EXECUTION COPY
ASSET PURCHASE AGREEMENT
By and Between
ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation,
and
UNICOM COMMUNICATIONS, INC.,
a Kansas corporation
November 24, 1998
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF SELLER'S ASSETS . . . . . . . . . . . . . . . 1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Receivables . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Acquired Software . . . . . . . . . . . . . . . . . . . . . 2
(d) Third Party Software. . . . . . . . . . . . . . . . . . . . 2
(e) Tangible Personal Property. . . . . . . . . . . . . . . . . 2
(f) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Customer Contracts. . . . . . . . . . . . . . . . . . . . . 2
(h) Contracts and Other Agreements Relating to the Business . . 2
(i) Books, Records, Lists and Other Data. . . . . . . . . . . . 2
(j) Licenses, Permits . . . . . . . . . . . . . . . . . . . . . 3
(k) Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 3
(l) Marks and Names . . . . . . . . . . . . . . . . . . . . . . 3
(m) Copyrights. . . . . . . . . . . . . . . . . . . . . . . . . 3
(n) Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Licensed Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Retained Assets . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Title to the Purchased Assets; Documents of Conveyance . . . . . . 5
1.7 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 5
1.9 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . 6
2.1 Organization, Qualification, and Corporate Power . . . . . . . . . 6
2.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . . 7
2.4 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Events Subsequent to August 31, 1998 . . . . . . . . . . . . . . . 7
2.7 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Real Property and Personal Property. . . . . . . . . . . . . . . . 8
2.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.11 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . .10
2.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.13 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . .11
2.14 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.15 Receipt of Disclosure Documents. . . . . . . . . . . . . . . . . .11
2.16 Ability to Evaluate Risks and Merits . . . . . . . . . . . . . . .12
2.17 Suitability of Investment; No Plan of Distribution . . . . . . . .12
2.18 Access to Information. . . . . . . . . . . . . . . . . . . . . . .12
2.19 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . .12
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .13
3.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . .13
3.4 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.5 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.7 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . .14
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . .14
(b) Notices and Consents. . . . . . . . . . . . . . . . . . . .14
(c) Financial Statements. . . . . . . . . . . . . . . . . . . .14
(d) Operation of Business . . . . . . . . . . . . . . . . . . .14
(e) Preservation of Business. . . . . . . . . . . . . . . . . .14
(f) Access. . . . . . . . . . . . . . . . . . . . . . . . . . .14
(g) Notice of Developments. . . . . . . . . . . . . . . . . . .15
4.2 Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . .15
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . .15
(b) Litigation Support. . . . . . . . . . . . . . . . . . . . .15
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . .16
(d) Receivables . . . . . . . . . . . . . . . . . . . . . . . .16
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . .16
(f) Noncompetition and Nonsolicitation. . . . . . . . . . . . .17
(g) Prospectus. . . . . . . . . . . . . . . . . . . . . . . . .17
(h) Customer Contracts. . . . . . . . . . . . . . . . . . . . .17
(i) Equipment Inventory; Customer List for Retained Business. .17
ARTICLE V CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING . . . .17
5.1 Conditions to Obligation of Purchaser. . . . . . . . . . . . . . .17
5.2 Conditions to Obligation of Seller . . . . . . . . . . . . . . . .19
ARTICLE VI REMEDIES FOR BREACH . . . . . . . . . . . . . . . . . . . . . . .20
6.1 Survival of Representations and Warranties . . . . . . . . . . . .20
6.2 Indemnification Provisions for Benefit of Purchaser. . . . . . . .21
6.3 Indemnification Provisions for Benefit of Seller . . . . . . . . .21
6.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.5 Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.6 Maximum Liability. . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .22
7.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . .22
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .23
8.1 Press Releases and Public Announcements. . . . . . . . . . . . . .23
8.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . .23
8.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .23
8.4 Succession and Assignment. . . . . . . . . . . . . . . . . . . . .23
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.8 Equitable Relief; Arbitration. . . . . . . . . . . . . . . . . . .24
8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .25
8.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.13 Incorporation of Exhibits and Schedules. . . . . . . . . . . . . .26
8.14 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . .26
EXHIBITS
Exhibit A-1 - Form of License Agreement (License - 1 Software)
Exhibit A-2 - Form of License Agreement (License - 3 Software)
Exhibit B - Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Noncompetition and Nonsolicitation Agreement
Exhibit E - Form of Seller's Closing Certificate
Exhibit F - Form of Employment Agreements
Exhibit G - Form of Seller's Counsel Opinion
Exhibit H - Form of Purchaser's Closing Certificate
Exhibit I - Form of Purchaser's Counsel Opinion
SCHEDULES
Schedule 1 - The Business and the Retained Business
Schedule 1.1(b) - Hardware
Schedule 1.1(c) - Acquired Software
Schedule 1.1(d) - Third Party Software
Schedule 1.1(e) - Tangible Personal Property
Schedule 1.1(f) - Real Property
Schedule 1.1(g) - Customer Contracts
Schedule 1.1(h) - Other Contracts
Schedule 1.1(l) - Marks and Names
Schedule 1.1(m) - Patents and Copyrights
Schedule 1.2 - Licensed Assets
Schedule 1.3(a) - Retained Assets
Schedule 2.2 - Required Notices and Consents
Schedule 2.4 - Permitted Encumbrances
Schedule 2.8 - Real and Personal Property
Schedule 2.9 - Intellectual Property
Schedule 2.10 - Contracts
Schedule 2.12 - Litigation
Schedule 2.13 - Employee Benefits
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of
November 24, 1998, by and between ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation ("Purchaser"), and UNICOM COMMUNICATIONS, INC., a Kansas
corporation (the "Seller"). Purchaser and Seller are each individually
referred to as a "Party" and collectively referred to as the "Parties."
RECITALS
A. Seller is in the business in part of conducting the Business as
defined in Schedule 1.
B. Seller owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by Seller in the conduct of
the Business.
C. Seller also is in the business of conducting the Retained
Business as defined in Schedule 1.
D. Seller owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by Seller in the conduct of
the Retained Business.
E. Subject to the terms and conditions contained in this
Agreement, Seller desires to transfer to Purchaser, and Purchaser desires to
acquire from Seller, substantially all of Seller's assets that are used in the
operation of the Business (the "Acquisition"), but not in the operation of the
Retained Business.
AGREEMENT
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.
