EXHIBIT 10.7
Stock Purchase Agreement
Basic Provisions
This agreement made as of the 3rd day of September, 1998 (the "Agreement")
regarding the purchase of the outstanding common stock of DurangoNet, Inc., a
Colorado corporation (the "Company") among Internet Ventures, Inc., a California
corporation ("Buyer") and Xxxxxxxx Xxxxxxx, Xxx Xxxxxxx, Xxxx Xxxxxxxx, Xxx
Lounge and Xxxxx Xxxxxx (collectively, "Sellers"). Buyer and Sellers shall be
referred to hereinafter as (the "Parties"). Buyer and Sellers agree as follows:
1. Purchase: Subject to the terms and conditions contained in this
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Agreement and the attached Promissory Notes, Pledge Agreement and
Consulting Agreement, and in reliance upon the representations,
warranties and covenants of the parties contained herein and therein,
at the Closing Buyer agrees to acquire and Sellers agree to sell 1,000
shares of common stock, par value $.01 par share (the "Common Stock")
of the Company in exchange for a combination of stock, notes and cash,
as more particularly defined below.
2. Capitalization:
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(a) The total number of shares of Common Stock of the
Company authorized is one thousand (1,000) shares.
(b) There are presently 1,000 shares of Common Stock of
the Company outstanding.
(c) Each Seller owns the number of issued shares of
Common Stock set forth opposite such Seller's name on
the signature pages of this Agreement. Collectively,
the Sellers own all of the outstanding Common Stock
of the Company.
3. Valuation and Closing Consideration:
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(a) The valuation date shall be August 15, 1998.
(b) The net valuation of the Company shall be $689,640 as
the total consideration (the "Purchase Price") for
the purchase of the Common Stock. The components of
the Purchase Price shall be disbursed in the manner
as set forth in Section 3(d) through Section 3(h),
and, 4(a) herein,
(c) The current market price of each share of common
stock, par value $.01 par share of Buyer ("Buyer
Common Stock") is five dollars fifty cents ($5.50).
Buyer further acknowledges and represents that on
July 15, 1998, each share of Buyer Common Stock was
split two-for-one (the "Split"). Buyer further
represents and warrants that since the Split it has
not effected any reclassification, recapitalization,
stock split, combinations, exchange of shares or any
dividend payable in stock or securities.
(d) The Sellers acknowledge receipt of twenty five
thousand ($25,000) dollars paid by Buyer as a
refundable cash deposit (the "Deposit"). The Deposit
shall be refunded to Buyer if Sellers materially
breach their representations and warranties contained
herein.
(e) In addition to the Deposit, Buyer agrees to pay and
Sellers agree to accept, on the date of Closing, a
cash amount of one hundred ninety-nine thousand
($199,000) dollars. Buyer covenants to contribute
thirty-five thousand ($35,000) dollars in working
capital to the Company in order to open an office in
Montrose. In addition Buyer will contribute to the
Company a Hybrid point-of-presence and 25 Hybrid
modems, as needed, to be used for either the
Company's current "wireless T-1" operation or in
launching cable Internet service.
(f) Buyer shall issue to Sellers a minimum of ten
thousand (10,000) shares of Buyer Common Stock or
such number of shares required to constitute a
cumulative market value of fifty five thousand
($55,000) dollars, to be distributed, at the sole
discretion of Sellers, to the Company's key
employees.
(g) Buyer shall also execute promissory notes in favor of
each of the Sellers (the "Notes") in the aggregate
original principal amount of three hundred and
fifty-five thousand six hundred and forty dollars
($355,640). The Notes shall bear interest at the rate
of ten percent (10%) per annum and shall be in
substantially the form attached hereto as Exhibit A.
(h) Buyer shall further issue Buyer Common Stock of not
less than ten thousand (10,000) shares or the number
of shares having a market value of fifty five
thousand ($55,000) dollars to the Sellers distributed
in accordance with the Sellers' proportional
ownership in the Company.
(i) Buyer covenants that, other than the investments
contemplated hereby and such other investments as the
Buyer deems appropriate, Buyer shall use its best
efforts to maintain all of the Company's assets,
properties and customers in the Company. From the
date hereof until the date that each
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of the Notes has been paid in full, neither Buyer nor
any of its employees, agents or affiliates will
receive any dividend, salary or other financial
benefit from the Company that cumulatively exceeds
10% of the gross asset value of the Company.
(j) Buyer shall enter into a one year consulting
agreement with Xxxxxxxx Xxxxxxx in the amount of
$2,000 per month. Such consulting services shall be
governed under the terms and conditions as more
particularly described in the Independent Consulting
Agreement, attached hereto as Exhibit B, which shall
also be incorporated herein as part of this
Agreement. During such period of time as Xx. Xxxxxxx
remains as guarantor of any of the long term
liabilities of the Company Buyer shall tender to Xx.
Xxxxxxx a payment of five hundred dollars ($500) per
month without proration for partial months, and shall
fully indemnify and hold Xx. Xxxxxxx harmless against
any claim against such guarantees.
4. Intellectual Property: The Company shall have all rights to any
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intellectual property (including without limitation patents or patentable
inventions, copyrights or copyrightable subject matter, trade secrets,
technology or knowhow, designs protectable under any provision of United States
or foreign law, or trademarks or service marks) created or developed by the
Company or by its past or present employees (whether in whole or in part) during
the term of their employment with the Company, which shall be the sole property
of the Company. Company and its principals agree to cooperate in good faith with
the Company in securing, protecting, and defending any resulting patent,
copyright, trademark, design or trade secret rights in the United States.
