ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated November 8, 1996, is made by and
among AMNEX, INC., a New York corporation ("AMNEX"), CRESCENT PUBLIC
COMMUNICATIONS INC., a New York corporation and a wholly owned subsidiary of
AMNEX ("Buyer"), COASTAL TELECOM PAYPHONE COMPANY, INC., a New Jersey
corporation ("Coastal"), BEK TEL, INC., a New Jersey corporation ("Bektel"),
GARDEN STATE TELEPHONE INSTALLATION & SERVICE CO., INC., a New Jersey
corporation ("Garden State"), and ▇▇▇▇▇ ▇. ▇▇▇▇, ("▇▇▇▇"). Coastal, Bektel,
Garden State and King are hereinafter sometimes referred to collectively as the
"Sellers" and individually as a "Seller".
R E C I T A L S
A. The Sellers are engaged in the business of owning, installing,
servicing, operating and maintaining public pay telephones within the States of
New Jersey, New York and Pennsylvania (the "Business").
B. The Sellers desire to sell and Buyer desires to purchase, upon the
terms and subject to the conditions herein set forth, certain of the assets
owned by them and used in connection with the conduct of the Business, as such
assets are hereinafter described.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and agreements contained herein, the parties agree
as follows:
ARTICLE 1
DEFINITIONS USED IN THIS AGREEMENT
As used in this Agreement, the following terms have the following
meanings:
"Acquired Assets" has the meaning set forth in Section 2.2.
"Acquired Inventory" has the meaning set forth in subsection 2.2(e).
"Acquired Machinery" has the meaning set forth in subsection 2.2(h).
"Acquired Phones" has the meaning set forth in subsection 2.2(a).
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"Acquired Phones Without Written Contracts" has the meaning set
forth in subsection 2.10(d).
"Acquired Vehicles" has the meaning set forth in subsection 2.2(i).
"Acquired Vehicle Leases" has the meaning set forth in subsection
2.2(i).
"Additional Consideration" has the meaning set forth in Section 2.5.
"Additional Initial Shares" has the meaning set forth in subsection
2.5(b).
"1933 Act" has the meaning set forth in subsection 2.7(a).
"1934 Act" has the meaning set forth in subsection 2.7(b).
"AMNEX Common Stock" has the meaning set forth in subsection 2.4(b).
"Applicable Laws" has the meaning set forth in subsection 3.3(b).
"Assumed Liabilities" has the meaning set forth in Section 2.14.
"▇▇▇▇ of Sale" means the assignment and ▇▇▇▇ of sale in the form of
Exhibit A attached hereto delivered by the Sellers to Buyer at the Closing
transferring the Acquired Assets to Buyer.
"Business" has the meaning set forth in the Recitals.
"Business Headquarters" has the meaning set forth in subsection 2.3(f).
"Cleartel" has the meaning set forth in subsection 2.2(l).
"Cleartel Contract" has the meaning set forth in subsection 2.2(l).
"Cleartel Phones" has the meaning set forth in subsection 2.2(l).
"Closing" means the consummation of the transactions contemplated by
this Agreement. The time and place of the Closing are set forth in Section 2.1.
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"Closing Date" has the meaning set forth in Section 2.1.
"Closing Letters" has the meaning set forth in Section 2.12.
"Commission" has the meaning set forth in subsection 6.7(a).
"Commissioner" has the meaning set forth in subsection 2.10(c).
"Conditions of Sale" has the meaning set forth in Section 2.10.
"Contracts" has the meaning set forth in subsection 2.2(b).
"Disclosure Schedule" means the disclosure schedule attached hereto,
which schedule contains certain information constituting a material and integral
part of this Agreement.
"Equipment" has the meaning set forth in subsection 2.2(a).
"Excluded Assets" has the meaning set forth in Section 2.3.
"Excluded Contracts" has the meaning set forth in subsection 2.3(a).
"Excluded Phones" has the meaning set forth in subsection 2.3(a).
"Excluded Vehicles" has the meaning set forth in subsection 2.3(g).
"Excluded Vehicle Leases" has the meaning set forth in subsection
2.3(g).
"Execution Date" means the date of execution of this Agreement, which
is November 8, 1996.
"Final Payment Date" has the meaning set forth in subsection 2.4(c).
"First Put" has the meaning set forth in Section 5.6.
"Goodwill" has the meaning set forth in subsection 2.2(g).
"Holdback Period" has the meaning set forth in subsection 2.4(c).
"Holdback Shares" has the meaning set forth in subsection 2.4(c).
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"Initial Shares" has the meaning set forth in subsection 2.4(b).
"Instrument of Assumption" means the instrument of assumption of
liability in the form of Exhibit B attached hereto delivered by Buyer to the
Sellers at the Closing assuming the Assumed Liabilities.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Lease" has the meaning set forth in subsection 6.12(f).
"LEC Processing Fees" has the meaning set forth in Section 2.12.
"Legal Action" means any legal, regulatory, administrative or
arbitrative action, suit, claim, investigation or proceeding.
"Market Price" has the meaning set forth in Section 5.6.
"Miscellaneous Personal Property" has the meaning set forth in
subsection 2.2(j).
"Monthly Net Margin Reports" means the unaudited net margin reports of
the Sellers for the calendar months commencing October 1994 through and
including August 1996, which reports (i) set forth, among other things, the coin
and non-coin revenue generated and operating expenses incurred with respect to
the Acquired Phones and the Business as it relates thereto during each such
calendar month; (ii) were provided by the Sellers to Buyer for due diligence
purposes; and (iii) were reviewed by Buyer in such capacity and relied upon by
Buyer in negotiating and entering into this Agreement.
"NASDAQ Clearance Period" has the meaning set forth in subsection
2.7(b).
"New Jersey Payphone Rules" has the meaning set forth in subsection
2.10(c)(ii).
"New Jersey Bulk Transfer Tax Liability" has the meaning set forth in
subsection 2.9(a).
"New York Bulk Transfer Tax Liability" has the meaning set forth in
subsection 2.9(a).
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"New York City Payphone Rules" has the meaning set forth in
subsection 2.10(c)(i).
"NJ Tax Commission" has the meaning set forth in subsection 2.9(b).
"Non-Competition and Non-Hire Agreements" means the agreements in the
form of Exhibits F-1 and F-2 attached hereto delivered to Buyer at the Closing,
containing certain restrictive covenants granted, respectively, by each of the
Sellers, and by ▇▇▇▇ ▇. ▇▇▇▇▇▇, a director of Coastal and Garden State and a
primary officer of each of Coastal, Garden State and Bektel ("Arbeit"), for the
benefit of Buyer.
"Noncompliance Adjustment" has the meaning set forth in subsection
2.10(f).
"Noncompliance Phone" has the meaning set forth in subsection 2.10(f).
"Notice of Sale" has the meaning set forth in subsection 2.9(b).
"NY Tax Commission" has the meaning set forth in subsection 2.9(b).
"PA Tax Commission" has the meaning set forth in subsection 2.9(b).
"Pennsylvania Bulk Transfer Tax Liability" has the meaning set
forth in subsection 2.9(a).
"Pennsylvania Payphone Rules" has the meaning set forth in
subsection 2.10(c)(ii).
"Preclosing Operating Expenses" has the meaning set forth in
Section 2.11.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchase Price Adjustment" has the meaning set forth in subsection
2.8(c).
"Responsive Notice" has the meaning set forth in subsection 2.9(c).
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"Route 34" has the meaning set forth in subsection 2.3(f).
"Sales Tax Liability" has the meaning set forth in Section 2.14.
"Second Put" has the meaning set forth in Section 5.6.
"Service Agreements" has the meaning set forth in subsection 2.2(c).
"Settlement Notice" has the meaning set forth in subsection 2.10(f).
"Shares" has the meaning set forth in subsection 2.7(a).
"Software" has the meaning set forth in subsection 2.2(f).
"Software Licenses" has the meaning set forth in subsection 2.2(f).
"Tax" or "Taxes" means all federal, state or local income, gross
receipts, sales, use, employment, franchise, profits, property, excise or other
taxes, fees, stamp taxes and duties, assessments or charges of any kind
whatsoever (whether payable directly or by withholding), together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority with respect thereto.
"Third Put" has the meaning set forth in Section 5.6.
"Transferred Employees" has the meaning set forth in Section 7.1.
"Unaudited Financial Statements" has the meaning set forth in
subsection 3.4(b).
ARTICLE 2
THE CLOSING
2.1 Time and Place of Closing. The closing (the "Closing") shall take
place at the offices of Coastal located at ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, at or about 10:00 AM, local time, on Friday, November 15, 1996;
provided, however, that if Buyer and AMNEX shall not have received the proceeds
of the Financing by such date, then at the election of the Sellers, the Closing
shall occur on such later date as the parties hereto shall mutually agree, but
in no event later than
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December 16, 1996. At the time of the Closing, which for all purposes hereof
shall be deemed to have occurred at 12:01 AM, the conditions to the parties
respective obligations to close hereunder shall have been fully satisfied or
waived. Such time and the actual date on which the Closing hereunder shall occur
is herein called the "Closing Date".
2.2 Purchase and Sale of the Acquired Assets. Subject to the terms and
conditions hereof, at the Closing, the Sellers agree to sell to Buyer and Buyer
agrees to purchase from the Sellers, free and clear of all liens, charges,
security interests and other encumbrances described in Section 3.8, pursuant to
a ▇▇▇▇ of Sale, and for the consideration set forth in Section 2.4, the
following tangible and intangible assets and personal property owned by the
Sellers and used in connection with the conduct of the Business, wherever
located (collectively, the "Acquired Assets"):
(a) all right, title and interest of the Sellers in and to the four
thousand one hundred fifty (4150) pay telephones wholly (100%) owned by them
which bear the identification numbers and are installed at the locations set
forth on Section 2.2(a) of the Disclosure Schedule (such 4150 telephones being
hereinafter collectively referred to as the "Acquired Phones"), together with
the telephone booths, enclosures, stations, pedestals, apparatus, fixtures,
circuit boards, coin banks and any other equipment physically connected to or
installed in or with the Acquired Phones (the Acquired Phones and such equipment
being hereinafter collectively referred to as the "Equipment");
(b) all right, title and interest of the Sellers in, to and under all
telephone location lease or placement or similar agreements, commitments,
arrangements and understandings, both oral and written, express and implied,
associated with the Acquired Phones, in which any Seller has been granted, among
other things, the exclusive (or non-exclusive, as the case may be) right to
install and maintain the Acquired Phones at the locations set forth on Section
2.2(a) of the Disclosure Schedule (collectively, the "Contracts");
(c) all right, title and interest of the Sellers in, to and under all
maintenance, service and warranty agreements associated with the Equipment,
Software, Acquired Machinery, Acquired Vehicles, or any item constituting
Acquired Inventory or Miscellaneous Personal Property, including but not limited
to (i) all remaining and transferable warranties associated with any circuit
boards, management information systems, software and programs installed in or
utilized in connection
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with the Equipment and the Business as it relates thereto; and (ii) all
maintenance, service and warranty agreements listed on Section 2.2(c) of the
Disclosure Schedule (all of the foregoing maintenance, service and warranty
agreements being hereinafter collectively referred to as the "Service
Agreements");
(d) all books and records, including electronic or computerized records
and any documentation derived therefrom which relates to the Business and the
Equipment, including without limitation, service records, quality control
information, sales and marketing information, customer lists and information,
personnel records for those employees of the Sellers who are becoming
Transferred Employees, usage and traffic reports, call data summaries, and any
books and records relating to or containing information concerning any coin,
commission, surcharge or other revenue generated by the Acquired Phones,
commissions payable to site or property owners or lessees in connection
therewith, and any other relevant financial data;
(e) all supplies, spare parts, miscellaneous equipment and other items
of inventory (wherever the same may be located) which relate to the Business and
are on hand on the Closing Date, including but not limited to those listed on
Section 2.2(e) of the Disclosure Schedule (collectively, the "Acquired
Inventory");
(f) all software, programs and management information systems installed
in or utilized in connection with the Acquired Phones and the Business as it
relates thereto, including but not limited to the system used by the Sellers to
poll and convert data derived from the Acquired Phones (collectively, the
"Software"), together with all licenses and rights of use granted to the Sellers
with respect thereto (collectively, the "Software Licenses");
(g) the corporate names and logos (if any) of Coastal and Garden State,
together with all goodwill associated with or otherwise accruing to the Sellers
with respect to such names, logos, the Contracts and the Business as it relates
thereto (subject to the provisions of subsection 6.12(a)) (the "Goodwill");
(h) all right, title and interest of the Sellers in and to all coin
counting, sorting and scanning machines owned by them, including but not limited
to those listed on Section 2.2(h) of the Disclosure Schedule (collectively, the
"Acquired Machinery");
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(i) all right, title and interest of the Sellers (a) in and to those
certain motor vehicles owned by them (together with any loan agreements relating
thereto, to the extent the same are transferable) which are listed on Section
2.2(i)(a) of the Disclosure Schedule (collectively, the "Acquired Vehicles");
and (b) in, to and under those certain motor vehicle lease agreements, a
detailed listing of which (identifying vehicles covered, name of the leasing
company, amount of monthly lease payment, and expiration date for each lease
agreement) is set forth on Section 2.2(i)(b) of the Disclosure Schedule
(collectively, the "Acquired Vehicle Leases");
(j) all right, title and interest of the Sellers in and to all office
furniture, computer and office equipment, office telephone and security systems,
office fixtures and installations, and all telephone installation and repair
tools which are owned by them, including but not limited to those listed on
Section 2.2(j) of the Disclosure Schedule (collectively, the "Miscellaneous
Personal Property");
(k) all registries, applications, permits, franchises, licenses,
authorizations and approvals submitted or filed by any Seller to or with any
governmental or regulatory authority, or issued or granted by any such authority
to any Seller, in connection with operation of the Equipment and the Business as
it relates thereto (collectively, "Authorizations"), including but not limited
to those Authorizations involving local New Jersey or Pennsylvania authorities,
the New York City Commissioner and the New York City Payphone Rules (as such
terms are hereinafter defined);
(l) all right, title and interest of the Sellers in, to and under that
certain agreement dated as of October 15, 1991 between Coin Phone Distributors,
Inc. ("Coin Phone") and Cleartel Communications, Inc. ("Cleartel"), as amended
by that certain Settlement Agreement and Mutual Release dated as of January 5,
1994 among Coin Phone, Cleartel, Dingo Holding, Ltd., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇, and that certain Settlement Agreement and General Release dated
June 5, 1995 among Coastal, Cleartel, Forttel, Inc. ("Forttel") and National
Telecom USA, Inc., each an affiliate of Coastal, Garden State and Bektel
(collectively, the "Cleartel Contract"), which contract was assigned by Coin
Phone to Forttel and assumed by Forttel in connection with its acquisition of
Coin Phones' assets, and in turn assigned by Forttel to Coastal, and pursuant to
which contract, among other things, Coastal receives compensation in respect of
0+/0- calls routed to Cleartel and originating from the four hundred sixty five
(465) Acquired Phones whose
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identification numbers and installation sites are listed on Section
2.2(l) of the Disclosure Schedule (collectively, the "Cleartel Phones");
and
(m) all right, title and interest of the Sellers in and to all other
tangible and intangible assets or personal property of the Sellers used in
connection with the conduct of the Business and not otherwise enumerated in
Section 2.2 hereof (excepting those which are specifically identified as
Excluded Assets in Section 2.3 hereof).
