Exhibit 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
XXX.XXX, INC.
AND
XXXXXXXX.XXX, INC.
FUTUREONE, INC., AN ARIZONA CORPORATION
AND
FUTUREONE, INC., A NEVADA CORPORATION(1)
NOVEMBER 19, 1999
-------------------
1 Solely for the purposes of Sections 8(h) and 9 hereof.
TABLE OF CONTENTS
1. Definitions ..............................................................1
2. Basic Transaction ........................................................4
(a) Purchase and Sale of Acquired Assets ................................4
(b) Assumption of Liabilities ...........................................4
(c) Purchase Price ......................................................5
(d) Adjustment to Purchase Price ........................................6
(e) The Closing .........................................................6
(f) Deliveries at the Closing ...........................................7
(g) Allocation ..........................................................7
3. Representations and Warranties of the Seller .............................7
(a) Organization of the Seller ..........................................7
(b) Authorization of Transaction ........................................7
(c) Noncontravention ....................................................8
(d) Brokers' Fees .......................................................8
(e) Title to Acquired Assets ............................................8
(f) Financial Statements ................................................8
(g) Events Subsequent to Most Recent Month End ..........................8
(h) Undisclosed Liabilities .............................................9
(i) Legal Compliance ....................................................9
(j) Tax Matters .........................................................9
(k) Real Property .......................................................9
(l) Intellectual Property ..............................................10
(m) Tangible Assets ....................................................10
(n) Contracts ..........................................................10
(o) Insurance ..........................................................10
(p) Litigation .........................................................10
(q) Warranties .........................................................11
(r) Guaranties .........................................................11
(s) FCC Authorizations .................................................11
(t) Employees ..........................................................11
(u) Disclosure .........................................................11
(v) Refundable Deposits ................................................11
(w) Past Due Accounts ..................................................11
(x) Point of Presence Agreements .......................................12
4. Representations and Warranties of the Buyer .............................12
(a) Organization of the Buyer ..........................................12
(b) Authorization of Transaction .......................................12
(c) Noncontravention ...................................................12
(d) SEC Filings ........................................................13
(e) Buyer Shares .......................................................13
(f) Brokers' Fees ......................................................13
(g) Absence of Certain Changes .........................................13
(h) Disclosure .........................................................13
5. Pre-Closing Covenants ...................................................13
(a) General ............................................................13
(b) Notices and Consents ...............................................13
(c) Operation of the Acquired Assets ...................................14
(d) Preservation of Business ...........................................14
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(e) Full Access ........................................................14
(f) Notice of Developments .............................................14
(g) Legend .............................................................14
(h) Registration Rights Agreement ......................................15
6. Conditions to Obligation to Close .......................................15
(a) Conditions to Obligation of the Buyer ..............................15
(b) Conditions to Obligation of the Seller .............................16
7. Termination .............................................................17
(a) Termination of Agreement ...........................................17
(b) Effect of Termination ..............................................18
8. Post-Closing Covenants ..................................................18
(a) General ............................................................18
(b) Litigation Support .................................................19
(c) Transition .........................................................19
(d) Confidentiality ....................................................20
(e) Covenant Not to Compete ............................................20
(f) Survival of Representations and Warranties .........................21
(g) Third Party Consents ...............................................21
(h) Indemnification Provisions for Benefit of the Buyer ................21
(i) Indemnification Provisions for Benefit of the Seller ...............22
(j) Matters Involving Third Parties ....................................23
(k) Limitations on Indemnification Obligations .........................23
9. Escrow Agreement ........................................................24
10. Miscellaneous ..........................................................25
iii
(a) Press Releases and Public Announcements ............................25
(b) No Third-Party Beneficiaries .......................................25
(c) Entire Agreement ...................................................25
(d) Succession and Assignment ..........................................25
(e) Counterparts .......................................................25
(f) Headings ...........................................................26
(g) Notices ............................................................26
(h) Governing Law ......................................................27
(i) Arbitration ........................................................27
(j) Amendments and Waivers .............................................28
(k) Severability .......................................................28
(l) Expenses ...........................................................28
(m) Construction .......................................................28
(n) Incorporation of Exhibits and Schedules ............................29
(o) Specific Performance ...............................................29
Exhibit A - Acquired Assets
Exhibit A-1 - Customer Contracts and Customer List
Exhibit A-2 - Supplier Contracts and Supplier List
Exhibit A-3 - Tangible Assets
Exhibit A-4 - Accounts Receivable
Exhibit A-5 - Commercial Lease Agreements
Exhibit B - Lockup Agreement
Exhibit C - Xxxx of Sale
Exhibit D - Assignment and Assumption of Contracts
Exhibit E - Financial Statements
Exhibit F - Registration Rights Agreement
iv
Exhibit G - Opinion of Counsel to Seller
Exhibit H - Opinion of Counsel to Buyer
Exhibit I - Escrow Agreement
Exhibit J - Customer Transition Agreement
Exhibit K - Interim Agreement to Permit Occupancy Pending Assignment of Leases
Disclosure Schedule.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT entered into as of this 19th day of November,
1999, by and among XXX.XXX, INC., a Delaware corporation (the "Buyer"),
Xxxxxxxx.xxx, Inc., an Arizona corporation (the "Seller"), FutureOne, Inc.,
an Arizona corporation and sole shareholder of the Seller (the "Sole
Shareholder"), and, solely for purposes of Sections 8(h) and 9 hereof,
FutureOne, Inc., a Nevada corporation and sole shareholder of the Sole
Shareholder ("FutureOne, Inc"). The Buyer and the Seller are sometimes
referred to collectively herein as the "Parties".
This Agreement contemplates a transaction in which the Buyer will
purchase certain of the assets and assume certain specified liabilities of
the Seller in return for the consideration hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to the
assets of the Seller set forth on Exhibit A hereto.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorney's fees and
expenses involving or relating to the Acquired Assets.
"ASSIGNMENT AND ASSUMPTION OF CONTRACTS" has the meaning set forth
in Section 2(f) below.
