<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 16, 1999
SKYLYNX COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 0-24687 84-1360029
- ---------------- -------------------------- ---------------
(State or other (Commission file number) (Employer Identi-
incorporation) fication No.)
600 South Cherry Street, Suite 305, Denver, Colorado 80246
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 316-0400
---------------------------------------------------------------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
ITEM 2: ACQUISITION OF ASSETS
- ------ ---------------------
On July 16, 1999, SkyLynx Communications, Inc., a Colorado corporation,
through a wholly owned subsidiary, SkyLynx Communications MST, Inc., a
Delaware corporation, ("SkyLynx" or the "Company") closed upon and consummated
a definitive Asset Purchase Agreement dated as of July 15, 1999, (the
"Agreement") between the Company and Network Training and Consulting dba ISAT
Network, Source Internet Services, and the Internet Store, a Nevada
corporation ("Network"), and Norvel E. Swallie and Anne L. Swallie, as
shareholders of Network (the "Shareholders") (hereafter Network and the
Shareholders may collectively be referred to as the Sellers), pursuant to
which the Company purchased substantially all of the tangible and intangible
properties and assets ("Assets") used by Network in the business of internet
service provision (the "Business").
Under the terms of the Agreement, the Company acquired the Assets of the
Business, including inventories, accounts receivable, furniture, fixtures,
office machinery and equipment and other tangible property, all mailing,
client and customer lists, leasehold improvements and fixtures, prepaid
expenses, contracts and licenses, development assets and intangible assets.
The purchase price paid by the Company for the Assets of the Business and
for the covenant not to compete (the "Purchase Price") was $900,,000, which
was determined through arm's-length negotiations. The purchase price was
payable as follows: (i) the sum of $413,612 paid in cash at closing to
Network, (ii) the sum of $36,388 paid in cash at closing to the Shareholders,
and (iii) the balance of $450,000 was paid by the Company's issuance of shares
of its Common Stock, $.001 par value (the "Consideration Shares") having a
market value of $450,000, which market value was determined as the average
closing price of the Company's Common Stock on the over-the-counter market for
the ten (10) trading days immediately preceding the closing date. Of the
Consideration Shares, twenty percent (20%) were retained by the Company as
security for the Sellers' indemnification obligations under the Agreement (the
"Holdback Shares"). The Holdback Shares will be retained by the Company for
a period of one year and used as collateral to satisfy any claims the Company
may have against the Sellers for indemnity under the terms of the Agreement.
The source of the funds used by the Company to pay the purchase price was
working capital derived from the Company's recently completed private
placement of equity securities.
The Company will continue to operate the Business from its principal
facilities in Las Vegas, Nevada.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- ------ ---------------------------------
(a) Financial Statements
--------------------
Pursuant to Item 7(a)(4), the Registrant declares that it is
impracticable to provide the required audited financial statements relative
to the acquired business at the time of this Report. Such audited financial
statements required by Item 7(a) shall be filed not later than sixty (60) days
after the filing of this Current Report on Form 8-K.
(b) Pro Forma Financial Information
-------------------------------
Pursuant to Item 7(b) and Item 7(a)(4), the Registrant declares it
is impracticable to provide the required pro forma financial information
relative to the acquired business at the time of this Report. Such pro forma
financial information required by Item 7(b) shall be filed not later than
sixty (60) days after the filing of this Current Report on Form 8-K.
(c) Exhibits
--------
Item Title
---- -----
1.1 Asset Purchase Agreement dated as of July 15, 1999
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SKYLYNX COMMUNICATIONS, INC.
Dated: July 26, 1999 By: /s/ Jeffery A. Mathias
------------- -----------------------------
Jeffery A. Mathias, President
<PAGE>
TABLE OF CONTENTS
Page
RECITALS 1
TERMS OF AGREEMENT 1
ARTICLE 1 PURCHASE AND SALE OF ASSETS 1
1.1 Description of Assets 1
1.2 Non-Assignment of Certain Customer Accounts 3
1.3 Accounts Receivable 3
1.4 Proration of July 1999 Net Income 3
1.5 Change of Names 4
1.6 Excluded Assets 4
ARTICLE 2 PURCHASE PRICE AND RETENTION 4
2.1 Purchase Price 4
2.2 Liabilities 4
ARTICLE 3 CLOSING 5
3.1 Time and Place 5
3.2 Deliveries by Seller and Shareholders 5
3.3 Payment of Purchase Price 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SKYLYNX 6
4.1 Corporate Status 6
4.2 Corporate Power and Authority 6
4.3 Enforceability 6
4.4 No Violation 6
4.5 SkyLynx Common Stock 7
4.6 State Sales Tax 7
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLERS 7
5.1 Corporate Status 7
5.2 Power and Authority 8
5.3 Enforceability 8
5.4 Y2K. 8
5.5 Subsidiaries 8
5.6 No Violation 8
5.7 Taxes 8
5.8 No Commissions 8
5.9 Financial Statements 9
5.10 Changes Since the Current Balance Sheet 9
5.11 Litigation 9
5.12 Liabilities. 9
5.13 Indebtedness 10
5.14 Environmental Matters 10
5.15 Real Property, Leases and Significant Personal Property 10
5.16 Good Title, Adequacy and Condition 11
5.17 Compliance with Laws 11
5.18 Absence of Certain Changes or Events 11
5.19 Intellectual Property 11
5.20 Accounts Receivable 12
5.21 Licenses and Permits 12
5.22 Contracts and Customer Lists 12
5.23 Predecessor Status, Etc 13
5.24 Spin-Off by Seller 13
5.25 Records of Seller 13
5.26 Accuracy of Information Furnished by Seller and the Shareholders 13
5.27 Investment Intent 13
5.28 Acknowledgment Regarding Disclosure of Certain Materials 13
5.29 Survival 14
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE CLOSING 14
6.1 Conduct of Business by Seller Pending the Closing 14
ARTICLE 7 CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES 15
7.1 Further Assurances 15
7.2 Confidentiality, Publicity 15
7.3 No Other Discussions 16
7.4 Due Diligence Investigation 16
7.5 Related Party Agreements 16
7.6 Cooperation 16
7.7 Other Actions 16
7.8 Notification of Certain Matters 17
7.9 Payoff and Estoppel Letters 17
7.10 Accounting Treatment 17
7.11 Covenant Not to Compete 17
7.12 Employment 19
7.13 Business Records 19
7.14 Tax Related Matters 20
ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND SKYLYNX 20
8.1 Accuracy of Representations and Warranties; Compliance with
Obligations 20
8.2 No Material Adverse Change or Destruction of Property 21
8.3 Corporate Certificate 21
8.4 Consent 21
8.5 No Adverse Litigation 21
8.6 Delivery of Business Records 21
8.7 Opinion of Counsel 21
8.8 General 22
ARTICLE 9 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS 22
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations 22
9.2 Other Conditions 22
9.3 Corporate Certificates 22
9.4 No Adverse Litigation 22
ARTICLE 10 NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION 22
10.1 Non-Assumption of Liabilities; Indemnification 22
10.2 Assumption of Specific Liabilities 23
10.3 Survival of Representations and Warranties 23
10.4 Matters Involving Third Parties 24
ARTICLE 11 SECURITIES LAW MATTERS 24
11.1 Disposition of Shares 24
11.2 Legend 24
11.3 Contractual Restriction Legend 25
11.4 Delivery of the Hold Back Shares 25
11.5 No Bar 25
ARTICLE 12 DEFINITIONS 26
12.1 Defined Terms 26
ARTICLE 13 TERMINATION, AMENDMENT AND WAIVER 29
13.1 Termination 29
13.2 Effect of Termination 29
ARTICLE 14 GENERAL PROVISIONS 29
14.1 Notices 29
14.2 Entire Agreement 30
14.3 Expenses 31
14.4 Amendment; Binding Effect; Assignment 31
14.5 Counterparts 31
14.6 Governing Law: Interpretation 31
14.7 Access to Records 31
14.8 Attorneys' Fees 31
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
among
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation,
and
SKYLYNX COMMUNICATIONS MST, INC.
a Delaware corporation,
and
NETWORK TRAINING AND CONSULTING
dba ISAT Network, Source Internet Services, and The Internet Store
a Nevada corporation,
and
Norvel E. Swallie and Anne L. Swallie
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into and
made effective as of July 15, 1999 ("Effective Date"), by and among SKYLYNX
COMMUNICATIONS, INC., a Colorado corporation ("SkyLynx"), SKYLYNX
COMMUNICATIONS MST, INC., a Delaware corporation, a wholly-owned subsidiary
of SkyLynx ("Purchaser"), "NETWORK TRAINING AND CONSULTING" dba "ISAT
NETWORK", SOURCE INTERNET SERVICES", and "THE INTERNET STORE", a Nevada
corporation ("Seller"), and each of those persons, jointly and severally,
who are all of the shareholders of Seller, namely: Norvel E. Swallie and
Anne L. Swallie (collectively the "Shareholders"). Shareholders and Seller
are hereinafter collectively referred to as the "Sellers". Certain other
capitalized terms used herein are defined in Article 12 and throughout this
Agreement.
RECITALS
--------
A. Seller is engaged in the business of providing residential and
business dial-up and dedicated phone line and data access to the internet
along with web design, co-location and hosting services (the "Business")
with its headquarters located at 3909 W. Sahara, #5, Las Vegas, Nevada
89102, and is qualified to do business in the State of Nevada;
B. Seller has facilities and operations in the State of Nevada and
conducts business in the State of Nevada and California;
C. The Shareholders hold all of the outstanding capital stock of
Seller, and Purchaser is unwilling to enter into this Agreement without the
covenants and promises of Shareholders herein set forth; and
D. Purchaser desires to purchase and acquire certain assets,
properties, and contractual rights of Seller used in connection with the
Business, and Seller desires to sell such assets, properties, and
contractual rights to Purchaser, all on the terms and subject to the
conditions hereinafter set forth.
