EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
XXX.XXX, INC.
F/K/A ROCKY MOUNTAIN INTERNET, INC.
AND
TRIAD RESOURCES, L.L.C.
AND
XX. XXXXX X. XXXXXX AND XX. XXXXXXX X. XXXXXX
DATED AS OF JULY 30, 1999
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Purchase and Sale of Acquired Assets . . . . . . . . . . 5
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . 5
(c) Adjustments to Purchase Price . . . . . . . . . . . . . . 6
(d) The Closing . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Deliveries at the Closing . . . . . . . . . . . . . . . . 7
(f) Allocation . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Assumption of Liabilities . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of the Seller. . . . . . . . . . 8
(a) Organization of the Seller . . . . . . . . . . . . . . . 8
(b) Authorization of Transaction . . . . . . . . . . . . . . 8
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 8
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . 9
(e) Title to Acquired Assets . . . . . . . . . . . . . . . . 9
(f) Financial Statements . . . . . . . . . . . . . . . . . . 9
(g) Events Subsequent to Most Recent Month End . . . . . . . 9
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . 9
(i) Legal Compliance . . . . . . . . . . . . . . . . . . . . 10
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 10
(k) Real Property . . . . . . . . . . . . . . . . . . . . . . 10
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 10
(m) Fixed Assets . . . . . . . . . . . . . . . . . . . . . . 10
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 10
(o) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 10
(p) Litigation . . . . . . . . . . . . . . . . . . . . . . . 10
(q) Warranties . . . . . . . . . . . . . . . . . . . . . . . 11
(r) Guaranties . . . . . . . . . . . . . . . . . . . . . . . 11
(s) State PUC Authorizations and FCC Authorizations . . . . . 11
(t) Investment . . . . . . . . . . . . . . . . . . . . . . . 11
(u) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 11
4. Representations and Warranties of the Buyer . . . . . . . . . . 11
(a) Organization of the Buyer . . . . . . . . . . . . . . . . 12
(b) Authorization of Transaction . . . . . . . . . . . . . . 12
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 12
(d) Complete Investigation . . . . . . . . . . . . . . . . . 12
(e) SEC Filings . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Absence of Certain Changes . . . . . . . . . . . . . . . 12
(g) The Buyer Shares . . . . . . . . . . . . . . . . . . . . 13
(h) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . 13
(i) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 13
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . 13
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Notices and Consents . . . . . . . . . . . . . . . . . . 13
(c) Operation of the Acquired Assets . . . . . . . . . . . . 13
(d) Preservation of Business . . . . . . . . . . . . . . . . 13
(e) Full Access/Due Diligence . . . . . . . . . . . . . . . . 13
(f) Audit . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(g) Notice of Developments . . . . . . . . . . . . . . . . . 14
(h) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Registration Rights Agreement . . . . . . . . . . . . . . 14
6. Conditions to Obligation to Close . . . . . . . . . . . . . . . 14
(a) Conditions to Obligation of the Buyer . . . . . . . . . . 14
(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 . . . . . . . . . . . . . . . . . . . 18
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . 19
(e) Covenants Not to Compete . . . . . . . . . . . . . . . . 19
(f) Survival of Representations and Warranties . . . . . . . 20
(g) Third Party Consents . . . . . . . . . . . . . . . . . . 20
(h) Indemnification Provisions for Benefit of the Buyer . . . 20
(i) Indemnification Provisions for Benefit of the Seller . . 21
(j) Matters Involving Third Parties . . . . . . . . . . . . . 22
(k) Other Indemnification Provisions . . . . . . . . . . . . 23
(l) Limitations on Indemnification Obligations . . . . . . . 23
9. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 23
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 24
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(a) Press Releases and Public Announcements . . . . . . . . . 24
(b) No Third-Party Beneficiaries . . . . . . . . . . . . . . 24
(c) Entire Agreement . . . . . . . . . . . . . . . . . . . . 24
(d) Succession and Assignment . . . . . . . . . . . . . . . . 24