2.3 Excluded Assets. It is expressly understood and agreed that the
following (collectively, the "Excluded Assets") are specifically excepted from
the Acquired Assets being transferred to Buyer pursuant to the terms and
conditions hereof:
(a) all right, title and interest of the Sellers in and to the thirty
five (35) other pay telephones partially (less than 100%) owned or leased by the
Sellers which bear the identification numbers and are installed at the locations
set forth on Section 2.3(a) of the Disclosure Schedule (such 35 telephones being
hereinafter collectively referred to as the "Excluded Phones"), together with
the telephone booths, enclosures, stations, pedestals, apparatus, fixtures,
circuit boards, coin banks and any other equipment physically connected thereto
or installed therewith, and all telephone location lease or placement agreements
associated with the Excluded Phones in which any Seller has been granted any
telephone installation and/or maintenance rights (collectively, the "Excluded
Contracts");
(b) all right, title and interest of the Sellers in and to all local
telephone company deposits and other prepaid expenses, credits and deferred
charges pertaining to the Acquired Phones and the Business as it relates thereto
and which are created in the ordinary course of the Business before the Closing
Date, including any NYNEX Corp., New York Telephone, ▇▇▇▇ Atlantic Corp., New
Jersey ▇▇▇▇, Diamond State or ▇▇▇▇ of Pennsylvania basic service charges paid by
any Seller before the Closing Date (it being understood and agreed that each
Seller shall look solely to such third parties for reimbursement of such amounts
or application of them as a credit against monies due and owing from each Seller
to such third parties, and that Buyer and AMNEX shall have no responsibility or
liability whatsoever in the matter);
(c) all cash and cash equivalents generated by or arising out of
the Acquired Phones and the Business as it relates thereto before the
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Closing Date, including but not limited to all cash in bank accounts, ▇▇▇▇▇
cash, and cash in the coin banks of the Acquired Phones before the Closing Date
(subject to the provisions of subsection 2.13 hereof);
(d) all accounts receivable and notes receivable generated by or
arising out of the Acquired Phones and the Business as it relates thereto before
the Closing Date, including but not limited to all commissions and dial-around
compensation earned by and due and owing to any Seller in respect of 0+/0- or 1+
calls made or dialed around from the Acquired Phones before the Closing Date;
(e) all contracts, agreements, commitments, arrangements and
understandings, both oral and written, other than the Cleartel Contract,
pursuant to which, among other things, (i) any Seller has engaged or appointed a
third party to provide operator or other telecommunications services for it or
its phones; and/or (ii) any Seller earns or receives commissions or dial-around
compensation in respect of 0+/0- or 1+ calls made or dialed around from its
phones;
(f) all right, title and interest of the Sellers in, to and under all
real property leases, if any, existing between any of them, as Lessee, and ▇▇▇▇
▇▇▇▇▇ ▇▇ LLC, a New Jersey limited liability company and affiliate of the
Sellers ("Route 34"), as Lessor, with regard to the building owned by Route 34
and located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ (the "Business
Headquarters");
(g) all motor vehicles owned by the Sellers (together with any loan
agreements relating thereto) that are not specifically listed on Section
2.2(i)(a) of the Disclosure Schedule (collectively, the "Excluded Vehicles"),
and all motor vehicle lease agreements to which any Seller is party that are not
specifically listed on Section 2.2(i)(b) of the Disclosure Schedule
(collectively, the "Excluded Vehicle Leases");
(h) the corporate name and logo (if any) of Bektel (subject to the
provisions of subsection 6.12(a)).
2.4 Purchase Price and Payment. In consideration of the transfer to
Buyer of the Acquired Assets at the Closing, and subject to the terms and
conditions hereof, Buyer shall purchase the Acquired Assets for an aggregate
consideration of Ten Million Dollars ($10,000,000) (the "Purchase Price"). The
Purchase Price shall be paid to the Sellers in the following manner:
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(a) Two Million Five Hundred Thousand Dollars ($2,500,000) of the
Purchase Price shall be paid in cash on the Funding Date by wire transfer of
immediately available funds to a depository or depositories designated by the
Sellers. For purposes hereof, the "Funding Date" shall mean the date of receipt
by AMNEX and Buyer of the proceeds of the financing initiated by them in
connection with and anticipation of consummation of the transactions
contemplated hereby (the "Financing"). AMNEX and Buyer anticipate that the
Funding Date shall occur on or before December 16, 1996.
(b) Seven Million Dollars ($7,000,000) of the Purchase Price shall be
paid in stock by the issuance and delivery to the Sellers or their designees at
the Closing, or on the first business day following expiration of the NASDAQ
Clearance Period (whichever date occurs last), of 2,153,846 shares of the Common
Stock of AMNEX, $.001 par value per share (the "AMNEX Common Stock"). For
purposes of this Agreement, such 2,153,846 shares shall hereinafter be referred
to collectively as the "Initial Shares".
(c) Subject to the provisions of Section 2.8 hereof, an additional
153,846 shares of the AMNEX Common Stock, representing Five Hundred Thousand
Dollars ($500,000) or five percent (5%) of the Purchase Price, shall be held
back by Buyer and AMNEX for a period of one hundred twenty (120) days following
the Closing Date (the "Holdback Period"), with issuance and delivery of all or
the applicable portion of such shares, if any, to be made to the Sellers or
their designees on the first business day following expiration of the Holdback
Period (such business day being hereinafter referred to as the "Final Payment
Date"). For purposes of this Agreement, such 153,846 shares shall hereinafter be
referred to collectively as the "Holdback Shares". It is expressly understood
and agreed that all Holdback Shares shall remain the property of AMNEX until the
applicable portion thereof are in fact issued and delivered to the Sellers or
their designees on the Final Payment Date. No Holdback Shares shall become a
Seller's property unless and until such Seller shall be in actual possession
thereof. Accordingly, in no event shall the Holdback Shares be subject to a
constructive trust for any Seller's benefit, or otherwise be deemed to be any
Seller's property.
2.5 Additional Consideration. In consideration of the restrictive
covenants granted by each Seller and Arbeit pursuant to the Non-
Competition and Non-Hire Agreements delivered to Buyer at the Closing,
and in payment of the broker's fee described in subsection 6.12(i)
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hereof, Buyer shall pay additional aggregate consideration of Two Million
Dollars (2,000,000) ("Additional Consideration"). The Additional Consideration
shall be paid as follows:
(a) One Million Five Hundred Thousand Dollars ($1,500,000) of the
Additional Consideration shall be paid in cash on the Funding Date by wire
transfer of immediately available funds to a depository or depositories
designated by the Sellers.
(b) Five Hundred Thousand Dollars ($500,000) of the Additional
Consideration shall be paid in stock by the issuance and delivery of an
additional 153,846 shares of the AMNEX Common Stock to the Sellers or their
designees at the Closing, or on the first business day following expiration of
the NASDAQ Clearance Period (whichever date occurs last). For purposes of this
Agreement, such 153,846 shares shall hereinafter be referred to collectively as
the "Additional Initial Shares".
2.6 Contingent Consideration. Notwithstanding anything to the contrary
contained herein, in the event that AMNEX and Buyer shall not have received the
proceeds of the Financing by December 16, 1996 (the "Outside Date"), then in
lieu of tendering $2,500,000 of the Purchase Price and $1,500,000 of the
Additional Consideration in cash, as provided in subsections 2.4(a) and 2.5(a)
hereof, respectively, AMNEX shall, on the Outside Date, or on the first business
day following expiration of the NASDAQ Clearance Period (whichever date occurs
last), issue and deliver to the Sellers or their designees, 1,230,769 shares of
the AMNEX Common Stock in replacement thereof (collectively, the "Replacement
Shares"), together with an additional 615,385 shares of the AMNEX Common Stock
(collectively, the "Premium Shares"). For purposes of this Agreement, the
Replacement Shares and the Premium Shares shall hereinafter be referred to
collectively as the "Contingent Shares".
2.7 Acknowledgements and Agreements Concerning AMNEX Common Stock.
(a) It is understood and agreed that the Initial Shares, the Holdback
Shares, the Additional Initial Shares and the Contingent Shares to be issued and
delivered in accordance with the terms hereof (collectively, the "Shares") shall
not be registered under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (collectively, the "1933 Act"). Each
Seller, for it or himself, and on behalf of its or his designees, if any,
acknowledges that the Shares are not being registered under the 1933 Act due to
AMNEX's reliance upon Section 4(2) thereof, which section
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provides an exemption from registration for certain transactions by an issuer
not involving any public offering. Each Seller, for it or himself, and on behalf
of its or his designees, if any, further acknowledges that AMNEX's reliance
thereon is predicated on their representations and warranties contained in
Section 3.14 hereof. Accordingly, each Seller understands and will ensure that
its and his designees, if any, will understand, that the Shares must be held
indefinitely unless they are subsequently registered under the 1933 Act or an
exemption from such registration exists, and that the stock certificate(s)
evidencing ownership of the Shares which they receive shall bear the following
restrictive legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. These shares have been acquired for
investment and not for distribution or resale. They may not be sold,
assigned, mortgaged, pledged, hypothecated, or otherwise transferred
or disposed of without an effective
registration statement for such shares under the Securities
Act of 1933 or an opinion of counsel for AMNEX that registration is
not required under such Act."
(b) Notwithstanding anything to the contrary contained herein, AMNEX
shall not be obligated to deliver any of the Shares until prior written notice
of their issuance in compliance with Rule 10b-17 promulgated under the
Securities Exchange Act of 1934 (the "1934 Act") shall have been given to NASDAQ
and the National Association of Securities Dealers, Inc. and the applicable
pre-issuance notification period therefor (the "NASDAQ Clearance Period") shall
have expired. AMNEX agrees to cause such written notice to be given to NASDAQ
and the National Association of Securities Dealers, Inc. on the first business
day following the Execution Date (or, in the case of the Contingent Shares, the
first business day following the earlier of the Outside Date or the date upon
which AMNEX becomes reasonably aware that issuance of the Contingent Shares
shall be necessary).
(c) Each Seller agrees (i) to cause its or his designees, if any, to
execute letters containing acknowledgments, agreements and representations
concerning the Shares which are identical to the acknowledgments, agreements and
representations made by it or him in
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subsection 2.7(a) and Section 3.14 of this Agreement, respectively
(collectively, the "Designee Letters"); and (ii) to deliver all such Designee
Letters to AMNEX at the Closing. The execution and delivery to AMNEX of a
Designee Letter for each such designee, if any, shall be a condition precedent
to AMNEX's obligation to deliver a stock certificate issued in the name of such
designee. Accordingly, notwithstanding anything to the contrary contained
herein, AMNEX shall not be obligated to deliver any certificate evidencing
ownership of any Shares by any designee of a Seller, unless and until AMNEX
shall be in receipt of a Designee Letter with respect thereto.
(d) Each holder of the Shares shall be entitled to receive piggyback
registration rights with respect to the Shares held by them in accordance with
the provisions of Article 5 hereof. Only Sellers (not Seller's designees) shall
be entitled to receive puts with respect to the Shares held by them in
accordance with the provisions of Article 5 hereof.
(e) AMNEX warrants that upon issuance, the Shares shall be validly
issued, fully paid and nonassessable, subject to the provisions of Section 630
of the Business Corporation Law of the State of New York, if applicable.
2.8 Rationales for Holdback; Purchase Price Adjustments. (a) The
Holdback Shares are being held back by AMNEX in order to ensure and secure the
due performance by the Sellers of their obligations under this Agreement, which
obligations include but are not limited to the following: (i) their duty to
bring all noncomplying Acquired Phones and Equipment into compliance with the
Conditions of Sale set forth in Section 2.10 hereof (for example, upgrading of
existing ▇▇▇▇▇▇ boards to state of the art quality), except to the extent that
Buyer shall elect to perform any such obligation on behalf of the Sellers, in
which case the cost and expense experienced by Buyer in undertaking and
complying with such obligation shall be chargeable to and reimbursable from the
Holdback Shares; (ii) their duty to have timely paid or to hereafter timely pay,
all fees, charges, expenses, bills, debts and obligations arising from the
operation of the Business before the Closing Date, including but not limited to
any bills for operating expenses associated with the Acquired Phones and the
Business as it relates thereto, which bills are received after the Closing Date,
but which relate to periods occurring before the Closing Date, in accordance
with Section 2.11 hereof; (iii) their duty to timely pay all fees and charges of
NYNEX Corp., New York Telephone, ▇▇▇▇ Atlantic Corp., New Jersey ▇▇▇▇, Diamond
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State and ▇▇▇▇ of Pennsylvania (except for any required LEC Processing Fee),
relating to the transfer of the phone lines associated with the Acquired Phones
to Buyer, in accordance with the provisions of Section 2.12 hereof; (iv) their
duty to pay all indemnification monies reasonably determined by Buyer or AMNEX
to be due and owing to either of them, in accordance with the terms of this
Agreement; and (v) their duty to have timely paid or to hereafter timely pay the
New York Bulk Transfer Tax Liability, the New Jersey Bulk Transfer Tax Liability
and the Pennsylvania Bulk Transfer Tax Liability, in each case in accordance
with the provisions of Section 2.8 hereof.
(b) It is understood and agreed that the purpose of the Holdback Shares
is to provide a source of funds from which Buyer and/or AMNEX may draw or
otherwise obtain monies due and owing to either of them in respect of an
indemnity made by any Seller for the benefit of Buyer or AMNEX herein or in
connection herewith (an "Indemnity Adjustment"), or a Purchase Price Adjustment
(as such term is hereinafter defined). Accordingly, Buyer and/or AMNEX may, in
their reasonable sole discretion, and in accordance with the provisions set
forth in subsection 2.8(d) below, satisfy any such Indemnity Adjustment or
Purchase Price Adjustment through a reduction of the number of Holdback Shares.
(c) For purposes of this Agreement, a "Purchase Price Adjustment" shall
be a post-closing adjustment to the Purchase Price resulting from (i) a default
or failure on the part of any Seller in performance of its obligations hereunder
(subject to the applicable cure provisions hereof, if any); (ii) a breach by any
Seller of any representation, warranty, covenant or agreement made by it herein
or in any agreement or instrument executed in connection herewith (subject to
the applicable cure provisions hereof and thereof, if any); and/or (iii) Buyer
and/or AMNEX having experienced costs and expenses as a result of undertaking
any Seller's obligation as summarized above and effecting compliance therewith.
It is understood and agreed that Buyer or AMNEX shall have the right in their
reasonable sole discretion, and in accordance with the provisions set forth in
subsection 2.8(d) below, to effect a Purchase Price Adjustment by reduction of
the number of Holdback Shares. Should there be no Holdback Shares, or should the
number thereof remaining available for reduction be insufficient to satisfy such
Purchase Price Adjustment, then the balance of the Purchase Price Adjustment
shall be satisfied by offset against the Available Cash Flow, and thereafter, by
the indemnities given by the Sellers (including King in his individual
capacity), as provided in Article 9 hereof. The
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dollar amount of each Purchase Price Adjustment to be made, if any, shall be
determined in accordance with the provisions hereinafter set forth.
(d) (i) Within ten (10) days after having made a determination that a
Purchase Price Adjustment or Indemnity Adjustment is required, but in no event
later than the Final Payment Date, AMNEX or Buyer shall give written notice
thereof to any Seller (a "Holdback Notice"). In the case of a Purchase Price
Adjustment, the Sellers shall have forty five (45) days from the date of receipt
of a Holdback Notice therefor (the "Purchase Price Adjustment Payment Period")
to satisfy the amount set forth therein, and in the case of an Indemnity
Adjustment, the Sellers shall have thirty (30) days from the date of receipt of
a Holdback Notice therefor (the "Indemnity Adjustment Payment Period") to
satisfy the amount set forth therein. It is understood and agreed that the
Sellers shall have the full Purchase Price Adjustment Payment Period or
Indemnity Adjustment Payment Period (as the case may be) to satisfy the amount
set forth in a Holdback Notice, notwithstanding the occurrence of the Final
Payment Date prior to the expiration of such periods. With regard to any
Holdback Notice that remains outstanding and unsatisfied after the Final Payment
Date (an "Outstanding Holdback Notice"), that number of Holdback Shares as shall
be sufficient to satisfy the amount set forth in such Outstanding Holdback
Notice shall, notwithstanding anything to the contrary contained herein,
continue to be held back after the Final Payment Date, until such time as the
amount set forth in such Outstanding Holdback Notice is satisfied in the manner
provided in subsection 2.8(d)(ii) or 2.8(d)(iii) hereof.