TERMS OF AGREEMENT
------------------
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Description of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Seller does hereby grant, convey,
sell, transfer and assign to Purchaser the following assets, properties,
and contractual rights of Seller (collectively, the "Assets"), wherever
located, subject to the exclusions hereinafter set forth; provided,
however, that the Assets shall not include those assets identified as
"Excluded Assets" pursuant to Section 1.6:
(a) all machinery, leasehold improvements, construction in
progress, furniture and fixtures, computer equipment and monitors, routers,
servers, computer software, and any other fixed assets owned by Seller and
used in the operations of the Business, including, without limitation, the
fixed assets listed on Schedule 1.1(a) attached hereto and made a part
hereof (the "Equipment");
(b) all real property interests (whether owned or leased) used
or for use in the Business (the "Real Property"), as specifically described
on Schedule 1.1(b) attached hereto and made a part hereof, and all
improvements thereon;
(c) all motor vehicles used or for use in the Business, and all
radios, attachments, and accessories now located in or on such motor
vehicles (the "Rolling Stock"), as the same are listed and more completely
described by manufacturer, model number and model year on Schedule 1.1(c),
attached hereto and made a part hereof;
(d) all of Seller's interests and rights and benefits under any
leases of machinery, vehicles, equipment, tools, furniture, fixtures or
other fixed assets;
(e) all contractual rights of Seller with Seller's customers
(whether oral or in writing, and including without limitation all ISP
Service Agreements and Customer Agreements to which Seller is a party, and
all accounts receivable relating to services prior to the Closing (the
"Accounts Receivable"), which relate to the conduct of the Business and all
other rights to provide services to customers of Seller (the "Customer
Accounts"), and all commitments, lists, leases, permits, licenses,
consents, approvals, franchises and other instruments relating to the
Customer Accounts (the "Related Documents"); a complete and accurate list
of the Customer Accounts and the Related Documents is set forth on Schedule
1.1(e), attached hereto and made a part hereof, and true and complete
copies of all Customer Accounts (or descriptions of unwritten arrangements)
and Related Documents in printed or in electronic format shall be delivered
to Purchaser simultaneously with the execution and delivery of this
Agreement;
(f) the contracts and other agreements to which Seller is a
party listed on Schedule 1.1(f) (the "Assumed Contracts");
(g) all of Seller's inventory of parts, supplies and accessories
of every kind, nature and description used or for use in connection with
the Business (the "Inventory");
(h) all proprietary rights of Seller, including, without
limitation, all right, title and interest of Seller in and to all trade
secrets, slogans, processes, rights, symbols, trademarks, service marks,
logos, and trade names used in the Business;
(i) all permits, licenses (including Class C licenses),
franchises, consents and other approvals and operating rights relating to
the Business that are assignable or transferable, which are more completely
described and set forth on Schedule 1.1(i), attached hereto and made a part
hereof, true and complete copies of which are attached to Schedule 1.1(i);
(j) all communications equipment (together with any rights to
frequencies related thereto) used in connection with the Business, wherever
located;
(k) all right, title and interest of Seller in and to all
telephone and telecopier numbers used by Seller in the conduct of the
Business;
(l) all of Seller's right, title and interest in and to the name
"Network Training and Consulting", "ISAT Network", "Source Internet
Services" and "The Internet Store" and any other names used in connection
with the Business and the rights to use such names (the "Business Names");
(m) all manual and automated routing and billing information and
components thereof, including, without limitation, all routing and billing
computer software and programs containing any customer information;
(n) all of the good will of the Business;
(o) all amounts on deposit with Seller; and
(p) all other tangible and intangible assets used in the
Business, including those set forth on Seller's balance sheets dated as of
December 31, 1998 and March 31, 1999, copies of which are attached as
Schedule 1.1(p) hereto.
All of the foregoing assets, properties and contractual rights
described in Section 1.1(a) through (p) are hereinafter sometimes
collectively called the "Assets."
1.2 Non-Assignment of Certain Customer Accounts. Notwithstanding
anything to the contrary in this Agreement, to the extent that the
assignment hereunder of any Customer Account shall require the consent of
any third party, neither this Agreement nor any action taken pursuant to
its provisions shall constitute an assignment or an agreement to assign if
such assignment or attempted assignment would constitute a breach thereof
or result in the loss or diminution thereof; provided, however that in each
such case, Seller shall use its best efforts to obtain the consent of such
other party to such assignment to Purchaser. If such consent is not
obtained, Seller shall cooperate with Purchaser in any reasonable
arrangement designed to provide for Purchaser the benefits under any such
Customer Account. Attached hereto as Schedule 1.2 is a list of all
Customer Accounts requiring consent to their assignment.
1.3 Accounts Receivable. As described in Section 1.1(e) above, the
Accounts Receivable are to be conveyed to Purchaser at the Closing.
However, if Seller receives any payments after the Closing in connection
with the Accounts Receivable, then Seller shall forward such payments to
Purchaser on a regular basis (but at least monthly), together with an
itemized list of the sources thereof. Attached hereto as Schedule 1.3 is a
true and complete list of all Accounts Receivable of Seller as of May 31,
1999.
1.4 Proration of July 1999 Net Income. As of the date which is
seventy-five (75) days after the Closing Date, Purchaser and Seller shall
meet to account for amounts paid in respect of Accounts Receivable relating
to services performed for customers in the month of July 1999, and the
amount of expenses incurred or paid in respect of July 1999 ("July 1999
Expenses"). To the extent that July 1999 Revenues exceed July 1999
Expenses (with the difference being "July 1999 Net Income"), Seller shall
be entitled to a portion thereof equal to July 1999 Net Income times a
fraction, the numerator of which equals the number of days prior to the
Closing Date in July and the denominator of which is 31.
1.5 Change of Names. On the Closing Date, Seller shall cease doing
business under Seller's current Business Names or any name the same as or
similar to "Network Training and Consulting", "ISAT" or "Internet Services
and Training" or any other symbol, trademark, servicemark, logo, or trade
name now used by Seller. Seller shall, on the Closing Date, deliver to
Purchaser, in form suitable for filing, such certificates, consents and
other documents as are necessary to effect the transfer of the registration
of the Business Names conveyed by Seller pursuant to this Agreement in the
State of Nevada and in any other relevant jurisdiction.
1.6 Excluded Assets. Notwithstanding anything contained in Section
1.1, Sellers shall not sell and Purchaser shall not acquire any right,
title or interest in or to the assets identified in Schedule 1.6 (the
"Excluded Assets").
ARTICLE 2
PURCHASE PRICE AND RETENTION
2.1 Purchase Price. On the Closing Date, Purchaser shall deliver in
consideration for the Assets and the restrictive covenants set forth
herein, an aggregate of Nine Hundred Thousand Dollars ($900,000) (the
"Purchase Price") payable as follows: (a) Four Hundred Thirteen Thousand
Six Hundred Twelve Dollars ($413,612) in immediately available funds by
wire transfer to Seller, (b) Thirty-Six Thousand Three Hundred Eighty-Eight
Dollars ($36,388) to the Shareholders, and (c) that certain number of
shares of Common Stock of SkyLynx, $.001 par value, having an aggregate
Market Value, as defined herein, equal to Four Hundred Fifty Thousand
Dollars ($450,000) (the "Shares"), which Shares shall be issued to the
Seller in consideration for the restrictive covenants set forth herein,
including but not limited to, the covenant not to compete, as described in
Section 7.11 ((a) and (b); any reference herein to delivery of the Purchase
Price shall also take into account the retention of the Hold Back Shares
described below); provided, however, that twenty percent (20%) of the
Shares (the "Hold Back Shares") shall be retained by Purchaser for a period
of one (1) year from the Closing Date (the "Hold Back Period") as security
for the obligations of the Sellers (including without limitation the
indemnification obligations set forth in Article 10 hereof), and Seller
acknowledges that forfeiture of the Hold Back Shares may be required
pursuant to Articles 10 and 11 hereof. In addition to all other rights and
remedies which Purchaser may have with respect to the Hold Back Shares,
Purchaser shall have all rights and remedies of a secured party under the
Colorado Uniform Commercial Code and other applicable law with respect to
the Hold Back Shares. It is agreed and understood that the Shares are
"restricted securities" under the Securities Act of 1933, as amended, and
as such, such shares are unregistered and are not readily tradeable in the
public capital markets for a period of at least one (1) year after their
issuance.
2.2 Liabilities. Except in connection with obligations incurred
after the Closing in connection with contracts assumed by Purchaser
hereunder, Purchaser is not assuming any liabilities of Sellers. In
particular, no liabilities arising or accruing prior to the Closing are
being assumed by Purchaser hereunder.
ARTICLE 3
CLOSING
3.1 Time and Place. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Assets (the
"Closing") shall take place on July 16, 1999, 10:00 a.m., P.S.T., or such
other time mutually agreed by both parties, at the offices of McDermott,
Will and Emery located at 2700 Sand Hill Road, Menlo Park, California,
94025. The date on which the Closing occurs shall be referred to as the
"Closing Date."
3.2 Deliveries by Seller and Shareholders. At the Closing, Seller
and Shareholders shall deliver to Purchaser and SkyLynx the following
executed documents:
(a) a General Conveyance, Assignment and Bill of Sale, in form
and substance satisfactory to Purchaser, and Sellers, conveying, selling,
transferring, and assigning to Purchaser all of the Assets (the "Bill of
Sale");
(b) Certificates of Title and/or registrations to the Rolling
Stock property endorsed to Purchaser;
(c) a receipt acknowledging payment by Purchaser of the Purchase
Price;
(d) fully executed consents to the assignment of the Customer
Accounts, if any, in form and substance satisfactory to Purchaser;
(e) the documents evidencing Seller's change of Business Names
as required by Section 1.5;
(f) a certified copy of the resolutions of the Shareholders and
directors of Seller authorizing the execution, delivery and performance of
this Agreement, the sale of the Assets to Purchaser, and the consummation
of the transactions contemplated herein, and a certificate of secretary of
Seller, dated the Closing Date, that such resolutions were duly adopted and
are in full force and effect, along with an incumbency certificate of
Seller;
(g) required consents for assignment of leases, if any;
(h) the assignment of the Permits described on Schedule 5.21;
(i) an opinion of counsel to Seller and Shareholder, in form and
substance reasonably satisfactory to Purchaser;
(j) consents to the assignment of Assumed Contracts, if any;
(k) such other documents or separate instruments of sale,
assignment or transfer reasonably required by Purchaser; and
(l) such certificates, consents and other documents as are
necessary to effect the transfer of the registration of the Business Names
conveyed by Seller pursuant to this Agreement in the States of Nevada and
California and in any other relevant jurisdiction in form suitable for
filing.
