DRAFT 11/13/99
ASSET PURCHASE AGREEMENT
BETWEEN
ACCESS ANYWHERE LLC
("BUYER")
CHOICETEL COMMUNICATIONS INC.
("SELLER")
DATED AS OF NOVEMBER 15, 1999
DRAFT 11/13/99
SCHEDULES
SCHEDULE TOPIC
1.1(a) Equipment and Other Tangible Assets
1.1(b) Site Contracts
1.2 Excluded Assets
1.3 Assumed Liabilities by Buyer
4.0 Schedule of Exceptions
4.1 Jurisdictions of Seller's Business
4.4(a) Seller's Audited Financials
4.4(b) Seller's Interim Financials
6.8(a) Allocation of Purchase Price
8.1 Documents Delivered by Buyer to Seller
EXHIBITS
EXHIBIT TOPIC
3.1 Advants, Inc. Subscription Agreement
3.2 Kiosk Term Sheet
3.3 Shareholder's Agreement
3.4 Consulting Agreement
3.5 Sublease Agreement
6.5 Non-Competition Agreement
6.10 CLEC Resale Agreement
7.9 Opinion of Counsel to Seller
8.6 Opinion of Counsel to Buyer
-i-
DRAFT 11/13/99
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT") is made on November 15,
1999 between ACCESS ANYWHERE LLC, a Minnesota limited liability company with
principal offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("BUYER"), and CHOICETEL COMMUNICATIONS INC., a Minnesota corporation with
principal offices located at ▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("SELLER").
RECITAL
A. Seller operates a business that provides and services public
pay telephones located at various sites in Minnesota, Wisconsin, New York, Iowa
and North Dakota, and owns various pay telephones, pay telephone equipment, site
contract rights, leasehold interests, tools, inventories, supplies, account
receivables, operating accounts, advertising and sales materials, computer
hardware and software, and miscellaneous assets used in connection with the
operation of the business, including all the stock of ChoiceTel, Inc., a
competitive local exchange carrier (collectively, the "BUSINESS").
B. Seller desires to sell to Buyer certain assets of the
Business, and Buyer desires to purchase such assets from Seller, on the terms
and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
ARTICLE I.
THE TRANSACTION
1.1 SALE AND PURCHASE OF ASSETS. At the Closing, as defined in
Section 1.4 below, Seller shall sell, transfer, convey and deliver to Buyer, and
Buyer shall purchase and accept from Seller, all assets owned or controlled by
Seller which are used in the operation of the Business, including Seller's
business as a going concern, goodwill and assets of every kind, nature and
description existing on the Closing Date, as defined in Section 1.4 below, and
which are used in the operation of the Business, wherever such assets are
located in the States of Minnesota, Wisconsin, New York, Iowa and North Dakota,
and whether real, personal or mixed, tangible or intangible, and whether or not
any of such assets have any value for accounting purposes or are carried or
reflected on or specifically referred to in the Seller's books or financial
statements, except those assets specifically excluded pursuant to Section 1.2 of
this Agreement, free and clear of any and all liens, security interests, claims,
charges and encumbrances ("ENCUMBRANCES"). The properties, business, goodwill
and assets to be transferred hereunder (collectively, the "PURCHASED ASSETS")
include, but are not limited to, the following:
(a) EQUIPMENT AND OTHER TANGIBLE ASSETS. All pay
telephones, and all furniture, fixtures, equipment, machines and other
tangible assets which are owned by
Seller and used in connection with the Business as of the Closing Date,
including but not limited to the tangible assets set forth on SCHEDULE
1.1(a).
(b) SITE PROVIDER CONTRACTS. All contracts relating to
the Business ("SITE CONTRACTS") pertaining to the provision of pay
telephones placed or to be placed into operation at particular sites
pursuant to an agreement with site owners or operators ("SITE
PROVIDERS"), together with the Seller's right to provide pay telephone
services to the Site Providers, including the Site Contracts identified
on SCHEDULE 1.1(b).
(c) TRADE INFORMATION. The names, addresses and other
pertinent information of all Site Providers, Seller's customer lists,
if any, (together with the right to solicit and service said
customers), manuals, forms, computer programs, business plans or like
data respecting the Business or the conduct thereof, whether existing
or created as of the date of this Agreement or as of the date of
Closing.
(d) NAME AND PROPRIETARY INFORMATION. All rights relating
to exclusive use of the names "Intelliphone" and "AAA Telephone
Systems" or any similar or derivative name, all goodwill relating
thereto, and the right to free use of any proprietary information
respecting the Business or the conduct thereof.
(e) CASH AND ACCOUNTS RECEIVABLE. As of the Closing Date
the cash in all the pay telephones identified on SCHEDULE 1.1(a), all
account receivables relating to the Business, including dial-around
compensations and other payments or compensations due, but not yet
paid, to Seller, and all prepaid expenses relating to the Business
(collectively, "CURRENT ASSETS").
(f) CHOICETEL, INC. CAPITAL STOCK. All of the outstanding
capital stock of ChoiceTel, Inc., a wholly-owned subsidiary of the
Seller ("CLEC SUBSIDIARY").
1.2 EXCLUDED ASSETS. Seller shall retain, and the Purchased Assets
shall not include, the assets identified on SCHEDULE 1.2.
1.3 ASSUMPTION OF LIABILITIES. Except for liabilities identified
on SCHEDULE 1.3 ("ASSUMED LIABILITIES"), Buyer does not assume and shall not
assume or in any way undertake to pay, perform, satisfy or discharge any other
liability of Seller, whether existing on, before or after the Closing Date or
arising out of any transactions entered into, or any state of facts existing on,
prior to or after the Closing Date.
1.4 CLOSING. The consummation of the purchase and sale of the
Purchased Assets, the assumption of the Assumed Liabilities and the consummation
of the other transactions contemplated hereby (the "CLOSING") shall take place
at the offices of ▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing at 9:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated
hereby (other than conditions with respect to the actions the respective parties
will take at the Closing itself), or at such other time, date or place as the
parties may mutually agree (the "CLOSING DATE").
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1.5 RISK OF LOSS. The risk of loss, damage, theft or destruction
to any of the Purchased Assets or other property to be conveyed to Buyer under
this Agreement shall be borne by Seller to the time of Closing. In the event of
such loss, damage, theft or destruction, Seller shall replace or repair the
lost, stolen, damaged or destroyed property to its condition prior to the loss,
theft, damage or destruction. If the replacement or repair is not completed
prior to Closing, then the Purchase Price (as defined below) will be adjusted by
an amount that will be required to complete the replacement or repair after
Closing.
ARTICLE II.
PURCHASE PRICE; PAYMENT
2.1 PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Purchased Assets shall be $4,300,000, plus the Price Adjustment ("PRICE
ADJUSTMENT") and minus the Phone Adjustment ("PHONE ADJUSTMENT"). The Price
Adjustment shall equal the difference between the dollar value of Current Assets
of Seller transferred to Buyer at Closing LESS the dollar value of all Assumed
Liabilities assumed by Buyer at Closing. A resulting positive Price Adjustment
will constitute an increase to the Purchase Price, and a resulting negative
Price Adjustment will constitute a decrease to the Purchase Price, on a
dollar-for-dollar basis. The Price Adjustment and Phone Adjustment will be
subject to post-closing reconciliation based on Seller's Post-Closing financial
statements ("POST-CLOSING FINANCIALS") as described in Section 2.3 below. The
Phone Adjustment shall equal the dollar amount resulting from multiplying (i)
$2,000 times (ii) the difference of (a) the number, if any, resulting from
subtracting from 2,031 (b) the number of active pay telephones on the Closing
Date. The Phone Adjustment shall not be less than zero. For determining the
amount to be paid at Closing, the Phone Adjustment will be estimated in good
faith by Buyer and Seller.
2.2 PAYMENT OF PURCHASE PRICE.
Buyer shall pay the Purchase Price as follows:
(a) At closing, Buyer shall pay to Seller an initial
amount ("INITIAL PAYMENT") by cash, certified check or by wire transfer
in an amount equal to the Purchase Price LESS (i) $575,000 ("HOLDBACK
AMOUNT"), and (ii) if Buyer is subject to Minnesota Statutes Section
270.102 regarding the effect of a lien for unpaid sales tax, the amount
required to be withheld under Section 270.102. For the purpose of
calculating the Initial Payment, the Price Adjustment shall be based
upon estimated financial statements of the Business as of the Closing
Date, prepared by the Seller consistent with its historical accounting
practices (the "ESTIMATED CLOSING FINANCIALS").