5. Management Fee: Subject to Paragraph 3 (i) the Company agrees to enter into
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a Consulting Agreement with Internet Ventures, Inc. to provide advice regarding
the operations of the Company. In consideration for these services, Internet
Ventures, Inc. shall receive compensation for these services in the amount of
five percent (5%) of the Company's gross revenues payable on a monthly basis.
INTENDING TO BE LEGALLY BOUND. The Parties have executed this Agreement as of
the date first written above.
Buyer:
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INTERNET VENTURES, INC.
By:/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Title: President and CEO
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Sellers: No. of Shares
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/s/ Xxxxxxxx Xxxxxxx
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Xxxxxxxx Xxxxxxx 880 (88%)
/s/ Xxxxx X. Xxxxxxx
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Xxx Xxxxxxx 50 (5%)
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx 50 (5%)
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx 10 (1%)
/s/ Xxx Lounge
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Xxx Lounge 10 (1%)
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Independent Consulting Agreement
This Independent Consulting Agreement ("Agreement") dated September 3, 1998
is made between Xxxxxxxx Xxxxxxx and DurangoNet, Inc., a Colorado corporation
("DurangoNet").
Recitals
WHEREAS, DurangoNet provides access to the Internet to residences and
businesses in the Durango, Colorado area and currently operates an office in
Durango, Colorado,
WHEREAS, DurangoNet wishes to improve the efficiency of its Durango
operation and increase the number of its subscribers;
WHEREAS Xxxxxxxx Xxxxxxx has expertise in operating an Internet access
business;
WHEREAS DurangoNet wishes to utilize the operational skill of Xxxxxxxx
Xxxxxxx to consult with DurangoNet's Durango office and utilize Xxxxxxxx
Xxxxxxx'x contacts in Durango to increase DurangoNet's subscriber base.
Agreement
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, the sufficiency of which is hereby acknowledged, Xxxxxxxx Xxxxxxx and
DurangoNet agree as follows:
1. Authority: Xxxxxxxx Xxxxxxx will report to Xxxx Xxxxxx, Chief Operations
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Officer for DurangoNet's parent corporation Internet Ventures, Inc.
Michaela's responsibilities will include providing advice regarding the
operations of DurangoNet's Durango office, assist in developing plans
related to subscriber growth and retention, serve as a local liaison in the
community to develop community awareness of DurangoNet, focus as a promoter
of local groups to develop local content, speak with not-for-profit
organizations and other responsibilities as may be appointed, from time to
time, by Xxxx Xxxxxx. Xxxx Xxxxxx will provide any and all job assignments
to Xxxxxxxx Xxxxxxx in writing. If it appears to Xxxxxxxx Xxxxxxx that the
total time commitment required of Xxxxxxxx Xxxxxxx, for any and all job
assignments when taken together, will exceed forty (40) hours in one month
Xxxx Xxxxxx and Xxxxxxxx Xxxxxxx will converse by telephone or meet in
person to adjust the job assignments. Such conversation or meeting will
occur so that the parties may insure that the total time commitment will
not exceed forty (40) hours in one month or, in the alternative, if
Xxxxxxxx Xxxxxxx agrees to perform work in excess of forty (40) hours per
month, provide for additional compensation for hours in excess of forty
(40) hours per month.
2. Term: This Agreement will have a term of one (1) year.
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3. Compensation: DurangoNet will pay Xxxxxxxx Xxxxxxx for her consulting
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services two thousand dollars ($2,000.00) per month.
4. Costs and Expenses: Xxxxxxxx Xxxxxxx does not have the authority to incur
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any costs, charges or expenses on behalf of DurangoNet without the prior
written permission of Xxxx Xxxxxx.
Xxxxxxxx Xxxxxxx will be responsible for paying all taxes, workers'
compensation and employee liability insurance expenses, licenses, permits,
fees, etc. related to or arising out of the performance of her obligations
under this contract.
5. Confidentiality: Xxxxxxxx Xxxxxxx understands that during the term of this
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Agreement, she may become privy to information that DurangoNet believes is
confidential and proprietary ("Confidential Information"). Confidential
Information includes, but is not limited to, accounting records,
administrative procedures, contracts, customer lists, financial
information, technical know how and processes concerning DurangoNet, its
subsidiaries, its divisions, parent corporation or affiliated companies,
Xxxxxxxx Xxxxxxx agrees that she will not disclose any Confidential
Information during either the term of this Agreement or for one (1) year
thereafter.
6. Intellectual Property: Xxxxxxxx Xxxxxxx agrees that any intellectual
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property including, without limitation, patents or patentable inventions,
copyrights or copyrightable subject matter, trade secrets, technology or
know how, designs protectable under any provision of United States or
foreign law, or trademarks or service marks ("intellectual property")
created or developed by Xxxxxxxx Xxxxxxx (whether in whole or in part)
during the term of this Agreement shall be the sole property of DurangoNet
if the intellectual property was created within the scope of Xxxxxxxx
Xxxxxxx'x consultation responsibilities as set forth in Section I above.