3.3 Payment of Purchase Price. Purchaser shall pay the Purchase
Price in accordance with Section 2.1.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SKYLYNX
As a material inducement to Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser and SkyLynx
represent and warrant to Sellers that the statements contained in this
Article 4, except as set forth in any schedules to the subsections of this
Article 4 delivered by Purchaser and SkyLynx to the Sellers on the date
hereof (such schedules hereinafter collectively referred to as the
"Disclosure Schedules" and, individually, as a "Disclosure Schedule"), if
any, which schedules may be required to be supplemented from time to time
by Purchaser and SkyLynx after the date of this Agreement in order to make
such representations and warranties true as of the date such representation
and warranties are given: (i) are correct and complete as of the Effective
Date; (ii) will be correct as of the Effective Date and the Closing Date
(as though made then and as though the Closing Date was substituted for the
date of this Agreement throughout this Article 4); and (iii) shall survive
the Closing.
4.1 Corporate Status. Purchaser is a corporation duly organized,
authorized, validly existing and in good standing under the laws of the
State of Delaware and SkyLynx is a corporation duly organized, authorized,
validly existing and in good standing under the laws of the State of
Colorado. Each of Purchaser and SkyLynx has the requisite power and
authority to own or lease their respective properties and to carry on their
respective business as now being conducted.
4.2 Corporate Power and Authority. Each of Purchaser and SkyLynx has
the corporate power and authority to execute and deliver this Agreement, to
perform their respective obligations hereunder and to consummate the
transactions contemplated hereby. Each of Purchaser and SkyLynx has taken
all action necessary to authorize the execution and delivery of this
Agreement, the performance of their respective obligations hereunder and
the consummation of the transactions contemplated hereby.
4.3 Enforceability. This Agreement has been duly executed and
delivered by Purchaser and SkyLynx and constitutes a legal, valid, and
binding obligation of Purchaser and SkyLynx, enforceable against Purchaser
and SkyLynx in accordance with its terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
4.4 No Violation. The execution and consummation of this Agreement
by Purchaser and SkyLynx will not: (i) contravene any provision of the
certificate of incorporation or bylaws of Purchaser or articles of
incorporation or bylaws of SkyLynx; (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment,
or order of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon, or enforceable against Purchaser or
SkyLynx; or (iii) require the consent, approval, authorization, or permit
of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person.
4.5 SkyLynx Common Stock. Upon the Closing and the issuance and
delivery of certificates representing the Shares to Shareholders, the
Shares will be validly issued, fully paid and non-assessable shares of
Common Stock of SkyLynx and subject to no Liens.
4.6 State Sales Tax. Notwithstanding anything contained herein to
the contrary, Purchaser agrees to assume the obligations of Seller, if any,
pertaining to Nevada state sales tax in connection with the transaction
contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Purchaser and SkyLynx to enter into this
Agreement and to consummate the transactions contemplated hereby, the
Sellers, jointly and severally, represent and warrant to Purchaser and
SkyLynx that the statements contained in this Article 5, except as set
forth in the Disclosure Schedules to the subsections of this Article 5
delivered by the Sellers to Purchaser and SkyLynx on the date hereof, if
any, which Disclosure Schedules may be required to be supplemented from
time to time by the Sellers after the date of this Agreement in order to
make such representations and warranties true as of the date such
representations and warranties are given: (i) are correct and complete as
of the Effective Date; (ii) will be correct as of the Closing Date (as
though made then and as though the Closing Date was substituted for the
date of this Agreement throughout this Article 5); and (iii) shall survive
the Closing. Nothing in the Disclosure Schedules shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless
the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in detail. In addition, nothing in the
Disclosure Schedules shall be deemed to limit the indemnification
provisions set forth in Article 10 hereof. 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 a document or other item itself).
Nothing in this paragraph shall require the disclosure of an exception on
more than one (1) Disclosure Schedule made a part of this Agreement;
provided, however, that in all such instances, the Disclosure Schedule on
which the requested information is located must be cross-referenced on the
appropriate Disclosure Schedule.
5.1 Corporate Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada
and is in good standing and is qualified to conduct business under all
applicable laws, regulations, ordinances, and orders of Governmental
Authorities to carry on its business, including but not limited to, the
laws of the State of Nevada and California and has the requisite power and
authority to own or lease its properties and to carry on the Business as
now being conducted. Seller is duly authorized and qualified, under all
applicable laws, regulations, ordinances, and orders of Governmental
Authorities, to carry on the Business in the places and in the manner as
now conducted except where the failure to be so authorized or qualified
would not have a Material Adverse Effect on the Business.
5.2 Power and Authority. Each of the Sellers has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of his or its obligations hereunder and the consummation of the
transactions contemplated hereby. Each Seller has the requisite competence
and authority to execute and deliver this Agreement, to perform his or its
respective obligations hereunder and to consummate the transactions
contemplated hereby.
5.3 Enforceability. This Agreement has been duly executed and
delivered by each Seller, and constitutes the legal, valid and binding
obligation of each Seller, enforceable against each Seller in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at
law or in equity.
5.4 Y2K. Sellers are unaware of any potential material Y2K impact on
the Business.
5.5 Subsidiaries. Seller does not presently own of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock, or any other equity interest in
any corporation, association or business entity, nor is Seller, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity, except as provided in Schedule 5.5.
5.6 No Violation. The execution and consummation of this Agreement
will not: (i) contravene any provision of the articles of incorporation or
bylaws of Seller (the "Charter Documents"); (ii) violate or conflict with
any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration
award, which is either applicable to, binding upon or enforceable against
Seller, its assets or securities, or any of the Sellers; (iii) conflict
with, result in any breach of, or constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute
a default) under, or give rise to a right to terminate, amend, modify,
abandon or accelerate, any Contract which is applicable to, binding upon or
enforceable against any of the Sellers or the assets or securities of any
of the Sellers; (iv) result in or require the creation or imposition of any
Lien upon or with respect to any of the assets or securities of any of the
Sellers; or (v) to the best of each of the Shareholder's or Seller's
knowledge, require the consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person.
5.7 Taxes. Sellers acknowledge and agree that the Purchaser has made
no representations to Sellers regarding the tax consequences of any amounts
received by Sellers pursuant to this Agreement. Sellers agree to pay
federal or state taxes (exclusive of the Nevada state sales tax assumed by
Purchaser pursuant to Section 4.6) which are required by law to be paid
with respect to this Agreement
5.8 No Commissions. None of the Shareholders or Seller has incurred
any obligation for any finder's or broker's or agent's fees or commissions
or similar compensation in connection with the transactions contemplated
hereby.
5.9 Financial Statements. The Sellers have delivered to Purchaser
the financial statements of Seller for the year ending December 31, 1998,
and a balance sheet for the three month period ending March 31, 1999,
(collectively, the "Financial Statements"), copies of which are attached
hereto as Schedule 5.9. The balance sheet dated as of March 31, 1999 of
Seller included in the Financial Statements is referred to herein as the
"Current Balance Sheet." The Financial Statements fairly present the
financial position of Seller pertaining to the Assets at each of the
balance sheet dates and the results of operations for the periods covered
thereby, and have been prepared on a cash basis accounting consistently
applied throughout the periods indicated, except as otherwise disclosed to
Purchaser in Schedule 5.9. The books and records of Seller fully and
fairly reflect all transactions, properties, assets, and liabilities of
Seller. There are no material special or non-recurring items of income or
expense during the periods covered by the Financial Statements, and the
Current Balance Sheet does not reflect any write-up or revaluation
increasing the book value of any assets, except as specifically disclosed
in Schedule 5.9. The Financial Statements reflect all adjustments
necessary for a fair presentation of the financial information contained
therein.
5.10 Changes Since the Current Balance Sheet. Except as provided in
Schedule 5.10, since the date of the Current Balance Sheet, Seller has not:
(i) sold, leased or transferred any of its properties or assets; (ii) made
or obligated itself to make capital expenditures consistent with past
practice; (iii) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions
other than in the ordinary course of business, except for this Agreement
and the transactions contemplated hereby; (iv) waived, cancelled,
compromised or released any rights; (v) made or adopted any change in its
accounting practice or policies; (vi) made any adjustment to its books and
records; (vii) entered into any transaction with any Affiliate other than
transactions in the ordinary course of business consistent with past
practice; (viii) terminated, amended, or modified any agreement; (ix)
imposed any security interest or other Lien on any of its assets; (x)
entered into any other transaction or was subject to any event which had or
may have a Material Adverse Effect on Seller or the Business; (xi) except
as contemplated in this section, engaged in any other transaction out of
the ordinary course of the Business; (xii) paid any dividends or made any
distribution of cash or property to the Shareholders (except for payment of
their regular salaries); or (xiii) agreed to do or authorized any of the
foregoing.
5.11 Litigation. Except as provided in Schedule 5.11, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending or to any Seller's knowledge threatened against, by
or affecting any of the Shareholders, Seller, the Business, or the assets
of Seller, or which questions the validity or enforceability of this
Agreement or the transactions contemplated hereby, and to any Seller's
knowledge there is no basis for any of the foregoing. There are no
outstanding orders, decrees or stipulations issued by any Governmental
Authority in any proceeding to which the Shareholders or Seller is or was a
party which have not been complied with in full or which continue to impose
any material obligations on the Assets.
5.12 Liabilities. Schedule 5.12 sets forth all liabilities or
obligations, whether accrued, absolute, contingent or otherwise, of Seller
not reflected on the Current Balance Sheet, including: (i) liabilities and
obligations existing on the date hereof, incurred in the ordinary course of
business consistent with past practice since the date of the Current
Balance Sheet; and (ii) liabilities incurred in the ordinary course of
Business prior to the date of the Current Balance Sheet which were not
required to be recorded thereon, including but not limited to liabilities
arising out of guarantees, repurchases of any of Seller's securities, and
indemnification agreements (the liabilities and obligations referenced in
(i) and (ii) above are referred to as the "Designated Liabilities"). None
of the Designated Liabilities relates to any breach of contract, breach of
warranty, tort infringement, or violation of law, and none arose out of any
action, suit, claim, governmental investigation, or arbitration proceeding.