(b) On the date six months after the Closing Date, Buyer
shall pay Seller an amount ("FINAL PAYMENT") equal to the Holdback
Amount: (i) reduced for any indemnification claims Buyer may have
against Seller; (ii) reduced by $1,000 for each Site Contract that is
canceled or terminated by a Site Provider within 12 months after the
Closing Date for which a valid contract does not exist; (iii) reduced
by the Post-Closing Phone Adjustment ("POST-CLOSING PHONE ADJUSTMENT");
(iv) reduced by any other liabilities incurred by Seller prior to the
Closing Date and paid on behalf of Seller by
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Buyer in the ordinary course of business; and (v) reduced or
increased for any Post-Closing Price Adjustment ("POST-CLOSING PRICE
ADJUSTMENT"). The Post-Closing Price Adjustment shall equal the
difference between the Price Adjustment based on the Post-Closing
Financials, as defined in Section 2.3, and the Price Adjustment
based on the Estimated Closing Financials. A positive Post-Closing
Price Adjustment will increase the Final Payment and a negative
Post-Closing Price Adjustment will decrease the Final Payment, on a
dollar-for-dollar basis. The Post-Closing Phone Adjustment shall
equal the difference between the Phone Adjustment determined by the
Buyer after Closing and the Phone Adjustment estimated for Closing
purposes. A positive Post-Closing Phone Adjustment will increase the
Final Payment and a negative Post-Closing Phone Adjustment will
decrease the Final Payment, on a dollar-for-dollar basis. In
addition, if the number of Site Contracts that do not meet all the
provisions of Section 4.10(f)(i) - (iv) of this Agreement ("KEY SITE
CONTRACT PROVISIONS") as of the Closing Date, exceeds ten percent
(10%) of the total number of Site Contracts as of the Closing Date
("THRESHOLD AMOUNT"), the Holdback Amount will be reduced by $1,000
for each Site Contract in excess of the Threshold Amount that does
not meet all of the Key Site Contract Provisions.
Within 30 days after the first anniversary of the Closing Date, Buyer
shall submit any additional claims for payment under Section 2.2(b)(ii) for Site
Contracts which terminated within the 12-month period after the Closing Date and
which were not deducted from the Holdback Amount. Seller shall pay to Buyer the
stated amount within 15 days of receiving notice from Buyer.
2.3 POST-CLOSING FINANCIALS. Within 120 days after the Closing
Date, Buyer shall deliver to Seller a definitive balance sheet, income statement
and proposed Price Adjustment and proposed Phone Adjustment for Buyer as of the
Closing Date ("PROPOSED FINANCIALS"), which will be prepared consistent with
Seller's historical accounting practices and which shall be used for determining
any Post-Closing Price Adjustment and Post-Closing Phone Adjustment. Seller will
provide the information necessary and assist Buyer in preparing the Proposed
Financials. The Proposed Financials shall become the Post-Closing Financials and
final Price Adjustment and final Phone Adjustment if Seller does not object to
them in writing within 15 days of receipt thereof. In the event that Seller
objects to the Proposed Financials, Seller shall notify Buyer of such objections
within the 15-day period following the delivery of the Proposed Financials,
stating the objection and the reasons therefor. Upon Buyer's receipt of such
objection, the parties shall attempt to resolve such disagreement through
negotiations. Upon resolution of such disagreement, the Proposed Financials, as
amended by such negotiated resolution, shall become the Post-Closing Financials
and final Price Adjustment and final Phone Adjustment. If Buyer and Seller
cannot resolve such disagreement within 10 days from the end of the foregoing
15-day period, the parties shall submit the matter for resolution to a
nationally recognized firm of Certified Public Accountants, not affiliated with
either party (the "INDEPENDENT CPA"), with the costs thereof to be shared
equally by the parties. The Independent CPA shall deliver to the parties, within
30 days of submission of the matter to such firm, a balance sheet, income
statement and final Price Adjustment and final Phone Adjustment as of the
Closing Date, consistent with Seller's historical accounting practices and terms
of this Agreement (the "CPA
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FINANCIALS"). The CPA Financials will become the Post-Closing Financials upon
delivery thereof to the parties.
ARTICLE III.
ANCILLARY AGREEMENTS
3.1 STOCK PURCHASE. As consideration for the transactions
contemplated by the parties under this Agreement, Buyer or its assigns, will
purchase 4.5 Units (each Unit consisting of 50,000 shares of common stock and a
three-year Warrant to purchase an additional 10,000 shares) of Advants, Inc., a
subsidiary of Seller, pursuant to the Confidential Placement Memorandum dated
August 25, 1999. The parties will enter into a subscription agreement identical
in form to the attached EXHIBIT 3.1.
3.2 DELIVERY OF KIOSKS. Within 180 days after the Closing Date,
Seller will deliver to Buyer without additional consideration from Buyer, one
hundred (100) fully functional, ready-to-install internet kiosks with an
approximate value of $4,000 per kiosk, as more fully described in the Kiosk Term
Sheet attached as EXHIBIT 3.2.
3.3 SHAREHOLDERS' CONSENT. Simultaneous with the execution and
delivery of this Agreement, shareholders of at least fifty-one percent (51%) of
Seller's stock will enter into a shareholder agreement identical in form to
EXHIBIT 3.3, which provides that the shareholders consent to, and will vote in
favor of, this Agreement.
3.4 CONSULTING AGREEMENT. At Closing, Seller and Buyer shall enter
into a Consulting Agreement identical in form to that attached as EXHIBIT 3.4.
The Consulting Agreement shall provide that Seller will make available for six
months after the Closing Date one-half of the time of ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇. Buyer shall pay Seller pursuant to this Consulting Agreement $8,333.33
per month for the six-month term of the agreement.
3.5 SUBLEASE AGREEMENT. At Closing, Seller and Buyer shall enter
into a Sublease Agreement in the form attached hereto as EXHIBIT 3.5. The
Sublease Agreement shall provide that Seller will sublease to Buyer ____% of
Seller's space at its place of Business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇. The Sublease Agreement shall provide that rent for the space
subleased will be the monthly rent paid by Seller times the percentage subleased
by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SELLER
For purposes of the following representations and warranties, the term
"Seller" includes both Seller and CLEC Subsidiary. Seller hereby represents and
warrants as follows:
4.1 SELLER ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
Seller has all requisite power and authority to own its properties and assets
and to conduct its businesses as now conducted and as proposed to be conducted.
Seller is duly qualified to do business as a foreign corporation and is
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in good standing in every jurisdiction where the character of the properties
owned or leased by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified and
in good standing would not have a Material Adverse Effect (as defined in
Section 4.5 of this Agreement). SCHEDULE 4.1 sets forth all of the
jurisdictions in which the Seller is qualified to do business. Complete and
accurate copies of the corporate documents of Seller, with all amendments
thereto to the date hereof, have been furnished to Buyer or Buyer's
representatives.
4.2 AUTHORIZATION; VALIDITY OF AGREEMENT. The execution, delivery
and performance by Seller of this Agreement and, subject to satisfaction of the
conditions herein, the consummation of the transactions contemplated hereby has
been duly authorized by its directors and shareholders. The execution, delivery
and performance by Seller of this Agreement and, subject to satisfaction of the
conditions herein, the consummation of the transactions contemplated hereby has
been duly authorized by Seller. This Agreement and the other agreements between
the parties and documents delivered pursuant hereto (the "TRANSACTION
DOCUMENTS") to which Seller may be party have been duly executed and delivered
by Seller, as applicable, and constitute the valid binding and enforceable
obligation of each of them, except as such enforceability may be limited by
general principles of equity and bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to creditors rights generally (the
"BANKRUPTCY EXCEPTION").
4.3 NO CONFLICT OR VIOLATION. Except as set forth in SECTION 4.3
of the SCHEDULE OF EXCEPTIONS, the execution, delivery and performance by Seller
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not: (i) violate or conflict with any provision of the
organizational documents of Seller; (ii) violate any provision of law, statute,
judgment, order, writ, injunction, decree, award, rule, or regulation of any
court, arbitrator, or other governmental or regulatory authority applicable to
Seller; (iii) violate, result in a breach of, constitute (with due notice or
lapse of time or both) a default or cause any obligation, penalty, premium or
right of termination to arise or accrue under any contract, service or other
customer agreement, lease, license, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which Seller is a
party or by which it is bound or to which its respective properties or assets is
subject; (iv) result in the creation or imposition of any lien, charge or
encumbrance of any kind whatsoever upon Seller's properties or assets; and (v)
result in the cancellation, modification, revocation or suspension of any
License (as defined in Section 4.13 of this Agreement).
4.4 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 4.4(a) are
the audited balance sheets of Seller as of December 31, 1997 and 1998 and
statements of income of the Seller for the years then ended and the notes
thereto, if any, and attached hereto as SCHEDULE 4.4(b) is the unaudited balance
sheet of the Seller as of September 30, 1999 (the "INTERIM BALANCE SHEET"),
together with the related unaudited statement of income for the period then
ended and the notes thereto, if any (all such financial statements, including
the Estimated Closing Financials, being hereinafter collectively referred to as
the "FINANCIAL STATEMENTS"). The Financial Statements, including the notes
thereto: (i) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except that the Interim
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Balance Sheet, the Estimated Closing Financials and the related statement of
income and cash flow are subject to normal year-end adjustments and may omit
footnotes); (ii) present fairly the financial position, results of operations
and changes in cash flow of the Seller as of such dates and for the periods
then ended (subject, in the case of the unaudited interim Financial
Statements, including the Estimated Closing Financials, to normal year-end
audit adjustments consistent with prior periods); (iii) reflect accurately in
all material respects the assets, liabilities, costs and expenses of the
Seller, as they relate to the Business; and (iv) are in all material respects
accurate, complete, correct and in accordance with the books of account and
records of the Seller.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SECTION 4.5 of the SCHEDULE OF EXCEPTIONS, since September 30, 1999, there has
been no change in the properties, assets, condition (financial or otherwise),
liabilities or operations of the Business, which, individually or in the
aggregate, has had a material adverse effect on the Business or the financial
condition, operations or prospects of the Business (a "MATERIAL ADVERSE
EFFECT"). Except as set forth in SECTION 4.5 of the SCHEDULE OF EXCEPTIONS,
Seller is not aware of any facts related to Seller that, individually or in the
aggregate, would as of the Effective Date be reasonably likely to have a
Material Adverse Effect.