"ASSUMED LIABILITIES" means (a) those existing obligations of the
Seller under the real estate leases as indicated on Exhibit A-5 attached
hereto and (b) the obligation to provide certain services to the customers
acquired as part of the Acquired Assets, but only to the extent that such
obligation is reflected as Deferred Revenue on the balance sheet contained in
the Most Recent Financial Statements; PROVIDED, HOWEVER, that the Assumed
Liabilities shall NOT include any other Liability of the Seller not specified
in (a) or (b) above.
"XXXX OF SALE" means the Xxxx of Sale attached hereto as Exhibit C.
"BUYER" has the meaning set forth in the preface above.
"BUYER SHARE" means any share of the common stock, $0.001 par value
per share, of the Buyer.
"CLOSING" has the meaning set forth in Section 2(e) below.
"CLOSING DATE" has the meaning set forth in Section 2(e) below.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Parties that is not already generally available
to the public.
"DFA SMALL COMPANY PORTFOLIO" means the DFA Small Company Portfolio
(Ticker: DFSCX).
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"DISTRIBUTEES" has the meaning set forth in Section 2(c)(ii) below.
"ESCROW AGENT" has the meaning set forth in Section 2(c)(iii) below.
"ESCROW AGREEMENT" has the meaning set forth in Section 9 below.
"ESCROW FUND" has the meaning set forth in Section 9 below.
"ESCROW PERIOD" has the meaning set forth in Section 2(c)(iii) below.
"ESCROW SHARES" has the meaning set forth in Section 2(c)(iii) below.
"EXCLUDED ASSETS" means the assets of the Seller not purchased by
the Buyer hereunder.
"FCC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by the Federal
Communications Commission or similar federal governmental agency to provide
the telecommunications services currently provided by the Seller and to
conduct its business as it is currently conducted.
"FINAL DISBURSEMENT" has the meaning set forth in Section 2(c)(ii)
below.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f)
below.
"FUTUREONE, INC." has the meaning set forth in the preface above.
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"GAAP" means United States generally accepted accounting principles
as in effect
"INITIAL DISBURSEMENT" has the meaning set forth in Section 2(c)(i)
below.
"INTELLECTUAL PROPERTY" means (a) all licenses for and any
modifications to computer software which are part of the Acquired Assets, (b)
the "FutureOne" domain name for the purpose of serving customers that use the
domain name "xxxxxxxxx.xxx," and (c) all practices and procedures and other
license agreements and confidential business information (including ideas,
know how, production processes and techniques, specifications, and customer
and supplier lists) used in the operation of the Acquired Assets.
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" OR "LIABILITIES" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"LOCKUP AGREEMENT" has the meaning set forth in Section 2(c)(v)
below.
"LOCKUP PERIODS" has the meaning set forth in Section 2(c)(v) below.
"LOCKUP SHARES" has the meaning set forth in Section 2(c)(v) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 3(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3(f) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section
3(f) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"POST-CLOSING REVENUE" has the meaning set forth in Section 2(d)(ii)
below.
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"PRE-CLOSING REVENUE" has the meaning set forth in Section 2(d)(i)
below.
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"RECURRING REVENUE RATE" has the meaning set forth in Section 2(d)
below.
"REFUNDABLE DEPOSITS" has the meaning set forth in Section 3(v)
below.
"REGISTERED SHARES" has the meaning set forth in Section 2(c)(iv)
below.
"SEC" means the United States Securities and Exchange Commission.
"SEC FILINGS" HAS THE MEANING SET FORTH IN SET FORTH IN SECTION 4(D)
BELOW.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, OTHER THAN (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and, (c) purchase money
liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SOLE SHAREHOLDER" has the meaning set forth in the preface above.
"TANGIBLE ASSETS" has the meaning set forth in Section 3(m) below.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ACQUIRED ASSETS. On and subject to
the terms and conditions of this Agreement, the Buyer agrees to purchase from
the Seller, and the Seller agrees to sell, transfer, convey, and deliver to
the Buyer, all of the Acquired Assets at the Closing, for the consideration
specified below in this Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to assume and become
responsible for the Assumed Liabilities at the Closing. The Buyer will not
assume or have any
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responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities, except
as otherwise provided in Section 8(c)(iv) below.
(c) PURCHASE PRICE. In exchange for the Acquired Assets,
the Buyer agrees to pay to the Seller $2,900,000 (the "Purchase Price"),
subject to adjustment in accordance with Sections 2(d)(i) and 2(d)(ii) below:
i. At the Closing, Buyer will issue to the Seller
that number of the Buyer Shares equal to eighty percent (80%) of the Purchase
Price (the "Initial Disbursement") divided by the average closing price per
share of the Buyer Shares for the five (5) day period ending on the day prior
to the Closing Date (the "Closing Price"). The Initial Disbursement set forth
herein is subject to adjustment in accordance with Section 2(d)(i) below and
a lock-up agreement in accordance with section 2(c)(v) below.
ii. Ninety (90) days after the Closing, the Buyer
will issue to the Seller that number of the Buyer Shares equal to ten percent
(10%) of the Purchase Price (the "Final Disbursement") divided by the Closing
Price. The Final Disbursement set forth herein is subject to the adjustments
in Sections 2(d)(i) and 2(d)(ii) below and a lockup agreement in accordance
with Section 2(c)(v).
iii. At and as of the Closing Date, to secure the
obligations under Section 8 below, and as more fully described in Section 9
below, the Buyer shall deposit with an escrow agent (the "Escrow Agent") the
Buyer Shares equal to ten percent (10%) of the Purchase Price divided by the
Closing Price (the "Escrow Shares"), which Escrow Shares shall be held by the
Escrow Agent for eighteen (18) months following the Closing Date (the "Escrow
Period"). The Escrow Shares shall be registered under the Securities Act
ninety (90) days prior to the expiration of the Escrow Period.