5.13 Indebtedness. Schedule 5.13 sets forth the outstanding
principal amount of and outstanding interest on (as of the date set forth
in the Schedule) all indebtedness for borrowed money and capitalized lease
obligations (including the outstanding principal amount and accrued but
unpaid interest and the name of the lender) owed to a bank or any other
Person by Seller and the name and telephone number of Seller's contact at
such bank or other Person.
5.14 Environmental Matters. Seller is not in violation of and has not
received any notice (nor would there be any basis for such a notice) from
any local, state or federal agency having jurisdiction over the Business,
Seller's operations, properties, or assets or responsibility for the
enforcement of local, state, or federal environmental, health, and safety
laws (as defined in this Section) of any violation of any environmental,
health and safety laws by Seller or its officers or employees, in
connection with the Assets.
5.15 Real Property, Leases and Significant Personal Property.
Schedule 5.15 sets forth:
(a) All real property used in the Business;
(b) All personal property owned by Seller or used by the
Business as of the Current Balance Sheet date, included on the Current
Balance Sheet, all of which is included in the accounts reflected on the
Current Balance Sheet;
(c) All other personal property of Seller acquired since the
Current Balance Sheet date; and
(d) All leases for real and personal property to which Seller is
a party involving real or personal property, including in each case true,
complete and correct copies of all such leases and including an indication
as to which real and personal property is currently owned, or was formerly
owned, by any of the Shareholders or Seller. All of the material machinery
and equipment and all other tangible assets of Seller are in good working
order and condition, ordinary wear and tear excepted, and have been
maintained in accordance with industry practice. All leases set forth in
Schedule 5.15, are in full force and effect and constitute valid and
binding agreements of Seller and constitute valid and binding agreements of
the other parties thereto in accordance with their respective terms, and
all fixed assets used by Seller are either owned by Seller or leased under
a valid agreement. Schedule 5.15 also sets forth a summary description of
all plans or projects involving the opening of new operations or the
acquisition of any real property or existing business, with respect to
which Seller has made any material expenditure in the one-year period prior
to the date of the Agreement, or entered into a written commitment
therefor, which if pursued by Seller would require additional expenditures
of capital.
5.16 Good Title, Adequacy and Condition.
(a) Seller has, and at Closing will have, good and marketable
title to the Assets with full power to sell, transfer and assign the same,
free and clear of any Lien, and by virtue of the grant, conveyance, sale,
transfer, and assignment of Assets hereunder, Purchaser shall receive good
and marketable title to all of the Assets, free and clear of all Liens.
(b) The Assets constitute, in the aggregate, all of the assets
and properties necessary for the conduct of the Business in the manner in
which and to the extent to which such business is currently being conducted
and, except as provided in Schedule 5.16, include, without limitation, all
tangible and intangible assets owned by Seller including all vehicles,
equipment and inventory (more particularly described in Schedule 5.16), and
all Contracts, customer lists, intellectual property, accounts receivable,
and licenses and permits of Seller.
5.17 Compliance with Laws. Except as provided in Schedule 5.17 and to
the best of Seller's and the Shareholders' knowledge, Seller is in
compliance with all laws and regulations and is not in violation of any
order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Seller and there are no claims, actions, suits or
proceedings pending or, to the knowledge of Seller or any of the
Shareholders, threatened, against or affecting Seller or the Business, at
law or in equity, before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them, and no notice of any
such claim, action, suit or proceeding, whether pending or threatened, has
been received.
5.18 Absence of Certain Changes or Events. Since January 1, 1999,
except as provided in Schedule 5.18, there has not been: (i) any Material
Adverse Change in the Business, or (ii) any material loss, damage, or other
casualty to the Assets. Since January 1, 1999, the Seller has operated the
Business in the ordinary course of business consistent with past practice
and has not: (i) incurred or failed to pay or satisfy any material
obligation or liability (whether accrued, contingent or otherwise) relating
to the operations of the Business except in the ordinary course of business
consistent with past practice; (ii) incurred or failed to discharge or
satisfy any Lien other than Liens arising in the ordinary course of
business that do not, individually or in the aggregate, interfere with the
use, operation, enjoyment or marketability of any of the Assets, all of
which shall be released as of the Closing Date; (iii) sold or transferred
any of the Assets of the Business or canceled any debts or claims or waived
any rights material to the Business relating to the operations of the
Business, except in the ordinary course of business consistent with past
practices; (iv) defaulted on any material obligation; (v) entered into any
transaction material to the Business, amended or terminated any arrangement
material to the Business or relating to the Business, except in the
ordinary course of business consistent with past practice; or (vi) entered
into any agreement or made any commitment to do any of the foregoing.
5.19 Intellectual Property. Schedule 5.19 hereto sets forth a true
and complete list of all of the Sellers' patents, patent applications,
licenses, copyrights, copyright registrations, copyright registration
applications, trade names, trademarks, trademark registrations, trademark
applications, servicemarks, servicemark registrations and servicemark
applications, domain names, IP addresses, trade secrets and similar rights,
and any applications in respect thereto (the "Intellectual Property") used
by the Sellers in whole or in part for the conduct of the Business as now
conducted. All the Intellectual Property is owned by the Sellers free and
clear of any and all Liens, and no licenses for the use of any of such
rights have been granted by the Shareholders or Seller to any third
parties. All of such rights are valid and enforceable and are adequate and
appropriate for the Business as now conducted. Except as listed on
Schedule 5.19, all of such rights will be acquired by Purchaser at the
Closing, and the transfer of and use by Purchaser of such rights will not
require the consent of any other person. To the Shareholders' and Seller's
best knowledge, the operation of the Business does not infringe in any way
on or conflict with any registered or unregistered patent, trademark, trade
name, copyright, license or other right, of any person, and the Sellers do
not license any such right from others. The Sellers do not know of any
person who has wrongfully used, or threatened to use, any of the
Intellectual Property. No claim is pending or threatened or has been made
within the past five (5) years, to the effect that any such infringement or
conflict has occurred. The Intellectual Property is adequate and
appropriate for the Business as now conducted, and the Sellers' rights in
the same are valid and subsisting. The Sellers have the full right to use
their name in every jurisdiction where they do business.
5.20 Accounts Receivable. Except as provided in Schedule 5.20, all of
the Accounts Receivable of Seller are valid and legally binding, represent
bona fide transactions, and arose in the ordinary course of business of
Seller. To the best of Seller's and the Shareholders' knowledge, all of
such Accounts Receivable posted on or after March 31, 1999, are good and
collectible receivables and will be collected in full in accordance with
the terms of such Accounts Receivable, without set-off or counterclaims;
provided, however, that to the extent that the Accounts Receivable are not
collected, the allowance for doubtful accounts contained in the Current
Financial Statement is adequate based on Seller's historical experience.
5.21 Licenses and Permits. Except as provided in Schedule 5.21, and
to the best of Seller's and Shareholders' knowledge, Seller possesses all
licenses and required governmental or official approvals, permits or
authorizations (collectively, the "Permits") for its Business and
operations. All Permits are valid and in full force and effect, Seller is
in compliance in all material respects with their requirements, and no
proceeding is pending or to Seller's or any Shareholder's knowledge
threatened to revoke or amend any of the Permits. None of the Permits is
or will be impaired or in any way affected by the execution and delivery of
this Agreement or the transactions contemplated hereby.
5.22 Contracts and Customer Lists. Schedule 5.22 lists all customers
and contracts of Seller that account for more than 1% of Seller's annual
gross revenue, all contracts of Seller requiring payment or performance
involving $10,000 or more, and all contracts and obligations with a term
longer than one (1) year (collectively, the "Material Contracts"). All of
the Material Contracts: (i) are valid and binding obligations of the
parties; (ii) are not in default and will not become in default solely upon
notice or the passage of time without curative action; and (iii) will
remain in full force and effect following the Closing, without requiring
the consent of the other parties thereto and without causing a default,
right to terminate or right to modify any terms under any such Material
Contracts, notwithstanding any provisions in any such Material Contracts
which may set forth a restriction or change in control of Seller. Seller
has delivered to Purchaser true, complete and correct copies of all
Material Contracts prior to Closing. None of the parties to the Material
Contracts (which include all of Seller's significant Customers) has
cancelled or substantially reduced or, to the knowledge of Seller or any of
the Shareholders, is currently attempting or threatening to cancel any
Material Contract or substantially reduce utilization of the services
provided by Seller, and Seller has complied with all commitments and
obligations pertaining to any Material Contract, and is not in default
under any such Material Contract, and no notice of default has been
received.
5.23 Predecessor Status, Etc. There have been no predecessor
corporations of Seller for the past five (5) years. Seller has not been a
subsidiary or division of another corporation or part of an acquisition
which was later rescinded.
5.24 Spin-Off by Seller. Within the preceding two (2) years, there
has not been any sale, spin-off or split-up of material assets of Seller or
any other person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, Seller.
5.25 Records of Seller. All material corporate actions taken by
Seller have been duly authorized or ratified. All accounts, books, ledgers
and official and other records of Seller have been fully, properly and
accurately kept and completed in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained therein.
5.26 Accuracy of Information Furnished by Seller and the Shareholders.
No statement or information contained in this Agreement and the various
Disclosure Schedules and Annex attached hereto or in any certificate
furnished to Purchaser pursuant hereto, contains or shall contain any
material untrue statement of a fact or omits or shall omit any material
fact necessary to make the information contained therein not misleading.
The Sellers have provided Purchaser with true, accurate and complete copies
of all documents listed or described in the various Disclosure Schedules
attached hereto. If the Sellers become aware of any fact or circumstance
which would change a representation or warranty of Seller in this
Agreement, the party with such knowledge shall immediately give notice of
such fact or circumstance to Purchaser. However, such notification shall
not relieve the Sellers of their obligation under this Agreement, and at
the sole option of Purchaser, the truth and accuracy of any and all
warranties and representations of Seller at the date of this Agreement
shall be a precondition to the consummation of this transaction. The
Shareholders acknowledge that the Shares are subject to transfer
limitations under federal and state securities laws.