4.6 LITIGATION. Except as set forth in SECTION 4.6(a) of the
SCHEDULE OF EXCEPTIONS, there are no claims, actions, suits, proceedings, labor
disputes or investigations pending or, to Seller's knowledge, threatened before
any federal, state or local court or governmental, administrative or regulatory
authority, domestic or foreign, or before any arbitrator of any nature, brought
by or against Seller or any of its officers, directors, employees, agents
involving, affecting or relating to the Business or the transactions
contemplated by this Agreement. Except as set forth in SECTION 4.6(b) of the
SCHEDULE OF EXCEPTIONS, none of Seller's Purchased Assets are subject to any
order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, that affects
the assets, properties, operations, prospects, net income or financial condition
of the Business or which would interfere with the transactions contemplated by
this Agreement.
4.7 COMPLIANCE WITH APPLICABLE LAWS. The operations of the
Business have been conducted in accordance with all applicable laws,
regulations, orders and other requirements of all courts and other
governmental or regulatory authorities having jurisdiction over Seller, or
any of the assets, properties and operations, including, without limitation,
all such laws, regulations, orders and requirements relating to the Business.
Seller has not received notice of any violation of any such law, regulation,
order or other legal requirement, and is not in default with respect to any
order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, domestic
or foreign, applicable to the Business. To Seller's knowledge, there are no
proposed changes in any such laws, rules or regulations (other than laws of
general applicability) that would adversely affect the transactions
contemplated by this Agreement or all or a substantial part of the Business.
4.8 NO UNDISCLOSED LIABILITIES. Except as identified and reflected
or reserved against in the Financial Statements or as set forth in SECTION 4.8
of the SCHEDULE OF EXCEPTIONS, Seller does not have any liabilities or
obligations, whether accrued, contingent, absolute,
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determined, determinable or otherwise of any nature whatsoever, and no facts
or circumstances exist which, after the passage of time, could reasonably be
expected to result in any claims against, or material obligations or
liabilities of Seller relating to or affecting the Business.
4.9 TAXES.
(a) All Returns (as defined in Section 4.9(c) below)
required to be filed by Seller have been duly filed on a timely basis
and such Returns are true, complete, and correct in all material
respects. All Taxes (as defined in Section 4.9(b) below) shown to be
payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other Taxes
(other than as described in SECTION 4.9 of the SCHEDULE OF EXCEPTIONS)
are payable by Seller with respect to items or periods covered by such
Returns (whether or not shown on or reportable on such Returns) or with
respect to any period prior to the date of this Agreement. Seller has
withheld and paid over all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. There
are no liens on any of the assets of Seller with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that
Seller is contesting in good faith through appropriate proceedings and
for which appropriate reserves (excluding reserves for deferred Taxes)
have been established.
(b) For purposes of this Agreement, the term "TAXES"
shall mean all taxes and similar fees and assessments, however
denominated, relating to or affecting the Business, including any
interest, penalties or other additions to tax that may become payable
in respect thereof, imposed by any federal, territorial, state, or
local or any agency or political subdivision of any such government,
which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not limited to,
federal income taxes and state income taxes), real property gains
taxes, payroll and employee withholding taxes, unemployment insurance
taxes, social security taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes and fees, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers'
compensation, and other obligations of the same or of a similar nature
to any of the foregoing, which Seller is required to pay, withhold, or
collect.
(c) For purposes of this Agreement, the term "RETURNS"
shall mean all reports, estimates, declarations of estimated tax,
information statements and returns relating to, or required to be filed
in connection with, any Taxes, including information returns or reports
with respect to backup withholding and other payments to third parties
relating to or affecting the Business.
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4.10 CERTAIN AGREEMENTS.
(a) SECTION 4.10 of the SCHEDULE OF EXCEPTIONS sets forth
a true and complete list of all material contracts, agreements,
instruments, licenses, commitments and other arrangements to which
Seller is a party and relating to the Business or otherwise affecting
any of the assets, properties or operations relating to the Business
including, as applicable but without limitation, all material written
(i) contracts, agreements and commitments, (ii) agency and brokerage
agreements, (iii) service and other customer contracts, (iv) contracts,
loan agreements, letters of credit, repurchase agreements, mortgages,
security agreements, guarantees, pledge agreements, trust indentures,
promissory notes and other documents or arrangements relating to the
borrowing of money or for lines of credit, (v) real property leases or
any subleases relating thereto, personal property leases, employee
plans, employment and labor agreements, any material agreement relating
to Intellectual Property as defined in Section 4.12 (including service
agreements relating thereto) and insurance contracts, (vi) agreements
and other arrangements for the sale of any assets, property or rights
other than in the ordinary course of business or for the grant of any
options or preferential rights to purchase any assets, property or
rights, (vii) documents granting any power of attorney with respect to
the affairs of Seller, (viii) suretyship contracts, performance bonds,
working capital maintenance or other forms of guaranty agreements, (ix)
contracts or commitments limiting or restraining Buyer, Seller or any
of their employees or Affiliates from engaging or competing in any
lines of business or with any person, firm, or corporation, (x)
partnership or joint venture agreements, (xi) material licenses,
including, but not limited to, material software licenses, and (xii)
all amendments, modifications, extensions or renewals of any of the
foregoing (the foregoing contracts, agreements and documents are
hereinafter referred to collectively as the "CONTRACTS" and
individually as a "CONTRACT").
(b) To Seller's knowledge, each Contract is valid,
binding and enforceable against the parties thereto in accordance with
its terms, except as such enforceability may be limited by the
Bankruptcy Exception, and is in full force and effect on the date
hereof. Seller has performed all material obligations to be performed
by it, including, but not limited to, the timely making of any rental
or other payments, required to be performed by it under, and is not in
material default or breach of in respect of, any Contract, and no event
has occurred which, with due notice or lapse of time or both, would
constitute such a default.
(c) To Seller's knowledge, no other party to any Contract
is in default in respect thereof, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default.
(d) To Seller's knowledge, no party to any Contract
intends to cancel or terminate any such agreement, whether as a result
of the transactions contemplated by this Agreement or otherwise.
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(e) Each of the Site Contracts is assignable without the
consent of the Site Provider and without the payment of any fine or
expense and pursuant to such assignment, the assignee will have all of
the rights, title and interests of the Seller and the original maker as
though such assignee was an original party thereto.
(f) Section 4.10 of the SCHEDULE OF EXCEPTIONS sets forth
complete and correct information about each of the Seller's Site
Contracts. Except as set forth in Section 4.10(f) of the SCHEDULE OF
EXCEPTIONS, at least 90% of the Site Contracts have as of this date and
of the Closing Date the following provisions:
(i) an initial term of at least five years;
(ii) automatically renews at the end of the
current term;
(iii) Seller's exclusive right to operate pay
telephones at the location or locations subject to the Site
Contract;
(iv) cannot be terminated by the Site Provider
during the term of the Site Contract.
(g) Seller has delivered to Buyer or its representatives
true and complete originals or copies of all the Site Contracts and a
copy of every default notice received by Seller during the past three
(3) years with respect to any of the Site Contracts.
4.11 ACCOUNTS RECEIVABLE. All accounts receivable of Seller
relating to or affecting the Business that are reflected on the Financial
Statements or on the accounting records of Seller as of the Closing Date
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of the Business. All
accounts receivable payable to or for the benefit of Seller relating to or
affecting the Business reflected on the Financial Statements or on the
accounting records of Seller as of the Closing Date either have been collected
in full or are (or will be) current and collectible in amounts not less than the
aggregate amount thereof (net of reserves established in accordance with GAAP
applied consistently with prior practice, carried (or to be carried) on the
books of Seller.
4.12 INTELLECTUAL PROPERTY.
(a) SECTION 4.12 of the SCHEDULE OF EXCEPTIONS sets forth
a true and complete list of all Intellectual Property (either
registered, applied for, or common law) owned by, registered in the
name of, licensed to, or otherwise used by Seller that is of material
importance to the conduct of the Business. Except as disclosed in
Section 4.12(a) of the Schedule of Exceptions, all of the Intellectual
Property listed in SECTION 4.12 of the SCHEDULE OF EXCEPTIONS is owned
by Seller without any Encumbrances or used by Seller pursuant to a
valid and enforceable license or other agreement. Such list includes
any licenses, sublicenses or other agreements in which Seller grants a
license to any person to use Intellectual Property. As used herein,
"INTELLECTUAL PROPERTY" means (i) trademarks and service marks
(registered or unregistered), trade dress, trade names and other names
10
and slogans embodying business or product goodwill or indications of
origin, all applications or registrations in any jurisdiction
pertaining to the foregoing and all goodwill associated therewith; (ii)
patents, patentable inventions, discoveries, improvements, ideas,
know-how, formula methodology, processes, technology and computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications
and data), and all applications or registrations in any jurisdiction
pertaining to the foregoing, including all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof; (iii)
trade secrets, know-how, including confidential and other non-public
information, and the right in any jurisdiction to limit the use or
disclosure thereof; (iv) copyrights in writings, designs, mask works or
other works, and registrations or applications for registration of
copyrights in any jurisdiction; (v) licenses, including, but not
limited to software licenses, immunities, covenants not to ▇▇▇ and the
like relating to any of the foregoing; (vi) Internet Web sites, domain
names and registrations or applications for registration thereof; (vii)
books and records describing or used in connection with any of the
foregoing; (viii) claims or causes of action arising out of or related
to infringement or misappropriation of any of the foregoing; and (ix)
customer lists.