iv. The number of Buyer Shares to be issued
pursuant to Sections 2(c)(i) above equal to fifty percent (50%) of the
Purchase Price divided by the Closing Price shall be allocated among and
distributed by the Seller to itself and its shareholder, (the "Distributees")
as determined by the Seller in its sole and absolute discretion and shall be
registered under the Securities Act of 1933, as amended (the "Registered
Shares"). Subject to the provisions of Rule 145 of the Securities Act of
1933, as amended, the Distributees shall be allowed to sell, trade and
otherwise transfer the Registered Shares; PROVIDED, HOWEVER, that the
Distributees may not sell, trade or otherwise transfer more than 4,000 of
such Registered Shares in any one trading day, and the Distributees may not
sell, trade or otherwise transfer any such Registered Shares during the first
30 minutes and the final 30 minutes of any trading day; PROVIDED FURTHER,
that the Seller shall be allowed to make a one-time transfer of the
Registered Shares to the DFA Small Company Portfolio (Ticker: DFSCX), or to
another fund recommended
5
by the Seller, but at the Buyer's sole discretion and only after receiving
written permission from the Buyer.
v. The number of Buyer's Shares issued pursuant
to Section 2(c)(i) above equal to thirty percent (30%) of the Purchase Price
divided by the Closing Price, and the Buyer's Shares issued in the Final
Disbursement as set forth in Section 2(c)(ii) above will be subject to a
lockup agreement (collectively, the "Lockup Shares") in the form attached
hereto as Exhibit B (the "Lockup Agreement") for the following periods of
time: ten percent (10%) of the Buyer's Shares for a period of six (6) months
from the date of issuance; an additional twenty percent (20%) of the Buyer's
Shares for a period of twelve (12) months from the date of issuance; and the
Buyer's Shares issued in the Final Disbursement for a period of three (3)
months from the date of issuance (the "Lockup Periods"); PROVIDED, HOWEVER,
that in no event shall the Lockup Shares include the Registered Shares. The
Lock Up Shares shall be registered under the Securities Act on or prior to
the date of the expiration of the relevant Lockup Period.
(d) ADJUSTMENT TO PURCHASE PRICE. The Purchase Price set
forth in Section 2(c) above is based upon an monthly recurring revenue rate
directly derived from the Acquired Assets of $138,333 for the calendar month
immediately preceding the month in which the Closing occurs (the "Recurring
Revenue Rate"). For purposes of this Agreement, the Recurring Revenue Rate
has been determined through accrual based accounting in accordance with GAAP
for revenues that recur each month on a customer specific and plan type basis.
i. In the event that the monthly revenue rate
directly derived from the Acquired Assets for the one (1) month period
immediately preceding the Closing (the "Pre-Closing Revenue") is less or more
than the Recurring Revenue Rate, the Purchase Price shall be reduced or
increased by $20.96 for each dollar that the Pre-Closing Revenue is less or
more than the Recurring Revenue Rate.
ii. In the event that the average monthly revenue
rate directly derived from the Acquired Assets for the ninety (90) day period
immediately following the Closing Date (the "Post-Closing Revenue") is less
than the Recurring Revenue Rate, the Final Disbursement shall be reduced by
$20.96 for each dollar that the Post-Closing Revenue is less than the
Recurring Revenue Rate; PROVIDED, HOWEVER, that (A) any monies refunded or
forgiven by the Buyer to a customer for sales promotional or customer
retention purposes, but not otherwise legally owed to such customer, and (B)
revenues lost as a result of a service outage (i) that the Seller could not
reasonably have foreseen nor prevented or (ii) that was caused by any
negligent action or omission of the Buyer not directly or indirectly related
to any action or omission of the Seller with respect to the Acquired Assets,
shall not be deducted from the Post-Closing Revenue.
(e) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place by in
presence or by telephone conference
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call, or at the corporate headquarters of the Buyer, 000 00xx Xxxxxx, Xxxxx
Xxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxx 00000, commencing at 10:00 a.m. local
time on the earlier of (i) the second business day following the satisfaction
or waiver of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or (ii)
November 19, 1999 (the "Closing Date"); PROVIDED, HOWEVER, that the Closing
Date may be extended upon mutual written agreement of the Parties.
(f) DELIVERIES AT THE CLOSING. At the Closing: (i) the
Buyer will deliver to the Seller (A) the various certificates, instruments,
and documents referred to in Section 6 below, and (B) the Purchase Price
specified in Sections 2(c)(i) through 2(c)(iii); (ii) the Seller will deliver
to the Buyer (A) the various certificates, instruments, and documents
referred to in Section 6 below, (B) the Xxxx of Sale in the form attached
hereto as Exhibit C, and (C) the Assignment and Assumption of Contracts in
the form attached hereto as Exhibit D; and (iii) each Party shall deliver
such other instruments of sale, transfer, conveyance, and assignment as the
other Party and its counsel reasonably may request.
(g) ALLOCATION. The Parties agree that the Buyer may
allocate the Purchase Price (and all other capitalizable costs) among the
Acquired Assets for all purposes (including financial accounting and tax
purposes) in the most tax-efficient manner available to the Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 3:
(a) ORGANIZATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Arizona.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, all individuals who are signatories
to this Agreement have been duly authorized to execute, deliver, and cause
the Seller to perform this Agreement. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in accordance with
its terms and conditions.
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(c) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to in
Section 2 above), will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Seller is subject, or any provision of the articles of incorporation or
bylaws of the Seller or (ii) conflict with, result in a material breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of the Acquired Assets ). The Seller does not need
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement,
except for the "Supplier Contracts" and the Leases being assumed by Buyer
hereunder.
(d) BROKERS' FEES. The Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated, and the Buyer shall have no Liability
whatsoever to such broker.
(e) TITLE TO ACQUIRED ASSETS. As of the date of Closing,
the Seller shall provide to the Buyer good and marketable title to all of the
Acquired Assets, free and clear of any Liabilities, but excluding the Assumed
Liabilities and certain other Liabilities set forth on Section 3(e) of the
Disclosure Schedule to be paid by the Seller pursuant to Section 8(l) below,
including all debts, obligations, claims, limitations, liens, Security
Interests, restrictions on transfer, and/or any other encumbrances whatsoever.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit E are
the following financial statements of the Seller (collectively, the
"Financial Statements"): (i) unaudited balance sheets and statements of
income as of and for the month ended October 31, 1999 (the "Most Recent
Fiscal Month End") and for the nine (9) months ended September 30, 1999; and
(ii) as they relate specifically to the Acquired Assets, a statement of
revenue for the one month ended October 31, 1999, and the balances in the
deferred revenue and accounts receivable accounts as of October 31, 1999
(collectively, the "Most Recent Financial Statements"). The Most Recent
Financial Statements (without any notes thereto) have been prepared in
accordance with GAAP on a consistent basis throughout the periods covered
thereby, and are true, correct, and complete.