(ii) Any Seller shall have the right to satisfy the amount of
a Purchase Price Adjustment or Indemnity Adjustment (as the case may be) set
forth in a Holdback Notice, by either (x) remitting the amount thereof to AMNEX
or Buyer in cash; or (y) requesting that AMNEX use its best efforts to find a
buyer for a sufficient number of Holdback Shares to satisfy the amount thereof.
In order to effectuate item (y) immediately above, such Seller must serve
written notice thereof (a "Notice to Sell") on AMNEX within five (5) business
days after its receipt of a Holdback Notice therefor. Upon receipt of a Notice
to Sell, AMNEX shall be obligated to use its best efforts to find a buyer for a
sufficient number of Holdback Shares to satisfy the amount thereof. Such Seller
may revoke its Notice to Sell by sending written notice thereof to AMNEX;
provided, however, that such revocation shall not be effective unless AMNEX
receives such notice of revocation before it finds a buyer for such Holdback
Shares. The proceeds of any sale of
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such Holdback Shares shall be applied to satisfy the amount of the Purchase
Price Adjustment or Indemnity Adjustment (as the case may be) set forth in such
Holdback Notice.
(iii) In the event that a Purchase Price Adjustment or
Indemnity Adjustment (as the case may be) set forth in a Holdback Notice shall
not have been satisfied prior to the expiration of the relevant Purchase Price
Adjustment Payment Period or Indemnity Adjustment Payment Period, as indicated
in such Holdback Notice, then AMNEX shall be entitled, at any time after
expiration of such period, to reduce the number of Holdback Shares by an amount
equivalent to the Purchase Price Adjustment or Indemnity Adjustment (as the case
may be) set forth in such Holdback Notice, divided by Three Dollars ($3.00). The
parties hereto mutually agree that $3.00 per share represents a fair and
equitable valuation for the Holdback Shares for the purposes of this subsection
2.8(d).
2.9 State and City Tax Liabilities. (a) The Sellers agree, collectively
and severally, to assume sole responsibility and liability for the timely
payment of all (i) New York state and local sales, use and other Taxes, if any,
arising from the operation of the Business or any acquisitions consummated by a
Seller before the Closing Date (or otherwise accrued as of the Closing Date),
the liability for which may be imposed upon Buyer in the absence of the Sellers'
payment and satisfaction in full of such taxes, and the relevant taxing
authority's claim for which is protected by a first priority right and statutory
lien against the consideration being paid for the transfer in bulk of Sellers'
business assets to Buyer (the "New York Bulk Transfer Tax Liability"); (ii) New
Jersey state and local sales, use and other Taxes, if any, arising from the
operation of the Business or any acquisitions consummated by a Seller before the
Closing Date (or otherwise accrued as of the Closing Date), the liability for
which may be imposed upon Buyer in the absence of the Sellers' payment and
satisfaction in full of such taxes, and the relevant taxing authority's claim
for which is protected by a first priority right and statutory lien against the
consideration being paid for the transfer in bulk of Sellers' business assets to
Buyer (the "New Jersey Bulk Transfer Tax Liability"); and (iii) all Pennsylvania
state and local sales, use and other Taxes, if any, arising from the operation
of the Business or any acquisitions consummated by a Seller before the Closing
Date (or otherwise accrued as of the Closing Date), the liability for which may
be imposed upon Buyer in the absence of the Sellers' payment and satisfaction in
full of such taxes, and the relevant taxing authority's claim for which is
protected by a first
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priority right and statutory lien against the consideration being paid for the
transfer in bulk of Sellers' business assets to Buyer (the "Pennsylvania Bulk
Transfer Tax Liability").
(b) Without limiting the generality of the foregoing, each Seller
agrees to timely pay and fully satisfy all taxes determined by the Department of
Taxation and Finance of the State of New York, the Division of Taxation of the
State of New Jersey, and the Pennsylvania Department of Revenue (respectively,
the "NY Tax Commission", the "NJ Tax Commission", and the "PA Tax Commission")
to be due and owing from it or him and any other Seller to the States of New
York, New Jersey and Pennsylvania. In compliance with Section 1141(c) of the
N.Y. Tax Law, the Sales and Use Tax Act and the Business Personal Property Tax
Act of the State of New Jersey (specifically, N.J.S.A. Section 54:32B-22),
Section 240 of the Pennsylvania Tax Reform Code of 1971, as amended, and Section
1403 of the Laws of Pennsylvania, the Fiscal Code, Buyer shall provide each of
the NY Tax Commission, the NJ Tax Commission, and the PA Tax Commission with
prior notice, by registered mail, of the proposed sale by the Sellers to Buyer
of the Acquired Assets, and the price, terms and conditions of such sale (a
"Notice of Sale"). In the case of the PA Tax Commission, Buyer shall also
require that the Sellers present a certificate from such taxing authority,
showing that all Pennsylvania tax reports have been filed, and all Pennsylvania
state taxes paid to, and including the Closing Date.
(c) In the event that Buyer and/or any Seller receives a notice from
the NY Tax Commission, the NJ Tax Commission and/or the PA Tax Commission in
response to the Notice of Sale (a "Responsive Notice"), which Responsive Notice
sets forth a claim for tax monies due and owing from any Seller to the States of
New York, New Jersey and/or Pennsylvania, the Sellers shall pay, collectively or
severally, all such monies to such states within thirty (30) days of Buyer's
and/or any Seller's receipt of such Responsive Notice, or by the due date
specified in such Responsive Notice (whichever occurs first). In the event that
the Sellers fail to timely and fully pay such monies to such states, then Buyer
or AMNEX may elect to pay such monies on their behalf, in which case Buyer or
AMNEX shall be entitled to receive a Purchase Price Adjustment equivalent to the
amount of such tax monies paid by them, and, subject to the provisions set forth
in subsection 2.8(d) hereof, the number of Holdback Shares shall be reduced
accordingly. Should there be no Holdback Shares, or should the number thereof
remaining available for reduction be insufficient to satisfy such Purchase Price
Adjustment, then the balance of the Purchase Price Adjustment shall be
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satisfied by offset against the Available Cash Flow, and thereafter, by the
indemnities given by the Sellers (including King in his individual capacity), as
provided in Article 9 hereof.
(d) Notwithstanding the foregoing, if any Seller has in good faith
protested the amount of any unpaid tax liability to the States of New York, New
Jersey and/or Pennsylvania as set forth in a Responsive Notice, and notified
Buyer in writing of such protest (which notice must be accompanied by such
Seller's correspondence and any backup materials provided to the NY Tax
Commission, the NJ Tax Commission, and the PA Tax Commission), and Buyer
receives such notice prior to issuing any payments to the NY Tax Commission, the
NJ Tax Commission and the PA Tax Commission, then Buyer shall refrain from
making such payment during the Holdback Period and for so long thereafter as
such Seller reasonably requires; provided, however, that (i) such Seller
diligently prosecutes such protest and keeps Buyer fully informed as to the
progress thereof; (ii) Buyer experiences no liability whatsoever as a result
thereof; (iii) none of the NY Tax Commission, the NJ Tax Commission or the PA
Tax Commission, attempts to collect any monies from Buyer towards such Seller's
unpaid tax liability (or otherwise unreasonably interferes with Buyer's
operation of the Business); and (iv) an amount of Holdback Shares sufficient to
satisfy such unpaid tax liability (including any interest and penalties thereon)
continues to be held back by Buyer and AMNEX after the Holdback Period expires
and until such time as such liability is fully paid and satisfied, or determined
by the relevant taxing authorities to be fully paid and satisfied, and a release
in form and substance reasonably acceptable to Buyer and AMNEX is issued by the
relevant taxing authorities evidencing such payment and satisfaction.
(e) Notwithstanding anything to the contrary contained herein, Buyer
shall have the right to pay all or any portion of the unpaid New York Bulk
Transfer Tax Liability and New Jersey Bulk Transfer Tax Liability and
Pennsylvania Bulk Transfer Tax Liability (and to set off the amounts so paid
from the Holdback Shares and the Available Cash Flow, as provided herein) on the
first anniversary of the Closing Date, whether or not any Seller's protest with
regard thereto shall have been resolved.
(f) In the event that the NJ Tax Commission and/or the PA Tax
Commission shall fail to provide a Responsive Notice identifying the New Jersey
Bulk Transfer Tax Liability and/or the PA Bulk Transfer Tax Liability before the
end of the Holdback Period, then an amount of Holdback Shares sufficient to
satisfy such unpaid tax liability
-20-
(including any interest and penalties thereon) as shall be mutually determined
by the parties' respective accountants in good faith, but in no event more than
100,000 Shares, shall continue to be held back by Buyer and AMNEX after the
Holdback Period expires and until such time as such liability is fully paid and
satisfied, or determined by the relevant taxing authorities to be fully paid and
satisfied, and a release in form and substance reasonably acceptable to Buyer
and AMNEX is issued by the relevant taxing authorities evidencing such payment
and satisfaction; provided, however, that in no event shall such number of
Shares be held back for a period of more than one (1) year and one (1) day from
the Closing Date.
(g) The Sellers agree, collectively and severally, to indemnify and
hold harmless Buyer and AMNEX from and against any and all loss, cost, expense
(including reasonable attorneys' fees), debt, liability, claim or damage which
Buyer or AMNEX may suffer or incur as a result of a breach by any Seller of the
provisions of this Section 2.9.
2.10 Conditions of Sale. It is expressly understood and agreed that,
except as otherwise provided herein, upon Closing, the Equipment must meet each
of the following specifications (collectively, the "Conditions of Sale"), unless
Buyer waives in writing any of such Conditions of Sale:
(a) Except as otherwise provided herein, all Equipment must be state of
the art and include (i) Elcotel #5 boards or Protel or Intellical boards of
equivalent quality, or ▇▇▇▇▇▇ boards that have been upgraded to state of the art
quality at the sole cost and expense of the Sellers; (ii) Palco, Western,
Calstar, Tydell, Quadrum or equivalent cases; (iii) an enclosure for each
Acquired Phone; (iv) a pedestal for each Acquired Phone that is not mounted to
the outside of a building or a wall inside a building; (v) a coin bank (complete
with top) for each Acquired Phone (exclusive of any which are included in the
Acquired Inventory); and (vi) otherwise be in reasonably good working order.
(b) All Equipment must be capable of accommodating all current and
known future requirements of the North American Numbering Plan.
(c) (i) All Equipment located in New York City must be in full
compliance with the New York City Charter, Local Law Number 68 for the Year
1995, and subchapters 1, 2, 3 and 4 of Chapter 6 of Title 67 of the Rules of the
City of New York relating to permits and other requirements for public pay
telephones (collectively, the "New York City Payphone
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Rules"), including but not limited to those rules relating to the installation
of public pay telephones through a conduit or other opening on a building
facade, and the obtaining of written consent therefor. The relevant Sellers must
have (A) submitted interim registries for all Acquired Phones installed at New
York City sites and activated prior to March 1, 1996, and paid all occupancy
fees due and owing thereon current to the Closing Date; (B) made the necessary
filings and paid the requisite fees to effectuate and transfer to Buyer all
interim registries, permits and franchise applications filed by or granted to
them under and pursuant to the New York City Payphone Rules; (C) reasonably
cooperated with Buyer in the prosecution of any such registries, interim permits
or franchise applications during the ninety (90) day period following the
Closing Date; (D) not caused (whether by acting or failing to act or otherwise)
the Commissioner of the Department of Information Technology and
Telecommunications of the City of New York (the "Commissioner") to deny or
revoke his approval of the transfer of such interim registries, permits and
franchise applications from them to Buyer; and (E) otherwise complied in all
material respects with the terms and provisions of the New York City Payphone
Rules.
(ii) All Equipment located in cities or municipalities of the
States of New Jersey and Pennsylvania having rules, regulations, ordinances or
laws governing or otherwise affecting public pay telephones, including but not
limited to municipal or local ordinances relating to permits and other
requirements for public pay telephones, must be in full compliance with all such
rules, regulations, ordinances and laws (collectively and respectively, the "New
Jersey Payphone Rules" and the "Pennsylvania Payphone Rules"). The relevant
Sellers must have (A) obtained all licenses, permits, authorizations and
approvals required by the New Jersey Payphone Rules and the Pennsylvania
Payphone Rules; (B) paid all license, occupancy and other fees due and owing
thereon current to the Closing Date; (C) made the necessary filings and paid the
requisite fees to effectuate and transfer to Buyer all such licenses, permits,
authorizations and approvals; and (D) otherwise complied in all material
respects with the terms and provisions of the New Jersey Payphone Rules and the
Pennsylvania Payphone Rules.
(d) Except for the four hundred twenty (420) Acquired Phones whose
identification numbers and locations are set forth on Section 2.10(d) of the
Disclosure Schedule (collectively, the "Acquired Phones Without Written
Contracts"), the Sellers must have a written contract for each Acquired Phone,
which Contract must (i) authorize and empower the relevant Seller to select, or
not prohibit or impede in any way such
-22-
Seller's right to select, the operator service provider and interexchange
carrier for such phones; (ii) have a remaining term of at least one (1) year
from and after the Closing Date; (iii) be properly transferred or assigned to
Buyer on the Closing Date or promptly thereafter, with consent, if any, required
therefor, having been obtained in writing and delivered to Buyer on or promptly
after the Closing Date (or the benefits thereof otherwise being made available
to Buyer); and (iv) remain in full force and effect for a period of at least
ninety (90) days following the Closing Date, with no premature cancellation or
early termination of the term thereof or removal of the Acquired Phone(s)
associated with such Contract being effected, required or threatened by or due
to acts of third parties, including but not limited to the Commissioner or any
owner or lessee of the location(s) covered by such Contract, for reasons other
than material fault on the part of Buyer.
(e) All Acquired Phones Without Written Contracts must remain installed
for a period of at least ninety (90) days following the Closing Date, with no
removal thereof being effected, required or threatened by or due to acts of
third parties, including but not limited to the Commissioner or any owner or
lessee of the location(s) involved, for reasons other than material fault on the
part of Buyer.
(f) It is expressly understood and agreed that the Sellers are solely
responsible and liable for upgrading, modifying or replacing the Acquired Phones
and other Equipment and Contracts and taking all other action and paying all
costs and expenses as shall be necessary or appropriate to effect compliance
with each of the Conditions of Sale as set forth above (including but not
limited to the requirement that all ▇▇▇▇▇▇ boards be upgraded to state of the
art quality). In the event that any failure to comply with the Conditions of
Sale as set forth above is not cured to Buyer's reasonable satisfaction before
the Final Payment Date (which cure may include but not be limited to the
furnishing by any Seller to Buyer of (i) replacement equipment reasonably
acceptable to Buyer, with de-installation of the noncomplying equipment and
installation of the replacement equipment in its place being effected by such
Seller at its sole cost and expense and within thirty days or less of Buyer's
request therefor; or (ii) a replacement Contract or site reasonably acceptable
to Buyer, with de-installation of the Acquired Phone at issue and
re-installation of the same at such new site being effected by such Seller at
its sole cost and expense and within thirty days or less of Buyer's request
therefor), then Buyer and AMNEX shall be entitled to receive with regard to each
such affected
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Acquired Phone (a "Noncomplying Phone"), a Purchase Price Adjustment of One
Thousand Dollars ($1,000) (the "Noncompliance Adjustment"); provided, however,
that Buyer and AMNEX shall not be entitled to receive Noncompliance Adjustments
with respect to the first three hundred (300) Noncomplying Phones, it being
agreed that Noncompliance Adjustments may be effected only to the extent that
there are more than 300 Noncomplying Phones. Buyer agrees to provide the Sellers
with a written notice (a "Settlement Notice") on or before the Final Payment
Date, identifying all Noncomplying Phones for which Noncompliance Adjustments
pursuant to this Section 2.10 shall be made. Notwithstanding anything to the
contrary contained herein, the Noncompliance Adjustment shall be AMNEX's and
Buyer's sole and exclusive remedy for any Seller's failure to comply with the
Conditions of Sale as set forth above.
