ASSET PURCHASE AND SALE AGREEMENT
Dated as of
May 11, 1998
between
SKYLYNX COMMUNICATIONS, INC.
and
NADEX WEST, INC.
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into effective this 11th day of May,
1998, by and among SKYLYNX COMMUNICATIONS, INC. , a Colorado corporation, or a
wholly owned subsidiary to be formed for the purpose of performing this
Agreement, ("Skylynx," the "Company" or "Buyer") and NADEX WEST, INC., a
Nevada corporation ("Nadex" or "Seller").
WITNESSETH
WHEREAS, Seller is the owner of certain tangible and intangible
properties and assets used in connection with certain wireless communications
operations (the "Business"); and
WHEREAS, Buyer desires to purchase and Seller desires to sell the assets
used in connection with such Business, subject to the terms and conditions
hereinbelow set forth.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and adequacy whereof is hereby
acknowledged, the parties agree as follows:
SECTION 1: PURCHASE AND SALE OF ASSETS
On the terms and subject to the conditions of this Agreement, and in
reliance upon the representations and warranties of Seller and Buyer contained
in this Agreement:
1.1 DESCRIPTION OF ASSETS. Subject to such regulatory approvals and
legal requirements as may be necessary to consummate same, Seller hereby
sells, transfers and assigns to Buyer the following properties and assets,
both tangible and intangible, owned by Seller and used by it in connection
with the operation of its Business, as described and listed in Exhibit 1.1 to
this Agreement (hereafter the "Assets").
(a) Leases covering two (2) MDS channels granted under
licenses issued by the Federal Communications Commission
("FCC") within the Fresno, California geographical area
("Leases").
(b) All FCC approvals, licenses and permits of Seller to
provide digital services utilizing the MDS channels under
the Leases.
(c) All of Seller's furniture, fixtures, office machinery and
equipment.
(d) All engineering designs, drawings, reports and other
intellectual property associated with the development of
the MDS channels under the Leases.
(e) All raw materials, work in process and other tangible
assets of Seller.
(f) All other tangible and intangible assets of Seller not
specifically identified in the foregoing associated with
or related to the development and provision of digital
services utilizing the two MDS channels covered under the
Leases.
1.2 EXCLUDED ASSETS. The Assets to be acquired by Buyer from Seller
shall not include the following assets and property of Seller:
(a) All business and accounting records of Seller pertaining
to the business, except as specified above; provided,
however, that the Buyer shall have reasonable access and
opportunity to make copies of any such records which may
be necessary for the continuing conduct of a business by
Buyer.
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price as defined in
Section 2 hereof shall be allocated among the Assets purchased as set forth on
Exhibit 1.3. The allocation shall be binding on the parties for all purposes,
including without limitation, the appropriate tax treatment under Section 1060
of the Code to be accorded to the transactions contemplated by this Agreement.
1.4 NO ASSUMPTION OF LIABILITIES. Except as expressly provided for
in this Agreement, Buyer is acquiring the Assets free and clear of all claims,
liens or liabilities of Seller and shall have no obligation to pay or
otherwise discharge any obligation or liability of Seller incurred in
connection with Seller's operation of the Business prior to the Closing Date;
and Seller agrees to indemnify, defend and hold harmless Buyer with respect to
any claim, damage or liability for such obligations. Notwithstanding the
forgoing provisions, Buyer assumes and agrees to pay and discharge all
covenants, stipulations, agreements and obligations of Buyer under the Leases
accruing on or after the date of this Agreement or otherwise attributable to
the period commencing on the date of this Agreement and continuing thereafter
for so long as the Leases remain in full force and effect.
1.5 EMPLOYMENT MATTERS. It is understood and agreed Buyer is not
assuming any union contracts, pension liabilities, xxxxxxx'x compensation
commitments or employee obligations of Seller, and all such matters shall be
and remain Seller's sole responsibility and obligation.
1.6 TAXES AND OTHER COSTS. All transfer, sales and conveyance taxes
related to the sale shall be payable by Seller.
1.7 REGULATORY APPROVALS. To the extent the transfer and sale of the
Assets requires the approval or consent of the FCC or other regulatory or
governmental approvals, Seller, and its officers and directors, agree to
exercise best efforts to apply for and obtain such regulatory approvals as
expeditiously as possible and to cooperate with all reasonable requests of
Buyer and its representatives in connection with obtaining such approvals.
SECTION 2: PURCHASE PRICE
2.1 The Purchase Price for the Assets shall consist of (i) fifty
thousand (50,000) shares of the Common Stock, $.001 par value, (the "Common
Stock") of Buyer (the "Fixed Shares"), and (ii) an additional twenty-five
thousand (25,000) shares of Buyer's Common Stock (the "Contingent Shares"),
subject to the provisions of Section 2.2 below.