(g) EVENTS SUBSEQUENT TO MOST RECENT MONTH END. Since the
Most Recent Fiscal Month End, there has not been any material adverse change
in the
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business, financial condition, operations, results of operations, or future
prospects of the Acquired Assets of the Seller.
(h) UNDISCLOSED LIABILITIES. The Seller has no Liability
with respect to the Acquired Assets with the exception of the Assumed
Liabilities (and the Seller does not have any reason to believe that any
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand may be brought against any of them giving rise to any Liability).
(i) LEGAL COMPLIANCE. The Seller has complied in all
material respects with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), with respect to the Acquired Assets, including FCC
Authorizations, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply.
(j) TAX MATTERS. The Seller has timely filed all Tax
Returns with respect to the ownership and operation of the Acquired Assets
and paid all Taxes due thereunder, and no Liability exists for any unpaid
Taxes relative to the Acquired Assets prior to the Closing.
(k) REAL PROPERTY. The Seller does not own any interest in
any real property. Section 3(k) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Seller related
to the Acquired Assets. The Seller has delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section 3(k) of the
Disclosure Schedule (as amended to date). Other than such leases or
subleases, the Acquired Assets do not include any real property or any
interest therein. With respect to each lease and sublease listed in Section
3(k) of the Disclosure Schedule:
i. the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect, except where the
illegality, invalidity, non-binding nature, unenforceability or
ineffectiveness would not have a material adverse effect on the financial
condition of the Company;
ii. the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby,
except where the illegality, invalidity, non-binding nature, unenforceability
or ineffectiveness would not have a material adverse effect on the financial
condition of the Company;
iii. no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a material
9
breach or constitute a default or permit termination, modification, or
acceleration thereunder;
iv. no party to the lease or sublease has
repudiated any provision thereof;
v. there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
vi. with respect to each sublease, the
representations and warranties set forth in subsections (i) through (v) above
are true and correct with respect to the underlying lease;
vii. the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
viii. all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws, rules,
and regulations; and
ix. all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities.
(l) INTELLECTUAL PROPERTY. The Seller owns or has the right
to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the Acquired Assets as
presently operated, free and clear of any Security Interests, Liabilities or
other restrictions.
(m) TANGIBLE ASSETS. The Seller owns all tangible assets
set forth in Exhibit A-3 (the "Tangible Assets"). Each such Tangible Asset is
free from material defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes
for which it presently is used.
(n) CONTRACTS. Except as set forth in Section 3(n) of the
Disclosure Schedule, no material contracts or other agreements exist relating
to the Acquired Assets to which the Seller is a party.
(o) INSURANCE. The Acquired Assets have been, and will be
until the Closing Date, covered by an insurance policy (providing property,
casualty, and liability coverage) adequately insuring the Acquired Assets.
(p) LITIGATION. The Seller (i) is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge, relative
to the Acquired Assets,
10
nor (ii) is it a party or, to the Knowledge of the Seller, is threatened to
be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator with
respect to the Acquired Assets. The Seller does not have any reason to
believe that any such action, suit, proceeding, hearing, or investigation may
be brought or threatened against the Seller relative to the Acquired Assets.
(q) WARRANTIES. No product or service sold, leased, or
delivered by the Seller with respect to the Acquired Assets is subject to any
guaranty, warranty, or other indemnity.
(r) GUARANTIES. The Seller is not a guarantor or otherwise
is liable for any Liability or other obligation (including indebtedness) of
any other Person with respect to the Acquired Assets.
(s) FCC AUTHORIZATIONS. There are no FCC Authorizations
which have been issued to the Seller with respect to the Acquired Assets.
(t) EMPLOYEES. The Seller is not a party to or bound by any
collective bargaining agreement, nor has Seller experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Seller has not committed any unfair labor practice that,
individually or in the aggregate, would have a material adverse effect on the
Acquired Assets. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Seller. The Seller believes it has complied in
all material respects to all applicable federal, state and local laws,
statutes, rules, ordinances and regulations regarding their respective
employees.
(u) DISCLOSURE. The representations and warranties
contained in this Section 3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 3 not misleading.
(v) REFUNDABLE DEPOSITS. The Seller has made certain
deposits to secure liabilities of the Seller for leases, utilities, and
telecommunications circuit agreements to be assumed by the Buyer under this
Agreement from which no deductions would be made were the Seller to complete
the terms of such leases, utilities, and telecommunication circuit agreements
and request reimbursement from the holders of such deposits (the "Refundable
Deposits"), which amount to a total sum equal to or greater than $18,330.
(w) PAST DUE ACCOUNTS. None of the customers' accounts to
be acquired by the Buyer as part as of the Acquired Assets will be more than
sixty (60) days past due
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as of the Closing Date, and no revenue relating to accounts that will be more
than sixty (60) days past due as of the Closing Date is included in the
Pre-Closing Revenue, with the exception of the accounts of those customers
that the Parties mutually agree, on or prior to ninety (90) days after the
Closing Date, demonstrate reasonable indicia of a pattern of late but
reasonably reliable payment, provided that the Seller shall use its
reasonable best efforts to assist the Buyer in obtaining the payment of such
accounts within a reasonable time after the Closing Date.
(x) POINT OF PRESENCE AGREEMENTS. All Point of Presence
agreements to which the Seller is a party (the "POP Agreements") are in final
and written form as of the Closing Date and will remain in full force and
effect, pursuant to the same terms and conditions, from and after the Closing
Date and are attached hereto as Exhibit A-5..
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to in
Section 2 above), will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Buyer is subject or any provision of its charter or bylaws or (ii) conflict
with, result in a material breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject. The
Buyer does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated
by this Agreement (including the assignments and assumptions referred to in
Section 2 above).