With respect to any intellectual property over which DurangoNet, its
subsidiaries, its divisions, parent corporation or affiliated companies
claim ownership, Xxxxxxxx Xxxxxxx agrees to cooperate in good faith with
DurangoNet in securing, protecting, and defending any resulting patent,
copyright, trademark, design, or trade secret rights whether in the United
States or in any foreign country.
7. Documents, Computer Files and Data: Xxxxxxxx Xxxxxxx agrees that any
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documents, computer files, or data embodied in any form created by Xxxxxxxx
Xxxxxxx in the course of this Agreement is made as a part of carrying out
her consultant responsibilities under Section 1 of this Agreement (and any
identical or non-identical copies thereof) shall be and remain the sole
property of DurangoNet. Xxxxxxxx Xxxxxxx shall follow any rules or
regulations established in good faith by DurangoNet to protect the secrecy
or integrity of such documents, computer files, or data, and shall
surrender all such documents, computer
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files, or data to DurangoNet promptly upon termination of this Agreement
for any reason, whether or not a specific demand is made therefor.
8. Non-Competition: During the term of this Agreement, Xxxxxxxx Xxxxxxx agrees
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not to advise, consult, be employed by or hold any financial interest in
any entity other than DurangoNet which provides Internet access.
For one year after the termination of this Agreement, Xxxxxxxx
Xxxxxxx agrees not to solicit any DurangoNet subscribers to obtain Internet
access elsewhere.
9. Termination: Xxxxxxxx Xxxxxxx may terminate this Agreement at any time for
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any reason whatsoever. DurangoNet may terminate this Agreement if Xxxxxxxx
Xxxxxxx has committed a material breach of her obligations under this
Agreement and has failed to cure the breach within thirty (30) days after
receiving written notice of the breach, or may otherwise terminate the
agreement, without cause, by serving written notice, to Xx. Xxxxxxx, ninety
days in advance of the proposed date of termination.
10. Arbitration: All claims and disputes and other matters in question between
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the parties hereto, arising out of or relating to this Agreement shall be
resolved according to the rules of the American Arbitration Association
then in force and effect. The seat of such arbitration shall be Farmington,
New Mexico. This agreement to arbitrate shall be enforceable under the
prevailing law. The award rendered by the arbitrator(s) shall be final and
binding, and judgment may be entered in any court having jurisdiction
thereof.
Notice of the demand for arbitration shall be given by the aggrieved
party to the other party to this Agreement and a copy thereof shall be
filed with the American Arbitration Association. The demand for arbitration
shall be made within thirty (30) days after the claim, dispute or other
matter has arisen.
In the event a dispute is submitted to arbitration, the arbitrator(s)
shall award costs and reasonable attorney's fees to the prevailing party.
11. Assignment: Xxxxxxxx Xxxxxxx may neither assign nor transfer her
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obligations under this Agreement in whole or in part, by operation of law
or otherwise, without the written consent of DurangoNet. This Agreement
shall be binding upon the successors and assigns of DurangoNet.
12. Waiver: The failure of either party to enforce at any time or for any
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period of time any of the provisions of this Agreement shall not be
construed as a waiver of such provisions or of the right of such party
thereafter to enforce each and every such provision.
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13. Notices: Any notice required or allowed hereunder may be sent by courier,
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electronic mail, telephone facsimile or by registered mail return receipt
requested and shall be deemed given and made on the date sent to the
following addresses.
DurangoNet c/o Internet Ventures, Inc. Xxxxxxxx Xxxxxxx
211 Via Xxxxx 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000 Xxxxxxx, XX 00000
fax # 000-000-0000 fax 0 000-000-0000
xxxxxx@xxxxx.xxx xxx@xxxxxxxx.xxx
Attention: Xxx Xxxxx
Either DurangoNet or Xxxxxxxx Xxxxxxx may change their address by providing
notice to the other party in writing,
14. Governing Law: This Agreement shall be construed and governed in accordance
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with the laws of the State of Colorado without giving effect to Colorado's
choice of law rules.
15. Severability: It is the intention of both DurangoNet and Xxxxxxxx Xxxxxxx
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to enter into a complete agreement in compliance with Colorado law, should
any provision of this agreement not be in compliance with Colorado law,
such inconsistent provision shall be deemed superseded by such law or rule,
and the agreement shall otherwise be fully enforceable and in effect;
16. Entire Agreement: This Agreement contains the entire and only consulting
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agreement between the parties, there being merged herein all prior and
collateral representations, promises and condition in connection with such
matter; and any representations, promises and conditions not incorporated
herein shall not be binding on either party, This Agreement may not be
changed, modified or superseded except by a writing signed by the party to
be charged.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective on
the date first written above.
/s/ Xxxxxxxx Xxxxxxx Dated: 9/3/98
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Xxxxxxxx Xxxxxxx
Dated:
Xxxxxx X. Xxxxx - President
DurangoNet, Inc
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Non-Competition and Confidentiality
Xxxxxxxx Xxxxxxx makes this Confidentiality and Non-Competition Agreement
("Agreement") with Internet Ventures, Inc., a California Corporation,
("Ventures"), in consideration for Ventures agreeing to purchase her shares of
stock in DurangoNet, Inc. ("Durango").
The effective date of this Agreement will begin on the date this Agreement
is signed by Xxxxxxxx Xxxxxxx and will continue for a period of three (3) years.