2.2 Buyer shall cause certificates representing the Contingent Shares
to be delivered to Buyer's acting secretary, as escrow agent, to be held in
accordance with the terms and conditions of this Section 2.2. The Contingent
Shares shall not be deemed issued and outstanding until and less earned and
distributed to Seller in accordance with this Section 2.2. The Contingent
Shares shall be released from escrow and distributed and delivered to Seller
upon the Fresno, California network system (the "Fresno System") generating
and reporting, on a stand alone basis, annual net income for a full fiscal
year of at least Eight Hundred Thirty-Five Thousand Dollars ($835,000). The
vesting, distribution and delivery of the Contingent Shares shall further be
contingent upon the Fresno System satisfying the annual Eight Hundred Thirty-
Five Thousand Dollar ($835,000) net income milestone while under the direct
management, supervision and control of Till Xxxxxxxxxxx ("Xxxxxxxxxxx"), Xxx
Xxxxxxxx, Jr. ("Xxxxxxxx") and Xxxxxxx Xxxxxxxx ("Xxxxxxxx"), or any
combination of Seller's officers, or any other individuals that may be
appointed and managed by Seller's officers.
SECTION 3: PURCHASE OPTION
3.1 Seller and its executive officers agree to exercise best efforts
to obtain, on behalf of Buyer, an option to purchase (the "Purchase Option")
the FCC licenses for the MDS channels included in the Leases. Such Purchase
Option must be upon terms and subject to conditions acceptable to Buyer in its
absolute discretion. In the event Seller is able to obtain on behalf of Buyer
a Purchase Option acceptable to Buyer, Buyer agrees to issue to Seller an
additional fifty thousand (50,000) shares of Buyer's Common Stock (the "Option
Shares").
3.2 In connection with Seller's efforts to solicit and obtain the
Purchase Option, Seller shall have no authority to represent or bind the Buyer
as to any matter whatsoever, it being understood that all agreements or
arrangements shall be subject to acceptance by Buyer. In connection with such
efforts, Seller shall make no representation or warranty of whatsoever kind or
description to any third person or party with respect to Buyer or purportedly
on behalf of Buyer and agrees to indemnify, defend and hold harmless the Buyer
from any liability which may arise or be claimed against the Buyer by virtue
of Seller's acts or omissions in connection with obtaining such Purchase
Option.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and with
the understanding and expectations that Buyer will be relying thereon in
consummating the transactions contemplated hereunder, Seller hereby represents
and warrants as follows:
4.1 UNREGISTERED STOCK. Seller represents that it understands that
the Skylynx Common Stock comprising the Fixed Shares, Contingent Shares and
Option Shares has not been registered for sale under federal or state
securities laws and that said securities are being issued to Seller pursuant
to a claimed exemption from the registration requirements of such laws.
Seller understands that in order to maintain such exemption it must be
acquiring the stock with no view to making a public distribution of said
securities, and the representations and warranties contained in this Section
4.1 are given with the intention that Skylynx may rely thereon for purposes of
claiming such exemption; and that it understands that they must bear the
economic risk of their investment in the Skylynx Common Stock for a
substantial period of time, because the Skylynx Common Stock has not been
registered under the federal or state securities laws and cannot be sold
unless subsequently registered under such laws or unless an exemption from
such registration is available.
4.2 STOCK ACQUIRED FOR INVESTMENT; LIMITATIONS ON DISPOSITIONS.
Seller represents that it is acquiring the Skylynx Common Stock for its
principal's account and for investment and not with a view to, or for the sale
in connection with, any distribution thereof in violation of the Securities
Act of 1933, as amended. Seller agrees that, other than distribution of
SkyLynx Common Stock to its own principals, the stock will not be offered for
sale, sold or otherwise transferred for value and that no transfer thereof
will be made by it unless (i) a registration statement with respect thereto
has become effective under the Securities Act of 1933, as amended, or (ii)
there is presented to SkyLynx an opinion of counsel for Seller reasonably
satisfactory to SkyLynx that such registration is not required, or (iii) there
is presented to SkyLynx a letter from the Securities and Exchange Commission
(said Commission having been informed of all relevant circumstances) to the
effect that in the event the stock is transferred by Seller without such
registration, the Commission or the staff will not recommend any action.
Seller consents that any transfer agent of SkyLynx may be instructed not to
transfer any of the stock unless it receives satisfactory evidence of
compliance with the foregoing provisions and that there may be endorsed upon
any certificates (or instruments issued in substitution therefor), SkyLynx'
regular legend regarding the sale of restricted securities.