ARTICLE I
SALE AND PURCHASE OF SELLER'S ASSETS
I.1 PURCHASED ASSETS. On the terms and subject to the conditions
contained herein, at the Closing (as defined in Section 1.9 below) Seller shall
sell to Purchaser, free and clear of all liens, claims, security interests,
encumbrances or rights of others, except for the Permitted Encumbrances (as
defined in Section 1.6 below), all of Seller's right, title and interest in and
to the assets (the "Purchased Assets") used by Seller in the Business existing
as of the date on which the transactions contemplated hereby are consummated
(the "Closing Date"), and which are listed below:
(a) RECEIVABLES. All accounts receivable, notes receivable
and similar receivables accruing from the Business and existing as of the
Closing Date and accruing after the Closing Date.
(b) HARDWARE. All of the hardware listed on SCHEDULE 1.1(b),
any related documentation or manuals, and Seller's rights under related
warranties.
(c) ACQUIRED SOFTWARE. All of the software listed on
SCHEDULE 1.1(c) (the "Acquired Software"), including all inventories of computer
program code for that software, any related documentation or manuals, and
Seller's rights under all related warranties.
(d) THIRD PARTY SOFTWARE. All third party software licensed
by Seller and listed on SCHEDULE 1.1(d), including any related documentation and
user materials, and Seller's rights under all related warranties (the "Third
Party Software").
(e) TANGIBLE PERSONAL PROPERTY. The fixed assets listed on
SCHEDULE 1.1(e), and all other tangible personal property listed on SCHEDULE
1.1(e). The tangible personal property included in the Purchased Assets is sold
"as is, where is," without express or implied warranties of condition,
merchantability, suitability for a particular purpose or otherwise.
(f) LEASES. That portion of Seller's leasehold interest in
the real property listed on SCHEDULE 1.1(f) (the "Real Property Leases") and
used in the Business (which leasehold interest shall be assigned pursuant to a
mutually acceptable Sublease and/or other documentation to be entered into by
the Parties after the Closing Date) and all of Seller's leasehold interest in
the hardware, fixed assets and other tangible personal property listed on
SCHEDULE 1.1(f) (the "Personal Property Leases").
(g) CUSTOMER CONTRACTS. All contracts, agreements, licenses,
permits, arrangements, permissions and other commitments with customers with
respect to the Business listed on SCHEDULE 1.1(g) (the "Customer Contracts").
(h) CONTRACTS AND OTHER AGREEMENTS RELATING TO THE BUSINESS.
All agreements, licenses, permits, personal property leases, permissions and
other commitments and arrangements, oral or written, or the parts thereof, that
relate only to the Business and not to the Retained Business and that are listed
on SCHEDULE 1.1(h) (collectively with Customer Contracts, the "Acquired
Contracts").
(i) BOOKS, RECORDS, LISTS AND OTHER DATA. Copies of all
customer lists used directly in the Business and the related books, records,
files, invoices, accounts, surveys, records, supplier lists, catalogs, price
lists, marketing and advertising information, purchasing histories, profiles and
materials, technical bulletins, books and records of account and other
financial, customer and credit data, and all firmware, tapes and other materials
used to store, record or produce such data, owned, leased or licensed by Seller
and used directly in the Business.
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(j) LICENSES, PERMITS. All applicable governmental licenses,
permits, approvals and authorizations that relate to the operation of the
Business (to the extent transferable).
(k) PREPAYMENTS. All security, utility or similar deposits
or prepaid expenses of Seller.
(l) MARKS AND NAMES . The trademarks, service marks, and
trade names (including registrations, licenses, and applications to register
pertaining thereto) listed on SCHEDULE 1.1(l).
(m) COPYRIGHTS. The copyrights (including registrations,
licenses, and applications to register pertaining thereto), and other
intellectual property rights, trade secrets, and other proprietary information,
processes, and formulas necessary for the operation of, the Business and listed
on SCHEDULE 1.1(m).
(n) GOODWILL. All goodwill of the Business as a going
concern associated with the Business including the trademarks, service marks,
trade names and domain names set forth in SCHEDULES 1.2(l) AND 1.2(m) and
excluding the goodwill associated with the Retained Business.
I.2 LICENSED ASSETS. On the Closing Date and pursuant to the terms
of the License Agreements in the forms of EXHIBITS A-1 AND A-2 attached hereto,
Seller shall grant to Purchaser permanent, paid-up, royalty-free, non-exclusive
licenses for the software listed on SCHEDULE 1.2 (the "Licensed Software") for
the uses and subject to the limitations described on SCHEDULE 1.2.
I.3 EXCLUDED ASSETS. The assets of Seller not expressly set forth
in SECTION 1.1 (the "Excluded Assets") shall be retained by Seller, including
without limitation the following:
(a) RETAINED ASSETS. All assets of Seller used in or
material to or necessary to the operation of the Retained Business, including
without limitation the items listed on SCHEDULE 1.3(a).
(b) CASH. Cash and cash equivalents held by Seller.
I.4 ASSUMED LIABILITIES. At the Closing, Purchaser shall assume
and shall thereafter pay, discharge and perform all of the obligations of Seller
related to the Business arising after the Closing (the "Assumed Liabilities"),
which consist of the following:
(a) All obligations related to the Real Property Leases and
Personal Property Leases arising after the Closing Date, PROVIDED THAT
liabilities resulting from the obligation to make lease payments on the Personal
Property Leases assumed hereunder shall not exceed, in the
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aggregate, $230,447 from and after the Closing Date through the date of
termination in effect for each lease on the date hereof.
(b) All obligations related to the Acquired Contracts arising
after the Closing Date.
(c) All accounts payable relating to the Business and arising
after the Closing Date.
(d) Obligations related to the Meridian Phone System;
Purchaser and Seller agree that, with respect to the Meridian phone system,
Purchaser shall assume the rental cost under the existing lease and Seller shall
agree to pay Purchaser at least $750 per month for twelve months for use of such
phone system.
For the remainder of the month in which the Closing Date occurs (the
"Closing Month"), Seller shall immediately forward to Purchaser all invoices due
with respect to the Business (but not with respect to the Retained Business),
and Purchaser shall pay all invoices relating to the Assumed Liabilities when
due. Within forty-five (45) days after the Closing Date, the Parties will
jointly prepare a reconciliation of such payments and obligations, at which
time, Seller shall reimburse Purchaser for its pro rata share of such payments
and obligations based upon the number of days elapsed from the Closing Date to
the end of the Closing Month.
I.5 EXCLUDED LIABILITIES. Other than as set forth in Section 1.4,
Purchaser shall not assume or be liable for, and Seller shall retain and remain
responsible for, all of Seller's debts, liabilities and obligations of any
nature whatsoever, whether accrued, absolute or contingent, whether known or
unknown, whether due or to become due and whether related to the Purchased
Assets or otherwise, including without limitation:
(a) Income and capital gains taxes incurred as a result of
the transactions contemplated hereby.