1. Confidentiality:
Xxxxxxxx Xxxxxxx agrees not disclose to anyone outside of Ventures or
Durango any "Confidential Information".
Confidential Information is any information or material that relates to the
past, present, or future research, development, operating or business activities
of either Ventures or Durango that has not been made generally available to the
public.
Xxxxxxxx Xxxxxxx acknowledges that a breach of this Agreement will give
rise to damages that are not readily compensable at law and, accordingly,
Xxxxxxxx Xxxxxxx agrees that the Ventures and Durango shall be entitled to
equitable relief to enforce the provisions hereof, without limitation to any
other rights or remedies Ventures and Durango may have.
2. Non-Competition:
Xxxxxxxx Xxxxxxx agrees not to directly or indirectly, in any form or
manner, participate in Internet access activities which are competitive with the
Ventures and its divisions, subsidiaries and affiliated companies or have a
monetary interest in an amount not to exceed five percent (5%) or invest capital
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in an amount not to exceed five percent (5%) in any operation that has an annual
revenue of less than ten million dollars ($10,000,000.00) and which provides
Internet access within a seventy five mile radius of any city in which Ventures
owns and/or operates a business.
By:/s/ Xxxxxxxx Xxxxxxx Dated:September 3, 1998
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Xxxxxxxx Xxxxxxx
STOCK PURCHASE AGREEMENT
STANDARD TERMS AND CONDITIONS
On the following terms and conditions, these Standard Terms and Conditions
together with the Basic Provisions to which this document is attached constitute
the Stock Purchase Agreement between Buyer and Sellers identified in the Basic
Provisions.
1. CERTAIN DEF1NED TERMS.
a. Certain Defined Terms. The following terms have the respective
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meanings set forth below:
"Agreement" means the Basic Provisions, these Standard Terms and
Conditions, and the Exhibits and Schedules referenced herein and
therein.
"Authorized Shares of the Company" means the number of Shares of
the Company set forth in Subparagraph 2.a. of the Basic
Provisions which are authorized as of the date of this Agreement
under the charter documents of the Company and its by-laws.
"Buyer" means Internet Ventures, Inc., a California corporation.
"Buyer Common Stock" means the shares of common stock of Buyer
which may be exchanged and delivered to Sellers pursuant to the
Agreement and as specified under the terms of the Notes.
"Closing" means the consummation of the transactions contemplated
in this Agreement.
"Closing Date" means the date of execution of this Agreement.
"Common Stock" means the outstanding shares of capital stock of
the Company being sold and delivered to Buyer pursuant to the
Agreement.
"Common Stock of the Company" means the total number of shares of
the Company set forth in Subparagraph 2.b. of the Basic
Provisions which are issued and outstanding as of the date of
this Agreement.
"Company" means the Company identified in the first paragraph of
the Basic Provisions.
"Disclosure Exhibit" means the schedule dated as of the date of
this Agreement, delivered to Buyer and executed by Sellers. The
Disclosure Exhibit shall be part of this Agreement and referenced
hereinafter as Exhibit C.
"Sellers" means the persons executing the Agreement and
identified as such.
"Valuation" means the value of the Common Stock pursuant to
Paragraph 3.b. of the Basic Provisions.
"Valuation Date" means the date for the Valuation, as set forth
in Paragraph 3.a. of the Basic Provisions.
"Value" means the agreed upon value of each share of Buyer Common
Stock for purposes of the potential future exchange contemplated
by the Agreement.
b. Accounting Terms. Accounting terms used in the Agreement shall have
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the meanings ascribed to such terms under Generally Accepted
Accounting Practices, consistently applied by Company.
2. PURCHASE AND SALE OF SHARES.
a. Sale of Common Stock. Subject to the terms and conditions set forth in
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the Agreement and in reliance upon the representations and warranties
of Sellers and Buyer herein, at the Closing Sellers shall sell and
deliver to Buyer and Buyer shall purchase and accept from Sellers, all
of the Common Stock owned by Sellers, constituting all of the Common
Stock of the Company.
b. Purchase and/or Exchange of Common Stock. In consideration for the
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sale and delivery of the Common Stock of the Company, at the Closing
Buyer shall issue and deliver to Sellers such good and valuable
consideration as more particularly defined in the Basic Provisions
attached hereto.
c. Transfer Taxes. Sellers shall be solely responsible for the payment of
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any and all taxes, fees, and similar charges incident to the sale and
transfer of the Common Stock.
3. CLOSING
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a. Time and Place. The Closing shall take place at the offices of
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DurangoNet. Inc. at 10:00 a.m. local time, on the date of execution of
this Agreement or such other time or place agreed upon by the parties
in writing.
b. Transactions at the Closing. At the Closing, the following shall
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occur.
(1) Sellers shall deliver to Buyer certificates representing the
Common Stock of the Company, which shall be duly endorsed for
transfer by Sellers.
(2) Buyer shall deliver to Sellers the Notes, duly executed by Buyer
and to be countersigned by Sellers at Closing.
(3) Buyer, Company and the Sellers shall enter into Non-Competition
and Confidentiality Agreements, dated as of the Closing Date, a
form of which is attached hereto as Exhibit D.
(4) Buyer and Sellers, as applicable, shall deliver to the other
party hereto any and all other assignments, documents,
instruments and conveyances requested by such other party to
effect the consummation of the transactions contemplated by this
Agreement and to evidence Buyer's interest in and title to the
Common Stock of the Company.