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(d) SEC FILINGS. The Buyer has filed all required reports,
schedules, forms, statement and other documents with the SEC since January 1,
1998 (the "SEC Filings"). As of their respective dates, the SEC Filings
complied in all material respects with the requirements of the Securities Act
or the Securities Exchange Act, as the case may be, the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Filings , and none
of the SEC Filings when filed contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) BUYER SHARES. The Buyer Shares have been duly
authorized, will be, when issued, validly issued, fully paid, nonassessable,
and validly existing, free and clear of any Liabilities and other
encumbrances and restrictions, except as set forth herein.
(f) BROKERS' FEES. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
(g) ABSENCE OF CERTAIN CHANGES. Since the date of the
filing with the SEC of its most recent quarterly report on Form 10-Q, as
supplemented by subsequent current reports on any Forms 8-K thereafter, there
has not been any material adverse change with respect to the business of the
Buyer or any event, occurrence, or development of a set of circumstances or
facts known to the Buyer, which, as of the date hereof, could reasonably be
expected to have a material adverse effect on the Buyer.
(h) DISCLOSURE. The representations and warranties
contained in this Section 4 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 4 not misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of
the Closing conditions set forth in Section 6 below).
(b) NOTICES AND CONSENTS. The Seller will give any notices
to third parties, and the Seller will use its reasonable best efforts to
obtain any third party consents, that the Buyer reasonably may request in
connection with the matters referred to in Section 3 above. Each of the
Parties will give any notices to, make any filings
13
with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Sections 3 and 4 above. Without
limiting the generality of the foregoing, each of the Parties will make any
further filings that may be necessary, proper, or advisable in connection
therewith.
(c) OPERATION OF THE ACQUIRED ASSETS. The Seller will not
engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business, with respect to the Acquired Assets.
(d) PRESERVATION OF BUSINESS. The Seller will keep the
Acquired Assets substantially intact, including its present use and operation
thereof, and its relationships with licensors, suppliers, customers, and
employees related to the Acquired Assets.
(e) FULL ACCESS. The Seller will permit representatives of
the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Seller, to all of
the Seller's premises, properties, personnel, books, records (including Tax
records), contracts, and documents of, or pertaining to, the Acquired Assets.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other Party of any material adverse development causing
a breach of any of its own representations and warranties in Sections 3 and 4
above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement this Agreement or the Exhibits hereto
or to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) LEGEND. The Buyer and the Seller covenant and agree
that fifty percent (50%) of the Buyer Shares will bear the following legend
until the Buyer Shares are registered pursuant to Sections 2(c)(iv) and
2(c)(v) hereof and the Registration Rights Agreement (as defined below):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY ACCEPTING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
ISSUER THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE ISSUER, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS, (C) IN ACCORDANCE WITH RULE 144 UNDER
THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR (D) IN ACCORDANCE WITH ANY OTHER EXEMPTION UNDER
THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
14
SECURITIES LAWS UPON THE DELIVERY OF A LEGAL OPINION, REASONABLY
SATISFACTORY TO THE ISSUER, TO THE FOREGOING EFFECT. THE TRANSFER OF
THE SECURITIES IS ALSO RESTRICTED UNDER THE TERMS OF A REGISTRATION
RIGHTS AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES
OF XXX.XXX, INC.
(h) REGISTRATION RIGHTS AGREEMENT. The Buyer shall agree,
and upon any distribution of the Buyer Shares to the Seller the Seller shall
agree, to become a party to and be bound by a Registration Rights Agreement
in the form attached hereto as Exhibit F (the "Registration Rights
Agreement"), setting forth the terms of ownership of the Buyer Shares;
PROVIDED, HOWEVER, that except as provided in Sections 2(c)(iv) and 2(c)(v)
hereof the Seller receiving the Buyer Shares shall not be entitled to any
demand registration rights.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation
of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
i. the representations and warranties set forth
in Section 3 above shall be true and correct in all material respects at and
as of the Closing Date;
ii. the Seller shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing;
iii. no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect adversely the right of the Buyer to own
the Acquired Assets, to operate the Acquired Assets (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
iv. the Seller and the Buyer shall have entered
into the Assignment and Assumption of Contracts;
v. the Seller shall have delivered to the Buyer
the Xxxx of Sale;
vi. the Seller and the Buyer shall have received
all other authorizations, consents, and approvals of governments and
governmental agencies, if any referred to in Sections 3 and 4 above;
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vii. the Seller shall have delivered to the Buyer
a certificate to the effect that each of the conditions specified above in
Section 6(a)(i)-(iii) is satisfied in all respects;
viii. the Buyer shall have received from counsel
to the Seller an opinion in form and substance as set forth in Exhibit G
attached hereto, addressed to the Buyer, and dated as of the Closing Date;
ix. the Buyer shall have completed and shall be
satisfied with its due diligence examination of the Seller;
x. the Buyer's board of directors shall have
approved this Agreement; and
xi. all actions to be taken by the Seller in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer.
The Buyer may waive any condition specified in this Section
6(a) if it executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation
of the Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
i. the representations and warranties set forth
in Section 4 above shall be true and correct in all material respects at and
as of the Closing Date;
ii. the Buyer shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing;
iii. no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
iv. the Seller and the Buyer shall have entered
into the Assignment and Assumption of Contracts and the Buyer shall have
delivered to the Seller the Registration Rights Agreement;
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v. the Buyer shall have delivered to the Seller
a certificate to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all respects;
vi. the Buyer shall have delivered to the Seller
evidence of the instructions to the Buyer's transfer agent to transfer (A) to
the Seller, a number of the Buyer Shares equal to eighty percent (80%) of the
Purchase Price divided by the Closing Price, and (B) to the Escrow Agent, the
Escrow Shares;
vii. the Seller shall have received from counsel
to the Buyer an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to the Seller, and dated as of the Closing Date;
viii. the Seller's board of directors shall have
approved this Agreement; and
ix. all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this
Section 6(b) if it executes a writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may
terminate this Agreement as provided below:
i. the Buyer may terminate this Agreement by
giving written notice to the Seller at any time prior to the Closing (A) in
the event the Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer has
notified the Seller of the breach, and the breach has continued without cure
for a period of fifteen (15) days after the notice of breach; (B) if the
Closing shall not have occurred on or before November 30, 1999 (or such later
date, if extended pursuant to Section 2), by reason of the failure of any
condition precedent under Section 6(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement.
ii. the Seller may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A) in
the event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Seller has
notified the Buyer of the breach, and the breach has continued without cure
for a period of fifteen (15) days after the notice of breach, or
17
(B) if the Closing shall not have occurred on or before November 30, 1999 (or
such later date, if extended pursuant to Section 2), by reason of the failure
of any condition precedent under Section 6(b) hereof (unless the failure
results primarily from the Seller itself breaching any representation,
warranty, or covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. Notwithstanding the termination
of this Agreement, the confidentiality provisions of this Agreement shall
survive.
8. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing:
(a) GENERAL.
i. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the
requesting Party; provided, however, that the Seller shall provide the Buyer
with such assistance, technical and otherwise, as the Buyer may reasonably
request in order to facilitate an efficient transition of the Acquired Assets
from the Seller to the Buyer.
ii. The Seller acknowledges and agrees that the
Seller shall deliver to the Buyer, within three (3) business days after the
Closing, all customer contracts, supplier and vendor contracts, hardware and
software maintenance agreements, maintenance records, configuration
documentation, and any other agreement directly related to the operation of
the Acquired Assets, and that the Seller, on an ongoing basis, shall deliver
to the Buyer, on the day of receipt or, if not feasible, within one business
day thereafter, any and all bills, payments, notices and any other documents
related to the Acquired Assets. Each party agrees to provide the other with
reasonable access, upon reasonable notice, to such documents, books, records,
agreements, and financial data related to the Acquired Assets as necessary.
The Seller acknowledges that audited balance sheets and statements of income,
changes in stockholders' equity, and cash flow relating to the Acquired
Assets as of and for the twelve (12) month-period ended December 31, 1998, as
well as unaudited financial statements for the nine (9) month-period ended
September 30, 1999 and for the nine (9) month-period ended September 30,
1998, must be prepared within sixty (60) days from the Closing Date and
agrees that the Seller shall provide to the Buyer and the Buyer's auditors
such assistance (including, but not limited to, production of documents,
access to the Seller's offices and files, and access to and assistance from
any employees of the Seller and/or FutureOne, Inc. as necessary) as the Buyer
and the Buyer's auditors may deem necessary in their sole discretion in order
to prepare such audited balance sheets and statements of income within sixty
(60) days from the Closing Date.
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(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on
or prior to the Closing Date involving the Acquired Assets, each of the other
Parties will cooperate with the contesting or defending Party and his or its
counsel in the contest or defense, make available his or its personnel, and
provide such testimony and access to his or its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Sections 8(h),
8(i), or 8(j) below).
(c) TRANSITION.
i. The Seller will not take any action that is
designed or intended to have the effect of discouraging any carrier,
supplier, lessor, licenser, customer, or other business associate of the
Seller from maintaining the same business relationships with the Buyer after
the Closing as it maintained with the Seller prior to the Closing. The Seller
will refer all customer inquiries relating to the Acquired Assets to the
Buyer from and after the Closing.
ii. The Seller shall cooperate in recommending
the Internet access and web-hosting services of the Buyer to any and all
future customers of the Seller who request such a recommendation, PROVIDED,
HOWEVER, that Seller shall not be obligated to recommend Buyer's services
when such recommendation would compete with a product or service offered by
Seller in accordance with Section 8(e) below.
iii. The Seller and Buyer will cooperate in
implementing the Customer Transition Agreement incorporated into this
Agreement as Exhibit J; PROVIDED, HOWEVER, that the Buyer will not willfully
and maliciously take any action that is specifically intended to materially
damage or injure the reputation of the "futureone" name while it is being
used by the Buyer under the terms of the Customer Transition Agreement.
iv. The Seller and the Buyer agree that, except
as otherwise provided in the Interim Agreement to Permit Occupancy Pending
Assignment of Leases (a copy of which is attached hereto as Exhibit K), the
Buyer will reimburse the Seller for the Buyer's pro rata share of all costs
and expenses incurred in connection with the operation of the Acquired Assets
from the Closing Date to the end of the month of November, 1999 (the
"Expenses") within ten (10) days after receiving from the Seller a summary of
the Expenses, together with appropriate documentation supporting such summary.
19
(d) CONFIDENTIALITY. The Seller shall treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in his/her or its possession. In the event that the
Seller or any of the Seller's shareholders is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that the Seller will notify the Buyer
promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 8(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Seller or the Seller's shareholders are, on the advice
of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller or the Seller's
shareholders (as the case may be) may disclose the Confidential Information
to the tribunal; PROVIDED, HOWEVER, that the Seller and the Seller's
shareholders shall use their reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
(e) COVENANT NOT TO COMPETE. For a period of two (2) years
from and after the Closing Date, the Seller, the Seller's shareholders and
their respective Affiliates, agree not to engage directly or indirectly in
any business that offers dial-up internet access, dedicated internet access
and web-hosting to third parties in the state of Arizona; PROVIDED, HOWEVER,
that Seller, the Seller's shareholders and their respective affiliates may
offer those specific services listed below:
i. high-speed Internet access as part of
Seller's or the Seller's affiliates' bundled communications package known as
NeighborComm(TM), but only on infrastructure built and owned or controlled by
the Seller or the Seller's affiliates and only within a four-and-one-half
(4.5)-mile radius of a NeighborComm(TM) hub location;
ii. hosting of electronic commerce based websites
that are developed by Seller's affiliate Rocket Science Creative division;
iii. direct, high-speed Internet connections
through the Seller's (or Seller's affiliates') CLEC operations, except that
the Buyer will be given right of first refusal to provide any element of such
direct, high-speed Internet connections that directly competes with the
Buyer's current services, on a wholesale basis; and
iv. in no case will the Seller, the Seller's
shareholders and their respective affiliates provide dialup Internet access,
nor will the Seller, the Seller's shareholders, and their respective
affiliates solicit any of the customers acquired as part of the Acquired
Assets.
20
If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 8(e) is invalid or unenforceable,
the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area
of the term or provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall
be enforceable as so modified after the expiration of the time within which
the judgment may be appealed
(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing and shall continue in full force and effect for a
period of two (2) years thereafter.