(b) The grants, registrations and applications for the
Intellectual Property have not lapsed, expired or been abandoned and,
except as disclosed in SECTION 4.12(b) of the SCHEDULE OF EXCEPTIONS,
no application or registration thereof is the subject of any legal or
governmental proceeding before any governmental, registration or other
authority in any jurisdiction.
(c) Seller owns or has the valid right to use all of the
Intellectual Property used by it or held for use by it in connection
with the Business. To Seller's knowledge, there are no conflicts with
or infringements by any third party of the Seller's Intellectual
Property used in connection with the Business. None of Seller's
Intellectual Property or the conduct of the business of Seller
conflicts with or infringes in any way the proprietary right of any
third party, which conflict or infringement, individually or in the
aggregate, would have a Material Adverse Effect. Except as disclosed in
SECTION 4.12(c) of the SCHEDULE OF EXCEPTIONS, Seller has not
initiated, and, to Seller's knowledge, there is no claim, suit, action
or proceeding pending or threatened against Seller as it relates to or
affects the Business (i) alleging any such conflict or infringement
with any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual
Property.
(d) Seller has taken reasonable precautions to ensure
that all trade secrets used in its Business have been properly
protected and have been kept secret.
(e) Seller's Intellectual Property is sufficient and
adequate in all material respects for it to carry on the Business as
presently conducted.
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4.13 LICENSES, PERMITS AND GOVERNMENTAL APPROVALS.
(a) SECTION 4.13(a) of the SCHEDULE OF EXCEPTIONS sets
forth a true and complete list of all licenses, permits, certificates,
franchises, authorizations and approvals issued or granted to Seller in
connection with the Business by the United States, any state or local
government, telecommunications regulatory authority, any foreign
national or local government, or any department, agency, board,
commission, bureau or instrumentality of any of the foregoing (each a
"LICENSE" and, collectively, the "LICENSES"), and all pending
applications therefor. Except as set forth in SECTION 4.13(b) of the
SCHEDULE OF EXCEPTIONS, each License has been issued to, and duly
obtained and fully paid for by, Seller and is valid, in full force and
effect, and to Seller's knowledge, not subject to any pending or
threatened administrative or judicial proceeding to suspend, revoke,
cancel or declare such License invalid in any respect.
(b) Seller has all Licenses required, and such Licenses
are sufficient and adequate in all material respects, to permit the
continued lawful conduct of the Business in the manner now conducted
and the ownership, occupancy and operation of its real property for
their present uses. Seller is not in violation in any material respect
of any of the Licenses. Except as disclosed in SECTION 4.13(b) of the
SCHEDULE OF EXCEPTIONS, the Licenses have never been suspended, revoked
or otherwise terminated, subject to any fine or penalty, or subject to
judicial or administrative review, for any reason other than the
renewal or expiration thereof. Seller has delivered to Buyer or its
representatives true and complete copies of all the Licenses together
with all amendments and modifications thereto.
4.14 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
(a) Except as disclosed in SECTION 4.14 of the SCHEDULE
OF EXCEPTIONS, there are no material transactions, intercompany
agreements or arrangements of any kind, direct or indirect, between the
Seller and any director, officer, employee, stockholder or relative or
Affiliate thereof relating to or affecting the Business, including,
without limitation, loans, guarantees or pledges to, by or for Seller
from, to, by or for any of such persons, that are either (i) currently
in effect or (ii) reflected in the Financial Statements. All such
intercompany agreements and arrangements between such persons, if no
longer in effect and if necessary for the conduct of the Business, have
been replaced with comparable agreements and arrangements.
(b) None of the shareholders of Seller is a party to any
contract, agreement or understanding to which Seller is not a party
which purports in any way to bind or obligate the Seller thereunder and
relate to or affect the Business.
4.15 REAL PROPERTY. Seller does not own any real property used in
the Business. SECTION 4.15 of the SCHEDULE OF EXCEPTIONS sets forth a true and
complete list of all real properties leased by Seller and used in the Business
(collectively, the "PROPERTY"), including a brief description of the operating
facilities located thereon and the annual rent payable thereon, the length of
the term, any option to renew with respect thereto and the notice and other
12
provisions with respect to termination of rights to the use thereof. Seller has
a valid leasehold in the real estate shown in SECTION 4.15 of the SCHEDULE OF
EXCEPTIONS as leased by it, in each case under written leases that are valid and
enforceable (except as enforceability may be limited by the Bankruptcy
Exception) (all such leases being referred to herein as "REAL PROPERTY LEASES"),
and there does not exist under any Real Property Lease any material default by
Seller or any event which with notice or lapse of time or both would constitute
such a default.
4.16 PERSONAL PROPERTY. The vehicles, furniture, fixtures,
equipment and other items of tangible personal property owned or leased by
Seller and used in the Business (the "PERSONAL PROPERTY") are sufficient and
adequate to carry on the Business as presently conducted and all items thereof
are in good operating condition and repair. Seller owns outright and has good
title, free and clear of all Encumbrances (other than the lien of current
property taxes and assessments not in default, if any), to the Personal Property
purported to be owned by Seller and to all the machinery, equipment, furniture,
fixtures, inventory, receivables and other tangible or intangible personal
property reflected on the Financial Statements and all such property acquired
since the date thereof, except for sales and dispositions in the ordinary course
of business since such date. Seller holds valid leases in all of the Personal
Property leased by it, and none of such Personal Property is subject to any
sublease, license or other agreement granting to any person any right to use
such property (all such leases, subleases, licenses and other agreements are
collectively referred to herein as "PERSONAL PROPERTY LEASES"). Seller is not in
material breach of or default (and no event has occurred which, with due notice
or lapse of time or both, may constitute such a lapse or default) of any
Personal Property Lease.
4.17 EMPLOYEE PLANS.
(a) BENEFIT PLANS; SELLER PLANS. SECTION 4.17 of the
SCHEDULE OF EXCEPTIONS discloses all written and unwritten "employee
benefit plans" within the meaning of Section 3(3) of ERISA relating to
or affecting the Business, and any other written and unwritten profit
sharing, pension, savings, deferred compensation, fringe benefit,
insurance, medical, medical reimbursement, life, disability, accident,
post-retirement health or welfare benefit, stock option, stock
purchase, sick pay, vacation, employment, severance, termination or
other plan, agreement, contract, policy, trust fund or arrangement
relating to or affecting the Business (each, a "BENEFIT PLAN"), whether
or not funded and whether or not terminated, (i) maintained or
sponsored by the Seller, or (ii) with respect to which the Seller has
or may have Liability or is obligated to contribute, or (iii) that
otherwise covers any of the current or former employees of the Seller
or their beneficiaries, or (iv) in which any current or former
employees of the Seller or their beneficiaries participated or were
entitled to participate or accrue or have accrued any rights thereunder
(each, a "SELLER PLAN"). No Seller Plan covers any employees of any
member of the Seller Group in any foreign country or territory. With
the exception of the requirements of Section 4980B of the Code, no
post-retirement benefits are provided under any Seller Plan that is a
welfare benefit plan as described in ERISA Section 3(1).
13
(b) COMPLIANCE. Each Seller Plan and all related trusts,
insurance contracts and funds have been created, maintained, funded and
administered in all respects in compliance with all applicable Laws and
in compliance with the plan document, trust agreement, insurance policy
or other writing creating the same or applicable thereto. No Seller
Plan is or is proposed to be under audit or investigation, and no
completed audit of any Seller Plan has resulted in the imposition of
any Tax, fine or penalty. Buyer shall have no liabilities following the
Closing with respect to any Seller Plan.
(c) MULTIEMPLOYER PLANS. No Seller Plan is a
multiemployer plan within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"). No member of the Seller
Group has withdrawn from any Multiemployer Plan or incurred any
withdrawal Liability to or under any Multiemployer Plan.
4.18 LABOR RELATIONS. SECTION 4.18 of the SCHEDULE OF EXCEPTIONS
sets forth a true and complete list of the names, titles, annual salaries and
other compensation of all employees of the Seller involved in the Business. The
relations of the Seller with its employees involved in the Business are
generally good. No employee of the Seller involved in the Business is
represented by any union or other labor organization. No representation
election, arbitration proceeding, grievance, labor strike, dispute, slowdown,
stoppage or other labor trouble is pending or to the knowledge of the Seller
threatened against, involving, affecting or potentially affecting the Business.
No complaint against the Seller is pending or, to the knowledge of Seller,
threatened before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar state or local agency, by or on behalf of
any employee of the Seller involved in the Business. The Seller has no liability
for employees involved in the Business for sick leave, vacation time, severance
pay or any similar item not fully reserved on the Financial Statements. The
Seller has no liability for any occupational disease of any of its employees,
former employees or others involved in the Business. Neither the execution and
delivery of this Agreement, the performance of the provisions hereof nor the
consummation of the transactions contemplated hereby will trigger any severance
pay obligation under any contract or under any Law with respect to employees of
the Business.