4.3 CORPORATE AUTHORITY. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, after
satisfaction of the conditions to close, nor compliance by Seller with any on
the provisions hereof will:
(a) conflict with or result in a breach of any provision of
its articles of incorporation or bylaws;
(b) other than as disclosed on Exhibit 4.3 hereto, result in a
default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or
obligation to which Seller is a party, or by which any of
its properties or assets may be bound except for such
default (or right of termination, cancellation, or
acceleration) as to which requisite waivers or consents
shall either have been obtained by Seller prior to the
Closing Date or the obtaining of which shall have been
waived by Buyer; or
(c) violate any order, writ, injunction, decree of a court of
competent jurisdiction or, to Seller's Best Knowledge, any
statute, rule or regulation applicable to Seller or any of
its properties or assets. To Seller's Best Knowledge, no
consent or approval by any governmental authority is
required in connection with the execution and delivery by
Seller of this Agreement or the consummation by Seller of
the transactions contemplated hereby, except for possible
notice under plant closing laws.
4.4 NO DEFAULTS. Each of the leases, including the Leases governing
the MDS channels, contracts and agreements to which Seller is a party, and
which will be assigned to and assumed by Buyer, is in full force and effect as
of the date hereof with no defaults existing thereunder.
4.5 NO BREACHES. Seller is not in violation of and the consummation
of the transactions contemplated hereby do not and will not result in any
material breach of, any of the terms or conditions of the Leases or any
agreement, contract, license or other instrument or obligation to which Seller
is a party or by which its Assets are bound; nor will the consummation of the
transactions contemplated hereby cause Seller to violate any statute,
regulation, judgment, writ, injunction or decree of any court, threatened or
entered in a proceeding or action in which Seller is, was or may be bound or
to which any of Seller's assets are subject.
4.6 CONDITION OF THE CORPORATION'S ASSETS. Seller's Assets are
currently in good and usable condition, normal wear and tear excepted, and
there are no defects or other conditions which, in the aggregate, materially
and adversely affect the operation or values of such assets. No third party
(including any officer or employee of Seller) has any proprietary interest in
any know-how or other intangible assets used by the Corporation in the conduct
of its business.
4.7 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of Seller, has been
duly executed and delivered by authorized officers of Seller, and is a valid
and binding Agreement on the part of Seller that is enforceable against Seller
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
4.8 NO LIENS OR ENCUMBRANCES. Seller has good and marketable title
to all of the Assets, tangible and intangible, free of any mortgages, security
interests or pledges of any kind whatsoever, except for such property and
assets as may be leased by Seller.
4.9 OBLIGATIONS AND LIABILITIES. Except as otherwise disclosed in
this Agreement or the Exhibits hereto, all of the Assets to be transferred and
conveyed to Buyer pursuant to this Agreement are free and clear of any claim,
lien, encumbrance or any liability of Seller. Other than overdue Channel
Lease payments owed by Seller and to be paid by Buyer in conjunction with the
assignment of the MDS Lease Contracts, Buyer shall not be liable or obligated
to pay, discharge or otherwise satisfy any indebtedness, liability or
obligation of Seller, whether incurred in connection with the operation of the
Business or otherwise; and Seller, for itself, successors and assigns, agrees
to indemnify and hold harmless Buyer, its successors and assigns, from any
such liability or obligation.
4.10 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW. There is no legal,
administrative, arbitration or other proceeding or governmental investigation
pending or threatened pertaining to Seller which might have a material adverse
effect on the Assets following the Closing Date.
4.11 SELLER'S REPRESENTATIONS TO BUYER ON FRESNO SYSTEM MANAGEMENT.
Seller and its officers agree to perform their duties in a manner that
represents the Buyer's best interests in the development and management of the
Fresno System.
SECTION 5: COVENANTS OF BUYER
As a material inducement to Seller to enter into this Agreement and with
the understanding and expectations that Seller will be relying thereon in
consummating the transactions contemplated hereunder, Buyer hereby represents
and warrants as follows:
5.1 EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, Buyer shall execute and deliver written employment agreements with
Xxxxxxxxxxx, Xxxxxxxx and Xxxxxxxx in the exact form of Exhibits 5.1(a), (b)
and (c) hereto.