(5) Buyer and Seller shall execute and deliver-the Pledge
Agreement, attached hereto as Exhibit E.
(6) Buyer shall deliver the number of freely tradeable sham of Buyer
Common Stock set forth in Sections 3(f) and 3(h) of the Basic
Provisions in such denominations and registered in such names as
Sellers shall have jointly instructed the Buyer prior to the
Closing Date.
4. GENERAL REPRESENTATIONS AND WARRANTIES OF BUYER
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Buyer represents and warrants to Sellers, that:
a. Authority to Execute and Perform Agreements. Buyer has the full right;
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power and authority to enter into, execute and deliver this Agreement,
the Notes and the Pledge Agreement.
b. Due Authorization, Enforceability. Buyer has taken or will take all
---------------------------------
actions necessary to be authorized to enter into and perform its
obligations under this Agreement, the Notes and the Pledge Agreement.
This Agreement the Notes and the Pledge Agreement are the legal, valid
and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.
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c. No Violation of Order or Law. Buyer is not a party to, subject to or
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bound by any law or order which would permit the execution or delivery
of this Agreement the Notes and the Pledge Agreement by Buyer or the
performance by it of its obligations hereunder or thereunder.
d. Consents. Neither the execution nor delivery by Buyer of this
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Agreement nor the consummation by Buyer of the transactions
contemplated herein or therein require the consent of any person.
e. Compliance with Laws. Buyer has obtained all necessary permits and
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other authorizations or orders of exemption as may be necessary or
appropriate under any and all applicable laws with respect to the
transactions contemplated herein including the Securities Act of 1933
as amended (the "Securities Act").
f. No Violation. Neither the execution or delivery by Buyer of this
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Agreement nor the consummation of the transactions contemplated herein
or therein will: (a) violate any provision of the Articles of
Incorporation. Bylaws, or other charter documents of Buyer; (b)
violate, or constitute a default under, permit the termination or
acceleration of the maturity of, or cause the loss of any rights or
options under, any contract to which Buyer is a party; (c) require any
authorization, consent or approval of, exemption or other action by,
or notice to, any party to any contract; (d) result in the creation or
imposition of any lien or encumbrance upon any properties, assets or
capital stock of Buyer; or (e) violate any law or order to which Buyer
or any of its properties is subject.
g. No Adverse Litigation. Buyer is not a party to any pending litigation
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which seeks to enjoin or restrict Buyer's ability to consummate the
transactions contemplated hereunder, nor is any such litigation
threatened against Buyer.
h. No Broker. Buyer shall pay any Broker's or Finder's fees to Xxxx
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Stetenfield in connection with this Agreement or the transactions
contemplated herein.
5. REPRESENTATIONS AND WARRANTIES OF BUYER CONCERNING BUYER
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COMMON STOCK
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Buyer represents and warrants to Sellers that:
a. Securities Laws. The Buyer Common Stock delivered to Sellers, pursuant
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to Sellers' election to convert the Notes and pursuant to this
Agreement will be issued and delivered to Sellers-in, compliance with
all applicable federal and state securities laws and regulations and
will be freely tradeable securities of the Buyer.
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b. Authorization to Issue Buyer Common Stock. The transactions
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contemplated by the Agreement have been duly authorized by all
requisite corporate action of Buyer.
c. Title to Buyer Common Stock. At the Closing and upon the consummation
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of a debenture conversion, as is potentially contemplated herein,
Sellers will acquire from Buyer good and marketable title to the Buyer
Common Stock free of any adverse claim including all liens and
encumbrances.
6. GENERAL REPRESENTATIONS AND WARRANTIES OF SELLERS
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Sellers represents and warrants to Buyer that:
a. Organization and Good Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the
state of its organization and has all requisite power to own its
assets and conduct its business.
b. Authority to Execute and Perform Agreements. Sellers have the full
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right, power and authority to enter into, execute and deliver this
Agreement and to transfer, convey and sell at the Closing the Common
Stock to be sold by Sellers hereunder.
c. Enforceability. This Agreement is, and as of the Closing Date, will
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be, the legal, valid and binding obligation of Sellers, enforceable
against Sellers in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or general principles of equity.
d. No Violation of Order or Law. Neither the Company nor Sellers is a
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party to, subject to or bound by any law or order which would prevent
the execution or delivery of this Agreement by the Sellers, or the
performance by any of them of their respective obligations hereunder.
e. Consents. Neither the execution or delivery by Sellers of this
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Agreement nor the consummation by Sellers of the transactions
contemplated herein require the consent of any entity, person, or
governmental agency, except for those consents as listed on Exhibit C.
f. No Violation. Neither the execution or delivery by Sellers of this
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Agreement nor the consummation of the transactions contemplated herein
or therein will: (a) violate any provision of the Articles of
Incorporation, Bylaws, or other charter documents of the Company; (b)
violate, or constitute a default under, permit the termination or
acceleration of the maturity of, or cause the loss of any rights or
options under, any contract to which Sellers or the Company is a
party, (c) require any authorization, consent or approval of,
exemption or other action by, or notice
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to, any party to any contract; (d) result in the creation or
imposition of any lien or encumbrance upon any properties or assets of
Sellers or the Company; or (e) violate any law or order to which any
of Sellers, Company, or any of their respective properties is subject.