4.19 CUSTOMER RELATIONS. Except as set forth on SECTION 4.19 of the
SCHEDULE OF EXCEPTIONS, to the knowledge of the Seller, there exists no
condition or state of facts or circumstances involving the customers, suppliers,
distributors or sales representatives of the Seller that Seller can reasonably
foresee could materially adversely affect the Business after the Closing Date.
4.20. ENVIRONMENTAL MATTERS. Notwithstanding anything to the
contrary contained in this Agreement and in addition to the other
representations and warranties contained herein:
(a) The Seller and its operations are in compliance with
all applicable laws, regulations and other requirements of governmental
or regulatory authorities or duties under the common law relating to
toxic or hazardous substances, wastes, pollution or to the protection
of health, safety or the environment relating to or affecting the
Business (collectively, "ENVIRONMENTAL LAWS") and have obtained and
maintained in effect all
14
licenses, permits and other authorizations or registrations required
in connection with the Business (collectively "ENVIRONMENTAL PERMITS")
required under all Environmental Laws and are in compliance with all
such Environmental Permits.
(b) The Seller has not performed or suffered any act
which could give rise to, or has otherwise incurred, liability to any
person in connection with the Business (governmental or not) under the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), or any other Environmental
Laws, nor has the Seller received notice of any such liability or any
claim therefor or submitted notice pursuant to Section 103 of CERCLA to
any governmental agency with respect to the Business.
(c) To the Seller's knowledge, no hazardous substance,
hazardous waste, contaminant, pollutant or toxic substance (as such
terms are defined in any applicable Environmental Law and collectively
referred to herein as "HAZARDOUS MATERIALS") has been released, placed,
dumped or otherwise come to be located on, at, beneath or near any of
the assets or properties owned or leased by the Seller and used in the
Business or any surface waters or groundwaters thereon or thereunder in
violation of any Environmental Laws or that could subject the Seller to
liability under any Environmental Laws.
(d) The Seller does not own or operate, and has never
owned or operated, aboveground or underground storage tanks used in the
Business .
(e) To the Seller's knowledge, with respect to any or all
of the real properties leased by the Seller and used in the Business
(i) there are no asbestos-containing materials, urea formaldehyde
insulation, polychlorinated biphenyls or lead-based paints present at
any such properties, and (ii) there are no wetlands as defined under
any Environmental Law located on any such properties.
(f) To the Seller's knowledge, none of the real
properties leased by the Seller and used in the Business (i) has been
used or is now used for the generation, transportation, storage,
handling, treatment or disposal of any Hazardous Materials, or (ii) is
identified on a federal, state or local listing of sites which require
or might require environmental cleanup.
(g) No condition exists on any of the real properties
leased by the Seller and used in the Business that upon the failure to
act, the passage of time or the giving of notice would give rise to
liability under any Environmental Law.
(h) There are no ongoing investigations or negotiations,
pending or threatened administrative, judicial or regulatory
proceedings, or consent decrees or other agreements in effect that
relate to environmental conditions in, on, under, about or related to
Seller, its operations or the real properties leased by the Seller and
used in the Business.
(i) Neither the Seller nor its operations is subject to
reporting requirements under the federal Emergency Planning and
Community Right-to-Know Act, 42 U.S.C.
15
Section 11001 et seq., or analogous state statutes and related
regulations in connection with the Business.
4.21 FINANCIAL ADVISOR. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of Seller.
4.22 YEAR 2000. Except as disclosed in SECTION 4.22 of the SCHEDULE
OF EXCEPTIONS and except that it does not have an Material Adverse Effect, each
material system comprised of software, hardware or data bases as used by Seller
in the Business has been tested and is fully capable of providing accurate
results using data having data ranges spanning the twentieth and twenty-first
centuries.
4.23 ACCURACY OF INFORMATION. The descriptions set forth in the
SCHEDULE OF EXCEPTIONS constitute part of the representations and warranties of
Seller herein and are materially accurate descriptions of the matters disclosed
therein. None of the representations, warranties or statements concerning Seller
contained in this Agreement, or in the SCHEDULE OF EXCEPTIONS, schedules or
exhibits hereto, or in any of the other Transaction Documents contains or will
contain any materially untrue statement of a fact or, to Seller's knowledge,
omit to state any material fact necessary in order to make any of such
representations, warranties or statements not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants as follows:
5.1 CORPORATE ORGANIZATION. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Minnesota.
5.2 AUTHORIZATION; VALIDITY OF AGREEMENT. The execution, delivery
and performance by Buyer of this Agreement and, subject to satisfaction of the
conditions herein, the consummation of the transactions contemplated hereby has
been duly authorized by Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes Buyer's valid, binding and enforceable
obligation.
5.3 NO CONFLICT OR VIOLATION. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby do not and will not: (i) violate or conflict with any
provision of the charter documents of Buyer; (ii) violate any provision of law,
statute, judgment, order, writ, injunction, decree, award, rule, or regulation
of any court, arbitrator, or other governmental or regulatory authority
applicable to Buyer; or (iii) violate, result in a breach of, constitute (with
due notice or lapse of time or both) a default or cause any obligation, penalty
or premium to arise or accrue under any contract, service or other customer
agreement, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which Buyer is a party or by which it is
bound or to which its properties or assets is subject.
16
5.4. ACQUISITION OF CHOICETEL, INC. SHARES FOR INVESTMENT. Buyer is
acquiring the shares of the common stock of ChoiceTel, Inc. for investment
purposes only and not with a view toward any distribution thereof except in
compliance with applicable securities laws.
ARTICLE VI.
COVENANTS
6.1 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until
the Closing Date, Seller shall conduct the Business solely in the
ordinary course consistent with past practices and except as required
or permitted pursuant to the terms hereof, the Seller shall not with
respect to the Business:
(i) make any material change in the conduct of
its businesses and operations or enter into any transaction
other than in the ordinary course of business consistent with
past practices, or terminate or amend any material contract or
enter into any new material contract without the prior written
consent of Buyer, which may not be unreasonably withheld;
(ii) make any sale, assignment, transfer,
abandonment or other conveyance of any of the Purchased Assets
or any part thereof, except transactions pursuant to existing
contracts set forth in the SCHEDULE OF EXCEPTIONS and
dispositions of inventory or of worn-out or obsolete equipment
for fair or reasonable value in the ordinary course of
business consistent with past practices;
(iii) subject any of the Purchased Assets, or any
part thereof, to any new lien, security interest, charge,
interest or other encumbrances except as may naturally arise
in the ordinary course of business consistent with past
practices;
(iv) enter into any new (or amend any existing)
employee benefit plan, program or arrangement or any
employment or consulting agreement, grant any general increase
in the compensation of employees, other than officers,
(including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or grant any
increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing
contractual provisions (provided that the foregoing does not
prohibit payment of cash bonuses to employees to the extent
such bonuses can be paid from available cash without
increasing borrowings or liquidating assets to fund the
bonuses);
(v) make or commit to make any capital
expenditure or to invest, advance, loan, pledge or donate any
monies to any clients or other persons or to make any similar
commitments with respect to outstanding bids or proposals;
17
(vi) fail to keep in full force and effect any
insurance policies comparable in amount and scope to coverage
maintained by it (or on behalf of it) on the date hereof;
(vii) take any other action that would cause any
of the representations and warranties made herein not to
remain materially true and correct;
(viii) make any change in any method of accounting
or accounting principle, method, estimate or practice except
for any such change required by reason of a concurrent change
in GAAP;
(ix) settle, release or forgive any material
claim or litigation or waive any material right; or
(x) commit itself to do any of the foregoing.
(b) From and after the date of this Agreement and until
the Closing Date, Seller shall, with respect to the Business:
(i) maintain, in all material respects, its
properties in accordance with present practices and in a
condition suitable for their current use;
(ii) file, when due or required, federal, state,
foreign and other tax returns and other reports required to be
filed and pay when due all taxes, assessments, fees and other
charges lawfully levied or assessed against it, unless the
validity thereof is contested in good faith and by appropriate
proceedings diligently conducted;
(iii) continue to conduct the Business in the
ordinary course consistent with past practices;
(iv) keep its books of account, records and files
in the ordinary course and in accordance with existing
practices;
(v) continue to maintain existing business
relationships with suppliers and customers to the extent that
such relationships are, at the same time, judged to be
economically beneficial to Seller, as applicable; and
(vi) maintain and comply with all Licenses.
6.2 ACCESS TO PROPERTIES AND RECORDS. Seller shall afford to Buyer
and Buyer's accountants, counsel agents or representatives, full access during
normal business hours throughout the period prior to the Closing Date (or the
earlier termination of this Agreement pursuant to ARTICLE IX) to all of Seller's
properties, books, Contracts and records relating to or affecting the Business
(including, but not limited to, Seller's accounting records, the workpapers of
Seller's independent accountants) and, during such period, shall furnish
promptly to Buyer all information concerning Seller's business, properties,
liabilities and personnel relating to or affect
18
the Business as Buyer may request. If the transactions contemplated hereby
are not consummated, Buyer shall continue to be bound by the Confidentiality
and Nondisclosure Agreement between Seller and ▇▇▇▇ ▇▇▇▇.