(b) All accounts payable of the Business arising in periods
on or before the Closing Date notwithstanding when any billing statement
therefor is received.
(c) All obligations with respect to employees of Seller who
are subsequently hired by Purchaser arising on or prior to the Closing Date,
including, without limitation, discharge of all wages and salaries of the
employees and all other costs and expenses related to their employment,
including any taxes, accrued holiday pay, accrued bonus, and contributions to
retirement benefit plans or other sums payable in respect of service prior to
such date.
I.6 TITLE TO THE PURCHASED ASSETS; DOCUMENTS OF CONVEYANCE. At the
Closing, Seller shall convey all of its right, title and interest in and to the
Purchased Assets to Purchaser, free and clear of all liabilities, obligations,
liens, encumbrances and rights of others, excepting only the liens, claims,
encumbrances or rights of others set forth on SCHEDULE 2.4 attached hereto
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(the "Permitted Encumbrances"). Title to the Purchased Assets shall be conveyed
by Seller to the Purchaser pursuant to a Bill of Sale, Assignment and Assumption
Agreement, in the form of EXHIBIT B attached hereto, and by such other documents
as are reasonably acceptable to counsel for Purchaser in accordance with the
terms hereof. Each of the parties hereto agrees to use its best efforts to take
or cause to be taken all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable, whether before or after Closing, to
ensure that the transfer of title to the Purchased Assets to Purchaser occurs as
contemplated hereunder.
I.7 PURCHASE PRICE. The purchase price for the Purchased Assets
shall be $1,700,000 (the "Purchase Price").
I.8 PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price shall be paid in the form of shares
(the "Purchaser Shares") of Purchaser's common stock, par value $.001 per share
(the "Purchaser Common Stock"), which shares shall be valued at the average of
the closing trading prices of Purchaser's Common Stock on the Nasdaq SmallCap
Market for the five (5) trading days immediately prior to the Closing. The
Purchaser Shares issued shall be registered when issued under the Securities Act
of 1933, as amended (the "Securities Act").
(b) The Purchase Price shall be paid as follows:
(i) 80% of the Purchaser Shares shall be issued at
Closing;
(ii) 10% of the Purchaser Shares shall be issued on the
date which is thirty (30) days after the Closing Date (but in no event
prior to January 3, 1999); and
(iii) 10% of the Purchaser Shares shall be deposited
(the "Escrow Deposit") with a mutually acceptable escrow agent (the
"Escrow Agent") pursuant to the terms of an escrow agreement in the form
of EXHIBIT C attached hereto (the "Escrow Agreement") by and among
Purchaser, the Company and the Escrow Agent. The Escrow Deposit shall
be distributed as follows: Within five (5) business days after the date
which is twelve (12) months after the Closing Date, Purchaser shall
instruct the Escrow Agent to disburse to the Seller from the Escrow
Deposit that number of Purchaser Shares remaining after reducing such
number of shares by the aggregate amount of any and all damages awarded
to Purchaser as of such date under a final judgment of a court of law or
arbitral body for Purchaser Losses pursuant to Article VI hereto.
I.9 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall occur as soon as practicable after the date hereof,
but in no event later than the date which is ten (10) days after the
satisfaction or waiver of all of the conditions precedent set forth herein, as
determined by Purchaser, at the offices of Purchaser's counsel, or by facsimile
should the Parties so agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Purchaser to enter into this Agreement and consummate this
transaction, Seller represents and warrants to Purchaser that the statements
contained in this Article II are true, correct and complete as of the date of
this Agreement and will be true, 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 Article II). As used in this Agreement, the term
"Material Adverse Effect" means a material adverse effect on the operations,
properties, assets, condition (financial or other) or results of operations of
the Business.
II.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Seller
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Seller is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required other than where the failure to be duly
qualified would not have a Material Adverse Effect. Seller has full power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it other than where the failure to have such would not have a
Material Adverse Effect. Seller has provided to Purchaser (i) true and correct
copies of the Seller's Articles of Incorporation and all amendments thereto;
(ii) true and correct copies of the Seller's bylaws and all amendments thereto;
and (ii) a list of the current directors and officers of Seller. Seller is not
in default under or in violation of any provision of its Articles of
Incorporation or bylaws.
II.2 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
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 Seller is subject or any provision of the
Articles of Incorporation or bylaws of 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 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), except where such action would not have a Material
Adverse Effect. Except as set forth on SCHEDULE 2.2, Seller need not give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any governmental agency or third party in order for the Parties to
consummate the transactions contemplated by this Agreement including, but not
limited to, the assignment of the Acquired Contracts.
II.3 AUTHORIZATION OF TRANSACTION. Seller has the full power and
authority to execute and deliver this Agreement and to perform the obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Seller, enforceable in accordance with its terms and conditions. This
Agreement has been approved by the Board of Directors and the shareholders of
the Seller, and no other corporate proceedings on the part of the Seller are
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necessary to authorize the execution and delivery of this Agreement or the
consummation by the Seller of the transactions contemplated hereby. Seller
believes it has provided adequate information to its shareholders on which the
shareholders can make an informed decision regarding the approval of the
transactions contemplated hereby.
II.4 TITLE TO ASSETS. Seller has good and marketable title to, or a
valid leasehold interest in, the Purchased Assets and the Licensed Software,
free and clear of all liens, claims, security interests, encumbrances or rights
of others, except for the Permitted Encumbrances listed on SCHEDULE 2.4.
II.5 FINANCIAL STATEMENTS. Seller has provided or shall provide
prior to Closing copies of the following financial statements relating to the
Business (collectively the "Financial Statements"): (i) unaudited financial
statements and a related report with respect to the fiscal year of Seller ended
December 31, 1997 and for the period ended August 31, 1998 (prorated financial
statement for the Business); (ii) accounts payables and accounts receivables
current within two (2) business days of the date hereof; and (iii) the balance
sheet for the Business for the period ended October 31, 1998 (the "Ending
Balance Sheet"). The Ending Balance Sheet has been prepared in accordance with
generally accepted accounting principles, consistently applied (except as may be
indicated thereon or in the notes thereto) and fairly presents the financial
condition of the Seller's Business as of the date thereof and the results of its
operations and changes in financial condition for the periods then ended,
subject, in the case of unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein; the
other material comprising the Financial Statements have been prepared on a
comprehensive basis of accounting other than generally accepted accounting
principles.
