hereby
sells, assigns, transfers and delivers to Buyer, and Buyer hereby purchases,
acquires and takes assignment and delivery of, the following assets and all of
Seller's right, title and interest therein and thereto (all of the assets sold,
assigned, transferred and delivered to Purchaser hereunder are referred to
collectively herein as the "Assets"), free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any kind whatsoever:
(a) all of Seller's right, title and
interest in the Seller's current base of Subscribers, numbered at approximately
six thousand (6,000), including all pertinent customer information for each
Subscriber and the expiration date of each Subscriber's service agreement;
(b) all of Seller's right, title and
interest in all service agreements for each Subscriber relating to the provision
of Internet access services; and
(c) all related goodwill with regard to any
of the foregoing.
3.2 Excluded Assets. Buyer shall not purchase from
Seller, and Seller shall not sell to Buyer, any assets which are not described
in Section 3.1 (the "Excluded Assets").
3.3 Purchase Price. The purchase price (the "Purchase
Price") for the Assets shall be calculated and paid as follows:
(a) on the Closing Date as defined
herein, Buyer will pay to Seller an advance payment (the "Advance") which shall
be calculated by taking the difference between $148,907 and the Payment Credit
due to the Buyer under this Agreement in consideration of fulfilling the
obligations of the Seller with respect to Prepaid Subscribers ("Payment
Credit"); and
(b) on approximately the tenth day of each
month for six (6) consecutive months following the Closing Date, the Buyer shall
cause
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the Seller to receive, collect and retain the sum of all amounts billed to
Transferred Subscribers for Internet access services (the "Monthly Payment"),
provided that Repurchase Option as hereinafter described has not been exercised;
and
(c) the Buyer agrees to be liable to the
Seller for an amount equal to the sum of all balances, not to exceed $25,000,
billed to Transferred Subscribers and remaining unpaid ("Outstanding
Receivables") as of the last day of the six (6) month period following the
Closing Date (the "End Date") and to assume the responsibility for collection of
such unpaid balances; the Buyer agrees to pay and the Seller agrees to accept as
payment, on the 100th day following the End Date, an amount equal to the total
portion of the Outstanding Receivables that the Buyer succeeds in collecting in
the 90-day period following the End Date pursuant to good-faith collection
efforts on the part of the Buyer.
The parties hereto acknowledge that the number of Subscribers set forth
in section 3.1(a) as the subject of this Agreement is a good-faith estimate
based on Seller's records; however, the Seller makes no warranty as to the
accuracy of the Subscriber count. Both parties agree that no adjustments shall
be made to the Purchase Price calculated as set forth herein should the actual
number of Subscribers differ from the estimated number set forth in section
3.1(a).
Buyer acknowledges the Seller's right to approximately $113,000 in
accounts receivable payments (the "Receivables") associated with Subscribers'
accounts and agrees to perform what services might be reasonably deemed
necessary to facilitate the collection of the Receivables for the benefit of the
Seller.
3.4 Repurchase Option. Buyer hereby grants to Seller the
option to repurchase all, but not less than all, of the Retained Subscribers as
hereinafter defined at any time during the Option Term set forth hereinafter at
the Repurchase Price defined hereinafter.
(a) Option Term. The period of time during
which the option to repurchase Assets may be exercised (the "Option Term") shall
begin on the Closing Date and shall end one (1) year after the Closing Date.
(b) Repurchase Price. The price at which the
Seller may repurchase the Assets from the Buyer ("Repurchase Price") shall be
calculated by multiplying $42,000 by six (6) or by the number of months, if less
than six (6) months, that the Seller received the Monthly Payment as defined in
section 3.3(b) of this Agreement, then subtracting the Payment Credit for
prepayments of Transferred Subscribers.
Buyer agrees to maintain a database of the Transferred Subscribers and
to perform the services that would reasonably be expected to retain the
Transferred Subscribers. The parties agree that, while the Buyer will make a
good-faith effort to retain Transferred Subscribers, the Buyer shall bear no
liability for non-retention of Transferred Subscribers. The parties agree that
the Seller's Repurchase Option pertains only to Transferred Subscribers whose
subscriptions have not been cancelled ("Retained Subscribers") as of the date
the Repurchase Option is exercised ("Repurchase Date") and that no
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adjustment to the Repurchase Price shall be made if the number of Retained
Subscribers on the Repurchase Date differs from the number of Subscribers on the
Closing Date.