5.2 CASH CAPITAL CONTRIBUTION. Buyer agrees to develop a Segregated
Bank Account and deposit One Million Two Hundred Thousand Dollars ($1,200,000)
to be used exclusively for the development, construction, completion and
initial operations of the Fresno System. In order to complete the
development, construction and deployment of the Fresno System in an
expeditious manner, Buyer agrees to disburse such Cash Capital Contributions
in the following increments: (1) Three Hundred Thousand Dollars ($300,000)
within seven (7) days of the date of this Agreement as first written above;
(2) an additional Five Hundred Thousand Dollars ($500,000) within sixty (60)
days of the date of this Agreement; payments under items (1) and (2) of this
Section 5.2 and can be made in the form of payments made directly to Network
Systems Technologies, Inc. for engineering services and POP Equipment
specifically designated for the Fresno System; additionally, payments into the
impressed account as specified below will become part of the contribution
requirements outlined in Items (1) and (2) of this Section 5.2; and (3) the
remaining balance due of Four Hundred Thousand Dollars ($400,000) within one
hundred twenty (120) days of the date of this Agreement. Buyer agrees to
establish an Impressed Account in a Fresno area bank within fifteen (15) days
of the date of this contract and to simultaneously deposit the sum of Sixty
Thousand Dollars ($60,000) into such account that is to be used for the
express purpose of ongoing operating expenses for the Fresno System. Buyer
also agrees that upon receipt of monthly itemized expenses by the fifth (5th)
day of each month for the previous month's expenses, to replenish that amount
into the Impressed Account by the tenth (10th) day. Buyer agrees that for the
first six months after the date of this Agreement any checks written from the
Impressed Account that exceed an amount of Ten Thousand Dollars ($10,000)
shall require signatures from both Buyer and Seller. Buyer also agrees that
Buyer's CFO will have signatory authority on the account for the first six
months from the date of this Agreement only for the purpose of signing checks
requiring two signatures as specified above. Buyer also agrees that after the
first six months from the date of this Agreement that signatory authority of
Buyer's CFO will be removed from the Impressed Account and that checks for an
amount greater than Ten Thousand Dollars ($10,000) will require signatures
from Seller's President and Secretary. In the event that the Buyer does not
make the Cash Capital Contributions in the increments as specified in this
Section 5.2, or in the event that any monies are withdrawn from the
aforementioned Segregated Account by Buyer without the express written
approval of Seller's President, Secretary and Treasurer, then Buyer will be
considered in breach of this Agreement. In the event of a Breach of Contract
by violation of the provisions and understandings developed in this Section
5.2, Buyer agrees that the following will AUTOMATICALLY result: (a) all
Transmission Equipment, Antenna Equipment (valued at not more than Fifteen
Thousand Dollars ($15,000), Point of Presence Equipment and Office
Furnishings/Equipment that have been purchased and/or delivered for the Fresno
System will remain in place and Seller will have the option to purchase
Transmission Equipment, Point of Presence Equipment and Office
Furnishings/Equipment at a price determined by a straight line, five year
depreciation schedule and Buyer shall provide five year financing terms at
current market interest rates and the Antenna System Equipment shall remain in
place and become the property of Lessor in accordance with the provisions in
the Channel Lease agreement; (b) the MDS Channel Lease assignments made in
correlation to this Agreement become void and nullified; (c) the office lease
at Fresno is assigned to Seller; (d) the sublease to Buyer for the tower space
and equipment room space at Fresno becomes void and nullified; and (e) all
assets being purchased in this Agreement to Buyer are transferred back to
Seller. In addition to the AUTOMATIC results for Breach of Contract by
violation of the provisions and understandings developed in this Section 5.2,
Buyer also agrees in such event to provide Seller from the Impressed Account
three (3) months operating expenses that consist of the normal monthly
expenses such as tower, equipment room and office space rent, MDS channel
lease payments, utilities, insurance and other miscellaneous monthly expenses
for the period of ninety days from the date of such breach. Buyer
acknowledges that all SkyLynx common stock shares issued to Seller will remain
the property of Seller or its principals.
5.3 POINT OF PRESENCE EQUIPMENT. In addition to the cash capital
contributions to the Fresno System, Buyer agrees to make available to the
Fresno System certain Point of Presence Equipment at such times and in such
quantities and configurations as Buyer shall determine may be reasonable and
necessary for the deployment of such system.
5.4 ADDITIONAL CAPITAL CONTRIBUTIONS. Buyer shall use reasonable
efforts to provide the capital necessary to develop, construct and deploy the
Fresno System in accordance with the provisions of this Section 5; provided,
however, that Buyer shall have the sole and exclusive right to determine the
timing, quantity and form of all capital contribution made to the Fresno
System. Under no circumstance shall Buyer have any liability whatsoever to
Seller, Seller's officers, directors or shareholders, arising from any
agreements contained in this Section 5 or arising from Buyer's determination
of the timing, quantity, form and manner of any capital contributions to the
Fresno System.