(g) It is expressly understood and agreed that the Purchase Price has
been calculated based upon a total of four thousand one hundred fifty (4,150)
Acquired Phones being sold to and purchased by Buyer at the Closing.
Accordingly, before the Closing Date (and preferably on Wednesday, November 13,
1996), a final count of the Acquired Phones shall be taken and mutually agreed
upon. If, as a result of such final count, the parties hereto shall mutually
determine that the actual number of Acquired Phones to be purchased by Buyer at
the Closing shall be more than 4,150, then the Purchase Price shall be increased
by $2,891 per Acquired Phone over this amount which Buyer actually purchases.
Conversely, in the event that the parties hereto shall mutually determine that
the actual number of Acquired Phones to be purchased by Buyer at the Closing
shall be less than 4,150, then the Purchase Price shall be decreased by $2,891
per Acquired Phone below this amount which Buyer actually purchases. Settlement
of the foregoing shall be made as follows. If Buyer shall be entitled to receive
monies pursuant to this subsection 2.10(g), then the amount thereof shall be
deducted from the Purchase Price due to the Sellers at the Closing in the same
proportion of cash and stock and at the same time and manner as is provided in
subsections 2.4(a) and 2.4(b) hereof. If, however, the Sellers shall be entitled
to receive monies pursuant to this subsection 2.10(g), then the same shall be
remitted to the Sellers in the same proportion of cash and stock and at the same
time and manner as is provided in subsection 2.4(a) and 2.4(b) hereof.
(h) Each Seller represents that, except to the extent of any written
waivers signed by Buyer on or before the Closing Date, or any exceptions
expressly permitted or provided for in this Agreement, all
-24-
Acquired Phones comply with the foregoing Conditions of Sale (subject to the
applicable timing and cure provisions thereof).
(i) The Sellers agree, collectively and severally, to indemnify and
hold harmless Buyer and AMNEX from and against any and all loss, cost, expense
(including reasonable attorneys' fees), debt, liability, claim or damage which
Buyer or AMNEX may suffer or incur as a result of a breach by any Seller of any
representation, warranty, or agreement contained in this Section 2.10, subject
to the limitations contained in Section 2.10(f) hereof.
2.11 Treatment of Preclosing Operating Expenses. Each Seller expressly
acknowledges and agrees that all fees, charges, expenses, debts and obligations
arising from the operation of the Acquired Assets and the Business as it relates
thereto before the Closing Date ("Preclosing Operating Expenses") are its sole
responsibility. Accordingly, all bills for local telephone company usage and
line charges or other operating expenses associated with the Business and the
Acquired Phones, whether in Buyer's or any Seller's name, and whether received
before, on or after the Closing Date, which bills pertain to operation of the
Acquired Phones, any other phones of the Sellers, or the Business before the
Closing Date, shall be the sole responsibility of the Sellers. Buyer agrees to
promptly forward bills received on or after the Closing Date to the relevant
Seller, and the Sellers agree, collectively and severally, to pay all such bills
in a timely fashion, and further agree, collectively and severally, to indemnify
and hold harmless Buyer and AMNEX from and against any and all loss, cost,
expense (including reasonable attorneys' fees), debt, liability, claim or damage
which Buyer or AMNEX may suffer or incur resulting from the failure of any
Seller to timely or fully pay (or to have timely or fully paid) all such bills
and all Preclosing Operating Expenses. To the extent that any Seller fails to
timely and fully pay any such ▇▇▇▇ or Preclosing Operating Expense (or failed to
make payment before the Closing Date), Buyer or AMNEX may elect to pay the same
on their behalf, in which case Buyer or AMNEX shall be entitled to receive a
Purchase Price Adjustment equivalent to the amount of such ▇▇▇▇ or Preclosing
Operating Expense paid by them, and, subject to the provisions set forth in
subsection 2.8(d) hereof, the number of Holdback Shares shall be reduced
accordingly. Should there be no Holdback Shares, or should the number thereof
remaining available for reduction be insufficient to satisfy such Purchase Price
Adjustment, then the balance of the Purchase Price Adjustment shall be satisfied
by offset against the Available Cash Flow, and thereafter, by the indemnities
given by the Sellers (including
-25-
King in his individual capacity), as provided in Article 9 hereof. On or before
the Final Payment Date, Buyer shall provide the Sellers with a Settlement Notice
summarizing any bills which it and AMNEX shall have paid on their behalf before
such date pursuant to this Section 2.11.
2.12 Certain Local Telephone Company Liabilities. On or before the
Closing Date, the Sellers shall (a) obtain from each local telephone company at
issue (including but not limited to NYNEX Corp., New York Telephone, ▇▇▇▇
Atlantic Corp., New Jersey ▇▇▇▇, Diamond State and ▇▇▇▇ of Pennsylvania), its
authorization and consent to the transfer from the Sellers to Buyer of all phone
lines associated with the Acquired Phones; and (b) pay all charges owed or owing
to such local telephone companies necessary to effect such transfer, except for
any required LEC Processing Fees (as hereinafter provided). In furtherance of
the foregoing, the Sellers shall deliver to Buyer at Closing a letter from each
such local telephone company, signed by a duly authorized signatory thereof
and/or such other evidence as Buyer and AMNEX may reasonably request, confirming
the matters set forth in items (a) and (b) immediately above (the "Closing
Letters"). The Sellers agree, collectively and severally, to indemnify and hold
harmless Buyer and AMNEX from and against any and all loss, cost, expense
(including reasonable attorneys' fees), debt, liability, claim or damage which
Buyer or AMNEX may suffer or incur as a result of a breach by any Seller of this
Section 2.12. To the extent that any Seller fails to pay any local telephone
company transfer charges as described above, then Buyer or AMNEX may elect to
pay them on such Seller's behalf, in which case Buyer or AMNEX shall be entitled
to receive a Purchase Price Adjustment equivalent to the amount of such charges
paid by them, and subject to the provisions set forth in subsection 2.8(d)
hereof, the number of Holdback Shares shall be reduced accordingly. Should there
be no Holdback Shares, or should the number thereof remaining available for
reduction be insufficient to satisfy such Purchase Price Adjustment, then the
balance of the Purchase Price Adjustment shall be satisfied by offset against
the Available Cash Flow, and thereafter, by the indemnities given by the Sellers
(including King in his individual capacity), as provided in Article 9 hereof. On
or before the Final Payment Date, Buyer shall provide the Sellers with a
Settlement Notice summarizing any charges which it and AMNEX shall have paid on
their behalf before such date pursuant to this Section 2.12. Buyer agrees to
assume responsibility for the payment of any and all fees imposed by NYNEX
Corp., New York Telephone, ▇▇▇▇ Atlantic Corp., New Jersey ▇▇▇▇, Diamond State
and ▇▇▇▇ of Pennsylvania for processing orders to change their records from a
Seller's name and address to Buyer's name and
-26-
address (such fees being collectively referred to herein as "LEC Processing
Fees").
2.13 Allocation of Purchase Price. On or before the Closing Date, the
Sellers, AMNEX and Buyer shall mutually agree in writing upon the values or
prices to be assigned to the various assets which constitute the Acquired Assets
as identified in Section 2.2 hereof and to the Non- Competition and Non-Hire
Agreements; provided, however, that it is expressly understood and agreed that
(i) not more than $3,616,000 in stock shall be allocated to Garden State; (ii)
not more than $3,084,000 in stock shall be allocated to Bektel; and (iii) no
cash whatsoever (only stock) shall be allocated to each of Garden State and
Bektel. The Sellers, AMNEX and Buyer agree that such values, prices and
allocations have been and will be separately established as a result of good
faith bargaining and that in reporting the transactions contemplated by this
Agreement to the Internal Revenue Service as is required by Section 1060 of the
Internal Revenue Code, they will use such agreed upon values, prices and
allocations, and cooperate with each other in meeting the requirements of the
Internal Revenue Code and the regulations promulgated thereunder.
2.14 Assumption of Certain Liabilities. After the Closing, Buyer
shall pay, perform and discharge (i) any New York, New Jersey or Pennsylvania
state or local sales tax which is required by law to be paid by Buyer as a
result of purchasing and taking possession of the Acquired Assets (collectively,
the "Sales Tax Liability"); (ii) those charges and operating expenses associated
with the Acquired Phones and the Business as it relates thereto which are
incurred in the ordinary course of business on and after the Closing Date; and
(iii) the liabilities and obligations of the Sellers arising on and after and to
be performed on and after the Closing Date under the Cleartel Contract and such
Contracts and Service Agreements as are included in the Acquired Assets and in
fact assigned to Buyer (or, in the case of consents to assign which have not
been properly obtained therefor, where and for so long as the benefits under the
Cleartel Contract and such Contracts and Service Agreements are in fact made
available to Buyer), other than those liabilities and obligations resulting from
a breach by any Seller before the Closing Date of the Cleartel Contracts or any
such Contracts or Service Agreements (items (i), (ii) and (iii) above being
hereinafter collectively referred to as the "Assumed Liabilities"). The Sellers
expressly acknowledge and agree that Buyer does not and shall not assume any
liabilities and obligations of any Seller (i) in respect of the Cleartel
Contract or any Contract or Service Agreement if the
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same is neither transferred nor assigned to, or the benefits under which are not
otherwise made available to Buyer on and after the Closing Date; (ii) for the
payment of any Taxes whatsoever (excepting the Sales Tax Liability); and (iii)
other than those expressly defined as Assumed Liabilities in this Section 2.14.
2.15 Reconciliation of Coin in the Field with Commissions Payable. In
order to fully effectuate the prorata allocation of operating expenses
contemplated by Section 2.14 above, the parties shall implement the following
procedures. On the day or evening before the Closing Date the Sellers shall poll
all of the Acquired Phones in order to determine the aggregate amount of coin
revenue residing in the coin banks of such phones, and shall deliver to Buyer at
the Closing, a computer printout of such data, together with an accounting of
all outstanding commissions payable to customers with respect to such phones. By
delivering such data printout and accounting, the Sellers shall be deemed
thereby to have collectively and severally represented to Buyer and AMNEX that
all of the Acquired Phones were polled and that the data concerning the amount
of coin residing therein and the accounting of commissions payable delivered
therewith were true, complete and correct in all respects. If the amount of coin
residing in the Acquired Phones, as reflected in the data printout and accepted
by Buyer, exceeds the amount of commissions payable set forth in the accounting
and accepted by Buyer, then Buyer shall pay such excess amount to the Sellers.
If, however, the amount of such coin is less than the amount of such commissions
payable, then the Sellers shall pay such shortfall amount to Buyer. In either
case, (a) the monies payable by Buyer or the Sellers shall be paid to the other
party on the Closing Date or promptly thereafter; and (b) Buyer shall take
responsibility for remittance of all such commissions payable to the customers
(provided that, in the instance of a shortfall as noted above, Buyer is in
receipt of the Sellers' payment satisfying same). It is understood and agreed
that all coin residing in the Acquired Phones as set forth in the computer
printout shall be collected by Buyer and used to satisfy the commissions payable
obligation described above. It is further understood and agreed that, to the
extent that the Sellers fail to timely pay to Buyer the shortfall amount
described herein, AMNEX and Buyer shall have the right in their reasonable sole
discretion to receive a Purchase Price Adjustment equivalent to the amount of
such shortfall, and subject to the provisions set forth in subsection 2.8(d)
hereof, the number of Holdback Shares shall be reduced accordingly. Should there
be no Holdback Shares, or should the number thereof remaining available for
reduction be insufficient to satisfy such
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Purchase Price Adjustment, then the balance of the Purchase Price Adjustment
shall be satisfied by offset against the Available Cash Flow, and thereafter, by
the indemnities given by the Sellers (including King in his individual
capacity), as provided in Article 9 hereof.
2.16 Documents and Other Items to be Delivered at the Closing. At the
Closing, (a) the Sellers shall deliver to Buyer the duly executed ▇▇▇▇ of Sale,
copies of the executed consents of their respective Boards of Directors and
shareholders authorizing and approving the sale of the Acquired Assets as
contemplated hereby, and the officer's certificates described in subsection
9.2(c) hereof; (b) Buyer shall deliver to the Sellers the duly executed
Instrument of Assumption, a copy of the executed consent of its Board of
Directors authorizing and approving the purchase of the Acquired Assets as
contemplated hereby, and the officer's certificate described in subsection
9.1(c) hereof; and (c) AMNEX shall deliver to the Sellers a copy of the executed
consent of its Board of Directors authorizing and approving the issuance of the
Shares, the granting of registration rights and puts in connection therewith,
and other terms regarding the purchase of the Acquired Assets as contemplated
hereby, and the officer's certificate described in subsection 9.1(c) hereof. In
addition to the above, at the Closing, the Sellers shall deliver or tender to
Buyer (a) all existing keys (both originals and duplicates) for the Acquired
Phones, the Acquired Machinery and the Acquired Vehicles; (b) copies of interim
registries for all of the Acquired Phones; (c) the Closing Letters; (d) the
Designee Letters; and (e) certificates of title for all of the Acquired
Vehicles, duly endorsed or otherwise in proper form for transfer.
2.17 Non-Assignment of Certain Contracts, Rights, Etc.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not constitute or be construed as an assignment by the Sellers to Buyer of any
contract, agreement, license or commitment (or of any claim, duty or right
arising therefrom), if an attempted assignment of the same without the consent
of the other party thereto would constitute a breach thereof or otherwise be
ineffective to complete the assignment. In the case of contracts and rights, if
any, which cannot be effectively transferred to Buyer without the consent of
third parties, and which consents have not been obtained and delivered to Buyer
on the Closing Date, the Sellers shall use their best efforts to obtain all such
consents and deliver them to Buyer promptly thereafter. Any costs or expenses
incurred in obtaining such consents shall be borne solely by the Sellers. If any
consent for assignment of
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an agreement is not in fact obtained, then to the extent reasonably possible,
the Sellers shall keep the agreement in effect and shall give Buyer the benefit
of such agreement to the same extent as if the Sellers had not been excluded
from assigning such agreement to Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller makes the following representations and warranties to Buyer and
AMNEX, each of which shall be deemed material, and Buyer and AMNEX, in
executing, delivering and consummating this Agreement, have relied upon the
correctness and completeness of each of such representations and warranties:
3.1 Organization. Each Seller which is a corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has the requisite power and authority to own all of its
properties and assets and carry on the Business as now being conducted. Each
Seller which is a corporation has heretofore provided Buyer and AMNEX with a
true, complete and correct copy of its Certificate of Incorporation and Bylaws.
3.2 Authority Relative to this Agreement. Each Seller has the power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by each Seller of
this Agreement and the consummation of the transactions contemplated hereby has
been duly and validly authorized by all necessary action on the part of each
Seller (including board of director and shareholder action, if applicable). This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes each Seller's valid, binding and enforceable obligation.
3.3 No Violations. (a) Neither the execution, delivery and performance
of this Agreement, the consummation by any Seller of the transactions
contemplated hereby, nor compliance by any Seller with any of the provisions
hereof shall (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of any Seller; (ii) result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to which
any Seller or any of the Acquired Assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to
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which requisite waivers or consents have been obtained or the obtaining of which
has been expressly waived in writing by Buyer; (iii) violate any order, writ,
injunction or decree applicable to any Seller or any of the Acquired Assets; or
(iv) to the best of the Sellers' knowledge upon due inquiry, violate any
statute, rule, regulation or ordinance applicable to any Seller or any of the
Acquired Assets.
(b) All licenses, permits, governmental and regulatory authorizations
and approvals held by the Sellers in respect of the Acquired Assets or the
Business are valid and there are no violations thereof, except for such
violations as would not have a material adverse effect on the Acquired Assets or
the financial condition of the Business as a whole. The Sellers possess all
licenses, permits, authorizations and approvals necessary for the conduct of the
Business, and all such licenses, permits, authorizations and approvals are in
full force and effect and freely transferable. Each Seller has complied in all
material respects with all rules, regulations, orders, laws and ordinances
applicable to the Acquired Assets and/or the Business (collectively, "Applicable
Laws"). Except for any noncompliance which has been cured or otherwise no longer
exists or, if not cured, would not have a material adverse effect on the
Acquired Assets or the financial condition of the Business as a whole, no Seller
has received written notice alleging any noncompliance with any Applicable Law.