6.3 CONSENTS AND APPROVALS.
(a). Except with regard to the Regulatory Approvals (as
defined below), Seller shall use all reasonable commercial efforts to
obtain, or cause Seller to obtain, all necessary consents, waivers,
authorizations and approvals of all persons, firms or corporations
required in connection with the execution, delivery and performance by
them of this Agreement, including without limitation, those listed on
SECTION 4.13(a) of the SCHEDULE OF EXCEPTIONS. Seller agrees to file a
proxy statement with the Securities and Exchange Commission for the
approval of the transactions described in this Agreement within ten
(10) days after the execution of this Agreement.
(b) The Seller shall use all reasonable commercial
efforts to assist Buyer in obtaining and providing all consents,
waivers, authorizations or approvals of and filings or registrations
with any state public utilities commission or comparable regulatory
body with authority over the Seller as a provider of telecommunications
services that is required of or, in Buyer's judgment, advisable to be
made by, Buyer or the Seller in connection with the execution and
delivery of this Agreement or the effectuation of the transactions
contemplated hereby (collectively, the "REGULATORY APPROVALS"). Pending
receipt of the Regulatory Approvals, Seller will remain responsible for
the operation of those aspects of the business of the Seller for which
unobtained Regulatory Approvals are required and for compliance with
all related applicable laws and regulations. Further, pending receipt
of the Regulatory Approvals, Seller will be managed and operated in a
manner that is fully consistent with the terms and conditions of
existing laws and regulations applicable to the Seller's business.
6.4 FURTHER ASSURANCES. Upon the request of a party hereto at any
time after the Closing Date, the other party shall forthwith execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as the requesting party or its
counsel may request in order to perfect title of Buyer and its successors and
assigns to the Purchased Assets or otherwise to effectuate the purposes of this
Agreement. In addition, prior to and after the Closing Date Seller will
cooperate and assist Buyer with the preparation for and transfer of the Business
from Seller to Buyer, including replacing the systems and contracts not being
transferred at Closing.
6.5 NON-COMPETITION. For a period of three (3) years following the
Closing Date, Seller, and ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ or any of Seller's shareholders owning more than ten percent (10%) of
the total shares of Seller as of the date hereof, whether as an individual or as
a group (collectively, "INTERESTED SHAREHOLDERS"), shall not directly or
indirectly, either as a principal, agent, employee, employer, stockholder,
co-partner or in any other individual or representative capacity whatsoever,
engage in the States of Minnesota or Wisconsin in a pay telephone business that
is directly competitive with or similar to Seller's pay phone business as it
exists immediately prior to Closing; and Seller or any
19
of the Interested Shareholders will not directly or indirectly, either as
principal, agent, employee, employer, stockholder, co-partner or in any other
individual or representative capacity whatsoever, solicit, call on, take
away, divert or assist any person in so soliciting, diverting, calling on, or
taking away any Site Provider or customers of Buyer, employ any of the then
or former employees of Buyer (including individuals employed by Seller as of
the date hereof or as of the Closing Date, but who subsequently become
employees of Buyer), or induce any such employees to terminate their
employment with Buyer. The covenants contained herein shall be construed and
interpreted in any judicial proceeding to permit its enforcement to the
maximum extent. Seller and Interested Shareholders agree that the restraint
imposed is necessary for the reasonable and proper protection of Buyer and
its affiliates, and that said restraint is reasonable in terms of subject
matter, duration, and geographic scope. It is understood by the parties that
these restrictive covenants are an essential element of this Agreement and
that, but for such covenant, Buyer would not have entered into this
Agreement. Without intending in any way to limit the remedies available to
Buyer, Seller understands and agree that damages at law may be an
insufficient remedy to Buyer if either breaches this covenant not to compete
and that Buyer may seek injunctive relief in any court of competent
jurisdiction to restrain the breach or the threatened breach of or otherwise
specifically to enforce the covenants contained in this Section 6.5. The
Interested Shareholders will sign the Non-competition Agreement attached
hereto as Exhibit 6.5 to effect this Section 6.5.
6.6 BEST EFFORTS. Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use its best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
6.7 NOTICE OF BREACH. Through the Closing Date, each of the
parties hereto shall promptly give to the other Party written notice with
particularity upon having knowledge of any matter that may constitute a breach
of any representation, warranty, agreement or covenant contained in this
Agreement.
6.8 TAX MATTERS. The following provisions shall govern the
allocation of responsibility between Buyer and Seller for certain tax matters
following the Closing Date:
(a) ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be allocated among the Purchased Assets in accordance with the
allocation set forth on SECTION 6.8(a) of the SCHEDULE OF EXCEPTIONS.
Buyer and Seller shall report the federal, state and local income and
other Tax consequences of the purchase and sale contemplated hereby in
a manner consistent with such allocation and shall not take any
position inconsistent therewith upon examination of any Tax Return, in
any refund claim, in any Litigation or otherwise.
(b) All transfer, documentary, sales, use, stamp,
registration, and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be paid
by Buyer when due.
20
6.9 EXCLUSIVITY. Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of the Seller which would result in the sale
of the Business (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek the foregoing, except, in the case of clause (ii), where
the failure of the Board of Directors of the Seller to so act in connection with
any such proposal or offer would constitute a breach of the Board of Directors'
fiduciary obligations to the holders of the capital stock of Seller (it being
agreed and understood for this purpose that the failure to respond to any such
offer or proposal which the Board of Directors of Seller determines to be
superior, from a financial point of view, in comparison to the transactions
contemplated by this Agreement may be deemed to be a breach of such fiduciary
duty). Seller will notify the Buyer immediately if any person makes any
proposal, offer, inquiry, or contact with respect to the foregoing.
6.10 INTERIM AGREEMENT WITH CLEC SUBSIDIARY. In the event that the
Minnesota Public Utilities Commission approval is required and such approval
cannot be obtained prior to the Closing Date, the transfer of the CLEC
Subsidiary shares from Seller to Buyer will be deferred until the required
approval is obtained. Prior to the transfer of the CLEC Subsidiary shares, the
CLEC Subsidiary will be managed and controlled by Seller and the CLEC Subsidiary
will resell its services to Buyer at the same rates it purchases these services
from its vendors. This Resale Agreement will be in the form attached hereto as
EXHIBIT 6.10.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the fulfillment by Seller, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by Buyer in its sole discretion:
7.1 RECEIPT OF DOCUMENTS. Buyer has received, or is receiving at
the Closing, all of the following, each duly executed by the parties thereto
(other than Buyer) and dated the Closing Date (or an earlier date satisfactory
to Buyer), in form and substance satisfactory to Buyer:
(a) KIOSK AGREEMENT. Kiosk Agreement based on the terms
set forth in EXHIBIT 3.2.
(b) CONSULTING AGREEMENT. Consulting Agreement in the
form set forth as EXHIBIT 3.4.
(c) SUBLEASE AGREEMENT. Sublease Agreement in the form
set forth as Exhibit 3.5.
(d) NON-COMPETITION AGREEMENT. Non-Competition Agreement
in the form set forth as EXHIBIT 6.5 executed and delivered by the
parties listed in Section 6.5.
21
(e) RESALE AGREEMENT. Resale Agreement in the form set
forth as Exhibit 6.10.
(f) OTHER DOCUMENTS. All documents (including, but not
limited to, a ▇▇▇▇ of sale, consents and assignments of contracts, and
Board of Director's and shareholders' resolutions) Buyer may reasonably
require relating to the existence of the Seller and the authority of
Seller for this Agreement, or otherwise required to effect the
transactions contemplated hereby, all in form and substance
satisfactory to Buyer.
7.2 REPRESENTATIONS AND WARRANTIES OF SELLER; OFFICER'S
CERTIFICATE. All representations and warranties made by Seller in this Agreement
and the other Transaction Documents are true and correct in all material
respects on and as of the Closing Date as if again made by Seller on and as of
such date, and Buyer has received a certificate dated the Closing Date and
signed by the Chief Executive of Seller to that effect.
7.3 NO DEFAULT. Seller is not in default of any material
obligation.
7.4 FINANCING. Buyer has obtained financing sufficient to finance
the transactions contemplated hereby on terms acceptable to Buyer.
7.5 PERFORMANCE OF OBLIGATIONS OF SELLER. Seller has performed in
all material respects all obligations required under this Agreement and the
other Transaction Documents to be performed by them on or before the Closing
Date, and Buyer has received a certificate dated the Closing Date and signed by
the Chief Executive of Seller to that effect.
7.6 CONSENTS AND APPROVALS. Receipt of all consents, waivers,
authorizations and approvals of any person, firm or corporation, the absence of
which in connection with the execution, delivery and performance of this
Agreement, would result in a Material Adverse Effect.
7.7 NO VIOLATION OF ORDERS, LAWS OR REGULATIONS. No preliminary or
permanent injunction or other order issued by any court or governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares this
Agreement invalid in any respect or prevents or would be violated by the
consummation of the transactions contemplated hereby, or which adversely affects
the assets, properties, operations, prospects, net income or financial condition
of Seller is in effect; and no action or proceeding before any court or
governmental or regulatory authority, domestic or foreign, has been instituted
or threatened by any government or governmental or regulatory authority,
domestic or foreign, or by any other person, or entity which seeks to prevent or
delay the consummation of the transactions contemplated by this Agreement or
which challenges the validity or enforceability of this Agreement; and the
transactions contemplated hereby will not violate any applicable law or
regulation.