II.6 EVENTS SUBSEQUENT TO AUGUST 31, 1998. Since August 31, 1998:
(a) Seller has conducted its Business in the ordinary course
and has not undergone any change in the business, financial condition,
operations, results of operations, or future prospects of Seller that would
reasonably be expected to result in a Material Adverse Effect.
(b) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) related to the Business involving more than $10,000 or outside the
ordinary course of business;
(c) Seller has not delayed or postponed the payment of
material accounts payable and other material liabilities related to the Business
outside the ordinary course of business; and
(d) Seller has not canceled, compromised, waived, or released
any material right or claim (or series of related material rights and claims)
related to the Business;
II.7 LEGAL COMPLIANCE. Seller, its predecessors and affiliates,
have complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders,
7
decrees, rulings, and charges thereunder) of federal, state or local governments
(and all agencies thereto) applicable to the Business, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against Seller alleging any failure so to comply
other than where the failure to comply would not have a Material Adverse Effect.
II.8 REAL PROPERTY AND PERSONAL PROPERTY. SCHEDULE 2.8 sets forth
a list containing a description of all interests in Real Property (including,
without limitation, leasehold interests) and Personal Property owned or
leased by Seller and necessary to the conduct of the Business. Seller has
good and marketable title to (or leasehold interests in) and rightful
possession of all of its Real and Personal Property, tangible and intangible,
necessary to the conduct of the Business, including that reflected in the
Ending Balance Sheet and all assets acquired by Seller since the date of the
Ending Balance Sheet. Except for the Permitted Encumbrances, the Real and
Personal Property necessary to the conduct of the Business is owned by Seller
free and clear of any liens, encumbrances, security interests, claims or
rights of another (including any rights of a subsidiary or other affiliate).
The tangible personal property of Seller is in good operating condition and
repair, normal wear and tear excepted, but is sold "as is, where is," without
express or implied warranties of condition, merchantability, suitability for
a particular purpose or otherwise. The Purchased Assets and the Licensed
Assets reflected in the Ending Balance Sheet, and any fully-depreciated
assets, acquired since the date of the Ending Balance Sheet, constitute all
the assets of Seller with respect to the Business. The operation of the
Business of Seller in the manner in which they are now operated does not
violate any material rules, regulations, or laws.
II.9 INTELLECTUAL PROPERTY.
(a) To the best of Seller's knowledge, Seller owns or has
the rights to use pursuant to license, sublicense, agreement, or permission all
intellectual property necessary for the operation of the Business of Seller as
presently conducted. To the best of Seller's knowledge, each item of
intellectual property owned or used by Seller immediately prior to the Closing
hereunder that is a Purchased Asset will be owned or available for use by
Purchaser on identical terms and conditions immediately subsequent to the
Closing hereunder. Seller has taken all necessary actions to maintain and
protect each item of intellectual property that it owns or uses in connection
with the Business.
(b) In the conduct of the Business, to the best of Seller's
knowledge, Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any material intellectual property rights of
third parties, and Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller have not received
any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Seller
must license or refrain from using any intellectual property rights of any third
party) asserting such infringement, misappropriation or conflict. To the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, no third party has
interfered with,
8
infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of Seller.
(c) SCHEDULE 2.9 identifies each trade name or unregistered
trademark used by Seller in connection with its Business. With respect to each
item of intellectual property required to be identified on SCHEDULE 2.9, except
as indicated on such SCHEDULE 2.9:
(i) Seller possesses all right, title, and interest in
and to the item, free and clear of any security interest, license, or
other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(iv) Seller has not agreed to indemnify any person for
or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) To the best of Seller's knowledge, SCHEDULE 2.9
identifies each item of intellectual property that any third party owns and that
Seller uses in the conduct of the Business pursuant to license, sublicense,
agreement, or permission. To the best of Seller's knowledge, Seller has
delivered to Purchaser true, correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of intellectual property required to be identified on SCHEDULE 2.9, to
the best of Seller's knowledge and except as set forth on such Schedule 2.9:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
9
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through (iv)
above are true and correct with respect to the underlying license;
(vi) the underlying item of intellectual property is
not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, is
threatened which challenges the legality, validity, or enforceability of
the underlying item of intellectual property; and
(viii) Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(e) SCHEDULE 2.9 identifies each domain name, dedicated Access
customer IP block, trade name or unregistered trademark used by Seller in
connection with the Business.
II.10 CONTRACTS. SCHEDULE 1.1(g) is a complete list of all of
Seller's customer contracts that relate to the Business. The Acquired Contracts
set forth in SCHEDULE 1.1(h) comprise all of the material contracts of Seller
related to the Business. Except as disclosed on SCHEDULE 2.10:
(a) Seller has fulfilled all material obligations required
to be performed by it prior to the date hereof with respect to each of the
Acquired Contracts; and
(b) To Seller's knowledge, no other contracting party to an
Acquired Contract is in breach thereof.
II.11 ACCOUNTS RECEIVABLE. The accounts receivable of the Business
(i) have arisen in the ordinary course of business of Seller; (ii) represent
bona fide payment obligations of the applicable account debtors; (iii) subject
only to reserves for bad debts set forth on the Financial Statements, which
reserves have been computed in a manner consistent with past practice and
subject to customer trade discounts consistent with past practice, have been
collected or will be collected in the ordinary course of business of Seller in
the aggregate recorded amounts thereof in accordance with their terms; and (iv)
they are not subject to any recoupments, set-offs or counterclaims, except as
allowed in clause (iii).
II.12 LITIGATION. Other than as set forth on SCHEDULE 2.12, in
relation to the Business there is no material outstanding injunction, judgment,
order, decree, ruling, or charge, and no pending or, to the knowledge of Seller,
threatened, adverse material claim, dispute, suit, proceeding, hearing or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction or before any arbitrator.
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II.13 EMPLOYEE BENEFITS. SCHEDULE 2.13 identifies the material
employee benefits and all employee benefit plans to which the Business's
employees are entitled.
II.14 BROKERS' FEES. Other than its fee payable to Davids &
Associates, 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.
II.15 RECEIPT OF DISCLOSURE DOCUMENTS. Seller has received and
carefully reviewed, and understands the information contained in, the
Disclosure Documents identified below (including the risk factors contained
therein) and all other documents Seller has requested from Purchaser. In
evaluating the suitability of the Acquisition and the resulting acquisition
of the Purchaser Shares and all other rights, whether contingent or fixed, to
receive Purchaser Shares (collectively the "Securities") (the Acquisition and
resulting acquisition of the Securities hereinafter referred to as the
"investment in the Securities"), Seller has not relied upon any
representations or other information (whether oral or written) from
Purchaser, its officers, directors, or employees or from any other person
other than as set forth herein, in the Disclosure Documents and in other
documents requested by Seller from Purchaser.