5.27 Investment Intent. The Seller is acquiring the Shares hereunder
for its own account and not with a view to, or for the sale in connection
with, any distribution of any of the Shares, except in compliance with
applicable federal and state securities laws. The Seller has had the
opportunity to discuss the transactions contemplated hereby with Purchaser
and SkyLynx and have had the opportunity to obtain such information
pertaining to Purchaser and SkyLynx as has been requested, including but
not limited to, filings made by SkyLynx with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
5.28 Acknowledgment Regarding Disclosure of Certain Materials. Each
of the Sellers hereby acknowledge and warrant that they have been provided
access to the following information: (i) all material books and records of
Purchaser; (ii) all material contracts and documents relating to the
transaction contemplated by this Agreement; (iii) all documents required to
be provided to each of the Sellers pursuant to Rule 502 of the Exchange Act
by SkyLynx, including the terms set forth in the Private Placement
Memorandum; and (iv) the opportunity to question the appropriate executive
officers and partners of Purchaser and SkyLynx.
5.29 Survival. Each of the representations and warranties set forth
in this Article 5 shall survive the Closing.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 Conduct of Business by Seller Pending the Closing. Except as
provided in Schedule 6.1, Seller and the Shareholders, jointly and
severally, covenant and agree that, except as otherwise expressly required
or permitted by the terms of this Agreement, between the date of this
Agreement and the Closing, the business of Seller shall be conducted only
in, and Seller shall not take any action except in, the ordinary course of
business consistent with past practice. Seller and the Shareholders shall
use its or their reasonable best efforts to preserve intact Seller's
business organizations, to keep available the services of its current
officers, employees and consultants, and to preserve its present
relationships with customers, suppliers and other Persons with which it has
business relations. By way of amplification and not limitation, Seller
shall not, except as expressly required or permitted by the terms of this
Agreement between the date of this Agreement and the Closing, directly or
indirectly, do or propose or agree to do any of the following without the
prior written consent of Purchaser:
(a) amend or otherwise change its Charter Documents except
change of corporate name and fictitious name registration in order to
complete sale transaction, as previously disclosed to Purchaser;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice; or any shares of its capital stock of any
class, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock or other securities;
(d) sell, lease or transfer any of its properties or assets
(other than in the ordinary course of business consistent with past
practice), or acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets; or make any investment either by purchase
of stock or securities, contributions of capital or property transfer, or
purchase any property or assets of any other Person (except in the ordinary
course of business consistent with past practice); make or obligate itself
to make capital expenditures out of the ordinary course of business
consistent with past practice; other than in the ordinary course of
business consistent with past practice, incur any obligations or
liabilities including, without limitation, any indebtedness for borrowed
money, issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for, the obligations of
any Person, or make any loans or advances, modify, terminate, amend or
enter into any Contract other than as expressly required or permitted
herein or in the ordinary course of business consistent with past practice,
or impose any security interest or other Lien on any of its assets other
than in the ordinary course of business consistent with past practice;
(e) pay any bonus to its officers or employees, or increase the
compensation payable or to become payable to its officers or employees or,
except as presently bound to do, grant any severance or termination pay to,
or enter into any employment or severance agreement with, any of its
directors, officers or employees, or establish, adopt, enter into or amend
or take any action to accelerate any rights or benefits which any
collective bargaining, bonus, profit sharing trust, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees;
(f) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a manner
consistent with past practices;
(g) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in the Financial
Statements, as appropriate, or liabilities incurred after the date thereof
in the ordinary course of business and consistent with past practice or
delay paying any amount payable beyond forty-five (45) days following the
date on which it is due, except to the extent being contested in good
faith;
(h) enter into any transaction or agreement with any of the
Sellers or an Affiliate thereof except for such transactions or agreements
expressly permitted herein; or
(i) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty in Article 5 untrue or incorrect in any respect.
ARTICLE 7
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions
contemplated hereby and to satisfy the conditions set forth in Articles 8
and 9. The Sellers shall cause Seller to comply with all of the covenants
of Seller under this Agreement. The Sellers covenant and agree to deliver
to Purchaser at the Closing the certificates, opinions and other documents
required to be delivered to Purchaser pursuant to Article 8, and Purchaser
covenants and agrees to deliver to the Sellers the certificates and other
documents required to be delivered to the Sellers pursuant to Article 9.
7.2 Confidentiality, Publicity. Except as required by law, none of
the parties hereto shall disclose the terms of this transaction to any
third party nor make any public announcement related to this Agreement or
the transactions contemplated hereby without the prior notification of the
other parties hereto. The disclosing party shall provide the other parties
with a copy of all public announcements proposed to be made by such parties
which relate to this Agreement or the transactions contemplated hereby
prior to the release of such announcements to the public. The disclosure
restrictions set forth herein shall not apply to release of such
information to each of the parties' accountants, legal counsels and key
employees.
7.3 No Other Discussions. Until this Agreement is terminated as
herein provided, none of the Shareholders, Seller, or its Affiliates,
employees, agents, and representatives will: (i) initiate, encourage the
initiation by others of discussions or negotiations with third parties or
respond to solicitations by third persons relating to any merger, sale, or
other disposition of any substantial part of the assets, the Business or
the properties of Seller (whether by merger, consolidation, sale of stock,
sale of assets, or otherwise); or (ii) enter into any agreement or
commitment (whether or not binding) with respect to any of the foregoing
transactions. The Sellers will immediately notify Purchaser if any third
party attempts to initiate any solicitation, discussion, or negotiation
with respect to any of the foregoing transactions.
7.4 Due Diligence Investigation. Purchaser shall be entitled to
conduct, prior to Closing, a due diligence investigation of Seller, its
assets and the Business. Seller shall provide Purchaser and its designated
agents and consultants with reasonable access during normal business hours
to Seller's business and the assets and all books, records, documents,
correspondence and other materials ("Proprietary Documents") related
thereto which Purchaser, its agents and consultants reasonably require to
conduct such due diligence review; provided, however, that without the
prior consent of Seller, Purchaser shall not contact, interview, meet,
solicit or otherwise discuss the transactions contemplated by this
Agreement with any customers, employees, or suppliers of Seller. Purchaser
agrees to keep strictly confidential and not to disclose to third parties
all or any portion of Proprietary Documents. The confidentiality
restriction set forth herein shall not apply to release of such information
to each of the parties' accountants, legal counsels and key employees.
Upon termination of this Agreement, Purchaser shall return all Proprietary
Documents, copies, extracts, and summaries thereof, in any form or medium,
in its possession, to Seller.
7.5 Related Party Agreements. Set forth in Schedule 7.5 are all of
the existing agreements between Seller and its Affiliates and between the
Seller and the Shareholders affecting the Assets, the Business, or the
Sellers' ability to perform their respective obligations hereunder, and
unless otherwise stated, such agreements shall continue to survive after
the Closing.
7.6 Cooperation. Each of the parties agrees to cooperate with the
other in the preparation and filing of all forms, notifications, reports
and information, if any, required or reasonably deemed advisable pursuant
to any law, rule or regulation in connection with the transactions
contemplated by this Agreement and to use their respective best efforts to
agree jointly on a method to overcome any objections by any Governmental
Authority to any such transactions.
7.7 Other Actions. Prior to the Closing, each of the parties hereto
shall take all appropriate actions, and do, or cause to be done, all things
necessary, proper or advisable under any applicable laws, regulations, and
contracts to consummate and make effective the transactions contemplated
herein, including, without limitation, obtaining all licenses, permits,
consents, approvals, authorizations, qualifications, and orders of any
Governmental Authority and parties to Contracts with Seller as are
necessary for the consummation of the transactions contemplated hereby.
Each of the parties shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by
it for the consummation of the transactions contemplated hereby. The
parties also agree to use best efforts to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby.
7.8 Notification of Certain Matters. The Sellers shall give prompt
notice to Purchaser of the occurrence or non-occurrence of any event which
would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained
herein not to be complied with or satisfied.
7.9 Payoff and Estoppel Letters. Prior to the Closing, the Sellers
shall request and deliver to Purchaser, with respect to any Indebtedness
affecting the Assets, the Business, or the Sellers' ability to perform
their respective obligations hereunder, payoff and estoppel letters from
such holders of any Indebtedness, which letters shall contain payoff
amounts, per diem interest, wire transfer instructions and an agreement to
deliver to Purchaser, upon full payment of any such Indebtedness, UCC-3
termination statements, satisfactions of mortgage or other appropriate
releases and any original promissory notes or other evidences of
indebtedness marked canceled.
7.10 Accounting Treatment. Sellers and Purchaser agree to follow tax
accounting treatment and allocations in respect of the sale of the Assets
consistent with the treatment and allocations described in Schedule 7.10.
7.11 Covenant Not to Compete. In order to ensure that Purchaser will
realize the benefits of the transactions contemplated hereby, the Sellers
agree with Purchaser that the Sellers will not, directly or indirectly,
alone or as a partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor, trustee, custodian, fiduciary,
lender, or security holder of any company, business, or entity, or
otherwise:
(a) for a period of three (3) years following the Closing Date,
engage in, or finance or provide financial assistance with respect to, any
business conducted by Seller in the preceding three (3) years, including,
without limitation, the Business, in the Restricted Territory; provided,
however, that, the beneficial ownership of less than five percent (5%) of
the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter
market shall not be deemed, in and of itself, to violate the prohibitions
of this section. Notwithstanding anything contained herein to the
contrary, Norvel E. Swallie and Anne L. Swallie shall be permitted to
conduct network training, network design and consulting work unrelated to
the ISP business without violating the prohibitions of this subsection;
(b) for a period of three (3) years following the Closing Date,
directly or indirectly: (i) induce any Person which is a customer of
Seller to patronize any business directly or indirectly in competition with
the Business in the Restricted Territory; (ii) canvass, solicit, or accept
from any Person which is a customer of the Business in the Restricted
Territory, any such competitive business; or (iii) request or advise any
Person which has a business relationship with the Business in the
Restricted Territory to withdraw, curtail, or cancel any such Person's
business with the Business;
(c) for a period of three (3) years following the Closing Date,
directly or indirectly employ, or solicit the employment of, any person who
was employed by Seller or the Purchaser at or within the prior six (6)
months, or in any manner seek to induce any such person to leave his or her
employment; provided, however, that the Sellers may hire any employee that
is terminated by Purchaser; and
(d) at any time following the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce, or retain in its
or their possession Seller's proprietary rights or records, including, but
not limited to, any of its customer lists.