g. No Adverse Litigation. Neither Sellers nor the Company is a party to
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any pending litigation which seeks to enjoin or restrict Sellers'
ability to sell or transfer the Common Stock hereunder, nor is any
such litigation threatened against Sellers.
h. No Broker. No broker or finder has acted for Sellers or the Company in
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connection with this Agreement or the transactions contemplated
herein.
i. Investment Representations. Buyer represents that:
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(i) it is an "Accredited Investor", as such term is defined in
Regulation D under the Securities Act;
(ii) it has had access to such additional financial and other
information, and has been afforded the opportunity to ask
questions of representatives of the Company, and to receive
answers to those questions, as it has deemed necessary in
connection with its acquisition of the Common Stock;
(iii) it acknowledges that the Common Stock that will be acquired
pursuant to this Agreement is being acquired in a transaction
not involving any public offering within the meaning of the
Securities Act, and the Common Stock has not been, and may
never be, registered under the Securities Act;
(iv) it acknowledges that the Common Stock will be in the form of
physical certificates and that the certificates will bear a
legend to the following effect:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION
OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY. TO THE EFFECT THAT THE PROPOSED SALE,
TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
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(v) it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks
of an acquisition of the Common Stock and is able to bear the
economic risk of a loss of an investment in the Common Stock
and is not acquiring the Common Stock with a view to the
distribution thereof or any present intention of offering or
selling any thereof in a transaction that would violate the
Securities Act or the securities laws of any state or any other
applicable jurisdiction.
7. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE
------------------------------------------------------
COMMON STOCK
------------
Sellers represent and warrant to Buyer that:
a. Common Stock. Sellers have good and marketable title to the Common
------------
Stock to be transferred to Buyer, and upon consummation of the
purchase and exchange contemplated herein, Buyer will acquire from
Sellers good and marketable title to all of the Common Stock of the
Company, free of any adverse claim including all liens and
encumbrances, except as otherwise noted herein, in the Basic
Provisions, the Note or the Pledge Agreement.
b. Securities Laws. Sellers have obtained all necessary permits and other
---------------
authorizations or orders of exemption as may be necessary or
appropriate under any and all applicable state and federal securities
laws and regulations with respect to the transactions contemplated
herein with respect to the Common Stock of the Company.
8. REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THE
-------------------------------------------------------
COMPANY AND BUYER REGARDING IVI
-------------------------------
Sellers represent and warrant that:
a. Capitalization. The authorized capital stock of the Company consists
--------------
solely of the Common Stock described in Subparagraph 2.a. of the Basic
Provisions. The Sellers own all of the Common Stock of the Company
described in Subparagraph 2.b. of the Basic Provisions. The Common
Stock of the Company have been duly authorized, and validly issued,
fully paid and are non-assessable, in compliance with applicable
securities and other federal and state laws, and except for such
Common Stock of the Company, there are no shares of capital stock or
other securities or other equity interests of the Company which have
been issued by the Company. There are no outstanding agreements,
commitments, rights of any character entitling any person or entity to
purchase or otherwise acquire any such securities or other equity
interests of any character of the Company.
-7-
b. Corporate Records. The minute books and stock record book of the
-----------------
Company, made available or to be made available to Buyer for its
examination pursuant to the provisions of this Agreement are accurate
and no portion thereof has been either altered or destroyed.
c. Subsidiaries. The Company has no subsidiaries except as set forth in
------------
Paragraph (c) of Exhibit C.
d. No Undisclosed Liabilities. Buyer and Seller each represent that
--------------------------
except for (i) those liabilities specifically reflected or reserved
against on the Financial Statements, (ii) those current liabilities
for trade or business obligations incurred since the end of the period
which the latest Financial Statement delivered to Buyer covers in
connection with the purchase of goods or services in the ordinary
course of business and consistent with past practices and none of
which is for breach of contract, breach of warranty, tort or
infringement), or (iii) those liabilities otherwise disclosed in
Paragraph (d) of Exhibit C (none of which liabilities is for breach of
contract, breach of warranty tort or infringement), the Company has
not, as of the date hereof, any direct or indirect indebtedness,
liabilities, claims, losses, damages, deficiencies, obligations or
responsibilities, known or unknown, liquidated or unliquidated,
accrued, absolute, contingent or otherwise required by generally
accepted accounting principles to be set forth on a financial
statement, which individually or in the aggregate are material to the
condition (financial or otherwise), assets, liabilities, business,
operations or prospects of the Company.
e. Contracts. Except as disclosed on Exhibit C Paragraph (e), no
---------
contracting party to any such contract is now in material breach
thereof or has breached the same in any material respect within the
month period prior to the date hereof and each contract is in full
force and effect.
f. Books and Records. The Company will furnish or make available to Buyer
-----------------
for its examination the following, each of which is, and will be
maintained as to remain until the Closing, accurate and complete in
all material respects:
(1) copies of the charter documents of the Company as in
effect on the date hereof,
(2) the minute books of the Company containing all
proceedings, consents, actions and meetings of its
shareholders and Board of Directors;
(3) copies of all correspondence with governmental agencies
relating to the Company.