The "Disclosure Documents" consist of the following: (i) Purchaser's Annual
Report on Form 10-KSB for the year ended December 31, 1997, (ii) Purchaser's
Proxy Statement for its annual meeting held on March 12, 1998, (iii) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998, and Amendment to the Quarterly Report on Form 10-QSB/A-1 for
the quarter ended March 31, 1998, (iv) the Registration Statement on Form S-1
dated November __, 1998, File No. 333-52731, with respect to the Purchaser
Shares to be issued pursuant to the terms of this Agreement (the "Registration
Statement"), including the prospectus contained therein (the "Prospectus"), (v)
Current Reports on Form 8-K, dated June 5, 1998 (disclosing the acquisition of
Infohiway, Inc., and the signing of an agreement and plan of merger with
Internet Communications Corporation ("ICC")) and dated June 30, 1998 (disclosing
the acquisition of Application Methods, Inc.), and Amendments No. 1 and No. 2 to
the Current Report on Form 8-K/A dated June 5, 1998; and (vi) the press releases
issued by ICC and Purchaser on or about October 14, 1998 with respect to the
claims asserted by ICC.
II.16 ABILITY TO EVALUATE RISKS AND MERITS. Seller has such
knowledge and experience in financial and business matters that Seller is
capable of evaluating the merits and risks of an investment in the Securities
and has the capacity to protect Seller's own interests in connection with an
investment in the Securities and has the net worth to undertake such risks.
II.17 SUITABILITY OF INVESTMENT; NO PLAN OF DISTRIBUTION. Seller has
obtained, to the extent Seller deems necessary, its own professional advice with
respect to the risks inherent in the investment in the Securities and the
suitability of an investment in the Securities in light of Seller's financial
condition and investment needs. Seller does not intend to engage in any
11
transfer of the Purchaser Shares that is set forth in Rule 145(a) promulgated
under the Securities Act.
II.18 ACCESS TO INFORMATION. Seller has been given access to full
and complete information regarding Purchaser and has utilized such access to
Seller's satisfaction, for the purposes of asking questions and receiving
answers concerning the terms and conditions of the Acquisition (including the
offering of the Securities in connection with the Acquisition) or verifying the
information included in the Disclosure Documents and obtaining any of the
documents described in the Disclosure Documents. Seller has been given the
opportunity to ask questions of, and to receive answers from, representatives of
Purchaser to obtain information concerning the Acquisition and to receive any
additional information, to the extent reasonably available, necessary to verify
the accuracy of information provided in the Disclosure Documents.
II.19 EXPENSES. Seller acknowledges that all costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby are the sole responsibility of each
Party and Seller will pay its respective costs and expenses; provided, however
that Purchaser and Seller shall each be responsible for one-half of the Escrow
Agent's fees.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Seller to enter into this Agreement and consummate this
transaction, Purchaser represents and warrants to Seller that the statements
contained in this Article III are true, correct and complete as of the date of
this Agreement and will be true, 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 Article III).
III.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Purchaser is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required other than where the failure to be duly qualified would not have a
material adverse effect on Purchaser. Purchaser has full power and authority
and all licenses, permits and authorizations necessary to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it other than where the failure to have such would not have a material
adverse effect on Purchaser, as the case may be.
III.2 NONCONTRAVENTION. Neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
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 Purchaser is subject or any provision of
the Articles of Incorporation or bylaws of Purchaser 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,
12
instrument, or other arrangement to which Purchaser 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), except where such action would
not have a material adverse effect on Purchaser. Except to comply with federal
and state securities laws, Purchaser need not give any notice to, make any
filing with, or obtain any authorization, consent or approval of any
governmental agency or third party in order for the Parties to consummate the
transaction contemplated by this Agreement.
III.3 AUTHORIZATION OF TRANSACTION. Purchaser has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Purchaser, enforceable in accordance with its terms and
conditions. No vote is required by the shareholders of Purchaser for the
consummation of the transactions contemplated by this Agreement. The Purchaser
Shares issuable pursuant to the terms hereof have been, or will be prior to the
Closing Date, duly authorized and reserved for issuance.
III.4 DISCLOSURE. As of the date thereof, the Registration Statement
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
III.5 BROKERS' FEES. Purchaser does not have any 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 Seller
could become liable or obligated.
III.6 EXPENSES. Purchaser acknowledges that all costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby are the sole responsibility of each
Party and Purchaser will pay its respective costs and expenses; provided,
however that Purchaser and Seller shall each be responsible for one-half of the
Escrow Agent's fees.
III.7 REGISTRATION. The Purchaser Shares shall be registered under
the Securities Act when issued pursuant to the Registration Statement. Other
than state "Blue Sky" laws compliance, no further registration or qualification
is necessary for the issuance to Seller, and the Seller's shares shall be issued
without any restrictive legends of any kind; Seller acknowledges the terms of
Subsection 4.2(g) below.
ARTICLE IV
COVENANTS
IV.1 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 his or its
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and
13
make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article V
below).
(b) NOTICES AND CONSENTS. Seller will give any notices to
third parties, and Parties will use their best efforts to obtain any third party
consents, that are required or that Purchaser may reasonably request in
connection with this transaction. Each of the Parties will give any notices to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies.
(c) FINANCIAL STATEMENTS. The Seller will obtain and
deliver to Purchaser prior to the date which is three (3) days prior to the
Closing Date unaudited financial statements of Seller for the month-end
preceding the Closing Date.
(d) OPERATION OF BUSINESS. After the date hereof, with
respect to the Business, Seller will not engage in any practice, take any
action, or enter into any transaction outside the ordinary course of business
without prior written consent from Purchaser. Without limiting the generality
of the foregoing, Seller will not (i)sell, dispose or otherwise transfer any of
the assets related to the Business, including without limitation waive any
material rights or claims, or impose any security interest upon any of its
assets, (ii) commit to doing any of the foregoing; or (ii) otherwise engage in
any practice, take any action, or enter into any transaction of the sort
described above or that would cause any condition, representation or warranty to
be breached or to become untrue.