3.4 Financial Information. (a) Attached hereto as Exhibit E are true,
complete and correct copies of the Monthly Net Margin Reports of the Sellers,
which reports accurately and completely set forth in all material respects the
gross coin revenue, the non-coin revenue, the local telephone company expense,
the interexchange company expense, the commissions expense, and the resulting
net revenue achieved with respect to the Acquired Phones for the periods
covered, in each case on a per ANI and per calendar month basis.
(b) Attached hereto as Exhibit F are true, complete and correct copies
of (i) the unaudited Balance Sheets of each Seller as of December 31, 1995 and
September 30, 1996; and (ii) the unaudited Income Statements of each Seller for
the year ended December 31, 1995, and for the nine (9) months ended September
30, 1996 (such balance sheets and income statements being hereinafter
collectively referred to as the "Unaudited Financial Statements"). The Unaudited
Financial Statements were prepared in accordance with generally accepted
accounting principles for interim financial information in response to the
requirements of Article 10 of Regulation S-X, and contain all
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adjustments (consisting of normal recurring accruals) necessary to present
fairly the assets, liabilities and financial position of each Seller with
respect to the Business as of such dates and in accordance with each Seller's
respective internal financial systems and procedures for the Business
consistently applied.
(c) All other financial information provided by the Sellers before or
at the Closing, including but not limited to copies of tax returns, any and all
information regarding coin collections, long distance revenues, LEC charges,
operator service provider revenues, parts and supplies expenses and commissions,
is true, complete and correct in all material respects.
3.5 Litigation. Except as set forth on Section 3.5 of the Disclosure
Schedule, there are no Legal Actions pending or, to the best of any Seller's
knowledge, threatened against any Seller, whether at law or in equity and
whether civil or criminal in nature, before or by any federal, state, municipal
or other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against any Seller (i) which relate to the
Acquired Assets or the Business; or (ii) which seek specifically to prohibit,
restrict or delay consummation of the transactions contemplated hereby or
fulfillment of any of the conditions of this Agreement.
3.6 Defaults. There is not, with respect to the Cleartel Contract or
any Contract or Service Agreement, any existing default, or event of default, or
event which with or without due notice or lapse of time or both would constitute
a default or event of default, on the part of any Seller or, to the best of any
Seller's knowledge, any other party thereto, except for such defaults as to
which requisite waivers or consents have been obtained or the obtaining of which
has been expressly waived in writing by Buyer or, if not obtained, would not
have a material adverse effect on the Acquired Assets or the financial condition
of the Business as a whole. Except as set forth on Section 2.10(d) of the
Disclosure Schedule, all Acquired Phones have written Contracts. All such
written Contracts are assignable (and substantially all of such written
Contracts are freely assignable (i.e., require no consent to assign)) and shall
remain in full force and effect for a period of at least one (1) year from and
after the Closing Date (i.e., have initial terms ending not sooner than the
first anniversary of the
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Closing Date). No Seller has knowledge that the Cleartel Contract or
any Contract or Service Agreement will be terminated or not renewed.
3.7 Equipment, etc.. All Equipment, Software, Acquired Machinery,
Acquired Vehicles, Acquired Inventory and Miscellaneous Personal Property being
purchased and transferred to Buyer hereunder is in reasonably good working
order, reasonable wear and tear excepted, and is usable and saleable in the
ordinary course of business. There are no keys for the Acquired Phones other
than those which are being delivered to Buyer at the Closing.
3.8 Title to Acquired Assets. The Sellers have, and from and after the
Closing, Buyer shall have, good, marketable and indefeasible title to all of the
Acquired Assets, free and clear of any and all liabilities, mortgages,
conditional sales agreements, security interests, leases, liens, pledges,
encumbrances, deeds of trust, equities, charges, claims, imperfections of title
or other burdens affecting any Seller's title to the Acquired Assets, except as
indicated on Sections 2.2(i)(a) and 2.2(i)(b) of the Disclosure Schedule
reflecting, respectively, loan balances (if any) on Acquired Vehicles and
remaining balances under Acquired Vehicle Leases.
3.9 Capitalization. (a) The authorized capital stock of Coastal
consists of 5,000,000 shares, no par value per share, 100 shares of which have
been designated as common shares and are presently issued and outstanding. All
such issued and outstanding common shares are duly authorized, validly issued,
fully paid and nonassessable and held of record and beneficially solely by King.
There are no options, warrants, rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital stock of Coastal
obligating it to issue or sell any shares of capital stock of, or other equity
interests in, Coastal, and there are no rights, agreements, arrangements or
commitments relating to the profits or revenues of Coastal, or proceeds upon the
sale of any capital stock or assets of Coastal, except for the rights of Arbeit
under and pursuant to a certain agreement dated August 10, 1994 between King
and Arbeit.
(b) The authorized capital stock of Bektel consists of 2500 shares,
no par value per share, 100 shares of which have been designated as common
shares and are presently issued and outstanding. All such issued and outstanding
common shares are duly authorized, validly issued, fully paid and nonassessable
and held of record and beneficially solely by King. There are no options,
warrants, rights of conversion or other
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rights, agreements, arrangements or commitments relating to the capital stock of
Bektel obligating it to issue or sell any shares of capital stock of, or other
equity interests in, Bektel, and there are no rights, agreements, arrangements
or commitments relating to the profits or revenues of Bektel, or proceeds upon
the sale of any capital stock or assets of Bektel, except for the rights of
Arbeit under and pursuant to a certain agreement dated August 10, 1994 between
King and Arbeit.
(c) The authorized capital stock of Garden State consists of 2000 shares, no par
value per share, 100 shares of which have been designated as common shares and
are presently issued and outstanding. All such issued and outstanding common
shares are duly authorized, validly issued, fully paid and nonassessable and
held of record and beneficially solely by King. There are no options, warrants,
rights of conversion or other rights, agreements, arrangements or commitments
relating to the capital stock of Garden State obligating it to issue or sell any
shares of capital stock of, or other equity interests in, Garden State, and
there are no rights, agreements, arrangements or commitments relating to the
profits or revenues of Garden State, or proceeds upon the sale of any capital
stock or assets of Garden State, except for the rights of Arbeit under and
pursuant to a certain agreement dated August 10, 1994 between King and Arbeit.
3.10 Absence of Changes. Since September 30, 1996, each Seller has
operated the Business in the usual and ordinary course, and there has not been
(a) any material adverse change in the operations, properties or condition
(financial or otherwise) of the Business; (b) any damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
Business or the Acquired Assets, or that could reasonably be expected to
materially and adversely affect the Business or the Acquired Assets; or (c) any
material deterioration of relations with customers (such as, but not limited to,
site or property owners or lessees) or suppliers of any Seller, the Business or
the Acquired Assets.
3.11 Expenses of the Business. No Seller is delinquent in the payment
of any bills, taxes, fees, charges, expenses, debts, obligations, commissions,
motor vehicle summons or fines, or other amounts due relating to the Contracts,
the Equipment (or any telephone lines associated therewith), or any other
Acquired Assets. All such bills, taxes, fees, charges, expenses, debts,
obligations, commissions, motor vehicle summons or fines, or other amounts have
been paid current.
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3.12 Taxes. Each Seller has filed or caused to be filed, all federal,
state and local tax returns which are required to be filed by it or him in
connection with the Business, and has paid or caused to be paid, or has made
adequate provisions on its or his books (i.e., reserves) for amounts sufficient
for the payment of, all taxes as shown on such returns or on any assessment
received by it or him, and has made all estimated tax payments required to be
made by it or him in order to avoid the imposition of penalties, interest and
other additions to tax. No tax liens have been filed against any Seller, and no
Seller has been notified of or otherwise has knowledge of, any claim being
asserted with respect to any such taxes. There is no action, suit, proceeding,
investigation or audit pending or threatened against any Seller in respect of
any tax or assessment, nor is any claim for additional tax or assessment being
asserted by any taxing authority whatsoever. All taxes which each Seller is
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, paid over to the proper governmental authorities on a
timely basis. All ad valorem taxes which are due and owing have been paid. No
prior tax return of any Seller has been audited and none of the officers,
directors or employees of any Seller have been notified or otherwise advised
that such an audit may occur.
3.13 Employee Matters. Each Seller, to the best of its knowledge upon
due inquiry, has complied with all federal, state and local laws, rules and
regulations relating to the employment of labor, including but not limited to
those related to wages, hours and payment of withholding and unemployment taxes.
Each Seller has withheld all amounts required by law or agreement to be withheld
from wages or salaries of its employees and is not liable for any arrearage of
wages or any taxes or penalties for failure to comply with any of the foregoing.
Buyer will not be obligated to employ any employee of any Seller or to make any
payment or provide any benefits to any employee of any Seller on account of
services rendered prior to the Closing Date. No Seller is party to any
collective bargaining agreement or pension or profit sharing or other employee
benefit plan which would require Buyer, as purchaser of the Acquired Assets, to
assume or become obligated to pay any of the obligations or liabilities of any
Seller under any such collective bargaining agreement or pension or profit
sharing or other employee benefit plan.
3.14 Investment Intent; Qualification as Investor. (a) Each
Seller represents and warrants that the Shares are being acquired for
its or his own account, for investment and not with a view to the resale
or distribution thereof within the meaning of the 1933 Act. Each Seller
-35-
further represents and warrants that it shall not sell, assign, transfer,
encumber, or otherwise dispose of any of the Shares unless (i) a registration
statement under the 1933 Act with respect thereto is in effect and the
prospectus included therein meets the requirements of Section 10 of the 1933
Act; or (ii) AMNEX has received a written opinion from its counsel that after
investigation of the relevant facts, such counsel is of the opinion that such
proposed sale, assignment, transfer, encumbrance or disposition does not require
registration under the 1933 Act.
(b) Each Seller represents that AMNEX has furnished it with its
recent filings with and reports to the Commission on Form 10-K for the year
ended December 31, 1995, Form 10-Q for the fiscal periods ended March 31, 1996
and June 30, 1996, and Form 8-K and Amendment No. 1 thereto for an event dated
June 28, 1996, and that it has reviewed the same and been afforded the
opportunity to obtain such other information as necessary to evaluate the
investment contemplated hereby. Each Seller further represents and warrants that
it is either an "accredited investor" within the meaning of Rule 501(a)
promulgated under the 1933 Act, or has substantial knowledge and experience in
financial and business matters and is capable of evaluating the merits and risks
associated with the acquisition of the Shares provided for herein. Each Seller
acknowledges that such acquisition may entail significant risks.
3.15 Full Disclosure. Each Seller has disclosed to Buyer in writing,
in or pursuant to this Agreement, all facts material to the Acquired Assets and
the Business (financial or otherwise). No Seller has any liabilities, whether
related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent or otherwise, which will have a
material adverse effect upon the Acquired Assets and the Business. No
representation or warranty to Buyer contained in this Agreement, and no
statement contained in the Disclosure Schedule, or any certificate, list or
other writing furnished to Buyer pursuant to the provisions hereof, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein not misleading.
3.16 No Brokers. Except as provided in subparagraph 6.12(i) hereof,
no Seller has engaged, consented to or authorized any broker, finder, investment
banker or other third party to act on its behalf, either directly or indirectly,
as a broker or finder in connection with this Agreement and the transactions
contemplated hereby.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND AMNEX
Buyer and AMNEX, jointly and severally, make the following
representations and warranties to the Sellers, each of which shall be deemed
material, and the Sellers, in executing, delivering and consummating this
Agreement, have relied upon the correctness and completeness of each of such
representations and warranties:
4.1 Organization. Each of Buyer and AMNEX is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the requisite corporate power and authority to own all of its
properties and assets and carry on its business as now being conducted.
4.2 Authority Relative to this Agreement. Each of Buyer and AMNEX has
the corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
Buyer and AMNEX of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and AMNEX. This Agreement has been duly
and validly executed and delivered by Buyer and AMNEX and constitutes Buyer's
and AMNEX's valid, binding and enforceable obligation.
4.3 No Violations. Neither the execution, delivery and performance of
this Agreement, the consummation by Buyer or AMNEX of the transactions
contemplated hereby nor compliance by Buyer or AMNEX with any of the provisions
hereof shall (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Buyer or AMNEX; (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to which
Buyer or AMNEX is a party or by which Buyer or AMNEX may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or the obtaining of which
has been expressly waived in writing by the Sellers; (iii) violate any order,
writ, injunction or decree applicable to Buyer or AMNEX; or (iv) to the best of
Buyer's or AMNEX's knowledge upon due inquiry, violate any statute, rule,
regulation or ordinance applicable to Buyer or AMNEX.
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4.4 Financial Information. (a) AMNEX has previously provided each
Seller with a true, correct and complete copy of its filings with and reports to
the Commission on Form 10-K for the year ended December 31, 1995, Form 10-Q for
the fiscal periods ended March 31, 1996 and June 30, 1996, and Form 8-K and
Amendment No. 1 thereto for an event dated June 28, 1996, which reports contain
certain consolidated financial statements. AMNEX represents that such financial
statements are true, correct and complete, were prepared in conformity with
generally accepted accounting principles, and accurately and fairly present the
assets, liabilities and financial position of AMNEX and its subsidiaries
(including but not limited to Buyer) and results of operations and cash flows of
AMNEX and its subsidiaries for the periods covered.
4.5 Litigation. There are no Legal Actions pending or, to the best of
Buyer's or AMNEX's knowledge, threatened against Buyer or AMNEX, whether at law
or in equity and whether civil or criminal in nature, before or by any federal,
state, municipal or other court, arbitrator, governmental department,
commission, agency or instrumentality, domestic or foreign, nor are there any
judgments, decrees or orders of any such court, arbitrator, governmental depart-
ment, commission, agency or instrumentality outstanding against Buyer or AMNEX
(i) which would have a material adverse effect on the financial condition of
Buyer and AMNEX as a whole; or (ii) which seek specifically to prohibit,
restrict or delay consummation of the transactions contemplated hereby or
fulfillment of any of the conditions of this Agreement.
4.6 No Brokers. Except as provided in subparagraph 6.12(i) hereof,
neither Buyer nor AMNEX has engaged, consented to or authorized any broker,
finder, investment banker or other third party to act on its behalf, either
directly or indirectly, as a broker or finder in connection with this Agreement
and the transactions contemplated hereby.
ARTICLE 5
REGISTRATION RIGHTS AND PUTS
5.1 Piggyback Rights. AMNEX agrees that, if during the period ending on
the second anniversary of the Closing Date (the "Registration Period"), it shall
propose to file, for the sale by AMNEX of Common Shares for cash, a registration
statement under the Act on Form ▇-▇, ▇-▇ or S-3 (or a comparable successor form)
(but excluding registration statements for employee benefit plans or
transactions of the nature contemplated by Rule 145, promulgated under the Act),
AMNEX shall use its reasonable best efforts to give written notice to the
holders of the
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Shares of such intention at least thirty (30) days prior to the proposed filing
date and shall include in such registration statement, at the written request of
such holders, all of the Shares not constituting Holdback Shares (it being
understood that once issued and delivered to the Sellers and their designees,
any Holdback Shares shall, for purposes of this Article 5, cease to be
categorized as such); provided, however, that AMNEX receives such request at
least ten (10) days prior to the proposed filing date; and provided, further,
that if, in the opinion of the managing underwriter or underwriters of the
offering of AMNEX's securities for which such registration statement is being
filed, such inclusion is likely to affect adversely the success of the offering
or the price that would be received, at the option of such managing underwriter
or underwriters, (i) the number of Shares to be added to the registration
statement shall be reduced (to zero if necessary), and/or (ii) such holders
shall delay the sale of the Shares included in the registration statement until
the expiration of the ninety (90) day period commencing with the effective date
of the registration statement. Notwithstanding the foregoing, AMNEX shall not be
required to provide any notice to such holders or to include any of the Shares
in any registration statement if, in the opinion of AMNEX's counsel, such shares
may be sold pursuant to any exemption from registration under the 1933 Act, and,
in any event, not on more than one (1) occasion; provided, however, that if as a
result of clause (i) above, less than all of the Shares not constituting
Holdback Shares are included in any registration statement, or in the event that
any registration initiated by AMNEX is terminated or withdrawn, AMNEX's
registration obligation herein shall continue until such time as all of the
Shares not constituting Holdback Shares are registered under the 1933 Act or
otherwise may be sold pursuant to an exemption from registration under the 1933
Act (unless the Registration Period shall have expired). Notwithstanding
anything to the contrary contained herein, AMNEX shall have the right to
terminate or withdraw any registration initiated by it prior to the
effectiveness thereof, whether or not any or all of the Shares are included
therein. Furthermore, if, after a registration statement becomes effective,
AMNEX advises any holders of the Shares that AMNEX considers it appropriate for
the registration statement to be amended, such holders shall suspend further
sales of the Shares until AMNEX advises them that such registration statement
has been amended.