3.5 Assumed Obligations. In exchange for the Payment
Credit, Buyer agrees to provide the Buyer's standard internet access services to
the Subscribers for the balance of their original prepaid service agreement
provided (i) no such service agreement shall have a term in excess of twelve
(12) months from the date of this Agreement and (ii) each Subscriber complies
with the acceptable use policies of Buyer. Buyer does not assume any other
obligation or liability of Seller including, but not limited to, any obligation
of Seller to maintain web pages for any Subscriber or the obligation of Seller
to provide any refunds, rebates, commissions, fees or payments to any Subscriber
of other Person, all of which shall remain with Seller.
3.6 No Other Liabilities Assumed. Buyer shall not and
does not hereby assume any liability or obligation of Seller, known or unknown,
contingent or otherwise, asserted or unasserted, other than as specifically set
forth in Section 3.5. Nothing contained herein shall cause the Buyer to assume
(a) liabilities or obligations arising out of the conduct of the Seller prior to
the Closing, whether known or unknown on the Closing Date; (b) any liabilities
or obligations arising out of any provision of any agreement, contract,
commitment or lease of the Seller, other than any liability or obligation under
the Assumed Obligations arising and to be performed after the Closing; (c) any
federal, state or local income or other tax: (i) payable with respect to the
business, assets, properties or operations of the Seller or any member of any
affiliated group of which Seller is a member, or (ii) incident to or arising as
a consequence of the negotiation or consummation by the Seller or any member of
any affiliated group of which Seller is a member of this Agreement and the
transactions contemplated hereby; (d) any liability or obligation under or in
connection with any assets not included in the Assets; (e) any employment-
related liability or obligation arising prior to or as a result of the Closing
to any employees, agents or independent contractors of the Seller, whether or
not employed by the Purchaser after the Closing, or under any benefit
arrangement with respect thereto; or (f) any liability or obligation of the
Seller arising or incurred in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated hereby and fees
and expenses of counsel, accountants and other experts.
3.7 Instruments of Transfer and Conveyance.
(a) The sale, conveyance, transfer,
assignment and delivery of the Assets, as herein provided, shall be effected by
delivery by Seller on the Closing Date of such bills of sale, endorsements,
assignments, certificates, drafts, checks or other instruments of transfer and
conveyance as Buyer shall reasonably deem necessary to vest in Buyer good and
marketable title to the Assets. Such instruments of transfer and conveyance
shall contain warranties as to marketable title and that such Assets are free
and clear of all pledges, liens, options, security interests, mortgages, claims,
charges or other encumbrances of any kind whatsoever.
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(b) Seller agrees that it will from time to
time after the Closing Date, upon the request of Buyer, promptly do, execute,
acknowledge and deliver, and will cause to be done, executed, acknowledged and
delivered, all such further instruments, certificates, assignments, transfers,
conveyances, powers of attorney, assurances and other documents, as may be
reasonably necessary or advisable to assure or confirm Buyer's free and clear
title to and interest in, or to enable Buyer to deal with and dispose of, any of
the Assets.
3.8 Closing. The closing hereunder (the "Closing") shall
be held at the offices of Seller as of the effective date of this Agreement, or
at such other time and place as the parties may agree upon (the "Closing Date").
At the Closing:
(a) Seller will execute and deliver to Buyer
the following: a General Xxxx of Sale and Conveyance in the form acceptable to
Buyer and such other instruments of transfer and conveyance as are required
pursuant to Section 3.5 above;
(b) Buyer will execute and deliver to Seller
an Assumption of Obligations relating to the obligations set forth in Section
3.5 above; and
(c) Each party will execute and deliver to
the others such other agreements, certificates, assignments, consents and other
documents as are required or specified in this Agreement or as may reasonably be
requested by the other party to evidence compliance with the terms hereof.