(g) THIRD PARTY CONSENTS. The Seller shall use its best
efforts to procure, and assist the Buyer in procuring, the consent of any
third party whose consent is required in connection with the transactions
contemplated by this Agreement.
(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
i. In the event the Seller breaches any of its
representations, warranties, and covenants contained in this Agreement, and,
if there is an applicable survival period pursuant to Section 8(f) above,
provided that the Buyer makes a written claim for indemnification against the
Seller within such survival period, then the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the breach
(or the alleged breach). If the Escrow Fund is not sufficient to cover any
such Adverse Consequences, then the Buyer shall be entitled to seek payment
directly from the Seller and, if the Seller cannot or will not cover such
Adverse Consequences, then the Buyer shall be entitled to seek payment
directly from the Sole Shareholder and, if the Sole Shareholder cannot or
will not cover such Adverse Consequences, then the Buyer shall be entitled to
seek payment directly from FutureOne, Inc.
ii. The Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability (with the exception of any Assumed Liability) of the Seller.
iii. The Seller agrees to indemnify the Buyer
from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Seller's operation of the Acquired Assets before the Closing.
21
iv. The Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability (with the exception of any Assumed Liability) of the Seller for
Taxes of the Seller related to the Acquired Assets.
v. The Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability of the Seller in relation to the termination of any of the
Seller's employees who are not employed by the Buyer.
vi. The Seller shall not have any Liability to
the Buyer for any Adverse Consequences set forth in this Section 8(h) to the
extent that such Adverse Consequences are covered by insurance of the Buyer.
vii. Notwithstanding anything contained herein to
the contrary, the Seller shall have no Liability to the Buyer as a result of
any breach of any representation, warranty or covenant, to the extent that
the Buyer knew that such representation, warranty or covenant was incorrect
prior to the Closing Date, except when such breach is the result of fraud or
willful misconduct.
(i) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
i. In the event the Buyer breaches any of its
representations, warranties, and covenants contained in this Agreement, and,
if there is an applicable survival period pursuant to Section 8(f) above,
provided that the Seller makes a written claim for indemnification against
the Buyer within such survival period, then the Buyer agrees to indemnify the
Seller from and against the entirety of any Adverse Consequences the Seller
may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by
the breach.
ii. The Buyer agrees to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller and its
shareholders may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Buyer's operation of the Acquired Assets after
the Closing.
iii. The Buyer shall not have any Liability to the
Seller for any Adverse Consequences set forth in this Section 8(i) to the
extent that such Adverse Consequences are covered by insurance of the Seller.
iv. Notwithstanding anything contained herein to
the contrary, the Buyer shall have no Liability to the Seller as a result of
any breach of any representation, warranty or covenant, to the extent that
the Seller knew that such
22
representation, warranty or covenant was incorrect prior to the Closing Date,
except where such breach is the result of fraud or willful misconduct.
(j) MATTERS INVOLVING THIRD PARTIES.
i. If any third party shall notify any Party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
ii. Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim, (B) the Indemnifying Party provides
the Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
iii. So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
8(i)(ii) above, (A) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(k) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
Notwithstanding the provisions of Section 8(h), through 8(j) above, none of
the Parties shall be obligated to
23
indemnify or pay damages to any other Party or Parties, as the case may be,
from and against any Adverse Consequences arising from or related to this
Agreement to the extent that such Adverse Consequences arising from or
related to this Agreement exceed the Purchase Price; PROVIDED, HOWEVER, that
any claims brought by a Party against another Party or Parties for fraud or
willful misconduct shall not be subject to the foregoing limitations.
(l) PAYMENT OF CERTAIN LIABILITIES. Seller and/or its affiliates
shall (i) make all payments necessary to satisfy any amounts due and payable
on the equipment leases and any other Liabilities of the Seller or its
affiliates relating to the Acquired Assets set forth on Section 3(e) of the
Disclosure Schedule, and (ii) satisfy in full all obligations included in
Section 3(e) of the Disclosure Schedule within sixty (60) days of the Closing
Date. In the event the Seller and/or its affiliates do not fully perform
their obligations under this Section 8(l) within sixty (60) days of the
Closing Date, the Buyer shall have no obligation to deliver to the Seller the
Final Disbursement and the Escrow Shares under this Agreement, and shall have
any other right or remedy available to the Buyer at law or in equity;
PROVIDED, HOWEVER, that, in addition to the foregoing, if the Seller does not
perform its obligations under this Section 8(l) and the Buyer, therefore, has
to assume the amounts and Liabilities set forth on Section 3(e) of the
Disclosure Schedule, then, as liquidated damages for its failure to perform
its obligations under this Section 8(l), the Seller shall deliver to the
Buyer, within two (2) business days from the completion of the sixty (60) day
period referred to above, a number of Lock-Up Shares so that the total of the
Escrow Shares, the Final Disbursement and such number of Lock-Up Shares shall
be, if multiplied by the Closing Price, equal to two (2) times the total
amount of all amounts due and payable on the equipment leases and any other
Liabilities of the Seller or its affiliates relating to the Acquired Assets
set forth on Section 3(e) of the Disclosure Schedule.
9. ESCROW AGREEMENT. As security for the indemnity of the Buyer by
the Seller provided for in Section 8 above, the Escrow Shares shall be
registered in the name of the Seller, and deposited (with an executed
assignment in blank) with Norwest Bank, N.A. as Escrow Agent such deposit to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth herein and in the Escrow Agreement to be signed by all parties thereto
(the "Escrow Agreement"). Any dividends or distributions of any kind
(including, without limitation, any shares received upon a stock split) made
in respect of any securities in the Escrow Fund shall be added to the Escrow
Fund and become a part thereof. In the event of any conflict between the
terms of this Agreement and the Escrow Agreement, the terms of the Escrow
Agreement shall govern. All costs and fees of the Escrow Agent for
establishing and administering the Escrow Fund shall be borne equally by the
Parties. Upon compliance with the terms hereof, the Buyer shall be entitled
to obtain indemnity first from the Escrow Fund for all Adverse Consequences
covered by the indemnity provided for in Section 8 above. If the Escrow Fund
is not sufficient to cover any such Adverse Consequences covered by Section 8
above, then the Buyer shall be entitled to seek payment directly from the
Seller and, if the Seller cannot
24
or will not cover such Adverse Consequences, then the Buyer shall be entitled
to seek payment directly from the Sole Shareholder and, if the Sole
Shareholder cannot or will not cover such Adverse Consequences, then the
Buyer shall be entitled to seek payment directly from FutureOne, Inc. The
form of the Escrow Agreement is attached hereto as Exhibit I.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the other Party; PROVIDED, HOWEVER, that any Party may
make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules hereto (including the documents referred to herein) constitutes the
entire agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party; PROVIDED, HOWEVER, that the
Seller or Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of
its Affiliates to perform its obligations hereunder (in any or all of which
cases the Seller and Buyer nonetheless each shall remain responsible for the
performance of all of their obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed by
facsimile and in any number of counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same
instrument. This Agreement may be executed by facsimile, provided that the
original counterpart is delivered within five (5) days of such execution.