7.8 NO MATERIAL ADVERSE CHANGE. During the period from the date of
the most recently completed audit of Seller's books, records and results of
operations to the Closing Date,
22
there has not been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of Seller.
7.9 OPINION OF COUNSEL. Buyer has received a favorable opinion,
dated as of the Closing Date, from counsels to the Seller, in substantially the
form of EXHIBIT 7.9.
7.10 LEGAL MATTERS. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of Seller
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of Seller in furtherance of the
transactions contemplated hereby, are to be in form and substance satisfactory
to counsel for Buyer.
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which may be waived on behalf of
Seller in its sole discretion:
8.1 RECEIPT OF DOCUMENTS. Buyer has executed and delivered, or is
executing and delivering at the Closing, the documents listed in SECTION 8.1 of
the SCHEDULE OF EXCEPTIONS to be executed by Buyer.
8.2 REPRESENTATIONS AND WARRANTIES OF BUYER. All representations
and warranties made by Buyer in this Agreement are true and correct as of the
Closing Date as if again made by Buyer on and as of such date, and Seller has
received a certificate dated the Closing Date and signed by the Chief Executive
of Buyer to that effect.
8.3 PERFORMANCE OF BUYER'S OBLIGATIONS. Buyer has performed in all
material respects all obligations required under this Agreement to be performed
by it on or before the Closing Date, and Seller has received a certificate dated
the Closing Date and signed by the Chief Executive of Buyer to that effect.
8.4 CONSENTS AND APPROVALS. All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any other person, firm or corporation, required in connection with the
execution, delivery and performance of this Agreement, absence of which could
result in material liability to Seller, have been duly obtained and are in full
force and effect on the Closing Date, provided, however, approval of the
Minnesota Public Utilities Commission is not a condition to the Closing of this
Agreement other than for the transfer of the shares of the CLEC Subsidiary,
which transfer may occur subsequent to Closing.
8.5 NO VIOLATION OF ORDERS. No preliminary or permanent injunction
or other order issued by any court or governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any government or governmental or regulatory
authority, domestic or foreign, binding upon Seller that declares this
23
Agreement invalid or unenforceable in any respect or which prevents or would
be violated by the consummation of the transactions contemplated hereby is in
effect; and no action or proceeding before any court or governmental or
regulatory authority, domestic or foreign, against Seller has been instituted
or threatened by any government or governmental or regulatory authority,
domestic or foreign, or by any other person or entity, which seeks to prevent
or delay the consummation of the transactions contemplated by this Agreement
or which challenges the validity or enforceability of this Agreement,
provided, however, approval of the Minnesota Public Utilities Commission is
not a condition to the Closing of this Agreement other than for the transfer
of the shares of the CLEC Subsidiary, which transfer may occur subsequent to
Closing.
8.6 OPINION OF COUNSEL. Seller has received a favorable opinion,
dated as of the Closing Date, from counsel to Buyer, in substantially the form
of EXHIBIT 8.6.
8.7 INITIAL PAYMENT. Buyer has delivered to Seller the Initial
Payment in the manner described in SECTION 2.2 of this Agreement.
8.8 LEGAL MATTERS. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of Buyer
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of Buyer in furtherance of the transactions
contemplated hereby, are to be in form and substance satisfactory to counsel for
Seller.
ARTICLE IX.
TERMINATION
9.1 METHODS OF TERMINATION. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time before the
Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer, if (i) Seller fails to comply in any
material respect with any of its covenants or agreements contained
herein or (ii) any of the representations and warranties of Seller is
definitively determined to be breached or is definitively determined to
be inaccurate in any material way;
(c) by Seller, if (i) Buyer fails to comply in any
material respect with any of its covenants or agreements contained
herein or (ii) any of the representations and warranties of Buyer is
definitively determined to be breached or definitively determined to be
inaccurate in any material way;
(d) by Seller, if it signs a letter of intent or enters
into an agreement with respect to a proposal or offer made by a third
party relating to the acquisition of any or all of the assets
contemplated for sale under the Agreement, which the Board of Directors
of Seller has in good faith and under its fiduciary obligations
determined to be superior,
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from a financial point of view, in comparison to the transactions
contemplated by this Agreement;
(e) by Seller or Buyer if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission has issued a non-appealable order, decree or ruling or taken
any other action (which order, decree or ruling the parties hereto have
used their best efforts to lift), which permanently restrains, enjoins
or otherwise prohibits the transactions contemplated by this Agreement;
provided, however, neither Buyer nor Seller will have a right to
terminate this Agreement for the lack of obtaining Minnesota Public
Utilities approval of the transfer of the CLEC Subsidiary shares; or
(f) by either Buyer or Seller if the transactions
contemplated hereby have not been consummated by January 31, 2000;
provided that, neither Buyer nor Seller shall be entitled to terminate
this Agreement pursuant to this SECTION 9.1(f) if such party's willful
breach (or the willful breach by such party's affiliates) of this
Agreement has prevented the consummation of the transactions
contemplated by this Agreement.
9.2 EFFECT OF TERMINATION. In the event of termination and
abandonment of this Agreement pursuant to SECTION 9.1 written notice thereof is
to be given forthwith to the other party and this Agreement will terminate and
the transactions contemplated hereby will be abandoned, without further action
by Seller or Buyer. If this Agreement is terminated as provided herein, no party
to this Agreement will have any liability or further obligation to any other
party to this Agreement except (i) as provided in SECTIONS 9.3., 10.1, 10.2,
10.3, 11.3 and 11.5.
9.3. BREAK-UP FEE. Notwithstanding any other provision herein, if
Seller terminates or abandons this Agreement pursuant to Section 9.1(d) or
Section 9.1(f), or if it terminates this Agreement for any other reason, except
as permitted by Sections 9.1(a), 9.1(c) or 9.1(e), then Seller shall immediately
pay to Buyer the sum of $350,000 ("BREAK-UP FEE"). The Break-up Fee is not
exclusive and will be in addition to other remedies that may be available to
Buyer at law or in equity.
ARTICLE X.
INDEMNIFICATION AND LIABILITIES
10.1 COVERAGE.
(a) Notwithstanding the Closing or the delivery of the
Purchased Assets, Seller shall indemnify and fully defend, save and
hold Buyer and its directors, officers, employees, agents, successors
and assigns, harmless, and Buyer shall indemnify and fully defend, save
and hold Seller and its directors, officers, employees, agents,
successors and assigns harmless, if any such party at any time or from
time to time suffers any damage, liability, loss, cost, expense
(including all reasonable attorneys consultants' and experts' fees),
claim or cause of action (each, a "LOSS") arising out of, relating to
or resulting from, any and all Events of Breach (as defined below).
25
(b) As used herein, "EVENT OF BREACH" means any one or
more of the following:
(i) any material untruth or inaccuracy in any
representation or warranty contained in this Agreement or any
other Transaction Document;
(ii) any failure to perform or observe any
material term, provision, covenant, agreement or condition to
be performed or observed under this Agreement or any other
Transaction Document;
(iii) the assertion of any claim or legal action
against Buyer by any person or governmental authority based
upon, or relating to the ownership or operation of the
business of Seller or any act or omission or obligation or
liability of Seller, or its directors, officers, employees or
agents, and occurring, arising or accruing on or prior to the
Closing Date, provided that such claim or legal action is not
(A) a claim for payment of money in an amount reflected as a
liability of Seller in the Financial Statements or SCHEDULE OF
EXCEPTIONS or (B) based upon an act or omission which first
occurred after the Closing Date; and
(iv) the assertion of any claim or legal action
against Seller by any person or governmental authority based
upon, or relating to the ownership or operation of the
Business or any act or omission or obligation or liability of
Seller, or its directors, officers, employees, or agents, and
occurring, arising or accruing after the Closing Date,
provided that such claim or legal action is not based upon an
act or omission which first occurred on or before the Closing
Date.
10.2 PROCEDURES. Subject to the limitation described in SECTION
10.3, an Event of Breach occurs or is alleged and the party or parties entitled
to receive the benefits of the indemnification provisions hereunder (the
"INDEMNIFIED PARTY") asserts that a party or parties has become obligated to the
Indemnified Party pursuant to SECTION 10.1 (the "INDEMNIFYING PARTY"), or if any
suit, action, investigation, claim or proceeding is begun, made or instituted as
a result of which the Indemnifying Party may become obligated to the Indemnified
Party hereunder, the Indemnified Party shall promptly notify the Indemnifying
Party; provided, that the failure to so promptly notify the Indemnifying Party
does not relieve the Indemnifying Party of its obligations hereunder except to
the extent it is materially prejudiced thereby. In case any claim is asserted or
suit, action or proceeding commenced against an Indemnified Party, the
Indemnifying Party will be entitled to participate therein, and, to the extent
that it may wish, to assume the defense, conduct or settlement thereof; provided
that such settlement is for the payment of money only, and does not impose any
obligation or limitation on the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election so to assume the
defense, conduct or settlement thereof, the Indemnifying Party will not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense, conduct or
settlement thereof unless the Indemnified Party has defenses that may conflict
with, or that may not be available to, the Indemnifying Party. The Indemnified
Party will reasonably cooperate with the Indemnifying Party in connection with
any
26
such claim assumed by the Indemnifying Party to make available to the
Indemnifying Party all pertinent information under the Indemnified Party's
control. The Indemnified Party will not consent to the entry of a judgment or
enter into any settlement with respect to the matter without the written
consent of the Indemnifying Party (not to be unreasonably withheld or
delayed). The Indemnifying Party will not consent to the entry of a judgment
with respect to the matter or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases
the Indemnified Party from all liability with respect thereto, without the
written consent of the Indemnified Party (not to be unreasonably withheld or
delayed).