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . 24
(f) Headings . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . 26
(i) Arbitration . . . . . . . . . . . . . . . . . . . . . . . 26
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . 26
(k) Severability . . . . . . . . . . . . . . . . . . . . . . 27
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 27
(m) Construction . . . . . . . . . . . . . . . . . . . . . . 27
(n) Incorporation of Exhibits and Schedules . . . . . . . . . 27
(o) Specific Performance . . . . . . . . . . . . . . . . . . 27
Exhibit A - Acquired Assets
Exhibit B - Excluded Assets
Exhibit C - Assumed Liabilities
Exhibit D - Xxxx of Sale
Exhibit E - Assignment and Assumption of Customer Contracts
Exhibit F - Assignment and Assumption of Supplier Contracts
Exhibit G - Financial Statements
Exhibit H - PUC and FCC Authorizations
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Exhibit I - Opinions of Counsel
Exhibit J - Registration Rights Agreement
Exhibit K - Allocation Schedule
Exhibit L - Escrow Agreement
Disclosure Schedules
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") entered into as of this
30th day of July, 1999, by and between XXX.XXX, INC., a Delaware corporation,
f/k/a ROCKY MOUNTAIN INTERNET, INC. (the "Buyer"), TRIAD RESOURCES, L.L.C.,
an Oklahoma limited liability company (the "Seller"), and Xx. Xxxxx X. Xxxxxx
and Xx. Xxxxxxx X. Xxxxxx (the "Members"). The Buyer, the Seller and the
Members are 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 of the 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.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"ASSIGNMENT AND ASSUMPTION OF CUSTOMER CONTRACTS" has the meaning set
forth in Section 2(e) below.
"ASSIGNMENT AND ASSUMPTION OF SUPPLIER CONTRACTS" has the meaning set
forth in Section 2(e) below.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2(g) below,
as set forth on Exhibit C hereto.
"BUYER" has the meaning set forth in the preface above.
"BUYER SHARES" means any share of the common stock, $0.001 par value per
share, of the Buyer.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(d) below.
"CLOSING DATE" has the meaning set forth in Section 2(d) below.
"CLOSING PRICE" has the meaning set forth in Section 2(b)(i) below.
"COMPANY" means WebZone, a division of Triad, L.L.C.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Parties that is not already generally available
to the public.
"DILUTIVE EVENT" has the meaning set forth in Section 2(b)(vi) below.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"DISTRIBUTEES" has the meaning set forth in Section 2(b)(ii) below.
"ESCROW AGENT" has the meaning set forth in Section 2(b)(iv) below.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by the
Buyer and the Seller substantially in the form of Exhibit L.
"ESCROW FUND" has the meaning set forth in Section 9 below.
"ESCROW PERIOD" has the meaning set forth in Section 2(b)(iv) below.
"ESCROW SHARES" has the meaning set forth in Section 2(b)(iv) below.
"EXCLUDED ASSETS" means the assets of the Seller not purchased by the
Buyer hereunder, as set forth on Exhibit B hereto.
"FCC" means the Federal Communications Commission.
"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.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f) below.
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"FIXED ASSETS" has the meaning set forth in Section 3(m) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time, and applied consistently throughout the period
involved.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations or
variations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies
and tangible embodiments thereof (in whatever form or medium), together with
all goodwill associated with the foregoing and all rights to use the
foregoing.
"INSTALLMENT PERIODS" has the meaning set forth in Section 2(b)(v) below.
"INSTALLMENT SHARES" has the meaning set forth in Section 2(b)(v) below.
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" OR "LIABILITIES" means any and all 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.
"MEMBERS" has the meaning set forth in the preface above.
"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).
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"PARTY" has the meaning set forth in the preface above.
"PERSON" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization,
syndicate, group or a governmental entity (or any department, agency, or
political subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(b) below.