25
(f) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
IF TO THE SELLER:
Xxxxxxxx.xxx Inc.
0000 X. Xxxxxxxxx Xx.
Xxxxx X-000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Northern, President
E-mail: xxx@xxxxxxxxx.xxx
COPY TO:
Squire, Xxxxxxx and Xxxxxxx LLP
Two Renaissance Square
00 X. Xxxxxxx Xxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xx. Xxxxx Xxxxxxxxxx
E-mail: xxxxxxxxxxx@xxx.xxx
IF TO THE BUYER:
XXX.XXX, Inc.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, Chairman & CEO
E-Mail: xxxxxxxx@xxx.xxx.xxx
COPY TO:
XXX.XXX, Inc.
000 00xx Xxxxxx, 00xx Xxxxx
00
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx, General Counsel
E-Mail: xxxxx.xxxxxxx@xxxx.xxx.xxx
Holland & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000-00000
Attention: Xx. Xxxxx X. Xxxx
E-Mail: xxxxx@xxxxxxxxxxx.xxx
IF TO FUTUREONE, INC.:
FutureOne, Inc.
0000 X. Xxxxxxxxx Xx.
Xxxxx X-000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Northern, President
E-mail: xxx@xxxxxxxxx.xxx
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Colorado
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
(i) ARBITRATION. The Parties hereby covenant and agree
that, except as otherwise set forth in this Agreement, any suit, dispute,
claim, demand, controversy or cause of action of every kind and nature
whatsoever, known or unknown, fixed or contingent, that the Parties may now
have or at any time in the future claim to have based in whole or in part, or
arising from or that in any way is related to the negotiations, execution,
interpretation or enforcement of this Agreement (collectively, the
"Disputes") shall be completely and finally settled by submission of any such
Disputes to arbitration under the Rules of Arbitration and Conciliation of
the American
27
Arbitration Association then in effect. If the Parties to the Dispute are
unable to agree on a single arbitrator, then such binding arbitration shall
be conducted before a panel of three (3) arbitrators that shall be comprised
of one (1) arbitrator designated by each Party to the Dispute and a third
arbitrator designated by the two (2) arbitrators selected by the Parties to
the Dispute. Unless the Parties to the Dispute agree otherwise, the
arbitration proceedings shall take place in Denver, Colorado and the
arbitrator(s) shall apply the law of the State of Colorado, USA, to all
issues in dispute, in accordance with Section 10(h). The findings of the
arbitrator(s) shall be final and binding on the Parties to the Dispute.
Judgment on such award may be entered in any court of appropriate
jurisdiction, or application may be made to that court for a judicial
acceptance of the award and an order of enforcement, as the party seeking to
enforce that award may elect. Notwithstanding any applicable rules of
arbitration, all arbitral awards shall be in writing and shall set forth in
particularity the findings of fact and conclusions of law of the arbitrator
or arbitrators. If the Buyer makes any claim based upon the alleged
intentional fraud or willful misconduct of the Seller or its shareholders and
such claim is not found by the arbitrator(s) to be valid or proven, the Buyer
shall pay the costs of the Seller or its shareholders incurred in connection
with such arbitration proceeding (including reasonable attorneys fees).
(j) AMENDMENTS AND WAIVERS. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(l) EXPENSES. Each of the Buyer and the Seller will bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires
28
otherwise. The word "including" shall mean including without limitation.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Without limiting the generality of
the foregoing, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty, or
covenant.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Party would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 10(i) above), in addition to any other remedy
to which it may be entitled, at law or in equity.
*****
29
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
XXX.XXX, INC.
By:
---------------------------
Xxxxxxx X. Xxxxxx
Title: Chairman and CEO
------------------------
XXXXXXXX.XXX, INC.
By:
---------------------------
Title:
------------------------
FUTURE ONE, INC., an Arizona corporation
By:
---------------------------
Title:
------------------------
SOLELY FOR PURPOSES OF SECTIONS 8(h) AND 9 ABOVE:
FUTUREONE, INC., a Nevada corporation
By:
---------------------------
Title:
------------------------
30
EXHIBIT A
ACQUIRED ASSETS
"Acquired Assets" means all right, title, and interest in and to certain of
the Internet and Web-related assets of the Seller, including (a) those real
property leases, improvements, fixtures, and fittings thereon, and easements,
rights-of-way, and other appurtenants thereto (such as appurtenant rights in
and to public streets) listed in the Disclosure Schedule, (b) tangible
personal property (such as machinery, equipment, inventories, and supplies,
parts, furniture, and vehicles) listed in Exhibit A-3, as well as any
software residing on such personal property, and the licenses and
modifications thereto, (c) agreements, contracts, Security Interests,
guaranties, other similar arrangements, and rights thereunder, and customer
and supplier lists, as listed in Exhibits A-1 and A-2, (d) accounts and other
receivables, as listed in Exhibit A-4, (e) all Refundable Deposits made by
the Seller to secure liabilities of the Seller for leases, utilities, and
telecommunications circuit agreements; (f) all books, records, ledgers,
files, documents, correspondence relating to the foregoing, and (g) all
Intellectual Property related to the foregoing, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringement thereof, and
rights to protection of interests therein under the laws of all jurisdictions.
31