Sellers expressly agree that Purchaser has a legitimate business
interest justifying the existence of this Section 7.11. Sellers
acknowledge that Seller may be exposed to: (i) certain information and
document of Purchaser that derive independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable, by proper means, by other persons who can obtain economic
value from its disclosure or use which is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy (the "Trade
Secrets"); (ii) valuable confidential business and professional information
of Purchaser that does not otherwise qualify as Trade Secrets of Purchaser;
(iii) substantial relationships of Purchaser with specific prospective or
existing customers, and clients of Purchaser; and (iv) the customer, and
client goodwill associated with Purchaser's businesses.
Purchaser and the Sellers have carefully considered the nature
and extent of the restrictions imposed by this Section 7.11 (collectively,
the "Restrictive Covenant") and the rights and remedies conferred upon
Purchaser under the Restrictive Covenant and hereby expressly acknowledge
and agree that: (i) any restricted period and the Restricted Territory and
all other restrictions contained in the Restrictive Covenant are designed
to eliminate competition which would otherwise be unfair to Purchaser; (ii)
the Restrictive Covenant is reasonable and necessary and fully required to
protect the legitimate business interests of Purchaser; (iii) Purchaser's
legitimate business interests extend throughout the Western United States
and Purchaser currently has customers, arrangements, and relationships
throughout the Western United States; (iv) the Restrictive Covenant imposes
a reasonable restraint upon the Sellers; (v) any violation of the terms of
the Restrictive Covenant could have a substantial detrimental effect on
Purchaser's business; (vi) the Restrictive Covenant does not stifle the
Sellers' inherent skill and experience; (vii) the Restrictive Covenant does
not confer a benefit upon Purchaser disproportionate to the detriment to
Seller; and (viii) the Sellers expressly acknowledge that the Sellers shall
have the ability to practice the Sellers' profession outside of the
Restricted Territory.
The Sellers hereby agree and acknowledge that Purchaser would
suffer irreparable harm if any of the Sellers violate the Restrictive
Covenant and that any damages resulting from any violation of the
Restrictive Covenant would be difficult to ascertain and, for that reason,
the Sellers expressly agree that, in the event of any violation of the
Restrictive Covenant, Purchaser shall be entitled to equitable relief,
including preliminary and permanent injunctive relief restraining any such
violation of any or all of the Restrictive Covenant either directly or
indirectly, from any court of competent jurisdiction, without proof of
actual damages and without posting bond, and such right of Purchaser shall
be cumulative and shall in no way limit any other remedies which Purchaser
may have (including, without limitation, the right to seek monetary
damages). Purchaser and each of the Sellers hereby agree that Purchaser
may assign, without limitation, the foregoing restrictive covenants to any
successor to Purchaser's business or any of Purchaser's Companies.
The Sellers acknowledge that the Restrictive Covenant has been
called to the attention of Seller and Seller understands that the
Restrictive Covenant is a material covenant of this Agreement and that
Purchaser would not have entered into this Agreement without the existence
of the Restrictive Covenant. Purchaser and Seller further agree that, in
the event of any litigation at law or at equity with regard to the
enforcement or interpretation of the Restrictive Covenant, Purchaser shall
be entitled to be reimbursed by the Sellers for all reasonable attorneys'
fees and costs which Purchaser and Purchaser's Affiliates incur, at all
levels of all such litigation, including without limitation, pre-trial and
appellate levels if Purchaser is successful in a court of law.
If a court having jurisdiction over this Agreement shall
determine that any restricted period or the Restricted Territory or any
other restriction contained in the Restrictive Covenant is overbroad or is
unenforceable for any reason whatsoever, it is the intention of Purchaser
and Seller that the Restrictive Covenant shall not thereby be terminated or
void, but shall be deemed amended to the extent required by such court to
render it valid and enforceable to the greatest extent permissible by such
court and the applicable law and public policy.
If any Seller violates the Restrictive Covenant, and Purchaser's
successors and assigns or any of Purchaser's Affiliates bring legal action
for injunctive or other relief, such party bringing the action shall not,
as a result of the time involved in obtaining the relief, be deprived of
the benefit of the full period of the Restrictive Covenant. Accordingly,
for any time period any Seller is in violation of the Restrictive Covenant,
such time period shall not be included in calculating the Restricted
Period.
7.12 Employment.
(a) Purchaser agrees to hire Norvel E. Swallie and Anne L.
Swallie to perform each of their respective duties as of the Effective Date
of this Agreement, for a period of ninety (90) days following the Closing
(the "Term"), at their respective salaries as of May 1, 1999, less
applicable tax withholdings or other deductions required by law.
(b) Seller has agreed to and has expressly represented to
Purchaser that Seller will be terminating the employment of all of Seller's
current employees effective as of the Closing Date; provided, however, that
Seller will remain responsible for all salary, benefits, and tax matters
pertaining to each individual's former employment with Seller. Effective
as of the Closing, Purchaser agrees to hire the current employees of
Seller, on an at-will employment basis, at their current salary rates.
7.13 Business Records.
(a) On or prior to the Closing, Seller shall provide Purchaser
and SkyLynx with all operating data and records of Seller, including,
without limitation, all of Seller's existing documents, files and other
material related to all current or past customers of the Business,
financial, accounting and credit records, correspondences, budgets and
other similar documents and records, which shall be maintained on-site at
Seller's current business headquarters for a period of ninety (90) days
following the Closing.
(b) Following the ninety (90) day period, Sellers shall be
permitted to retain and maintain said records off-site, with the express
understanding that Sellers shall thereafter provide Purchaser access to
review, inspect or copy upon five (5) days prior written notice, which
shall be provided by way of certified mail, return receipt requested for a
period of one (1) year after the Closing. Each of the Shareholders hereby
agree to perform in such reasonable manner as to assist Purchaser with
respect to obtaining access to such records after the ninety (90) day
period described herein. Sellers hereby acknowledge and agree that failure
on the part of Sellers to procure such documents in a timely fashion shall
trigger a Ten Thousand Dollars ($10,000) penalty, which shall be payable
out of the Hold Back Shares. In connection therewith, each of the Sellers
agree to provide Purchaser with notice by e-mail if at any time any of the
Sellers will be unavailable to provide access to such records for a period
exceeding seven (7) continuous days, for a period of one (1) year after the
Closing Date ("Notice Period"). During the Notice Period, the Sellers will
make every effort to provide access to Sellers records but will not be held
accountable if access cannot be reasonably arranged until Sellers return
from their respective absences. If Seller is requested to provide copies
of records, Seller will be reimbursed for reasonable time and materials.
(c) Notwithstanding anything contained herein to the contrary,
after the one (1) year period following the Closing, each of the Sellers
shall cooperate with Purchaser in the event that Purchaser is requested by
its accountants to provide certain information, or is required to make SEC
filings or other public filings. If Seller is requested to provide copies
of records, Seller will be reimbursed for reasonable time and materials.
7.14 Tax Related Matters. With respect to the assumption of the sales
tax obligation arising from this transaction assumed by Purchaser under
Section 5.7, Sellers represent and warrant that they have not and will not
from and after the Effective Date, undertake any action that would cause or
result in an audit, penalty or surcharges with respect to such sales tax
obligations.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND SKYLYNX
The obligations of Purchaser and SkyLynx to effect the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in whole or in part by Purchaser or SkyLynx;
8.1 Accuracy of Representations and Warranties; Compliance with
Obligations. The representations and warranties of the Shareholders and
Seller contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and
effect as though made at and as of that time except: (i) for changes
specifically permitted by or disclosed pursuant to this Agreement; and (ii)
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. The
Shareholders and Seller shall have performed and complied with all of their
obligations required by this Agreement to be performed or complied with at
or prior to the Closing Date, including those obligations set forth in
Article 7 herein. The Shareholders and Seller shall have delivered to
Purchaser and SkyLynx a certificate, dated as of the Closing Date, duly
signed, certifying that all such obligations have been performed and
complied with.
8.2 No Material Adverse Change or Destruction of Property. Between
January 1, 1999, and the Closing Date: (i) there shall have been no
Material Adverse Change in Seller or the Business; (ii) there shall have
been no adverse federal, state, or local legislative or regulatory change
affecting in any material respect the service or products of Seller or the
Business; and (iii) no material portion of the Assets shall have been
damaged by fire, flood, casualty, riot, or other cause (regardless of
insurance coverage for such damage), and there shall have been delivered to
Purchaser and SkyLynx a certificate to that effect, dated as of the Closing
Date and signed by the Sellers.
8.3 Corporate Certificate. Seller shall have delivered to Purchaser
and SkyLynx copies of resolutions adopted by its Board of Directors and the
Shareholders authorizing the transactions contemplated by this Agreement,
certified as of the Closing Date by the Secretary of Seller as being true,
correct, and complete.
8.4 Consent. Seller and the Shareholders shall have received
consents to the transactions contemplated hereby and waivers of rights to
terminate or modify any material rights or obligations of Seller and the
Shareholders from any person from whom such consent or waiver is required
under any contract to which the Shareholders, Seller, or the Assets are
bound, or who, as a result of the transactions contemplated hereby, would
have such rights to terminate or modify such contracts, either by the terms
thereof or as a matter of law. Without limiting the foregoing, the Sellers
shall have received all necessary consents to the transactions contemplated
by this Agreement including, without limitation, the transfer and
assignment of all operating permits necessary for the operation of the
Business, and shall have provided all proper notifications to and obtained
all necessary consents from such local, municipal, state or governmental
authorities as may be necessary in order to consummate the transactions
contemplated hereunder.