Simultaneously with the deliveries contemplated herein, Seller
will use its best efforts and take all such other action as may be reasonably
necessary to put Buyer in possession and control of the Assets.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
4.1 Authority for Agreement. This Agreement constitutes
the valid and legally binding obligation of Seller and the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Seller, will not conflict with or result in any violation of, or default under,
any provisions of the charter or bylaws of Seller, will not conflict with or
result in any violation of, or default with respect to, any mortgage, indenture,
lease, agreement or other instrument affecting the Assets, or to which Seller or
its affiliates is a party, or by which Seller or its affiliates is bound and
will not require the consent or approval or notice to any Person or any
governmental agency.
4.2 Properties. Seller has good, valid and marketable
title to the Assets subject to no liens, encumbrances, security interests or
mortgages whatsoever. The legal and beneficial interests in the Assets are owned
exclusively by Seller.
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4.3 Brokers, Finders, etc. No broker, finder or other financial
consultant has acted on behalf of Seller or its affiliates in connection with
the transactions contemplated by this Agreement and all negotiations relative to
this Agreement have been carried on directly without the intervention of any
such third party.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 Corporate Status. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer has
full power and authority to execute and deliver this Agreement on Buyer's
behalf, and to perform its obligations hereunder.
5.2 Authority for Agreement. Buyer has all necessary power and
authority to execute and deliver this Agreement and to carry out its obligations
hereunder. No notice, consent, approval, order or authorization of, or
registration, declaration or filing with, any person or entities, or with any
governmental authority is required in connection with the execution and delivery
of this Agreement or the consummation by Buyer of the transactions contemplated
hereby or thereby.
5.3 Brokers, Finders, etc. No broker, finder or other financial
consultant has acted on behalf of Buyer or its affiliates in connection with the
transactions contemplated by this Agreement and all negotiations relative to
this Agreement have been carried on directly without the intervention of any
such third party.
6. INDEMNIFICATION.
6.1 Indemnification. Seller covenants and agrees to indemnify and hold
Buyer harmless from and against any and all losses, liabilities, damages,
demands, claims, suits, actions, judgments or causes of action, assessments,
costs and expenses, including, without limitation, interest, penalties,
attorneys' fees, any and all expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, in writing or any
other claim, and any and all amounts paid in settlement of any claim asserted in
writing or litigation (each a "Loss") asserted against, resulting to, imposed
upon, or incurred or suffered by Buyer, directly or indirectly, as a result of
or arising from the operation of the Seller or Business prior to the Closing
Date, other than as otherwise contemplated herein. To the extent Buyer suffers
any Loss under this Section 4.1(a), or has identified a loss but has not
quantified the dollar value thereof, Buyer may withhold and off-set any payments
due to Seller under this Agreement to compensate (to the extent of any such
payment due) Seller for any such Loss.
7. MISCELLANEOUS PROVISIONS.
7.1 Entire Agreement. This Agreement, together with all the schedules
and exhibits hereto, constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between
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the parties in connection with the subject matter hereof except as specifically
set forth herein.
7.2 Amendment. This Agreement may be amended by the parties hereto at
any time, but only by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto.
7.3 Headings. The section headings are not to be considered part of
this Agreement and are included solely for convenience and are not intended to
be full or accurate descriptions of the contents thereof. References to Sections
are to portions of this Agreement unless the context requires otherwise.
7.4 Exhibits, etc. Exhibits and schedules referred to in this Agreement
are an integral part of and are incorporated in this Agreement by reference.
7.5 Assignment; Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and assigns.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
7.8 Severability. The provisions of this Agreement are severable, and
in the event that any one or more provisions are deemed illegal or
unenforceable, the remaining provisions shall remain in full force and effect.
7.9 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.10 Publicity and Disclosures. Seller and its officers and directors
agree not to issue or cause the publication of any press release or other
announcement with respect to this Agreement or the other transactions
contemplated hereby without the prior written consent of Buyer except to the
extent disclosure by Seller is required by any applicable law or regulation, by
an authorized administrative or governmental agency.
IN WITNESS WHEREOF, the parties hereby have duly executed this
Agreement as of the day and year first above written.
Seller Buyer
Xxxxxx.xxx, Inc. LightFirst, Inc.
________________________________ _______________________________________
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
President Chief Executive Officer
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