-8-
g. Full Disclosure. All documents and other papers delivered to Buyer by
---------------
or on behalf of Sellers in connection with this Agreement and the
transactions contemplated herein are accurate, complete and authentic
and does not contain any untrue statement of a material fact and does
not omit to state any material fact necessary to make the statements
made, in the context in which they are made, not false or misleading.
h. Subscribers. Except as previously provided to Buyer all subscribers am
-----------
fully paid and in good standing subscribers of the Company's Internet
access services as of the applicable date, on the terms and conditions
of the Company's standard Subscription Agreement which has been
heretofore delivered to Buyer. Except as set forth Paragraph (h) of
Exhibit C, no Subscriber has made any claim against Company on account
of the services provided to such subscriber or such subscription
agreement, except for claims which in the aggregate total less than
$5,000.
i. Absence of Certain Changes. Except as indicated on Exhibit C,
--------------------------
Paragraph (i), since the end of the period covered by the most recent
Financial Statements delivered to Buyer, the Company has conducted its
business only in the ordinary course consistent with past practice and
no event has occurred which, in any case, or in the aggregate, has had
or could reasonably be expected to have a material adverse effect upon
the Company's financial or business condition, assets, liabilities,
operations or prospects, or its ability to consummate the transactions
contemplated herein.
j. Tax Matters. The Company has filed all tax returns which it is
-----------
required to file in a timely manner and has paid or provided for the
payment of all taxes due and owing by it and has paid or provided for
the payment of all deficiencies or other assessments of taxes,
interest and penalties owed by it as of the date of Closing. There is
no assertion by any taxing authorities which, if true, would be
inconsistent with this representation or warranty. No tax audit is in
progress or threatened. All tax returns fully and accurately reflect
the Company's liability for taxes. The provisions for taxes in the
Financial Statements are fully adequate and correct. The Company has
not filed any consent on deficiencies or waiver of rights to contest a
tax claim with any taxing authority. The Company has delivered to
Buyer true and correct copies of all tax returns for the last five
fiscal years or such shorter period during which the Company has been
conducting business.
k. Compliance with Laws-Governmental Matters. The Company has complied
-----------------------------------------
with all material laws and regulations applicable to it and no
material capital expenditure will be required for continued
compliance. The Company has all material licenses and permits required
for the lawful conduct of its business. The Company is and has been in
compliance with the conditions of all such licenses and permits and no
-9-
proceeding or litigation is pending with respect to the Company's
compliance with laws or regulations, including without limitation,
with respect to any such license or permit. There is no proceeding or
litigation pending or proposed in writing concerning the Company's
compliance with environmental laws or regulations. Sellers have not
received any claim or demand nor are aware of any facts or
circumstances which would give rise to any present or potential
liability under any laws or regulations applicable to it, including,
without limitation, environmental laws or regulations.
l. Litigation. Except as set forth on Exhibit C, Paragraph (1), the
----------
Company is not a party to any proceeding or litigation of any nature,
nor is any proceeding or litigation threatened. Sellers have delivered
to Buyer all relevant pleadings with respect to the litigation
described on Exhibit C. There is no unsatisfied judgment, restraining
order, injunction, or other order of any court affecting the Company,
its properties, or business. In the conduct of its business, the
Company is not violating the intellectual property or other legal
rights of any entity or person or committing or omitting any act which
would have the probable effect of causing litigation.
m. Properties. The Sellers have delivered to Buyer a true and complete
----------
copy of the lease for all premises from which the Company conducts its
business, including all amendments thereof Such leases are in full
force and effect in accordance with their terms. The Company does not
own any real property. Except as listed on Paragraph (m) of Exhibit C,
the Company has good and marketable title to all of the tangible and
intangible equipment, machinery and other personal property used in
its business ("Property"), free and clear of any lien or encumbrance.
All leases for Property listed on Exhibit C are in full force and
effect and no default has occurred which is presently uncured under
any such leases. There are no disputes concerning any of the Property.
n. Compliance with Labor Laws. The Company is not a party to any
--------------------------
employment or collective bargaining agreement. The Company is in
compliance with all applicable laws and regulations relating to the
employment of labor The Company has neither presently nor in the past
any pension or other formal employment benefit plan or commitment to
adopt a plan except for the plans (the "Plans") described on Exhibit
C, Paragraph (n). The Company is in compliance with all applicable
laws and regulations relating to the Plans and the Company has made
all contributions required to be made pursuant to the Plans. No union
organizing effort has taken place with respect to the Company and no
strike is threatened. There is no claim, proceeding, or lawsuit
pending or threatened by any of the Company's employees. No facts or
circumstances exist which would be the basis for any claim or dispute
relating to the matters described in this Subparagraph other than any
claim pursuant to Worker Adjustment and Retraining Notification Act of
1988 as amended.
-10-
o. Obligations Relating to Employment of Employees. Except as set forth
-----------------------------------------------
on Paragraph (o) of Exhibit C, the Company is not a party to any
agreements with any of its employees or consultants, whether written
or oral. The Company has heretofore delivered to Buyer a true and
complete copy of all employment or consulting agreements listed on
Exhibit C. All accrued obligations of the Company (including for
salaries, vacation and holiday pay, sick pay, bonuses and other forms
of compensation) to any of its employees or to any third party
relating to the employment of employees by the Company, including all
benefits due on account of such employment, through the date hereof
have been paid or adequate accruals therefor have been made in the
Financial Statements. The Company had maintained and paid all premiums
due on all insurance policies required to be maintained by it relating
to the employment of employees, including workers compensation and
health and disability insurance, and no circumstances exist which
could cause any retroactive premium adjustments to any insurance
contract.