"RECURRING REVENUE RATE" has the meaning set forth in Section 2(c) below.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
to be executed by the Buyer and the Seller substantially in the form of
Exhibit J.
"REGISTERED SHARES" has the meaning set forth in Section 2(b)(iii) 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.
"STATE PUC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by any state or local
regulatory authority to provide the telecommunications services currently
provided by the Seller and to conduct its business as it is currently
conducted.
"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.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ACQUIRED ASSETS. On the basis of the
representations and warranties 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, assign, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing, for the consideration specified below in
this Section 2, free and clear of all Security Interests, Liabilities, and
other debts, obligations, claims, limitations, liens, and/or any other
encumbrances whatsoever, except for the Assumed Liabilities as set forth in
Section 2(g) hereof.
(b) PURCHASE PRICE. The Buyer agrees to pay to the Seller at the
Closing:
i. In exchange for the Acquired Assets, the Buyer will issue
to the Seller that number of the Buyer Shares equal to six million
seventy-five thousand and no/100ths dollars ($6,075,000.00) adjusted
per subsection (c) below (the "Purchase Price") divided by the average
closing price per share of the Buyer Shares for the ten (10) day
trading period ending on the day prior to the Closing Date (the
"Closing Price").
ii. The number of shares of the Buyer Shares to be issued
pursuant to Section 2(b)(i) above shall be allocated among and
distributed by the Seller to itself and its Members (the
"Distributees") as determined by the Seller in its discretion.
iii. At the Closing Date, forty percent (40%) of the Buyer
Shares issued pursuant to Section 2(b)(i) above will be registered
under the Securities Act (the "Registered Shares"). 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 the greater of 4,000 of such
Registered Shares in any one trading day, or more than five percent
(5%) of the average trading volume of such Registered Shares for the
previous ten day (10) trading periods in any one trading day, for a
period of thirty (30) days after the Closing Date.
iv. At the Closing Date, the Buyer will require that the
Seller deposit with an escrow agent (the "Escrow Agent") ten percent
(10%) of the Buyers Shares (the "Escrow Shares"), which Escrow Shares
shall be held by the Escrow Agent for twenty-four (24) months
following the Closing Date (the "Escrow Period"). The Escrow Shares
will be registered under the Securities Act on or prior to the date of
the expiration of the Escrow Period. Such Escrow Shares will be
without restriction against sale, trade and transfer of any kind at
the expiration of the Escrow Period.
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v. The remaining portion of the Purchase Price
(approximately fifty percent (50%)) not paid in Buyer Shares at
Closing, as the same may be further adjusted by post-closing
adjustments made pursuant to that certain Post-Closing Agreement
executed by the Parties at the Closing, shall be paid in Buyer Shares
issued to the Seller in the following installments subsequent to the
Closing: (A) one-half (1/2) thereof (approximately twenty-five (25%)
percent of the Purchase Price) six (6) months following the Closing
Date; and (B) one-half (1/2) thereof (approximately twenty-five
percent (25%) of the Purchase Price) twelve (12) months following the
Closing Date (collectively the "Installment Periods" and each an
"Installment Period"). The number of Buyer Shares to be issued at the
end of each Installment Period shall be determined by dividing the
Closing Price (adjusted as provided in Sections 2(b)(vi) and
2(c)(iii)) into the portion of the Purchase Price, adjusted as
provided in Sections 2(c)(i) and 2(c)(iii). The Buyer Shares so
issued will be registered under the Securities Act on or prior to the
date of the expiration of the Installment Periods and will be without
restriction against sale, trade and transfer of any kind.
vi. The Installment Shares issued at the end of the
Installment Periods shall be fully protected against a Dilutive Event,
as defined below, prior to the actual issuance as set forth in this
Section 2(b)(vi). If, on or after the Closing Date, the Buyer issues
any Buyer Shares as a result of any stock splits, stock dividend or
similar event (a "Dilutive Event"), the Closing Price shall be
adjusted, as appropriate, to reflect and account for the effect of the
Dilutive Event on the price of the Buyer Shares; E.G., a 2:1 stock
split shall cause the Closing Price to be divided by two (2); a six
percent (6%) stock dividend shall cause the Closing Price to be
divided by 1.06. After calculating and reflecting the effect of the
Dilutive Event in the Closing Price, the adjustment set forth in
Section 2(c)(iii) shall be calculated.