(e) PRESERVATION OF BUSINESS. Seller will keep the Business,
its properties and related goodwill substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(f) ACCESS. Seller will permit representatives of Purchaser
to have reasonable access (including providing introductions, where necessary)
to all premises, properties, personnel, lessors, licensors, vendors, supplies,
creditors, books, records (including tax records), contracts, and documents of
or pertaining to Seller. Seller will cause its independent accountants to make
available their work papers with respect to Seller and to otherwise provide such
assistance as is reasonably requested by Purchaser.
(g) NOTICE OF DEVELOPMENTS. Seller will give prompt written
notice to Purchaser of any adverse development causing a breach or a potential
breach of any of the representations and warranties in Article II above.
Purchaser shall give prompt written notice to Seller of any adverse development
causing a breach or a potential breach of any of the representations and
warranties in Article III above, and of any event that could reasonably have a
material adverse effect on the financial condition of Purchaser or the market
for its shares of Common Stock. No disclosure or discovery by a party hereto
shall be deemed to amend or supplement any Schedule hereto or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
14
(h) EXCLUSIVITY. 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 assets, of 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. Seller will notify
Purchaser immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing. Seller acknowledges that the
restriction set forth in this Section 4.1(h) is material to Purchaser and, that,
if breached, Purchaser shall be entitled to equitable relief.
IV.2 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 this
Agreement, each of the Parties will take such further action (including, the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Article VI below). Seller agrees that from and after Closing for a period of
one year, upon a reasonable request by Purchaser, Seller will promptly supply
copies of any documents, books, records (including tax records), agreements, and
financial data of any sort relating, to the Business.
(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 accruing on
or prior to the Closing Date involving Seller, each of the other Parties will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their 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
Article VI below).
(c) TRANSITION. Seller will not take any action that is
designed, intended or could reasonably be expected to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of Seller from maintaining the same business relationships with Seller
after Closing as it maintained with Seller prior to the Closing. Seller will
refer all customer inquiries relating to the Business of Seller to Purchaser
from and after the Closing.
(d) RECEIVABLES. Purchaser and Seller each agree to
cooperate in the collection of accounts receivable of the other party.
Purchaser will attempt to collect the accounts receivable of Seller in a manner
consistent with Seller's reasonable commercial practices prior to the Closing
Date (but without resort to litigation or the use of collection
15
agencies or similar efforts). If Purchaser receives funds attributable to an
account receivable of Seller, or Seller receives funds attributable to an
account receivable of Purchaser (including receivables arising after the Closing
Date which are attributable to the Business), the party receiving such funds
shall promptly convey them to the other party.
(e) CONFIDENTIALITY. The parties will treat and hold as
confidential all of the confidential information, refrain from using any of
the confidential information of the other party except as provided in this
Agreement, and deliver promptly to the other party, or destroy, at the
request and option of that party, all tangible embodiments (and all copies)
of the confidential information which are in his or its possession. In the
event that either party is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
confidential information, such party will notify the other party promptly of
the request or requirement so that the party subject to the request or
requirement may seek an appropriate protective order or waive compliance with
the provisions of this Section 4.2(e). If, in the absence of a protective
order or the receipt of a waiver hereunder, a party hereto is, on the advice
of counsel, compelled to disclose any confidential information to any
tribunal or else stand liable for contempt, such party may disclose the
confidential information to the tribunal; PROVIDED, HOWEVER, that the party
subject to such request or requirement shall use its best efforts to obtain,
at the request of such party, an order or other assurance that confidential
treatment will be accorded to such portion of the confidential information
required to be disclosed as such Party shall designate. The foregoing
provisions shall not apply to any confidential information which is generally
available to the public immediately prior to the time of disclosure.
Seller acknowledges and understands that confidential information,
including the existence of this Agreement before dissemination to the public,
may include "material, non-public information," as the term is understood and
interpreted under federal and state securities laws and rules. Seller further
acknowledges and understands that purchasing or selling securities while in
possession of material non-public information may subject the purchaser, seller
and/or person(s) who have provided such information to liability under such
laws, including potential criminal liability. Seller hereby agrees that all
confidential information, whether furnished before or after the date of this
Agreement, shall be treated confidentially.
(f) NONCOMPETITION AND NONSOLICITATION. Seller and Purchaser
agree to comply with the terms and conditions set forth in the Noncompetition
and Nonsolicitation Agreement, the form of which is attached hereto as EXHIBIT
D.
(g) PROSPECTUS. As long as Seller holds Purchaser Shares, a
current prospectus regarding the common stock of Purchaser shall be available
for use by Seller for one (1) year after the Closing Date; provided such
prospectus may not be available at times when Purchaser has to update the
disclosure pursuant to a supplement or post-effective amendment; provided
further that any such period of unavailability shall not exceed thirty (30) days
and the total of such periods shall not exceed ninety (90) days in the one year
following the Closing Date (and
16
any excess beyond ninety (90) days shall automatically extend such one-year
period by an equivalent number of days).
(h) CUSTOMER CONTRACTS. Purchaser and Seller shall each
perform the obligations under the Customer Contracts reasonably attributable to
the Business or the Retained Business, respectively.
(i) EQUIPMENT INVENTORY; CUSTOMER LIST FOR RETAINED BUSINESS.
Within ten (10) business days after the Closing Date, Seller shall deliver to
Purchaser a comprehensive inventory of all Personal Property included in the
Purchased Assets. Within thirty (30) days after the Closing Date, Seller shall
deliver to Purchaser a comprehensive list of Seller's customers with respect to
the Retained Business (the "Retained Business Customers").