5.5 BUYER ASSUMES LEASE OBLIGATIONS OF SELLER. In conjunction with
the assignment of MDS Leases, Buyer agrees to assume all of the Seller's
obligations as Lessee that are established in the Lease Agreements. Buyer
also agrees to make payment within ten (10) days of the date of this Agreement
the lease fees owed by Seller through May 31, 1998. Said fees total Thirteen
Thousand Three Hundred Thirty Three Dollars ($13,333) for the MDS1 lease and
Seven Thousand Two Hundred Dollars ($7,200) for the MDS2A lease.
5.6 BUYER'S OBLIGATION TO SELLER OF OPERATING CONTROL AND MANAGEMENT
OF FRESNO SYSTEM. Buyer agrees that Seller's officers will be directly
responsible for the development and management of the Fresno system,
including, but not limited to hiring and firing staff members, local
advertising and promotional events, marketing and sales of services and
allocation of funds. Buyer also agrees that Seller's officers will report
directly to and coordinate with Buyer's CEO, CFO and COO in the development of
the Fresno System. Any variation from the corporate organization as specified
in this Section 5.6 shall require written approval of both parties to become
effective.
5.7 BUYER'S OBLIGATION TO SELLER OF NETWORK CONTROL. Buyer agrees
that in addition to the Cash Capital Contribution and the delivery and
installation of certain Point of Presence Equipment as specified above in
Sections 5.2 and 5.3 respectively, Buyer will deliver and install the
equipment necessary to develop a Network Operations Center (NOC) in order to
accomplish the network management of the Fresno System. Such NOC equipment
shall not exceed a cost of Ten Thousand Dollars ($10,000). Other systems that
Buyer develops may be managed by the Fresno NOC at Buyer's discretion. Buyer
agrees that Seller's officers will manage the NOC consistent with the
corporate organization as defined above in Section 5.6.
SECTION 6: MISCELLANEOUS
6.1 ATTORNEYS' FEES. In the event there is any litigation or
arbitration between the parties concerning this Agreement, the successful
party shall be awarded reasonable attorneys' fees and litigation or
arbitration costs, including the attorneys' fees and costs incurred in the
collection of any judgment.
6.2 NOTICES. All notices required or permitted hereunder shall be
sufficient if delivered personally or mailed to the parties at the address set
forth below or at such other address as either party may designate in writing
from time to time. Any notice by mailing shall be effective forty-eight (48)
hours after it has been deposited in the United States certified mail, return
receipt requested, duly addressed and with postage prepaid.
6.3 PARTIAL INVALIDITY. If any provisions of this Agreement are in
violation of any statute or rule of law of any state or district in which it
may be sought to be enforced, then such provisions shall be deemed null and
void only to the extent that they may be in violation thereof, but without
invalidating the remaining provisions.
6.4 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto, their heirs, personal
representatives, successors and assigns and shall be binding on all persons
appointed to vote as proxies on any of the shares of common stock or voting
securities dedicated to this Agreement.
6.5 WAIVER. No waiver of any breach of any one of the agreements,
terms, conditions or covenants of this Agreement by either party shall be
deemed to imply or constitute a waiver of any other agreement, term, condition
or covenants of this Agreement. The failure of either party to insist on
strict performance of any agreement, term, condition or covenant, herein set
forth, shall not constitute or become construed as a waiver of the rights of
either or the other thereafter to enforce any other default of such agreement,
term, condition or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term, condition
or covenants of this Agreement.
6.6 GOVERNING LAW. This Agreement and the rights and duties of the
parties shall be construed enforced in accordance with the laws of the State
of California.
6.7 FAX/COUNTERPARTS. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and may be executed in counter
parts, each of which shall be deemed an original, but all of which shall
together constitute one agreement.
6.8 ENTIRE AGREEMENT. This Agreement with the attached exhibits
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof. There are no representations, warranties, conditions
or obligations except as herein specifically provided. Any amendment or
modification hereof shall require written approval of both parties to become
effective.
6.9 TIME. Time is of the essence of this Agreement and each of its
provisions.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
SKYLYNX COMMUNICATIONS, INC.,
a Colorado corporation,
By: /s/ Xxx Xxxxxx
----------------------------------
Xxx Xxxxxx, Chief Financial Officer
ATTEST: NADEX WEST, INC.,
a California corporation
/s/ Xxxxxx Xxxxxxxx, Jr. By: /s/ Till Xxxxxxxxxxx
------------------------------- -----------------------------------
Xxxxxx Xxxxxxxx, Jr., Secretary Till Xxxxxxxxxxx, President