(c) ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
determined and adjusted as follows:
i. The Purchase Price will be based upon a monthly Recurring
Revenue Rate derived from the Acquired Assets for the month
immediately preceding the Closing Date of two hundred seventy thousand
and no/100ths dollars ($270,000.00). In the event that the Recurring
Revenue Rate exceeds or is less than two hundred seventy thousand and
no/100ths dollars ($270,000.00), the Purchase Price shall be increased
or reduced, whichever may be the case, by twenty two dollars and
50/100ths dollars ($22.50) for each dollar that the Recurring Revenue
Rate exceeds or is less than such amount. For the purposes of this
Section 2(c)(i), the only revenues of the Seller not included in the
definition
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of "Recurring Revenue Rate" shall be unusual, non-recurring revenues
of the Seller unrelated to the Seller's internet access businesses,
including, but not limited to, set-up charges, web formatting
charges, and equipment sales.
ii. The Purchase Price shall be increased by the total amount
of accounts receivable acquired by the Buyer as of the Closing Date
and shall be decreased by (A) the total amount of accounts payable
that are related to the business of the Company and that are accrued
as of the Closing Date; (B) the amount of deferred revenue accrued as
of the Closing Date; and (C) one hundred thousand and no/100ths
dollars ($100,000.00) in exchange for the Buyer's agreement to assume
the lease obligations and the term loan as described below in Section
2(g).
iii. The number of the Buyer Shares to be issued pursuant to
Sections 2(b)(i) above shall be increased or decreased on the date of
issuance as follows: In the event the average closing price per share
of the Buyer Shares for the ten (10) day trading period ending on the
day prior to a date for issuance of the Installment Shares at the
expiration of the respective Installment Periods is: (A) lower than
the Closing Price determined at the Closing Date as set forth in
Section 2(b) above and as adjusted for any Dilutive Events, the
Purchase Price of such Installment Shares shall be decreased by $0.125
per share; and (B) higher than the Closing Price determined at the
Closing Date as set forth in Section 2(b) above and as adjusted for
any Dilutive Events, the Purchase Price of such Installment Shares
shall be increased by $0.125 per share.
(d) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place 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) July 30, 1999 (the "Closing Date"); PROVIDED,
HOWEVER, that the Closing Date may be extended until August 13, 1999, upon
mutual written agreement of the Parties.
(e) 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 Section 2(b); (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 D; (C) the
Assignment and Assumption of Customer Contracts in the form of Exhibit E (the
"Assignment and Assumption of Customer Contracts"); (D) the Assignment and
Assumption of Supplier Contracts in the form of Exhibit F (the "Assignment
and Assumption of Supplier Contracts"); and (iii)
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each Party shall deliver such other instruments of sale, transfer,
conveyance, and assignment as the other Party and its counsel reasonably may
request.
(f) ALLOCATION. The Parties agree that the allocation of the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) shall be in
accordance with the allocation schedule attached hereto as Exhibit K.
(g) ASSUMPTION OF LIABILITIES.
i. The Parties agree and acknowledge that, except as
expressly provided in this Section 2(g), the Buyer will not assume
any Liability or other obligation of the Seller pursuant to this
Agreement.
ii. On the terms and subject to the conditions set forth in
this Agreement, the Seller shall, on the Closing Date, assume the
Liabilities of the Seller as set forth on Exhibit C hereto (the
"Assumed Liabilities").