5.2 Expenses. The expenses of any registration statement pursuant to
this Article 5 shall be borne by AMNEX and shall include (a) the fees and
expenses of AMNEX's counsel and accountants; (b) all other out-of-pocket costs
and expenses of AMNEX incident to the preparation, printing
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and filing under the Act of the registration statement and all amendments and
supplements thereto; and (c) the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
shareholders. Under no circumstances, however, shall AMNEX be liable or
responsible for the fees and expenses of any holders of the Shares, or of its
counsel, incurred in connection with any registration or for underwriting
discounts and commissions or transfer taxes payable in connection with any sale
of Shares included in any registration statement.
5.3 Cross Indemnity. AMNEX will indemnify and hold harmless each holder
of the Shares and each person, if any, that controls the holders of the Shares
against losses, claims, damages or liabilities, joint or several, to which any
such persons may be subject, under the Act or otherwise, and to reimburse any of
such persons for any legal or other expenses incurred in connection with
defending against any such losses, claims, damages or liabilities, insofar as
such losses, claims, damages or liabilities arise out of or are based upon any
untrue statement of a material fact contained in any registration statement
under which the Shares were registered under the Act pursuant to this Article 5,
any prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities arise
out of or are based upon information furnished in writing to AMNEX by such
holders of the Shares or any underwriter or representative for such holders. By
requesting registration hereunder, each holder of the Shares shall be deemed
thereby to have agreed to indemnify and hold harmless AMNEX, its directors and
officers, any underwriter for AMNEX and each person, if any, who controls AMNEX
or any such underwriter within the meaning of the Act against any losses,
claims, damages or liabilities, joint or several, to which any of such persons
may be subject under the Act or otherwise, and to reimburse any of such persons
for any legal or other expenses incurred in connection with defending against
any such losses, claims, damages or liabilities, but only to the extent caused
by an untrue statement or omission of a material fact in any registration
statement under which the Shares were registered under the Act pursuant hereto,
any prospectus contained therein, or any amendment or supplement thereto, which
was based upon information furnished in writing to AMNEX by such holder or any
underwriter or representative for such holder.
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5.4 Certain Disclosures. As to any registration statement referred to
in this Article 5, each holder of the Shares shall provide AMNEX with a written
description of the proposed method or methods of distribution of the Shares
contemplated by each such holder and such other information as is required by
AMNEX, and AMNEX shall include such description and other information in the
registration statement and file any and all amendments and supplements necessary
in connection therewith.
5.5 Transfer of Rights. It is understood and agreed that the
registration rights set forth herein may be transferred in conjunction
with a transfer of the Shares.
5.6 Puts. If AMNEX does not file an appropriate registration statement
by the six month anniversary of the Closing Date, then any Seller who holds
Shares other than Holdback Shares (a "Qualifying Shareholder) may require AMNEX
to find a buyer for the purchase of up to that number of Shares not constituting
Holdback Shares as shall have an aggregate Market Price of One Million Dollars
($1,000,000) (the "First Put"). If AMNEX does not file an appropriate
registration statement by the twelve month anniversary of the Closing Date, then
the Qualifying Shareholders may require AMNEX to find a buyer for the purchase
of up to that number of additional Shares not constituting Holdback Shares as
shall have an aggregate Market Price of One Million Dollars ($1,000,000) (the
"Second Put"). If AMNEX does not file an appropriate registration statement by
the eighteen month anniversary of the Closing Date, then the Qualifying
Shareholders may require AMNEX to find a buyer for the purchase of up to that
number of additional Shares not constituting Holdback Shares as shall have an
aggregate Market Price of One Million Dollars ($1,000,000) (the "Third Put"). In
order to exercise the First Put or the Second Put or the Third Put, King or any
Seller, on behalf of all Qualifying Shareholders desiring to exercise such puts
(the "Participating Holders"), shall provide AMNEX with written notice thereof,
which notice must be accompanied by certificates evidencing the Participating
Holders' ownership of such Shares, together with stock powers duly executed by
such holders and medallion signature guaranteed, and otherwise in form
reasonably acceptable to AMNEX. AMNEX shall use its best efforts to find a buyer
for such Shares within thirty (30) days of its receipt of such notice,
certificates and stock powers. If, however, AMNEX is unable to find a buyer
within such thirty (30) day period, then AMNEX shall be obligated to buy back
such Shares on the thirtieth (30th) day following its receipt of such notice,
certificates and stock powers at the aggregate Market Price represented by such
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Shares. King or any Seller, on behalf of the Participating Holders, may revoke
such notice and cancel their exercise of any put for the Shares by sending
written notice thereof to AMNEX; provided, however, that such revocation and
cancellation shall not be effective unless AMNEX receives such cancellation
notice before it finds a buyer for such Shares. AMNEX agrees to pay over the
proceeds of any sale of the Shares to the Participating Holders within ten (10)
days after its receipt thereof. For purposes of this Section 5.6, the term
Market Price shall mean the then current bid price for the AMNEX Common Stock,
less a ten percent (10%) discount.
5.7 1934 Act Reports and Filings. AMNEX covenants and agrees to make
all filings with and reports to the Commission as shall be required of it under
the 1934 Act, such as, but not limited to, reports on Forms ▇▇-▇, ▇▇-▇, ▇-▇ and
any necessary amendments thereto, all of which filings and reports shall be made
on a timely basis.
ARTICLE 6
OTHER AGREEMENTS OF THE PARTIES
6.1 Conduct of Business. After the Execution Date and prior to the
Closing, the Sellers (i) will conduct the Business only in the usual, regular
and ordinary manner; (ii) will, at their expense, maintain all of the tangible
personal property which is a part of the Acquired Assets in reasonably good
repair; and (iii) will use their best efforts to preserve intact the present
business organization and operations, keep available the services of its
officers and employees and preserve their relationships with suppliers, dealers,
customers and others having business relationships with them. The Sellers will
confer with Buyer on a regular and frequent basis to discuss operational matters
of a material nature relating to the general status of the ongoing operations
and any problems relating to the conduct of the Business. The Sellers will
notify Buyer and AMNEX of any unexpected emergency or other material change in
the normal course of the Business or operations, of any pending or threatened
litigation or investigation initiated by any party, whether private or
governmental, against or relating to the Business, and of any budget revisions
planned for or contemplated by the Sellers involving the Business or any of the
Acquired Assets, and will keep Buyer and AMNEX fully informed of developments
with respect to such events and afford Buyer's and AMNEX's representatives
access to all materials prepared in connection therewith.
6.2 Forbearances by the Sellers. Except as otherwise contemplated by
this Agreement, no Seller will, after the Execution Date and prior to the
Closing, without the prior written consent of AMNEX and Buyer:
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(a) sell, dispose of, transfer or encumber any of the Acquired
Assets except in the ordinary course of business;
(b) mortgage, pledge or otherwise encumber any of the Acquired
Assets;
(c) amend, modify or cancel any Contract, Service Agreement,
Software License or Authorization except in the ordinary course of
business;
(d) make any commitments for capital expenditures related to the
Business and the Acquired Assets except in the ordinary course of
business;
(e) enter into any contract relative to the Business which will require
an expenditure of more than $10,000 without AMNEX's or Buyer's prior written
consent;
(f) cause or permit Coastal, Bektel or Garden State to make or pay any
dividend or distribution of cash or property to any person, or to increase in
any manner any compensation payable to any of its directors, officers or
employees without AMNEX's or Buyer's prior written consent;
(g) alter in any way the manner in which Coastal, Bektel or Garden
State has regularly and customarily maintained its books of account and
records; or
(h) enter into any agreements to do any of the things described in
clauses (a) through (g) above.
6.3 Negotiations with Others. From and after the Execution Date to the
Closing, no Seller will, directly or indirectly, without the written consent of
AMNEX and Buyer, encourage, participate in or initiate discussions or engage in
negotiations with any corporation, partnership, person or entity, other than
AMNEX and Buyer, concerning any possible proposal regarding the acquisition
other than in the ordinary course of business of part or all of the Acquired
Assets.
6.4 Investigations of Business and Properties. Each Seller will permit
AMNEX and Buyer, their agents, employees or designees to make such investigation
of the Business and properties, and of such Seller's financial and legal
condition, as AMNEX and Buyer deem necessary or advisable to familiarize
themselves therewith, provided such investigation shall not unreasonably
interfere with the normal operations of the Business. For this purpose, AMNEX's
and Buyer's accountants, counsel and other representatives shall, upon
reasonable
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notice and during normal business hours, be afforded access to the premises, key
employees and books and records of the Sellers. The Sellers shall furnish Buyer
with such financial and operating data and other information with respect to the
Business and the Acquired Assets as Buyer shall from time to time reasonably
request.
6.5 Public Announcements. No Seller shall issue any press release or
otherwise make any public statement with respect to this Agreement and the
transactions contemplated hereby unless such action is required by law or
consented to in writing by each of AMNEX and Buyer.
6.6 Sales and Transfer Taxes; Recording Fees. Except for the Sales Tax
Liability, stock transfer tax liability, if any, and the costs and fees
associated with the issuance and delivery by AMNEX's transfer agent of
certificates evidencing the Sellers' or their designees' ownership of any
Shares, all sales, transfer, recording and similar Taxes and fees incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne solely by the Sellers, and the Sellers shall file, or cause to be filed,
all necessary tax returns and other documents with respect thereto. If required
by applicable law, Buyer shall join in the execution of any such tax returns or
other documents; provided, however, that Buyer shall in no event be liable for
any such Taxes in respect of such returns.
6.7 Cooperation Regarding Tax Matters and Document Filings.
(a) Each of the Sellers and Buyer shall provide each other with such
cooperation and information as either of them reasonably may request of the
other in filing any report with the Securities and Exchange Commission (the
"Commission") or Tax Commission, any Tax return, amended return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes, or in
conducting any audit or other proceeding. Such cooperation and information shall
be provided to the requesting party at no or a de minimus cost (unless the same
would be unreasonable), and shall include but not be limited to the provision of
copies of all relevant Tax returns, documents and records, or portions thereof,
relating to the Acquired Assets and the Business. Each of the Sellers and Buyer
shall make its employees available on a mutually and reasonably convenient basis
to provide explanation of any documents or information provided hereunder, and
shall retain all returns, schedules and work papers and all material records or
other documents relating to Tax matters pertaining to the Acquired Assets and
the Business for the taxable year of each Seller and Buyer ending after
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the Closing Date and for all previous years, until the expiration of the statute
of limitations of the taxable years to which such returns and other documents
relate (and, to the extent notified by the other party in writing, any
extensions thereof). Any information obtained under this Section 6.7 shall be
kept confidential, except as may be otherwise necessary in connection with the
filing of returns or claims for refund or in conducting an audit or other
proceeding.
(b) If in order properly to prepare documents to be filed with
governmental authorities or its financial statements, it is necessary that any
party hereto be furnished with additional information relating to the Acquired
Assets and the Business and such information is in the possession of another
party hereto, the party possessing such information agrees to use its best
efforts to furnish such information to the party requesting it, at such
requesting party's sole cost and expense.
6.8 Books and Records. Buyer agrees that it shall preserve and keep all
books and records of the Sellers identified as Acquired Assets in Section 2.2(d)
hereof, in Buyer's possession for a period of at least six (6) years from the
Closing Date. During such six (6) year period, Buyer shall cooperate reasonably
with the Sellers and allow duly authorized representatives of the Sellers, as a
group, to have access to such books and records, upon reasonable prior written
notice to Buyer, and during Buyer's normal business hours, in order to examine,
inspect and copy such books and records. During the six month period following
the Closing Date, the Sellers shall be entitled to have such access on as many
occasions as shall be reasonably necessary for the proper windup of their
business operations. Thereafter, however, the Sellers shall only be entitled to
have such access on four occasions per calendar year.
6.9 Bulk Sales Compliance. The Sellers agree to take all actions
required under the applicable bulk sales provisions of the Uniform Commercial
Code as in effect in the States of New York, New Jersey and Pennsylvania, in
connection with the sale, transfer, conveyance and delivery of the Acquired
Assets hereunder. The Sellers agree, collectively and severally, to indemnify
and hold harmless Buyer from and against any and all loss, cost, expense
(including reasonable attorneys' fees), debt, liability, claim, damage, fine or
penalty which Buyer may suffer or incur resulting from the failure to comply in
any respect with the requirements of such bulk sales laws.
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6.10 Confidentiality. Each of the Sellers, on the one hand, and Buyer,
on the other hand, shall hold, and shall cause its or his officers, directors,
shareholders, employees, representatives, consultants and advisors and their
respective affiliates to hold, in strictest confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law
(in which case, where reasonably possible, notice of such required disclosure
shall be given to the affected party prior to such disclosure, except that no
notice need be given with regard to disclosures made pursuant to filings with
and reports to the Commission), the entire contents hereof, as well as any and
all documents executed in connection herewith and all documents and information
obtained by it with respect to the other in connection with the transactions
contemplated hereby, except to the extent that such information can be shown to
have been or to have become (i) generally available to the public other than as
a result of wrongful disclosure by the officers, directors, shareholders,
employees, representatives, consultants or advisors of the party receiving such
documents and information; (ii) made available to the public on a
nonconfidential basis from a source other than the officers, directors,
shareholders, employees, representatives, consultants or advisors of the party
receiving such documents and information; or (iii) known to the party receiving
such information prior to the date of the disclosure of such information.
However, nothing contained in this Section 6.10 shall preclude the disclosure of
such information on the condition that it remain confidential to auditors,
attorneys, lenders, investors or potential investors, financial advisors and
other consultants and advisors in connection with the performance of their
duties in preparation for consummation of the transactions contemplated hereby.
In addition, any party hereto may disclose the contents hereof with the prior
written consent of the other parties hereto, which consent shall not be
unreasonably denied or withheld. It is understood and agreed that the respective
obligations of the parties contained in this Section 6.10 shall survive
indefinitely.
6.11 Further Assurances. Subject to the terms and conditions herein
provided, each party hereto agrees to obtain, on the Closing Date or promptly
thereafter, all consents and approvals of third parties, whether private or
governmental, which may be reasonably necessary to implement the provisions of
this Agreement. Each party hereto further agrees to cooperate fully with the
other parties hereto, and at the reasonable request of any party hereto (the
"Requesting Party"), each such party shall, without further consideration,
execute and deliver, or cause to be executed and delivered, such additional
deeds, assignments,
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bills of sale, consents and other similar instruments, in form and substance
satisfactory to the Requesting Party as such Requesting Party may reasonably
deem necessary or desirable. No party, however, shall be required to initiate
any litigation, make any substantial payment or incur any material economic
burden in connection with the obtaining of any such consent or approval.