p. Insurance. Exhibit C, Paragraph (p), sets forth a true and correct
---------
list of all policies of insurance maintained by the Company. Such
policies are in full force and effect and in compliance with all
applicable laws and regulations. The Company is not in default under
any of the provisions of any of such policies of insurance. All
premiums due have been paid and the Company has not received a notice
of cancellation or non-renewal of any such policies.
q. Potential Conflicts of Interest. Except as disclosed on Paragraph (q)
-------------------------------
of Exhibit C, neither Sellers, nor any other officer, director or key
employee of the Company or any member of his/her family or other
affiliated person holds any financial or business interest in (i) any
of the Company's suppliers or customers, (ii) any agreement to which
the Company is a party, or (iii) any real property leased or owned in
whole or in party by the Company, or (iv) any Property of the Company.
r. Banking Relationship. Exhibit C, Paragraph (r), contains a true and
--------------------
complete list of each bank or other financial institution in which the
Company has an account or safety deposit box and the numbers of such
accounts and safety deposit boxes and the names of all authorized
signatories on such accounts and safe deposit boxes.
9. COVENANTS OF SELLERS
--------------------
a. Cooperation. The parties agree with each other that they will take all
-----------
actions necessary to effectuate and aid the others in effectuating the
intent and purpose of this Agreement.
10. INDEMNIFICATION
---------------
-11-
a. Indemnification by Sellers. Sellers shall indemnify, defend and hold
--------------------------
Buyer, its shareholders, subsidiaries, officers, directors, employees
and representatives, and their respective successors and assigns
harmless from and against any and all liability and losses (including
attorneys' fees and other legal costs) which may be incurred or
suffered by any such party and which may arise out of or result from
any breach of any representation, warranty, covenant or agreement of
Sellers contained in this Agreement or any agreement or document
referred to herein.
b. Indemnification by Buyer. Buyer shall indemnify, defend and hold
------------------------
Sellers, and his/her respective spouse, heirs and successors and
assigns harmless from and against any and all liability and losses
(including attorneys' fees and other legal costs) which may be
incurred or suffered by any such party and which may arise out of or
result from any breach of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement or any agreement or
document referred to herein.
11. TERMINATION; REMEDIES; SURVIVAL
-------------------------------
a. Specific Performance. The parties acknowledge that the subject matter
--------------------
of the transactions contemplated herein is unique and for that reason
among others, the parties hereto will be irreparably damaged in the
absence of the consummation of this Agreement. Therefore, in the event
of any breach by a party of this Agreement. The other party shall have
the right, at its election, to obtain an order for specific
performance of this Agreement without the need to post a bond or other
security, to prove any actual damage or to prove that money damages
would not provide an adequate remedy.
b. Attorney' Fees. If either Buyer or Sellers shall bring an action
--------------
against the other by reason of any alleged breach of any covenant,
provision or condition hereof, or otherwise arising out of this
Agreement, each party shall pay their respective-attorneys' fees and
court costs and actual expenses provided, however, that the prevailing
party shall still be entitled to punitive and compensatory damages as
may be awarded as well as any other relief to which it may be
entitled.
c. Survival of Indemnities, Representations and Covenants. The
------------------------------------------------------
indemnities, representations and, warranties contained in this
Agreement shall survive the Closing and continue eighteen (18) months
from the date of the Agreement.
12. DISPUTE RESOLUTION BY ARBITRATION
---------------------------------
Any dispute among the parties arising out of or relating to this Agreement
or any of the documents executed pursuant to this Agreement, including the
question of arbitrability, shall be resolved exclusively through binding
arbitration conducted under the Commercial Arbitration
-12-
Rules then in effect of the American Arbitration Association. The situs of such
arbitration shall be held in Farmington, New Mexico. The award of the arbitrator
in such arbitration shall be enforceable in any court of competent Jurisdiction.
13. MISCELLANEOUS
-------------
a. Entire Agreement. This Agreement (including the Basic Provisions and
----------------
the exhibits and schedules hereto and thereto, including the
Disclosure Schedule) and the agreements, documents and instruments to
be executed and delivered pursuant hereto or thereto are intended to
embody the final, complete and exclusive agreement among the parties
with respect to the purchase of the shares of Common Stock and related
transactions; are intended to supersede all prior agreements,
understandings and representations written or oral, with respect
thereto; and may not be contradicted by evidence of any such prior or
contemporaneous agreement, understanding or representation, whether
written or oral.
b. Governing Law. This Agreement is to be governed by and construed in
-------------
accordance with the laws of the State of California applicable to
contracts made and to be performed wholly within such State, without
regard to the conflicts of laws principles thereof.
c. Severability. In the event that any provision or any part of any
------------
provision of do Agreement shall be void or unenforceable for any
reason whatsoever, then such provision shall be stricken and of no
force and effect. However, unless such stricken provision goes to the
essence of the consideration bargained for by a party, the remaining
provisions of this Agreement shall continue in full force and effect,
and to the extent required, shall be modified to preserve their
validity,
d. No Third Party Rights. Nothing in this Agreement whether express or
---------------------
implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it
and their respective successors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability
of any third party to any party to this Agreement, nor shall any
provision give any third party any right of subrogation or action aver
against any party to this Agreement.
-END OF STANDARD TERMS-
-13-