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE MEMBERS. The
Seller and the Members represent and warrant 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 limited liability
company duly organized, validly existing, and in good standing under the
laws of Oklahoma.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full legal 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 and Exhibits and Schedules have been duly authorized to
execute, deliver, and cause the Seller to perform this Agreement. This
Agreement and Exhibits and Schedules constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement and Exhibits and Schedules, nor the consummation of the
transactions contemplated hereby (including the assignments and
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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 organization or operating agreement of the
Seller or (ii) conflict with, result in a 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 its 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.
(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 and Security Interests, including
all debts, obligations, claims, limitations, liens, restrictions on
transfer, and/or any other encumbrances whatsoever, except as described in
Section 2(g) hereof.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit G are the
following financial statements of the Company (collectively, the "Financial
Statements"): (i) audited balance sheets and statements of income, changes
in stockholders' equity, and cash flow relating to the Company as of and
for the calendar years ended December 31, 1996, 1997 and 1998 relating to
the Company (the "Most Recent Fiscal Year End"); and (ii) unaudited balance
sheet and statements of income, changes in Members' equity, and cash flow
relating to the Acquired Assets as of and for the period ended June 30,
1999 (the "Most Recent Month End") (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, present fairly and accurately
the financial condition of the Seller as of such dates and the results of
operations of the Seller of the Acquired Assets for such periods, and are
true, correct, and complete.
(g) EVENTS SUBSEQUENT TO MOST RECENT MONTH END. Since the Most Recent
Month End, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of the Acquired Assets of the Seller.
9
(h) UNDISCLOSED LIABILITIES. The Seller has no Liability with respect
to the Acquired Assets (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Financial Statements
(rather than in any notes thereto), (ii) Liabilities which have arisen
after the Most Recent Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement,
or violation of law; and (iii) those obligations expressly assumed herein.
(i) LEGAL COMPLIANCE. The Seller has complied 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 all State PUC Authorizations and the 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 will have 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 will exist for any unpaid Taxes
relative to the Acquired Assets prior to the Closing.
(k) REAL PROPERTY. Section 3(k) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Seller. 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). Each of such leases and subleases is, and will continue to be
after the Closing, legal, valid, binding, enforceable, and in full force
and effect, and no party to such leases and subleases is in breach or
default thereunder or has repudiated any provision thereof.
(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) FIXED ASSETS. The Seller owns all fixed assets comprised in the
Acquired Assets set forth in Exhibit A (the "Fixed Assets"). Each such
Fixed 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 is presently used.
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(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 or the Company 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, 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) STATE PUC AUTHORIZATIONS AND FCC AUTHORIZATIONS. Exhibit H
hereto identifies each of the State PUC Authorizations and the FCC
Authorizations which has been issued to the Seller with respect to the
Acquired Assets. None of the State PUC Authorizations or the FCC
Authorizations has been modified, amended, or otherwise altered, and each
remains legal, valid, binding, in full force and effect, and unaffected by
the transactions contemplated by this Agreement.
(t) INVESTMENT. Each of the Buyer and the Seller understands that
(i) certain of the Buyer Shares have not been registered, and will not be
registered, under the Securities Act, or under any state securities laws,
until after the Closing Date, and are being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public
offering; (ii) the Seller is acquiring the Buyer Shares solely for its own
account for investment purposes, and not with a view to the distribution
thereof (except to the Members of the Seller); (iii) each Member of the
Seller is a sophisticated investor with knowledge and experience in
business and financial matters; (iv) each Member of the Seller has received
certain information concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the merits
and the risks inherent in holding the Buyer Shares; (v) each Member
11
of the Seller is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Shares; and (vi) each Member of the Seller
together with its legal, tax and financial advisers have investigated the
Buyer and its business and have negotiated transactions contemplated
herein and have independently determined to enter into such transactions.
(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.
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 legal 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
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).