ARTICLE V
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
V.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) this Agreement and the Acquisition shall have received
the requisite Seller approval;
(b) Seller shall have procured all third party consents as
set forth on SCHEDULE 2.2;
(c) Seller shall have procured all necessary governmental
consents, and Purchaser shall have obtained a valid effectiveness order from the
Securities and Exchange Commission and shall have obtained any applicable state
securities law approvals;
(d) all of the representations and warranties set forth in
Articles II above shall be true and correct in all respects at and as of the
Closing Date and Purchaser shall have received a certificate of Seller in the
form of EXHIBIT E hereto to that effect;
(e) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(f) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, or local jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) affect adversely the right of
Purchaser to own the Purchased Assets, (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
17
(g) Seller shall deliver to Purchaser, a Certificate of the
Secretary of Seller dated as of Closing certifying that the following are true,
correct and complete copies and the originals thereof: Articles of Incorporation
of Seller, as amended, and certified by the Kansas Secretary of State, bylaws
(as amended to date), resolutions of the board of directors recommending
approval of the Acquisition;
(h) Seller shall have delivered to Purchaser a certificate to
the effect that each of the conditions specified above in this Section 5.1 have
been satisfied in all respects, in the form attached hereto as EXHIBIT E;
(i) Seller shall have delivered to Purchaser a Noncompetition
and Nonsolicitation Agreement by and between it and Purchaser, substantially in
the form attached hereto as EXHIBIT D;
(j) Grant Rogers and Gerald Combs shall have executed and
delivered to Purchaser the Employment Agreements, substantially in the form of
EXHIBIT F attached hereto;
(k) Purchaser shall have received an opinion from Seller's
counsel substantially in the form of EXHIBIT G attached hereto;
(l) Seller shall have at the Closing Date annualized revenues
(measured retrospectively based on the last full month immediately preceding the
Closing Date) of at least $1,100,000, of which $1,000,000 shall be from
recurring sources provided that if Seller does not have such revenue levels,
Purchaser shall have the right to acquire the Purchased Assets at an adjusted
Purchase Price based on agreed upon multiple of revenues. Such revenue shall be
generated from:
(i) at least 146 content hosting customers generating
$18,000 monthly recurring revenue;
(ii) at least 100 dedicated access service customers
generating $30,000 in monthly recurring revenue;
(iii) at least 1,700 dial-up access customers generating
$32,000 in monthly recurring revenue; and
(iv) guaranteed monthly recurring revenue of at least
$5,000 from Seller.
(m) Purchaser shall have received the Financial Statements;
(n) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required
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to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to Purchaser; and
(o) there shall have been no Material Adverse Change since
August 31, 1998.
Purchaser may waive any condition specified in this Section 5.1 only if it
executes a writing so stating, at or prior to the Closing.
V.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(a) all of the representations and warranties set forth in
Article III above shall be true and correct in all respects at and as of the
Closing Date and Seller shall have received a certificate of Purchaser in the
form of EXHIBIT H hereto to that effect;
(b) Seller shall have procured all necessary governmental
consents and Purchaser shall have obtained a valid effectiveness order from the
Securities and Exchange Commission and shall have obtained any applicable state
securities law approvals;
(c) Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(d) 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 or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, or (ii)
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);
(e) Purchaser shall deliver to Seller, a Certificate of the
Secretary of Purchaser dated as of Closing and certifying the resolutions of the
board of directors approving the Acquisition and all transactions contemplated
by this Agreement;
(f) Purchaser shall have delivered to Seller the Non-Compete
Agreement by and between Purchaser and Seller, substantially in the form
attached hereto as EXHIBIT D;
(g) Purchaser shall have delivered to Seller the
Non-Solicitation Agreement by and between Purchaser and Seller, substantially in
the form attached hereto as EXHIBIT C;
(h) Seller shall have received an opinion from Purchaser's
counsel substantially in the form of EXHIBIT I attached hereto.
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(i) the shelf registration statement of Purchaser with
respect to the resale by Seller of the Purchaser Shares shall continue to be
effective under the Securities Act with no stop order pending or threatened;
(j) all actions to be taken by Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Seller; and
(k) there shall have been no event which could reasonably
have a material adverse effect on the financial condition of Purchaser from the
date hereof until the Closing Date.
Seller may waive any condition specified in this Section 5.2 only if it executes
a writing so stating, at or prior to the Closing.
ARTICLE VI
REMEDIES FOR BREACH
VI.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder and continue in full force and effect until one
(1) year from the date of Closing.
VI.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER. Seller
shall indemnify, defend and hold harmless Purchaser, the officers, directors,
employees, partners, members, shareholders, of Purchaser, affiliates of
Purchaser (and their officers, directors, employees, members, partners and
shareholders), and agents (collectively, the "Purchaser Indemnified Parties")
from and against any action, loss, liability, damage, claim, fine, penalty, lien
or expense, including legal costs, attorneys' fees, and expenses, (collectively,
"Purchaser Loss") to the extent the same arises out of (i) any breach by Seller
of any representation, warranty, agreement, or covenant made by Seller in
Article II herein, (ii) Seller's failure to comply with any bulk sales or
similar law, (iii) any tax, including use or sales tax, for which Seller or any
of its shareholders, directors or officers is or may be liable in respect of the
conduct of the Business prior to the Closing, (iv) any claim arising out of or
in connection with the conduct of the Business prior to the Closing Date
alleging that all, or any portion of, the Business infringes any intellectual
property right or other interest of any person or entity, (v) any obligation of
Seller that is an Excluded Liability, whether arising before or after the
Closing and (vi) any claim by any shareholder of Seller with respect to the
transactions contemplated hereby. Each Purchaser Indemnified Party will give
prompt notice to Seller of any claim or condition to which the foregoing
indemnification covenant relates. At its election, Seller may control the
defense of such claim, at its expense, but shall not settle any such claim
without the consent of the respective Purchaser Indemnified Party or Parties,
which consent will not be unreasonably withheld.
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VI.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. Purchaser
shall indemnify, defend and hold harmless Seller, its officers, directors,
employees, partners, members, shareholders, affiliates (and their officers,
directors, employees, members, partners and shareholders), and agents
(collectively, the "Seller Indemnified Parties") from and against any action,
loss, liability, damage, claim, fine, penalty, lien or expense, including legal
costs, attorneys' fees, and expenses, (collectively, "Seller Loss") to the
extent the same arises out of (i) any breach by Purchaser of any representation
or warranty made by Purchaser in Article III herein, (ii) any tax, including use
or sales tax, for which Purchaser or any of its shareholders, directors or
officers is or may be liable in respect of the conduct of the Business after the
Closing Date, (iii) any claim incurred and arising from the conduct of the
Business after the Closing Date alleging that all, or any portion of, the
Business infringes any intellectual property right or other interest of any
person or entity, and (iv) any obligation of Seller expressly assumed by
Purchaser as an Assumed Obligation, to the extent such obligation was incurred
and arose from the conduct of the Business after the Closing. Each Seller
Indemnified Party will give prompt notice to Purchaser of any claim or condition
to which the foregoing indemnification covenant relates. At its election,
Purchaser may control the defense of such claim, at its expense, but shall not
settle any such claim without the consent of the respective Seller Indemnified
Party or Parties, which consent will not be unreasonably withheld.
VI.4 REMEDIES. Except with respect to any breach of Sections 4.1(h)
and 4.2(e), (f) and (g), and except with respect to any Party's obligation to
consummate the transactions contemplated hereby after the applicable conditions
set forth in Article V have been satisfied, the remedies set forth in this
Article VI shall be the exclusive remedy of Seller and Purchaser with respect to
the transactions contemplated by this Agreement.