8.5 No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate or collect damages
arising out of the transactions contemplated hereby, and which, in the
judgment of Purchaser and SkyLynx, makes it inadvisable to proceed with the
transactions contemplated hereby.
8.6 Delivery of Business Records. Sellers shall have provided access
to operating data and records of Seller, including, without limitation, all
of Seller's existing documents, files and other material related to all
current or past customers of the Business, financial, accounting and credit
records, correspondence, budgets and other similar documents and records
for a period of one (1) year from Closing.
8.7 Opinion of Counsel. Purchaser and SkyLynx shall have received an
opinion dated as of the Closing Date from counsel for Seller and the
Shareholders, in substantially the form attached hereto as Annex I.
8.8 General. All actions taken by the Sellers in connection with the
consummation of the transaction contemplated hereby and all certificates,
opinions and other documents required to effect the transactions
contemplated hereby, will be reasonably satisfactory in form and substance
to Purchaser and SkyLynx.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions, any or all of which may be waived in whole or
in part by the Sellers:
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Purchaser and SkyLynx
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as
though made at and as of that time except: (i) for changes specifically
permitted by or disclosed pursuant to this Agreement; and (ii) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Purchaser
and SkyLynx shall have performed and complied in all material respects with
all of its respective obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Purchaser and
SkyLynx shall have delivered to the Sellers a certificate, dated as of the
Closing Date, and signed by an executive officer thereof, certifying that
such representations and warranties are true and correct, and that all such
obligations have been performed and complied with, in all material
respects.
9.2 Other Conditions. At the Closing, Purchaser shall have delivered
to the Sellers the Purchase Price.
9.3 Corporate Certificates. Purchaser and SkyLynx shall have
delivered to Seller copies of resolutions adopted by their respective Board
of Directors authorizing the transactions contemplated by this Agreement
certified as of the Closing Date by the Secretary of Purchaser and SkyLynx
as being true, correct, and complete.
9.4 No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate, or collect damages
arising out of the transactions contemplated hereby, and which, in the
judgment of the Sellers, makes it inadvisable to proceed with the
transactions contemplated hereby.
ARTICLE 10
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
10.1 Non-Assumption of Liabilities; Indemnification.
(a) The Sellers agree, jointly and severally, to indemnify and
hold Purchaser, SkyLynx and their respective Affiliates harmless from and
against the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, related counsel and
legal fees and expenses) incurred or suffered by Purchaser and SkyLynx
(collectively, "Indemnifiable Damages") resulting from or arising out of:
(i) any material breach of a representation or warranty made by the Sellers
in or pursuant to this Agreement; (ii) any material breach of the covenants
or agreements made by the Sellers in this Agreement; (iii) any material
inaccuracy in any certificate delivered by the Sellers pursuant to this
Agreement; (iv) any material misrepresentation in or omission from any
Disclosure Schedule to this Agreement; (v) any liability of the Sellers to
creditors of the Sellers which is imposed on Purchaser or SkyLynx whether
as a result of bankruptcy proceedings or otherwise and whether as an
account payable by the Sellers or as a claim of alleged fraudulent
conveyance or preferential payments within the meaning of the United States
Bankruptcy Code or otherwise; (vi) the existence of creditors of the
Sellers which are not disclosed to Purchaser; or (vii) any violation by the
Sellers of the requirements of any governmental authority relating to the
reporting and payment of federal, state, local or other income, sales, use,
franchise, excise, payroll, property or other tax liabilities of the
Sellers which occurs or exists prior to the Closing Date. The indemnity
obligation contained in this Section 10.1(a) shall continue for a period of
three (3) years from and after the Closing Date; provided, however, that
the indemnity obligations hereunder shall continue indefinitely with
respect to any claim arising from or relating to matters for which
Purchaser or SkyLynx shall have provided notice to the Sellers of
Purchaser's or SkyLynx' intent to seek indemnification for such claims
prior to the expiration of such three (3) year period.
(b) The Sellers agree, jointly and severally, to indemnify and
hold Purchaser, SkyLynx and their respective Affiliates harmless from and
against the aggregate of all Indemnifiable Damages resulting from or
arising out of any occurrence or circumstance (whether known or unknown)
which occurs or exists on or prior to the Closing Date and which
constitutes, or which by the lapse of time or giving notice (or both)
would constitute, a breach or default by the Sellers under any lease,
Contract or other instrument or agreement whether written or oral. The
indemnity obligation contained in this Section 10.1(b) shall continue for
a period of two (2) years from and after the Closing Date.
Notwithstanding the foregoing time limitation, the obligation of the
Sellers to indemnify Purchaser or SkyLynx hereunder shall continue
indefinitely with respect to any claim arising from or relating to matters
for which Purchaser or SkyLynx shall have received a formal demand or
allegation from a third party and provided notice thereof to the Sellers
and of Purchaser's or SkyLynx' intent to seek indemnification for such
claims hereunder within two (2) years of the Closing Date.
10.2 Assumption of Specific Liabilities. Purchaser and SkyLynx agrees
to perform all of the Sellers' contractual obligations related to the
Assets and the Business to the extent, and only to the extent, such
obligations have been expressly assumed by Purchaser or SkyLynx hereunder
and that they first mature and are required to be performed by Purchaser or
SkyLynx after the close of business on the Closing Date. Purchaser and
SkyLynx agree to indemnify and hold Sellers harmless from all reasonable
expenses, losses, costs, deficiencies, liabilities and damages, including
attorneys' fees, arising solely from events occurring after the Closing
related to Purchaser's ownership of the Assets and Purchaser's conduct of
the Business.
10.3 Survival of Representations and Warranties. Each of the
representations and warranties made by Seller and the Shareholders in this
Agreement or pursuant hereto shall survive for a period of three (3) years
following the Closing Date. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation, each party shall
have the right to fully rely on the representations, warranties, covenants,
and agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement.
10.4 Matters Involving Third Parties.
(a) If any third party shall notify Purchaser, SkyLynx, or any
of the Sellers with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against the other party under this
Article 10, then the party receiving such Third Party Claim shall promptly
notify the other parties in writing; provided, however, that no delay on
the part of the notifying party in notifying the other parties shall
relieve such party from any obligation hereunder unless (and then solely to
the extent) the indemnifying party is thereby prejudiced.
(b) Purchaser and SkyLynx will have the right to defend against
all Third Party Claims with counsel of its choice reasonably satisfactory
to the Sellers. If any of the Sellers is the notifying party, such party
may retain separate co-counsel at its sole cost and expense and participate
in the defense of the Third Party Claim. None of the parties will consent
to the entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving to the notifying party
by the third party of a release of all liability in respect of such Third
Party Claim or which seeks an injunction, specific performance, or a
declaration of rights or other equitable relief that, in the good faith
judgment of notifying party, will likely have a material adverse effect on
the notifying party's operations without the prior written consent of the
notifying party (which shall not to be withheld unreasonably).
ARTICLE 11
SECURITIES LAW MATTERS
11.1 Disposition of Shares. The Seller represents and warrants that
the Shares being acquired by Seller hereunder are being acquired and will
be acquired for its own account, and will not be sold or otherwise disposed
of, except pursuant to: (a) an exemption from the registration requirements
under the Securities Act, which does not require the filing by SkyLynx with
the SEC of any registration statement, offering circular or other
documents, in which case, the Seller shall first supply to SkyLynx an
opinion of counsel (which counsel and opinions shall be satisfactory to
SkyLynx) that such exception is available; or (b) an effective registration
statement filed by SkyLynx with the SEC under the Securities Act.
11.2 Legend. The certificates representing the Shares shall bear the
following legend:
THE SALE OF THE SECURITIES REPRESENTED BY THIS
INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE,
HYPOTHECATION, PLEDGE OR OTHER DISPOSITION OF THESE
SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO UNLESS THE SALE
OR OTHER DISPOSITION IS MADE IN ACCORDANCE WITH RULE
144 UNDER THE ACT OR THE HOLDER OF SUCH SECURITIES
PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO SKYLYNX
COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
11.3 Contractual Restriction Legend.
The Hold Back Shares shall bear the following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED
HEREBY HAS BEEN CONTRACTUALLY RESTRICTED. THE HOLDER
AGREES THAT SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
SKYLYNX COMMUNICATIONS, INC., UNTIL THE EXPIRATION OF
SUCH RESTRICTION ON JULY 16, 2000.
11.4 Delivery of the Hold Back Shares.
At the end of the Hold Back Period, the Contractual Restriction
Legend found in Section 11.3 shall be removed from the Hold Back Shares to
reflect the expiration of the Hold Back Period. SkyLynx shall cause shares
to be issued and delivered to the Shareholders, subject to adjustments that
may be required to the Hold Back Shares, including but not limited to,
stock splits, dividends, redemptions, and any forfeiture of the Hold Back
Shares, or any portion thereof; provided, however, that should an
adjustment or forfeiture to the Hold Back Shares be required, Purchaser or
SkyLynx shall provide to the Shareholders a written accounting of any
adjustments that may be made by Purchaser or SkyLynx.
11.5 No Bar.
If the Hold Back Shares are insufficient to set off any claim for
any Indemnifiable Damages hereunder (or have been delivered in whole or
part to the Shareholders prior to the making or resolution of such claim),
then Purchaser or SkyLynx may take any action or exercise any remedy
available to them by appropriate legal proceeding to collect the
Indemnifiable Damages; provided, however, that the total amount of
Indemnifiable Damages recoverable by Purchaser or SkyLynx shall not exceed
the lesser of the following: (i) Four Hundred Fifty Thousand Dollars
($450,000) or (ii) the then fair market value of the Shares at the time the
resolution of such claims are made.
ARTICLE 12
DEFINITIONS
12.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
"Accounts Receivable" shall have the meaning described in Section
1.1(e).
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2
of the General Rules and Regulations under the Securities and Exchange Act
of 1934, as in effect on the date hereof.
"Agreement" shall have the meaning ascribed to it in the Preamble
of this Agreement.
"Assets" shall have the meaning set forth in Section 1.1 above.
"Assumed Contracts" shall have the meaning described in Section
1.1(f).