(d) COMPLETE INVESTIGATION. The Buyer has been afforded an
opportunity to conduct, and has conducted to its
12
satisfaction, a complete due diligence investigation of the Seller, the
Acquired Assets, and the Assumed Liabilities. The Seller has cooperated
in connection with the Buyer's investigation. The Buyer has been
furnished such information, and the Buyer has had an opportunity to ask
such questions and have them answered by the Seller as the Buyer deemed
necessary in order to make an informed investment decision with respect
to its acquisition of the Acquired Assets.
(e) 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 such SEC Filings were true, complete and accurate in all
respects.
(f) ABSENCE OF CERTAIN CHANGES. Since the date of 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.
(g) THE BUYER SHARES. The Buyer Shares will be, when issued, duly
issued, validly existing fully paid and non-assessable, free and clear of
any Liabilities and other encumbrances and restrictions, except as set
forth herein.
(h) 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.
(i) 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
13
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 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 Section 3 and Section 4 above.
(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 that could
reasonably be expected to adversely affect the transactions contemplated
hereby or the Acquired Assets or business, financial condition or prospects
of the Seller.
(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, and, except as required in the
Ordinary Course of Business, the Seller will not cause or permit the Seller
to acquire or accrue any capital assets having an individual cost in excess
of $10,000.00, or an aggregate cost in excess of $50,000.00, or incur any
liability in excess of $25,000.00 without the prior written consent of the
Seller.
(e) FULL ACCESS/DUE DILIGENCE. 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, operations, personnel, books,
records (including Tax records), contracts, and any and all documents of,
or pertaining to, the Acquired Assets, and the Buyer shall be entitled to
make copies of all such materials.
(f) AUDIT. The Seller will obtain an audit acceptable to the Buyer
of the Company's financial statements through the Seller's fiscal years
ending December 31, 1996, 1997 and 1998. The cost of such audit shall be
borne equally by the Seller and the Buyer, but the Buyer shall have the
right to approve the choice of auditors prior to their engagement.
(g) 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 Section 3 and
Section 4 above. No disclosure by any Party pursuant to this Section 5(f),
14
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.
(h) EXCLUSIVITY. Until the Closing Date, as it may be extended
pursuant to Section 2(d) above, the Seller will not (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the Acquired Assets, of the
Seller (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate
in, or facilitate in any other manner any effort or attempt by any Person
to do or seek any of the foregoing. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing. In the event of the Seller's breach
of this Section 5(h), the Seller shall pay to the Buyer the sum of Twenty
Five Thousand Dollars ($25,000).
(i) 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 I (the "Registration Rights Agreement"),
setting forth the terms of ownership of the Buyer Shares; PROVIDED,
HOWEVER, that 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
15
(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 Customers;
v. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Suppliers;
vi. the Seller shall have delivered to the Buyer the Xxxx of
Sale;
vii. the Seller and the Buyer shall have received all other
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3 and Section 4 above;
viii. 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;
ix. the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
x. the Buyer shall have completed and shall be satisfied
with its due diligence examination of the Seller;
xi. the Buyer's board of directors shall have approved this
Agreement;
xii. 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;
xiii. there shall have been no material adverse change in the
Seller's assets, financial condition, operating results, customer and
employee relations, business, prospects or financing arrangements,
since February 28, 1999;
xiv. the Buyer and certain key employees of the Seller
identified by the Buyer shall have entered into mutually acceptable
employment arrangements; and
xv. the Buyer shall have received audited financial
statements for the Seller's fiscal years ending December 31, 1996,
1997 and 1998, audited by an independent accounting firm approved by
the Buyer, the cost of which shall be bore equally by the Seller and
the Buyer, and unaudited financial statements prepared by management
of the Seller with respect to the Seller's operations for
16
the fiscal period ending June 30, 1999, not later than five (5) days
prior to the Closing Date.