VI.5 BASKET. No Party shall have liability under this Article VI
until the aggregate amount of indemnifiable losses (i.e., Purchaser Losses or
Seller Losses, as the case may be) to the indemnified Party (i.e., a Purchaser
Indemnified Party or a Seller Indemnified Party) as a result of all matters
covered by this Article VI exceeds $25,000 (the "Basket"). If the aggregate
amount of such indemnified losses exceeds the Basket, the indemnifying Party
shall be liable for all indemnifiable losses, including the first $25,000 of
such losses.
VI.6 MAXIMUM LIABILITY. In no event shall Seller, on the one hand,
or Purchaser, on the other hand, be liable under this Agreement for an aggregate
amount in excess of $500,000.
ARTICLE VII
TERMINATION
VII.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate
this Agreement with the prior authorization of its board of directors (whether
before or after receiving the Requisite Seller Approval) as provided below:
(a) the parties may terminate this Agreement by mutual
written consent at any time prior to the Closing Date;
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(b) Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing Date (i) in the event
Seller has breached any representation, warranty, or covenant contained in this
Agreement or (ii) if the Closing shall not have occurred on or before the date
which is fifteen (15) days after the date hereof; provided that such date shall
be extended if the conditions to Closing set forth in Section 5.2 above which
are in the control of Purchaser or its representatives have not yet been
satisfied. Purchaser's knowledge of the existence of a condition that would
entitle Purchaser so to terminate this Agreement shall not be construed as a
waiver of its rights so to terminate at any later date prior to the Closing
Date.
(c) Seller may terminate this Agreement by giving written
notice to Purchaser at any time prior to the Closing Date (i) in the event
Purchaser has breached any representation, warranty, or covenant contained in
this Agreement or (ii) if the Closing shall not have occurred on or before the
date which is fifteen (15) days after the date hereof; provided that such date
shall be extended if the conditions to Closing set forth in Section 5.1 above
which are in the control of Seller or its representatives have not yet been
satisfied. Seller's knowledge of the existence of a condition that would
entitle Seller so to terminate this Agreement shall not be construed as a waiver
of its rights so to terminate at any later date prior to the Closing Date.
VII.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7.1(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach), except that the
provisions contained in Section 4.2(e) above shall survive termination.
ARTICLE VIII
MISCELLANEOUS
VIII.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Seller shall not
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of Purchaser both
before and after Closing.
VIII.2 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.
VIII.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
VIII.4 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
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Party may assign either this Agreement or any of his or its rights, interests,
or obligations hereunder without the prior written approval of Purchaser and
Seller.
VIII.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
VIII.6 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.
VIII.7 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested), sent by overnight
courier or sent via facsimile to the Parties at the following addresses (or at
such other address for a Party as shall be specified by like notice):
If to Purchaser: Rocky Mountain Internet, Inc
Douglas H. Hanson, President, CEO and
Chairman
1099 18th Street, 30th Floor
Denver, Colorado 80202
Facsimile: (303) 672-0711
Copy to: Jacobs Chase Frick Kleinkopf & Kelley LLC
Matthew R. Perkins
1050 17th Street, Suite 1500
Denver, Colorado 80265
Facsimile: (303) 685-4869
If to Seller: Unicom Communications, Inc.
Elie Balas, CEO
7223 W. 95th Street
Suite 325
Overland Park, Kansas 66212
Facsimile: (913) 327-5376
Copy to: Morrison & Foerster LLP
Matthew D. Berger
555 West Fifth Street
Suite 3500
Los Angeles, CA 90013
Facsimile: (213) 892-5454
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Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
VIII.8 EQUITABLE RELIEF; ARBITRATION. If the Parties have been
unable to resolve any dispute or controversy arising under this Agreement,
then any such dispute or controversy arising with respect to any such claim
hereunder shall be settled by arbitration in Denver, Colorado by a panel of
three arbitrators in accordance with the commercial rules of the American
Arbitration Association, whose decisions shall be final, binding and
non-appealable; PROVIDED, HOWEVER, that notwithstanding the foregoing, the
Parties shall pursue all equitable remedies, if any (such as specific
performance, injunctive relief, rescission, etc.), in a state or federal
court of law in Colorado if the non-breaching party elects to do so and, in
such case, the breaching party shall not be permitted to dispute such claim
or claims in an arbitration proceeding. The three arbitrators shall be
selected pursuant to the rules of the American Arbitration Association from a
panel of independent and disinterested persons with at least ten years
experience in significant corporate, business or accounting matters, and who
are familiar with the purchase and sale of business concerns. The expenses
of both Parties in the arbitration, including reasonable attorneys' fees and
arbitration expenses, shall be paid by the prevailing party. If each party
prevails in part, the arbitrators will determine the appropriate allocation
of expenses among the Parties utilizing the principal described above.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction therefor, and the Parties consent to the
jurisdiction of the Colorado courts for this purpose.
VIII.9 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.
VIII.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing, and signed by
Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
VIII.11 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.
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VIII.12 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, or local
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. 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.
VIII.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
VIII.14 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Denver, Colorado in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 8.7 above. Nothing in this Section 8.14,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law or at equity. Each Party agrees that a final judgment
in any action or proceeding so brought shall be conclusive and may be enforced
by suit on the judgment or in any other manner provided by law or at equity.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation
By: /s/ Douglas H. Hanson
-----------------------------------
Douglas H. Hanson, CEO, President,
and Chairman of the Board
UNICOM COMMUNICATIONS, INC., a Kansas
corporation
By: /s/ Elie Balas
-----------------------------------
Elie Balas, Chief Executive Officer
26
SCHEDULE 1
Definitions of "Business" and "Retained Business"
1. The "Business" shall mean Seller's business providing the
following services to customers: (y) Access, or a dedicated link of varying
bandwidth between the Internet and a customer's content on a server or between
the Internet and a customer via a direct dial-up to a server; and (z) Hosting,
or the regular provision of hard disk storage space on, processing time from,
and other use of the hardware, operating system, Internet server software, and
certain core Internet application software of an Internet server in order to
allow access via the Internet to, security for, and backup of a customer's
content and Hosting services.
2. The "Retained Business" shall mean Seller's business of providing
the following services to the existing customers: (y) Content Development, or
the design, creation, development, construction, enabling, maintenance,
modification, enhancement, and editing of a customer's software content in
whatever form, including but not limited to text, graphics, audio, video, data,
and computer code; and (z) Software Development, or the design, creation,
development, construction, enabling, maintenance, modification, and enhancement
of hardware, software, software systems and web-based services.