6.12 Miscellaneous Other Agreements. In consideration of the
mutual covenants set forth herein, the parties agree as follows:
(a) Use of Corporate Names. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the corporate names
of Coastal and Garden State may be utilized by the Sellers for the limited
purpose of and for so long as shall be necessary and appropriate in winding up
the business affairs of Coastal and Garden State, but in no event for a period
of more than ninety (90) days following the Closing Date. With regard to the
corporate name of Bektel, the Sellers represent that, although the Contracts for
a number of the Acquired Phones are in the name of Bektel, since before November
1995, substantially all customer service contacts (in phone or in person),
repairs, commission checks and other business associated with such Contracts and
the Acquired Phones relating thereto have been handled in the name of and paid
for by Coastal (not Bektel), and that, therefore, a seamless or transparent
transfer of the portion of the Acquired Assets owned by Bektel may be
accomplished without use of Bektel's name or logo (if any). Based thereon, Buyer
has agreed to exclude the corporate name of Bektel from the Acquired Assets.
Accordingly, notwithstanding anything to the contrary contained herein, should
Buyer nevertheless find it necessary or appropriate to utilize Bektel's name for
purposes of ensuring or furthering a seamless or transparent transfer of the
Acquired Assets owned by Bektel, then the Sellers agree that Buyer shall have
the absolute right to do so.
(b) Right of First Refusal. The Sellers, collectively and severally,
hereby grant to Buyer, its successors and assigns, effective after the Closing,
a right of first refusal to match any offer from a third party for the purchase
of any number of Excluded Phones, together with (or without) any equipment
related thereto and telephone location lease or placement or similar agreements
and rights associated therewith, and any other assets not sold hereunder (the
"Right to Purchase"). The Right to Purchase must be exercised by Buyer or its
successor or assignee, if at all, within thirty (30) days after Buyer or its
successor or assignee receives written notice from the relevant
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Seller or Sellers that it or they have received an offer from a third party for
the purchase of any such property (the "Purchase Notice"), which Purchase Notice
shall be accompanied by a copy of the third party purchase offer. In the event
that Buyer or its successor or assignee elects to exercise the Right to
Purchase, it shall do so by sending written notice thereof to such Seller or
Sellers within the time period specified above. Upon receipt of such notice from
Buyer or its successor or assignee, the Sellers, collectively and severally,
shall discontinue discussions and negotiations with the third party and
thenceforth deal exclusively with Buyer or its successor or assignee and Buyer's
or its successor's or assignee's offer. In the event that Buyer or its successor
or assignee does not elect to exercise the Right to Purchase and the third party
purchase offer fails to be consummated within one hundred twenty (120) days of
the date of the Notice and upon terms substantially the same as those set forth
in the original third party purchase offer copied to Buyer (or, if consummated,
does not result in such Seller or Sellers being divested of all of the Excluded
Phones and equipment related thereto and telephone location lease or placement
or similar agreements and rights associated therewith, and any other assets not
sold hereunder), then the Right to Purchase shall continue to apply and the
Sellers, collectively and severally, shall be obligated to reoffer the Excluded
Phones and such other unsold assets for sale to Buyer. It is expressly
understood and agreed that any and all provisions contained in this subsection
6.12(b) may be assigned by Buyer upon notice to the Sellers, but without any
Seller's consent, in which case such assignee shall be entitled to the benefits
of this subsection 6.12(b) to the same degree and extent as Buyer.
(c) Audit and Provision of Certain Financial Information. AMNEX intends
to cause its independent public accountants to conduct an audit of the Business
for the purpose of preparing and furnishing Buyer with certified audited
financial statements (collectively, "Audited Financial Statements") for
attachment to AMNEX's report on Form 8-K, which report is required to be filed
with the Commission within fifteen (15) days of Buyer's acquisition of the
Acquired Assets, and which financial statements are required to be submitted to
the Commission within sixty (60) days thereafter. In order to reduce the time
and expense associated with conducting such audit, Seller's customary accountant
shall provide comprehensive work papers for the benefit of AMNEX's independent
public accountants, who shall have the right to utilize and incorporate such
papers as they determine in their reasonable sole discretion. The expense of the
audit conducted by AMNEX's independent public accountants shall be borne equally
by the Sellers, on the one
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hand, and AMNEX and Buyer, on the other hand. It is understood that the Audited
Financial Statements shall contain certain historical financial information and
shall consist of the following:
(i) Balance Sheets of each Seller as of December 31, 1994 and 1995,
March 31, 1996, June 30, 1996, and September 30, 1996, all of which shall be
prepared in conformity with generally accepted accounting principles, audited
and certified by each Seller's independent public accountants and accompanied by
their unqualified report thereon and notes thereto, which shall form an integral
part thereof;
(ii) Income Statements of each Seller for the years ended December 31,
1993, 1994 and 1995, and for the quarters ended March 31, 1996, June 30, 1996,
and September 30, 1996, all of which shall be prepared in conformity with
generally accepted accounting principles, audited and certified by each Seller's
independent public accountants and accompanied by their unqualified report
thereon and notes thereto, which shall form an integral part thereof; and
(iii) Statements of Cash Flow of each Seller for the years ended
December 31, 1993, 1994 and 1995, and for the quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996, all of which shall be prepared in
conformity with generally accepted accounting principles, audited and certified
by each Seller's independent public accountants and accompanied by their
unqualified report thereon and notes thereto, which shall form an integral part
thereof.
The Sellers acknowledge that conducting an audit of the Business and preparing
the statements enumerated above will necessarily involve time and effort on
their part. The Sellers further acknowledge that time is of the essence with
regard thereto and AMNEX may be adversely affected to a material degree in the
event that the Form 8-K is not timely filed. Accordingly, in furtherance of the
foregoing, and notwithstanding anything to the contrary contained in this
Agreement, each Seller agrees to cooperate fully with Buyer and Buyer's
accountants and to provide true, complete and correct historical and other
financial data and information at no cost and on a prompt basis to, or as and
when requested by, Buyer and Buyer's accountants. Each Seller further agrees,
upon the request of Buyer or Buyer's accountant's, to promptly provide them with
interim quarterly financial statements for the year ending December 31, 1996.
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(d) ANI Termination Notices and Acknowledgments. Before the Closing,
the Sellers (i) shall send prior written notice by certified mail (return
receipt requested and received) or federal express (receipt confirmed) to all
third party telecommunications service providers or agents thereof (except for
ANEI) with which it has any written or verbal agreements, arrangements or
commitments concerning any Acquired Phone, and/or from whom any Seller has
received any commissions and/or dial- around compensation with regard to any
Acquired Phone, of the pending sale and transfer of the Acquired Phones from
Seller to Buyer, in each case, in accordance with the notice provisions, if any,
applicable to such providers' or agents' agreements or course of dealing, or
otherwise consistent with good faith business practices (the "Third Party
Notice"); (ii) shall include in the Third Party Notice a listing of all ANIs
associated with the Acquired Phones and any other information reasonably
requested or required by such third party providers or agents; (iii) shall
obtain an acknowledgment from each such provider or agent of receipt of each
Third Party Notice and ANI listing; and (iv) shall obtain each such provider's
or agent's agreement (x) to remove all ANIs representing the Acquired Phones
from its database, records and customer files and (y) to treat all such ANIs and
Acquired Phones as being released from, and no longer subject to, any agreement,
arrangement or commitment made by or between any Seller and such provider or
agent; provided, however, that in the case of Cleartel, the Third Party Notice
shall be sent jointly by the Sellers and Buyer and, in lieu of item (iv) above,
the Third Party Notice shall contain a representation and warranty made by the
Sellers and Buyer, for the benefit of Cleartel, to the effect that the Cleartel
Phones shall remain on Cleartel's network for the balance of the term remaining
under the Cleartel Contract, that Buyer is assuming and will thereafter comply
with the duties and obligations of the Sellers thereunder, and that all rights
of and benefits accruing to the Sellers under the Cleartel Contract shall
thereafter become Buyer's rights and accrue to Buyer. In furtherance of the
foregoing, each Seller shall, as promptly as practicable after the Closing Date,
provide Buyer with a copy of the Third Party Notices and accompanying ANI
listings and the evidences of receipt thereof by each such provider and agent.
Each Seller represents and warrants to Buyer that except as required under the
Cleartel Contract, Buyer shall have no obligation to send any traffic whatsoever
to any third party telecommunications service providers or agents thereof, or to
program any Acquired Phone to any third party telecommunications service
provider, or otherwise have any duty owing to any third party telecommunications
service providers or agents thereof. Each Seller further represents and warrants
that except as required
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under the Cleartel Contract, from and after the Closing Date no Acquired Phone
will be bound by or subject to any contract with any such providers or agents
thereof, and all such contracts shall be terminated or amended to exclude the
Acquired Phones.
(e) Tax Treatment. It is the intent of the parties hereto and the
principle hereunder that the transactions contemplated hereby with respect to
Bektel and Garden State only (and not with respect to Coastal or King) qualify
as a tax-free reorganization within the meaning of Section 368 (a)(1)(C) of the
Internal Revenue Code of 1986, as amended. It is understood and agreed that, in
order to accomplish this tax-free treatment, (i) the consideration paid to each
of Bektel and Garden State must be solely in stock; and (ii) the aggregate
amount of the tax basis transferred with respect to Bektel and Garden State must
be no less than an amount equivalent to the total consideration paid to Bektel
and Garden State, less $1,200,000. All consideration paid to Coastal and/or King
shall be in cash and/or stock and the tax basis transferred with respect to
Coastal and/or King shall be in an amount equivalent to such total
consideration. The Sellers, collectively and severally, represent and warrant to
AMNEX and Buyer that the amount of the tax basis transferred at the Closing with
respect to the various Sellers shall be exactly as stated above, and that all
such tax basis amounts are supportable. It is further understood and agreed
that, as a result of the foregoing tax-free treatment, AMNEX and Buyer shall
incur a tax asset basis differential. In consideration of such tax asset basis
differential, the parties hereto agree that, notwithstanding the provisions of
subsection 2.4(a) hereof, the cash portion of the Purchase Price due at the
Closing, as provided in such subsection, shall be reduced by One Hundred
Thousand Dollars ($100,000). Notwithstanding the foregoing, AMNEX and Buyer do
not and will not make any representation or warranty or give any assurance or
guarantee as to the tax-free nature of any structure by which the transactions
contemplated by this Agreement are consummated and, in particular, make no
representation or warranty and give no assurance or guarantee that the Internal
Revenue Service will concur with such tax treatment and that such tax treatment
will in fact be obtained.
(f) Lease of the Office Headquarters. At the Closing, Route 34 shall
enter into a lease agreement ("Lease") with Buyer, pursuant to which, among
other things, Route 34 shall lease to Crescent for an initial term of five (5)
years from the Closing Date, the Office Headquarters, at a rental of $6,000 per
month. The Lease shall be substantially in the form attached hereto as Exhibit
C.
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(g) Non-Competition and Non-Hire Agreements. At the Closing, the
Sellers shall deliver to Buyer the Non-Competition and Non-Hire Agreement
executed by Arbeit, as well as the Non-Competition and Non- Hire Agreement
executed by King and the Sellers.
(h) Side Letter. The parties hereto shall cause National Telecom USA,
Inc., an affiliate of the Sellers ("National"), and American Network Exchange,
Inc., a wholly owned subsidiary of AMNEX and an affiliate of Buyer ("ANEI"), to
enter into a letter agreement, effective as of the Closing Date, addressing the
consequences to National of the consummation of the transactions contemplated
hereby (the "Side Letter"). The Side Letter shall be substantially in the form
attached hereto as Exhibit G.
(i) Broker's Fee. The parties hereto recognize National Telecom USA,
Inc., an affiliate of the Sellers, as the broker entitled to receive a fee, the
amount of which shall be mutually determined by the parties hereto on the
Closing Date, and the funds for which shall be drawn from the Additional
Consideration.
(j) Expenses of the Parties. Except as otherwise provided herein, each
party hereto shall be responsible for its own expenses in connection with all
matters relating to this Agreement and the transactions contemplated hereby.
ARTICLE 7
EMPLOYEES AND EMPLOYEE MATTERS
7.1 Transferred Employees. Set forth on Section 7.1 of the Disclosure
Schedule is a true, correct and complete listing of (a) all employees of
Coastal, Bektel and Garden State currently engaged in the Business; (b) the
salaried or hourly wages currently paid to such persons; and (c) brief
descriptions of the job functions currently performed by such persons. Prior to
the Closing, each Seller shall afford Buyer's representatives an opportunity to
offer employment with Buyer after the Closing, to any and all of such persons,
whether salaried or hourly employees, who Buyer in its sole discretion desires
to employ. Those employees selected by Buyer for employment and who elect to
become employees of Buyer after the Closing are hereinafter referred to as
"Transferred Employees" and shall be considered employees of Buyer effective as
of the Closing Date.
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7.2 Worker's Compensation. Buyer shall assume responsibility for any
worker's compensation claim made by any Transferred Employee arising from events
occurring on and after the Closing Date, and the Sellers, collectively and
severally, shall retain responsibility for any worker's compensation claim made
by any employee of them or any Transferred Employee that arises from events
occurring before the Closing Date.
7.3 Vacation and Sick Pay. Buyer shall assume responsibility for any
unpaid salaries, vacation and sick pay of the Transferred Employees accruing on
and after the Closing Date under and pursuant to Buyer's employment plans and
policies, and the Sellers, collectively and severally, shall retain
responsibility for any unpaid salaries, vacation and sick pay of the Transferred
Employees and all other employees of the Sellers accruing before the Closing
Date.
7.4 Employee Benefit Plans. Buyer will provide health, insurance,
disability or other employee welfare/benefit plans or arrangements for the
Transferred Employees as follows. During the period commencing on the Closing
Date and ending ninety (90) days thereafter, Buyer will pay or reimburse each
Transferred Employee for the amount of the premiums required to be paid to
continue each such individual's current health (i.e., hospitalization/major
medical and dental (if applicable)) coverage with the Sellers under C.O.B.R.A.
The amount of such premiums are set forth on Section 7.4 of the Disclosure
Schedule and each Seller represents that such amounts are true, complete and
correct. After the expiration of such ninety (90) day period, each Transferred
Employee will become eligible to participate in, and shall receive, health
coverage in accordance with that provided by Buyer to its other employees. Buyer
will also provide insurance, disability or other employee welfare/benefit plans
or arrangements for the Transferred Employees in accordance with Buyer's
standard employment plans and policies in effect on and after the Closing Date.
7.5 Administration. Each of the Sellers, on the one hand, and Buyer, on
the other hand, shall make their appropriate employees available to the other at
such reasonable times (and upon such reasonable terms) as may be necessary for
the proper administration by the other of any and all matters relating to
employee benefits and worker's compensation claims affecting their employees.
7.6 Special Arrangements Concerning ▇▇▇▇▇ ▇▇▇▇▇. It is understood
and agreed that ▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), in her capacity as Director of
each of Coastal, Bektel and Garden State and Chief Operating Officer of
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Coastal, possesses certain knowledge and expertise essential to the proper
windup of the business operations of the Sellers. Accordingly, for a period of
ninety (90) days following the Closing Date, AMNEX and Buyer agree to make ▇▇▇▇▇
reasonably available to the Sellers for purposes of assisting them in winding up
their business operations, it being understood and agreed that King and ▇▇▇▇▇
▇▇▇▇, the President and CEO of AMNEX, shall mutually determine Joyce's schedule
therefor (i.e., the number of hours and specific days which ▇▇▇▇▇ shall devote
to such activities for Sellers' benefit). It is understood and agreed that ▇▇▇▇▇
will be permitted to continue service as a Director of the Sellers and their
affiliates, including but not limited to National Telecom USA, Inc., National
Telecom Hospitality USA, Inc., and The Keystone Corporation, for so long as
▇▇▇▇▇ exercises reasonable discretion in such role, abstains from voting in
circumstances that pose a clear conflict of interest, and otherwise acts in a
fashion that would not adversely affect the interests of AMNEX, Buyer and their
affiliates.