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 Customers;
v. the Seller and the Buyer shall have entered into the
Assignment and Assumption of Suppliers;
vi. 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;
vii. the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Seller, and dated as of the Closing Date;
viii. the Seller's Members shall have approved and duly signed
this Agreement;
ix. the Purchase Price, as adjusted pursuant to Section 2(c),
is not less than Four Million Nine Hundred Fifty Thousand Dollars
($4,950,000);
17
x. the Buyer and certain key employees of the Seller
identified by the Buyer shall have entered into mutually acceptable
employment arrangements; and
xi. 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, or (B) if the Closing shall not have occurred on or
before July ____, 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); and
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 (B) if the Closing shall not have occurred on or
before July ____, 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. In the event that the Buyer fails to
consummate the transactions set forth and contemplated in this Agreement
for any reason other than material cause, the Seller shall be entitled to
receive from the Buyer $25,000. The Parties agree that material cause
shall be defined as a material decline in the revenues of the Seller's
business that results in a Recurring Revenue Rate for the calendar month
preceding the Closing Date of less than
18
$220,000; a material misrepresentation by the Seller regarding the
business to be acquired by the Buyer; a material change in the Seller's
business or the Acquired Assets described above which impairs the ability
of the Seller (or the Buyer following acquisition of the business) to
continue to adequately serve the customers associated with the business or
to maintain the monthly Recurring Revenue Rate at current levels; the
inability of the Company to deliver the Internet business and all Acquired
Assets described above free and clear of all Liabilities, Security
Interests, claims, liens, encumbrances and other similar burdens and
interests, except for the Assumed Liabilities; or the failure of the Buyer
to be able to fully satisfy all obligations and terms and conditions
required pursuant to this Agreement. 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. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of 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. The Seller acknowledges and agrees that, from and after the
Closing, the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, directly relating to the
Acquired Assets (but not the Excluded Assets); PROVIDED, HOWEVER, that the
Buyer shall provide the Seller and its Members with reasonable access to
such documents, books, records, agreements, and financial data as
necessary. Seller may retain copies of any such material as it deems
necessary for such purposes.
(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
Section 8(h), Section 8(i), or Section 8(j) below).
(c) TRANSITION. None of the Seller nor its Members will 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. Each of the Seller and its
19
Members will refer all customer inquiries relating to the business of the
Seller to the Buyer from and after the Closing.
(d) CONFIDENTIALITY. The Seller and the Buyer shall, and shall cause
each of its shareholders and Members to, 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 other party or destroy, at the request and option of the other
party, 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 the Buyer, as the case may be, or any of their shareholders or
Members are 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, each party will notify the other party promptly
of the request or requirement so that 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, either
party or its shareholders or Members are, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, either party or its shareholders or Members may
disclose the Confidential Information to the tribunal; PROVIDED, HOWEVER,
that either party and its shareholders or Members shall use its reasonable
best efforts to obtain, at the reasonable request of the other party, 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. The obligations of the parties under this
Section 8(d) shall survive the Closing Date for a period of two (2) years.
(e) COVENANTS NOT TO COMPETE. For a period of two (2) years from and
after the Closing Date, the Members 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 any geographic area in
which the Seller conducts that business as of the Closing Date; PROVIDED,
HOWEVER, that
i. notwithstanding the provisions of Section 8(e) above, the
covenant not to compete set forth herein shall not impede or in any
manner prohibit the full participation of the Members in the business
activities related to Enviryx, L.L.C., MBA, Inc., Teleradiology, and
their direct and indirect involvement in development of software
programs, including web-enabling programs and internet application
programs for customers of MBA and Enviryx;
ii. no owner of less than one percent (1%) of the outstanding
stock of any publicly traded corporation shall be deemed to be engaged
solely by reason thereof in any business activity in contravention
hereof; and
iii. 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
20
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, any material third party
consents.