"Bill of Sale" shall have the meaning described in Section
3.1(a).
"Business" shall have the meaning described in the Recitals.
"Business Names" shall have the meaning described in Section
1.1(l).
"Charter Documents" shall have the meaning described in Section
5.6.
"Closing" shall have the meaning described in Section 3.1.
"Closing Date" shall have the meaning described in Section 3.1.
"Common Stock" shall mean shares of common stock of the
Purchaser, $0.001 par value.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust, commitment,
obligation, or other contract, agreement, or instrument, whether written or
oral.
"Current Balance Sheet" shall have the meaning described in
Section 5.9.
"Customer Accounts" shall have the meaning described in Section
1.1(e).
"Designated Liabilities" shall have the meaning described in
Section 5.12.
"Disclosure Schedule" or "Disclosure Schedules" shall have the
meaning described in Article 4.
"Effective Date" shall have the meaning ascribed to it in the
Preamble of this Agreement.
"Equipment" shall have the meaning described in Section 1.1(a).
"Exchange Act" shall have the meaning described in Section 5.27.
"Excluded Assets" shall have the meaning described in Section
1.6.
"Financial Statements" shall have the meaning described in
Section 5.9.
"Governmental Authority" means any nation or government, any
state, regional, local, or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial, regulatory,
or administrative functions of or pertaining to government.
"Hold Back Period" shall have the meaning described in Section
2.1.
"Hold Back Shares" shall have the meaning described in Section
2.1.
"Indemnifiable Damages" shall have the meaning set forth in
Section 10.1(a).
"Intellectual Property" shall have the meaning described in
Section 5.19.
"Inventory" shall have the meaning described in Section 1.1(g).
"July 1999 Expenses" shall have the meaning described in Section
1.4.
"July 1999 Net Income" shall have the meaning described in
Section 1.4.
"Knowledge" or "to the best knowledge" or similar terms as used
in this Agreement, unless otherwise specifically defined herein, shall mean
the actual or constructive knowledge, after due inquiry and investigation,
of each of the Shareholders, the officers and directors of Seller, and its
key employees in managerial roles.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, or charge of any kind (including, but not limited to,
any conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law or any
jurisdiction in connection with such mortgage, pledge, security interest,
encumbrance, lien, or charge).
"Market Value" means the average closing price of a share of the
Common Stock on the over-the-counter market for the ten (10) trading days
immediately preceding the Closing Date.
"Material Adverse Change (or Effect)" means a change (or effect),
in the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Material Contracts" shall have the meaning described in Section
5.22.
"Notice Period" shall have the meaning described in Section
7.13(b).
"Permits" shall have the meaning described in Section 5.21.
"Person" means an individual, partnership, corporation, business
trust, joint stock corporation, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"Proprietary Documents" shall have the meaning set forth in
Section 7.4.
"Purchase Price" shall have the meaning ascribed to it in Section
2.1 of this Agreement.
"Real Property" shall have the meaning described in Section
1.1(b).
"Related Documents" shall have the meaning described in Section
1.1(e).
"Restricted Territory" means a two hundred fifty (250) mile
radius of downtown Los Angeles and all of the counties in the State of
Nevada.
"Restricted Securities" shall have the meaning described in
Section 2.1.
"Restrictive Covenant" shall have the meaning described in
Section 7.11(d).
"Rolling Stock" shall have the meaning described in Section
1.1(c).
"SEC" shall have the meaning set forth in Section 5.27.
"Shares" shall have the meaning set forth in Section 2.1(b).
"SkyLynx" shall have the meaning ascribed to it in the Preamble
of this Agreement.
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to any
Taxes; and
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security, and unemployment taxes imposed by any
federal, state, local, or foreign governmental agency, and any interest or
penalties related thereto.
"Term" shall have the meaning set forth in Section 7.12(a).
"Third Party Claim" shall have the meaning set forth in Section
10.4(a).
"Trade Secrets" shall have the meaning set forth in Section
7.11(d).
ARTICLE 13
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of all of the parties hereto at
any time prior to Closing; or
(b) by Purchaser in the event of a material breach by the
Sellers of any provision of this Agreement; or
(c) by either party if the Closing shall not have occurred by
August 31, 1999, notwithstanding the diligent efforts of all parties, and
the parties hereto have not agreed to extend the date to close.
13.2 Effect of Termination. Except as expressly stated herein, in the
event of termination of this Agreement pursuant to Section 13.1, this
Agreement shall forthwith become void; provided, however, that nothing
herein shall relieve any party from liability for the willful breach of any
of its representations, warranties, covenants or agreements set forth in
this Agreement. Purchaser shall immediately return to the Sellers any and
all documents pursuant to Section 7.4.
ARTICLE 14
GENERAL PROVISIONS
14.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and
shall be deemed delivered) by certified or registered mail (first class
postage pre-paid), guaranteed overnight delivery, or facsimile transmission
if such transmission is confirmed by delivery by certified or registered
mail (first class postage pre-paid) or guaranteed overnight delivery, to
the following addresses and telecopy numbers (or to such other addresses or
telecopy numbers which such party shall designate in writing to the other
party):
(a) If to Purchaser or, following the Closing:
SkyLynx Communications MST, Inc.
600 South Cherry Street, Suite 305
Denver, Colorado 80246
Attention: CEO and President
Fax: (303) 316-0404
With a copy to:
McDermott, Will & Emery
600 13th Street, N.W.
Washington, D.C. 20005-3096
Attention: Robert N. Jensen, Esq.
Fax: (202) 756-8087
(b) If to SkyLynx or, following the Closing:
SkyLynx Communications, Inc.
600 South Cherry Street, Suite 305
Denver, Colorado 80246
Attention: CEO and President
Fax: (303) 316-0404
With a copy to:
McDermott, Will & Emery
600 13th Street, N.W.
Washington, D.C. 20005-3096
Attention: Robert N. Jensen, Esq.
Fax: (202) 756-8087
(c) If to the Sellers prior to the Closing:
Network Training and Consulting
dba Internet Services and Training
3909 W. Sahara #5
Las Vegas, Nevada 89102
Attention: Norvel E. Swallie
Fax:
If to the Sellers after the Closing:
NES Services, Inc.
5601 Ocean Pines Circle
Las Vegas, Nevada 89130
Attention: Norvel E. Swallie
Fax:
14.2 Entire Agreement. This Agreement (including the Disclosure
Schedules and the Annex attached hereto) and other documents delivered at
the Closing pursuant hereto, contains the entire understanding of the
parties in respect of its subject matter and supersedes all prior
agreements and understandings (oral or written) between or among the
parties with respect to such subject matter. The Disclosure Schedules and
the Annex constitute a part hereof as though set forth in full above.
14.3 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own accounting and counsel
fees, incurred in connection with the negotiation and preparation of this
Agreement or any transaction contemplated hereby. Sellers shall be liable
for all sales, application, or transfer taxes or other such fees and costs
incurred in connection with this Agreement or any transaction contemplated
hereby.
14.4 Amendment; Binding Effect; Assignment. This Agreement may not be
modified, amended, supplemented, canceled or discharged, except by written
instrument executed by all parties. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Except as expressly provided herein,
the rights and obligations of this Agreement may not be assigned by the
Sellers without the prior written consent of Purchaser.
14.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
14.6 Governing Law: Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State
of Colorado applicable to contracts executed and to be wholly performed
within such State.
14.7 Access to Records. After the Closing Date and for a period of
ninety (90) days thereafter, the Sellers shall have upon ten (10) days
advance written notice reasonable access during regular business hours to
the books and records of Seller that are necessary to permit the Sellers to
exercise their rights hereunder and to obtain any information necessary for
their personal and corporate tax matters.
14.8 Attorneys' Fees. If any party to this Agreement shall bring any
action for any relief against any other party, declaratory or otherwise,
arising out of or in connection with this Agreement or the breach or
interpretation hereof, the losing party shall pay to the prevailing party a
reasonable sum for attorney's fees incurred in bringing such suit and/or
enforcing any judgment granted therein, all of which shall be deemed to
have accrued upon the commencement of such action and shall be paid whether
or not such action is prosecuted to judgment. Any judgment or order
entered in such action shall contain a specific provision providing for the
recovery of attorneys' fees and costs incurred in enforcing such judgment.
For the purposes of this section, attorneys' fees shall include, without
limitation, fees incurred in the following: (1) post-judgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examination; (4) collection proceedings; and (5) discovery.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly made effective as of the day and year first above written.
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SKYLYNX COMMUNICATIONS MST, INC.
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NETWORK TRAINING AND CONSULTING dba INTERNET
SERVICES AND TRAINING
a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
NORVEL E. SWALLIE
--------------------------------------
ANNE L. SWALLIE
<PAGE>
<PAGE>
LIST OF SCHEDULES
Schedule 1.1(a) - Description of Equipment
Schedule 1.1(b) - Description of Real Property
Schedule 1.1(c) Rolling Stock
Schedule 1.1(e) - Related Documents
Schedule 1.1(f) -- Assumed Contracts
Schedule 1.1(i) - Approvals and Operating Rights
Schedule 1.1(p) - Tangible and Intangible Assets
Schedule 1.2 -- Non-Assignment of Certain Customer Accounts
Schedule 1.3 -- Accounts Receivable
Schedule 1.6 -- Excluded Assets
Schedule 5.5 -- Subsidiaries
Schedule 5.9 -- Financial Statements
Schedule 5.10 -- Changes Since the Current Balance Sheet
Schedule 5.11 -- Litigation
Schedule 5.12 -- Liabilities
Schedule 5.13 -- Indebtedness
Schedule 5.15 -- Real Property, Leases and Significant Personal
Property
Schedule 5.16 -- Good Title, Adequacy and Condition
Schedule 5.17 -- Compliance With Laws
Schedule 5.18 -- Absence of Certain Changes or Events
Schedule 5.19 -- Intellectual Property
Schedule 5.20 -- Accounts Receivable
Schedule 5.21 -- Licenses and Permits
Schedule 5.22 -- Contracts and Customer Lists
Schedule 6.1 -- Conduct of Business Pending Closing
Schedule 7.5 -- Related Party Agreements
Schedule 7.10 -- Accounting Treatment