10.3 SURVIVAL OF REPRESENTATIONS/LIMITATION OF INDEMNIFICATION.
(a) The representations and warranties contained in
ARTICLES IV and V of this Agreement will survive until the second
anniversary of the Closing Date, except those representations and
warranties contained in (i) SECTION 4.10 (Taxes), which will survive
until the expiration (including extensions) of the applicable statute
of limitations, (ii) SECTION 4.21 (Environmental Laws), which will
survive until the seventh anniversary of the Closing Date, and (iii)
the first sentence of each of SECTIONS 4.1 and 5.1 and all of SECTIONS
4.2 and 5.2, which will survive indefinitely.
(b) All claims made as a result of breach or inaccuracy
of a representation or warranty set forth in this Agreement must be
made before the time specified herein for termination of that
representation or warranty. For purposes hereof, a claim will be deemed
timely made if a reasonably detailed good faith written notice of the
claim is delivered to the party against whom or which the claim is
asserted before the expiration of the applicable representation or
warranty. Claims timely made can be pursued until final resolution
notwithstanding expiration of the applicable representation or
warranty.
(c) Buyer may not bring any claim against the Seller
unless and until the aggregate amount of all claims of Buyer against
the Seller that have not yet been brought exceeds $50,000, at which
point any and all such claims may be brought.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1 SURVIVAL OF PROVISIONS. Subject to Sections 9.2 and 10.3 of
this Agreement, the respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements that are expressly required to be performed and are performed in full
or waived in writing on or before the Closing Date) will survive the Closing
Date and the consummation of the transactions contemplated by this Agreement.
11.2 PUBLICITY. Prior to the Closing Date, no party may, nor may it
permit its affiliates, directors, officers, employees, representatives or agents
to, issue or cause the publication of any press release or other announcement
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other parties, in order that such public statement shall be
jointly issued by both Buyer and Seller. Notwithstanding the foregoing, in the
event any such press release or announcement is required by law securities
27
exchange to be made by the party proposing to issue the same, such party shall
use its best efforts to consult in good faith with the other party prior to the
issuance of any such press release or announcement.
11.3 NONDISCLOSURE AND CONFIDENTIALITY. Buyer and Seller recognize
and agree that they each have certain confidential business and proprietary
information and trade secrets, including, without limitation, customer lists and
records, information concerning employee relations, selling, marketing and
distribution techniques, methods, processes and programs of Buyer and Seller,
which information and trade secrets are used by each in its business affairs to
obtain a competitive advantage. Buyer and Seller further recognize that the
protection of such confidential information and trade secrets against
unauthorized disclosure and use is of critical importance to each in maintaining
their affairs and competitive position. Accordingly, Buyer and Seller agree that
they will not, at any time prior to the signing of this Agreement or thereafter,
directly or indirectly make any independent use of, publish or disclose to any
person or organization, any of the confidential business and proprietary
information and trade secrets of the other, except to the extent required by
law. Upon the written request of either Seller or Buyer, the other party will
promptly return to the requesting party any such confidential information.
11.4 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This
Agreement will inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns; provided, that neither party may
assign or delegate any of the obligations created under this Agreement without
the prior written consent of the other parties. Notwithstanding the foregoing,
Buyer will have the unrestricted right to assign this Agreement and/or to
delegate all or any part of its obligations hereunder to any Affiliate of Buyer
or to any lender in connection with any financing. Nothing in this Agreement
will confer upon any person or entity not a party to this Agreement, or the
legal representatives of such person or entity, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
11.5 FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, all legal, accounting and other fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such fees, costs or expenses. If any
party hereto brings any action, suit, counterclaim, appeal, arbitration,
mediation or other proceeding (an "ACTION") for any relief against any other
party hereto or any of their affiliates, declaratory or otherwise, to enforce
the terms hereof or of any other Transaction Document or to declare rights
hereunder or thereunder, in addition to any damages and costs which the
prevailing party otherwise would be entitled, the losing party in any such
Action shall pay to the prevailing party or parties a reasonable sum for
ordinary and necessary attorneys' fees and costs incurred in connection with
such Action and/or enforcing any judgment, order, ruling or award (collectively,
a "DECISION") granted therein, all of which must be paid whether or not such
Action is prosecuted to a Decision. Any Decision entered in such Action must
contain a specific provision providing for the recovery of attorneys' fees and
costs incurred in enforcing such Decision. The court or arbitrator may fix the
amount of reasonable attorneys' fees and costs on the request of either party.
For the purposes hereof, attorneys' fees include, but are not limited to, fees
incurred in the following: (1) post judgment motions and
28
collection actions; (2) contempt proceedings; (3) garnishment, levy, and
debtor and third party examinations; (4) discovery; and (5) bankruptcy.
"PREVAILING PARTY" within the meaning of this Section includes, without
limitation, a party who agrees to dismiss an Action on the other party's
payment of the sum allegedly due or performance of the covenants allegedly
breached, or who obtains substantially the relief sought by it. If there are
multiple claims, the prevailing party is to be determined with respect to
each claim separately. The prevailing party is the party that has obtained
the greater relief in connection with any particular claim, although, with
respect to any claim, it may be determined by the court or arbitrator that
there is no prevailing party.
11.6 NOTICES. All notices and other communications given or made
pursuant hereto must be in writing and will be deemed to have been duly given or
made if delivered personally or sent by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses:
(a) If to Buyer, to:
▇▇▇▇ ▇▇▇▇, President
Access Anywhere LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
3400 City Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) If to Seller or Seller, to:
▇▇▇▇ ▇▇▇▇▇▇
ChoiceTel Communications Inc.
▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
29
or to such other persons or at such other addresses as furnished by either party
by like notice to the other, and such notice or communication will be deemed to
have been given or made as of the date so delivered or mailed.
11.7 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents, together with the schedules and the exhibits hereto, represent the
entire agreement and understanding of the parties with reference to the
transactions set forth herein and no representations or warranties have been
made in connection with this Agreement other than those expressly set forth
herein or in the other Transaction Documents, exhibits, certificates. This
Agreement supersedes all prior negotiations, discussions, term sheets, letters
of intent, correspondence, communications, understandings and agreements between
the parties relating to the subject matter of this Agreement and all prior
drafts of this Agreement, all of which are merged into this Agreement. No prior
drafts of this Agreement and no words or phrases from any such prior drafts may
be admitted into evidence in any action or suit involving this Agreement.
11.8 WAIVERS AND AMENDMENTS. The parties hereto may by written
notice to the other: (a) extend the time for the performance of any of the
obligations or other actions of the other; (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement; (c)
waive compliance with any of the covenants of the other contained in this
Agreement; (d) waive performance of any of the obligations of the other created
under this Agreement; or (e) waive fulfillment of any of the conditions to its
own obligations under this Agreement. The waiver by any party hereto of a breach
of any provision of this Agreement will not operate or be construes as a waiver
of any subsequent breach, whether or not similar, unless such waiver
specifically states that it is to be construed as a continuing waiver. This
Agreement may be amended, modified or supplemented only by a written instrument
executed by the parties hereto.
11.9 SEVERABILITY. This Agreement will be deemed severable, and the
invalidity or unenforceability of any term or provision hereof will not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there will be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
11.10 TITLES AND HEADINGS; REFERENCES. The Article and Section
headings and any table of contents contained in this Agreement are solely for
convenience of reference and do not affect the meaning or interpretation of this
Agreement or of any term or provision hereof. References herein to Sections,
Schedules and Exhibits are to the referenced Section, SCHEDULE or Exhibit hereto
unless otherwise specified.
11.11 SIGNATURES AND COUNTERPARTS. Facsimile transmission of any
signed original document and/or retransmission of any signed facsimile
transmission will be deemed the same as delivery of an original. At the request
of any party, the parties will confirm facsimile transmission by signing a
duplicate original document. This Agreement may be executed in two
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or more counterparts, each of which will be deemed an original and all of
which together will be considered one and the same agreement.
11.12 ENFORCEMENT OF THE AGREEMENT. The parties hereto acknowledge
that irreparable damage would occur if any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity.
11.13 GOVERNING LAW. This Agreement will be governed by and
interpreted and enforced in accordance with the laws of the State of Minnesota
without regard to the conflicts-of-law provisions.
[ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]
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SIGNATURE PAGE FOR ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ACCESS ANYWHERE LLC
By:
-------------------------------------------
-------------------------------------(name)
Its:
-----------------------------------(title)
CHOICETEL COMMUNICATIONS INC.
By:
-------------------------------------------
-------------------------------------(name)
Its:
-----------------------------------(title)
32