(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
i. In the event the Seller or the Members breach any of
their 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 and the Members within such
survival period, then the Seller and Members agree 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.
ii. In the event the Seller or the Members breach 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 and the Members within such
survival period, then the Seller and the Members agree 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).
iii. The Seller and the Members agree 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, other than the Assumed
Liabilities.
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iv. The Seller and the Members agree 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 for Taxes of the Seller
with respect to the Acquired Assets.
v. The Seller and the Members agree 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(i) to the extent
that such Adverse Consequences are covered by insurance of the Buyer.
Buyer shall cause its insurer to waive any subrogation rights against
Seller.
(i) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND THE
MEMBERS.
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 and the Members make a
written claim for indemnification against the Buyer within such
survival period, then the Buyer agrees to indemnify the Seller and the
Members from and against the entirety of any Adverse Consequences the
Seller and the Members 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 and the Members
from and against the entirety of any Adverse Consequences the Seller
and its Members 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 and
the Members 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. Seller shall cause its isurer to waive any
subrogation rights against Buyer.
(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
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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. (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) 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(j)(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).
iv. In the event any of the conditions in Section 8(j)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys' fees and
23
expenses), and (C) the Indemnifying Party will remain responsible for
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 to the fullest extent provided in this Section 8(j).
(k) OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions
set forth in Sections 8(h) through Section 8(j) above, are in addition to,
and not in derogation of, any statutory, equitable, or common law remedy
any Party may have with respect to the other Party or Parties, or the
transactions contemplated by this Agreement.
(l) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. Notwithstanding the
provisions of Section 8(h), through 8(k) above, neither Party shall be
obligated to indemnify the other Party or Parties, as the case may be, from
and against any Adverse Consequences (A) until such Party or Parties have
suffered Adverse Consequences in excess of fifty thousand and no/100ths
dollars ($50,000) in the aggregate after deduction of insurance proceeds
and after giving effect to income tax benefits, if any, (after which point
the Indemnifying Party or Parties will be obligated only to indemnify the
indemnified Party or Parties from and against further Adverse
Consequences), or (B) to the extent that such Adverse Consequences exceeds
the sum of five hundred thousand and no/100ths dollars ($500,000) in the
aggregate after deduction of insurance proceeds and after giving effect to
the income tax benefits; 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; and PROVIDED, FURTHER,
that the Members' obligations under Sections 8(h) through 8(k), shall be
several and not joint, and shall be proportionate to their respective
ownership interests in the Seller.
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.
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
or will not cover such Adverse Consequences, then the buyer shall be entitled
to seek payment directly from the Members. The form of the Escrow Agreement
is attached hereto as Exhibit L.
10. MISCELLANEOUS.
24
(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 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 Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed 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.
(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:
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IF TO THE SELLER:
Triad Resources, L.L.C.
000 Xxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Xx. Xxxxx X. Xxxxxx
COPIES TO:
Triad Resourses, L.L.C.
000 Xxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx
Holliman, Langholz, Xxxxxxx, Xxxxxxx & Sellers
00 Xxxx Xxxxx Xxxxxx
Xxxxx, XX 00000-0000
Attention: Xx. Xxxx X. Xxxxxxx
IF TO THE BUYER:
Rocky Mountain Internet, Inc.
d/b/a XXX.XXX
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx,
Chairman and Chief Executive Officer
COPIES TO:
Rocky Mountain Internet, Inc.
d/b/a XXX.XXX
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx, General Counsel
Holland & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000-00000
Attention: Xx. Xxxxx X. Xxxx
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,
26
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 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(i). 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 Members 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
Members 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,
27
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 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
28
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(j) 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., F/K/A ROCKY MOUNTAIN INTERNET, INC.
By:
-------------------------------
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
TRIAD RESOURCES, L.L.C.
By:
-------------------------------
Its:
-------------------------------
MEMBERS
By:
-------------------------------
Xxxxx X. Xxxxxx, Member
By:
-------------------------------
Xxxxxxx X. Xxxxxx, Member
30