ARTICLE 8
CLOSING CONDITIONS
8.1 Conditions to the Obligations of the Sellers. The obligation of the
Sellers to effect the transactions contemplated hereby shall be further subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by them:
(a) Buyer and AMNEX shall have performed, observed and complied in all
material respects with all the obligations and conditions required by this
Agreement to be performed, observed or complied with by each of them prior to
the Closing Date;
(b) the representations and warranties of Buyer and AMNEX set forth in
this Agreement shall have been true and correct in all material respects as of
the date of this Agreement and shall also be true and correct in all material
respects as of the Closing Date with the same force and effect as though made at
and as of the Closing Date (except as otherwise contemplated by this Agreement);
(c) The Sellers shall have received a certificate from an officer of
each of Buyer and AMNEX, dated as of the Closing Date, satisfactory in form and
substance to the Sellers, certifying (i) as to the fulfillment of the conditions
described in subsections 8.1(a) and 8.1(b) hereof, and (ii) that all necessary
corporate action to approve this
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Agreement and the consummation of the transactions contemplated hereby on the
part of Buyer and AMNEX has been duly and effectively taken;
(d) no court order shall have been entered which enjoins,
restrains or prohibits the consummation of the transactions contemplated
by this Agreement;
(e) Buyer shall have entered into the Lease with Route 34, effective as
of the Closing Date.
(f) National and ANEI shall have entered into the Side Letter,
effective as of the Closing Date.
8.2 Conditions to the Obligations of Buyer and AMNEX. The obligation of
Buyer and AMNEX to effect the transactions contemplated hereby shall be further
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Buyer and AMNEX:
(a) Each Seller shall have performed, observed and complied in all
material respects with all of the obligations and conditions required by this
Agreement to be performed, observed or complied with by each of them prior to
the Closing Date;
(b) The representations and warranties of each Seller, as set forth in
this Agreement, shall have been true and correct in all material respects as of
the date of this Agreement and shall also be true and correct in all material
respects as of the Closing Date with the same force and effect as though made at
and as of the Closing Date (except as otherwise contemplated by this Agreement);
(c) Buyer and AMNEX shall have received a certificate from an officer
of each of Coastal, Bektel and Garden State, and from King in his individual
capacity, dated as of the Closing Date, satisfactory in form and substance to
Buyer and AMNEX, certifying (i) as to the fulfillment of the conditions
described in subsections 8.2(a) and 8.2(b), and (ii) that all necessary
corporate (including shareholder) and other action to approve this Agreement and
the consummation of the transactions contemplated hereby on the part of each
Seller has been duly and effectively taken;
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(d) no court order shall have been entered which enjoins,
restrains or prohibits the consummation of the transactions contemplated
by this Agreement;
(e) Buyer and AMNEX shall have received from each Seller any and all
third party consents, approvals or waivers required (or, in Buyer's reasonable
sole discretion, evidence that appropriate arrangements can be made to obtain
any and all third party consents, approvals or waivers required, or to otherwise
furnish Buyer with the benefits thereof as provided in Section 2.16 hereof), (i)
to effectively transfer to Buyer the Acquired Assets and the rights and
privileges relating thereto; and (ii) for the lawful consummation of the
transactions contemplated hereby (or which are otherwise necessary for Buyer's
conduct of the Business immediately after the Closing);
(f) all liens on the Acquired Assets securing any indebtedness of
any person shall have been released prior to the Closing;
(g) there shall have been no material adverse change from the date of
the most recent Unaudited Financial Statements to the Closing Date in the
operations, earnings, assets, properties, business or condition (financial or
otherwise) of any Seller;
(h) the Sellers shall have delivered to Buyer the Non-Competition
and Non-Hire Agreements, duly executed by each of Arbeit and King and
the Sellers; and
(i) Subject to the provisions of Section 2.6 hereof, Buyer and
AMNEX shall have received the proceeds of the Financing.
8.3 Other Documents. Each of the Sellers, on the one hand, and Buyer
and AMNEX, on the other hand, will furnish to the other such certificates of
officers or other persons and such other documents to evidence fulfillment of
the conditions set forth in this Article 8 as the other may reasonably request.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The respective
representations and warranties of the parties contained in this Agreement shall
survive the Closing until the eighteen month anniversary thereof (the "Survival
Date"), at which time they shall lapse; provided, however, that (a) the
representation and warranty of the Sellers
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contained in Section 3.8 hereof shall survive indefinitely; (b) any
representation and warranty of the Sellers contained in this Agreement
concerning or affecting tax matters, including but not limited to the
representation and warranty of the Sellers contained in Section 3.12 hereof,
shall survive the Closing until the third anniversary thereof (the "Tax Matters
Survival Date"); and (c) any representation or warranty in respect of which
indemnity may be sought under Section 9.2 hereof shall survive the Survival Date
or the Tax Matters Survival Date, if notice, given in good faith, of the
specific inaccuracy in or breach thereof giving rise to a claim for
indemnification shall have been given to the party from which indemnification is
sought prior to the Survival Date or the Tax Matters Survival Date, as the case
may be. No investigation by any of the parties, heretofore or hereafter made,
shall affect the survival of any representation or warranty contained herein.
9.2 Cross Indemnity. (a) Subject to the terms and conditions of this
Agreement and the limitations contained in this Article 9, the Sellers,
collectively and severally, shall indemnify and hold harmless Buyer, AMNEX and
any affiliate thereof from and against (i) any breach of a representation or
warranty made by any Seller in this Agreement or in any instrument, agreement or
other document executed in connection herewith; (ii) the breach of any covenant
or agreement of any Seller contained in this Agreement or in any instrument,
agreement or other document executed in connection herewith; (iii) the breach of
any representation, warranty, covenant or agreement of Arbeit contained in any
instrument, agreement or other document executed in connection herewith; (iv)
any liability or obligation of any Seller not specifically assumed by Buyer
pursuant to this Agreement; and (v) any reasonable costs (including but not
limited to reasonable attorneys' and accountants' fees) incurred by Buyer, AMNEX
or any affiliate thereof in connection therewith.
(b) Subject to the terms and conditions of this Agreement and the
limitations contained in this Article 9, Buyer and AMNEX, jointly and severally,
shall indemnify and hold harmless each Seller and any affiliate thereof from and
against (i) any breach of a representation or warranty made by Buyer or AMNEX in
this Agreement or in any instrument, agreement or other document executed in
connection herewith; (ii) the breach of any covenant or agreement of Buyer or
AMNEX contained in this Agreement or in any instrument, agreement or other
document executed in connection herewith; (iii) any liability or obligation of
any Seller which is being specifically assumed by Buyer pursuant to this
Agreement (for example, the liabilities and obligations of the Sellers under the
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Cleartel Contract); and (iv) any reasonable costs (including but not limited to
reasonable attorneys' and accountants' fees) incurred by any Seller or affiliate
thereof in connection therewith.
(c) Each Seller represents that King, in his individual capacity, is
the sole owner of and holder of title to approximately 420 or ten percent (10%)
("King's Interest") of the Acquired Phones. For purposes of allocating the
indemnification obligation of the Sellers as provided in subsection 9.2(a) above
between King, on the one hand, and Coastal, Bektel and Garden State, as a group,
on the other hand, and in material reliance upon the representation of the
Sellers as set forth in this subsection 9.2(c), it is agreed that King shall be
personally obligated to indemnify Buyer and AMNEX in proportion to King's
Interest; provided, however, that with regard to Sections 3.2 and 3.8 and
subsection 3.3(a) hereof, such allocation shall not apply and King (as well as
each other Seller) shall be obligated to fully indemnify Buyer and AMNEX; and
provided, further, that should an indemnification obligation arise after
Coastal, Bektel or Garden State wind up their business, or should such Sellers,
as a group, otherwise have insufficient assets to satisfy an indemnification
obligation hereunder, then such allocation shall likewise not apply and King (as
well as each other Seller) shall be obligated to fully indemnify Buyer and
AMNEX. Nothing contained in this subsection 9.2(c), however, shall be construed
to affect in any way the provisions of section 9.4 hereof, which provisions
shall be considered independently of this subsection 9.2(c).
9.3 Third Party Claims. (a) Except as otherwise provided herein,
the procedures set forth in the following paragraphs of this Section 9.3
shall apply to indemnification of claims resulting from the assertion of
liability by persons or entities not parties to this Agreement.
(b) The party seeking indemnification (the "Indemnified Party") shall,
as promptly as reasonably practicable, give written notice to the party from
which indemnification is sought (the "Indemnifying Party") of any assertion of
liability by a third party which might give rise to a claim by the Indemnified
Party against the Indemnifying Party based on the indemnity agreements contained
in this Agreement or in any document executed and delivered in connection
herewith, stating the nature and basis of the assertion and the amount thereof
to the extent known. Failure on the part of the Indemnified Party to give prompt
notice to the Indemnifying Party shall not limit or otherwise affect such
Indemnified Party's right to indemnification hereunder so long as the
Indemnifying Party is not materially adversely affected.
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(c) In the event that any Legal Action is brought against an
Indemnified Party with respect to which the Indemnifying Party may have
liability under an indemnity agreement contained in this Agreement or in any
document executed and delivered in connection herewith, the Indemnifying Party
shall have the right, at its sole cost and expense, to defend the Indemnified
Party against such Legal Action (and any appeal and review thereof), with
counsel reasonably acceptable to the Indemnified Party. In any such Legal
Action, the Indemnified Party shall have the right to be represented by advisory
counsel and accountants, at its own expense, and the Indemnifying Party shall
keep the Indemnified Party fully informed as to such proceeding at all stages
thereof, whether or not the Indemnified Party is represented by its own counsel.
(d) Until the Indemnifying Party shall have assumed the defense of such
Legal Action, or if the Indemnified and Indemnifying Parties are both named
parties in such Legal Action and the Indemnified Party shall have reasonably
concluded that there may be defenses available to it that are different from or
in addition to the defenses available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to assume the defense of such
Legal Action but shall remain responsible for its obligation as an indemnitor),
all legal and other reasonable expenses incurred by the Indemnified Party as a
result of such Legal Action, shall be borne solely by the Indemnifying Party. In
such event the Indemnifying Party shall make available to the Indemnified Party
and its attorneys and accountants, for review and copying, all of its books and
records relating to such Legal Action and the parties agree to render to each
other such assistance as may reasonably be requested in order to facilitate the
proper and adequate defense of any such Legal Action.
(e) The Indemnifying Party shall not make any settlement of any claim
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a settlement involving
injunction or other equitable relief against the Indemnified Party or its
assets, employees or business. The Indemnified Party shall be entitled to
receive a general release for its benefit in any settlement, without obligation
to pay any money or other consideration therefor.
9.4 Security for Seller's Indemnities. (a) As security
during the Holdback Period and thereafter (where provided for in this
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Agreement) for the indemnification obligations of the Sellers to Buyer and AMNEX
as set forth in this Agreement and in any document executed and delivered in
connection herewith, it is agreed that any amounts reasonably determined by
Buyer or AMNEX to be due and owing to either of them in respect of any such
indemnity agreement may, in the reasonable sole discretion of Buyer or AMNEX, be
deducted from and applied against the Holdback Shares in accordance with the
provisions set forth in subsection 2.8(d) hereof. Buyer and AMNEX agree to
furnish such Seller with a written notice particularizing the amount being
deducted and the rationale therefor.
(b) The parties recognize that each of National Telecom USA, Inc.
("National") and The Keystone Corporation ("Keystone") is an affiliate of the
Sellers controlled by King, and that American Network Exchange, Inc. ("ANEI") is
a wholly owned subsidiary of AMNEX and affiliate of Buyer. Accordingly, as
additional security during the Holdback Period and thereafter for the
indemnification obligations of the Sellers to Buyer and AMNEX as set forth in
this Agreement and in any document executed and delivered in connection
herewith, it is agreed that any amounts reasonably determined by Buyer or AMNEX
to be due and owing to either of them in respect of any such indemnity agreement
may, in the reasonable sole discretion of Buyer or AMNEX, and upon thirty (30)
days prior written notice thereof to any Seller, National or Keystone (as the
case may be), be offset against any amounts due and owing from ANEI to National
and/or Keystone and/or any Seller; provided, however, that in no event shall the
amounts actually paid by ANEI to National and/or Keystone and/or any Seller
during any given calendar week be reduced to less than ninety five percent (95%)
of the amounts which would have been paid to each of such entities during such
calendar week if such offset had not been effected. It is further agreed that
any amounts due and owing from other subsidiaries or affiliates of AMNEX, Buyer
or ANEI to any other entities controlled by a Seller, may be offset in a manner
consistent with the terms set forth above. That portion of the amounts due and
owing from ANEI to National, Keystone, any Seller and its affiliates that is
available for offset pursuant to this subsection 9.4(b) shall be collectively
referred to herein as the "Available Cash Flow". Buyer and AMNEX agree to
furnish the Sellers, National and/or Keystone (as the case may be), with a
written notice particularizing the amount being offset from the Available Cash
Flow and the rationale therefor.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing (including facsimile or similar written
transmission) and shall be given:
(a) If to Buyer:
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to AMNEX:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to any Seller:
c/o National Telecom USA, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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or to such other person or address or telecopier number as the party to whom
notice is to be given may have furnished the other parties in writing by like
notice. If mailed, any such communication shall be deemed to have been given on
the third business day following the day on which the communication is posted by
registered or certified mail (return receipt requested). If sent by overnight
mail or fax, any such communication shall be deemed to have been given at the
end of business on the next business day, or the day of confirmation (provided
that such day is a business day), respectively. If given by any other means, any
such communication shall be deemed to have been given when delivered to the
address specified in this Section.
10.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
10.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.4 Amendment. This Agreement and the exhibits and schedules attached
hereto may be amended, modified or supplemented only by written agreement of the
parties hereto.
10.5 Extension; Waiver. At any time after the Closing, any party to
this Agreement which is entitled to the benefits hereof may (a) extend the time
for the performance of any of the obligations of another party hereto, (b) waive
any misrepresentation (including an omission) or breach of a representation or
warranty of another party hereto, whether contained herein or in any exhibit,
schedule or document delivered pursuant hereto, or (c) waive compliance of
another party hereto with respect to any of the terms, conditions or provisions
contained herein. Any such extension or waiver shall be valid only if set forth
in a written instrument signed by the party or parties giving the extension or
waiver.
10.6 Severability. If any provision, or part thereof, of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and not in any way affect
or render invalid or unenforceable any other provisions of this Agreement, and
this Agreement shall be carried out as if such invalid or unenforceable
provision, or part thereof, had been reformed
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so that it would be valid, legal and enforceable to the fullest extent permitted
by Applicable Law.
10.7 Miscellaneous. This Agreement (a) constitutes the entire agreement
and supersedes all other prior or contemporaneous agreements and understandings,
both written and oral, between or among the parties with respect to the subject
matter hereof; (b) except as otherwise provided herein, is not intended to and
shall not confer upon any other person or business entity, other than the
parties hereto and their successors and assigns, any rights or remedies with
respect to the subject matter hereof; (c) may be assigned by any party hereto
upon written notice to the other parties hereto (it being understood and agreed
that in such case the assignor shall remain liable for satisfaction of its
obligations hereunder and shall also cause its assigns to agree to the terms of
and assume the obligations under Article 5 hereof); and (d) shall be governed in
all respects by the laws of the State of New York without regard to its laws or
regulations relating to conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed in their individual capacity or by their respective officers thereunto
duly authorized on the date first above written.
AMNEX, INC. CRESCENT PUBLIC COMMUNICATIONS INC.
By:___________________________ By:___________________________
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
COASTAL TELECOM PAYPHONE THE KEYSTONE CORPORATION *
COMPANY, INC.
By:__________________________ By:_________________________
Name:________________________ Name:_______________________
Title:_______________________ Title:_______________________
BEK TEL, INC. NATIONAL TELECOM USA, INC. *
By:__________________________ By:__________________________
Name:________________________ Name:________________________
Title:_______________________ Title:_______________________
* with regard to the relevant
provisions hereof
GARDEN STATE TELEPHONE INSTALLATION
& SERVICE COMPANY, INC.
By:__________________________
Name:________________________
---------------------------
Title:_______________________ ▇▇▇▇▇ ▇. ▇▇▇▇, individually
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