Exhibit 10.16
PURCHASE AGREEMENT
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THIS IS AN AGREEMENT ("Agreement"), dated as of August 31, 1999 by and
among US WATS, INC., a New York corporation ("Buyer"), JMR Marketing
Corporation, a New Jersey corporation ("JMR"), and Xxxxx X. Xxxxx ("Xxxxx" and,
together with JMR, "Seller").
RECITALS
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WHEREAS, on August 13, 1999, Buyer and Seller reached agreement in
principle on the sale of certain assets by Seller to Buyer in exchange for
Buyer's issuance to JMR of 150,000 shares of Buyer's common stock, par value
$.001 per share ("Common Stock"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer is willing to purchase
from Seller, certain assets, upon and subject to the terms and conditions set
forth below.
NOW THEREFORE, in consideration of the mutual promises herein made, the
parties hereto, intending to be legally bound, agree as follows:
AGREEMENTS
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1. Sale and Purchase of Assets. Seller hereby (i) sells to Buyer free
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and clear of any liabilities, security interests, liens and other encumbrances,
all of Seller's right, title and interests in and to the furniture, fixtures,
equipment and other tangible assets identified on Schedule A (the "Tangible
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Assets") and (ii) assigns to Buyer all of Seller's rights under the contracts
and arrangements identified on Schedule B (the "Contracts") and the Business
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Plan identified on Schedule C (the "Business Plan" and, collectively with the
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Contracts and Tangible Assets, the "Assets"), and (iii) constitutes and appoints
Buyer the true and lawful agent and attorney-in-fact of Seller, with full power
of substitution or resubstitution in whole or in part, in the name and on behalf
of Seller, but for the benefit and at the expense of Buyer, as fully to all
interests and purposes as Seller might or could do if actually present (a) to
collect, assert or enforce any claim, right, interest or title of any kind in or
to the Assets, and to institute and prosecute all actions, suits and proceedings
which Buyer may deem proper in order to collect, assert or enforce any such
claim, right, interest or title, and (b) to defend, settle or compromise any and
all actions, suits or proceedings in respect of any such Assets. Seller
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable by Seller in any manner or for any reason. In addition, Seller
hereby confirms that Buyer shall have no further obligation to pay Seller or any
party claiming through Seller any commissions on account of the Contracts.
2. Purchase Price of Assets. In full consideration of the sale and
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assignment of the Assets, Buyer hereby agrees to issue to JMR 150,000 shares of
Common Stock, and (ii) assume those obligations and only those obligations that
accrue under the Contracts from and after the date hereof (the "Assumed
Liabilities").
3. No Assumption of Other Liabilities of Seller. Except for the Assumed
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Liabilities, Buyer does not and will not assume or become obligated to pay or
perform any liabilities or obligations of Seller whatsoever, including without
limitation liabilities or obligations of Seller under any and all of the
Contracts arising prior to the date of Closing.
4. Representations and Warranties by Seller. Seller represents and
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warrants to Buyer as follows:
4.1 Due Authorization. Seller has all requisite right, power
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and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate and individual action on the part
of Seller, and no further action is required on the part of Seller to authorize
the Agreement or the transactions contemplated hereby.
4.2 No Consents Required. No approval, authorization or consent of
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any person is required for the execution and delivery by Seller by this
Agreement, the assignment of the Contracts to Buyer or consummation by Seller of
the transactions contemplated hereby.
4.3 Liabilities and Obligations. Seller does not know or have any
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reasonable grounds to know of any basis for the assertion against the Assets of
any liability of any nature which will not be fully satisfied and discharged on
or before the date of Closing.
4.4 Title to Furniture, Fixtures and Other Tangible Assets. Seller
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has good and marketable title to the Tangible Assets, subject to no mortgage,
pledge, lien, conditioned sales or other agreement, lease, right, contract,
restriction, assessment, claim, encumbrance, security interest or change of any
nature.
4.5 Commissions. Seller has not made any agreement or taken any
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action which may cause anyone to become entitled to a commission or other
payment as a result of the sale contemplated by this Agreement.
4.6 No Default. Each Contract is in full force and effect. The
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Seller and each party to each Contract have complied with all respective
commitments and obligations on their part to be performed or observed
thereunder. Seller has not received notice of a default under any Contract. No
event or condition has happened or presently exists which constitutes a default
by Seller or any other party to their respective Contract or which after notice
or lapse of time or both would constitute a default by Seller or any other party
to any Contract under their respective Contract.
4.7 Securities Matters. (a) Seller is acquiring the shares of Common
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Stock solely for its own account without a view to distribution; (b) Seller is
aware that the shares of Common Stock have not been registered under the
Securities Act of 1933 or the securities laws
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of any state, that the shares of Common Stock cannot be distributed, sold,
pledged or otherwise disposed of unless they are registered thereunder or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such registration is available, and that the Company has no intention of so
registering interests in the Company thereunder and is under no obligation to do
so, and that accordingly Seller is able and is prepared to bear the economic
risk of holding the Common Stock and to suffer any loss associated with the
acquisition of the Common Stock; (c) Seller's knowledge and experience in
financial and business matters are such that Seller is capable of evaluating,
and has valued, the risk of acquiring the shares of Common Stock under this
Agreement and can bear the economic risk of making such acquisition; (d) Seller
is an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933; (e) the Company has afforded Seller an opportunity to obtain any
relevant information in its possession concerning the Company, and Seller has
had the opportunity to ask questions of, and receive answers from, the
management of the Company concerning the Company.
5. Additional Post-Closing Covenants of Seller. After the Closing,
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Seller will execute and deliver such further instruments of conveyance and
transfer and take such other action as Buyer reasonably may request to convey
and transfer effectively to Buyer any of the Assets to be sold hereunder, and
will assist Buyer in the collection or reduction to possession of any such
property. In addition, Seller covenants that after the Closing, Seller will use
its best efforts to cause the customers identified on Schedule D to remain as
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customers of Buyer, to encourage and facilitate the hiring by Buyer of such of
Seller's employees as Buyer determines to offer employment, and to cause its
employees and other representatives to cooperate with and respond to reasonable
inquiries of Buyer in order to effect a smooth transition from Seller to Buyer
of the operation of the business.
6. Non-Competition and Non-Solicitation.
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6.1 Restrictions. Seller shall not, until the date which is two
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years after the date hereof (the period of time before such date occurs, the
"Restricted Period"), except as set forth on Schedule E or in furtherance of
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Buyer's business, do any of the following, directly or indirectly, without the
prior written consent of Buyer: (a) own, manage, operate, join, control, finance
or participate in the ownership, management, operation, control or financing of,
or be connected as a partner, principal, agent, representative, consultant or
otherwise with any business or enterprise engaged directly or indirectly in the
business of selling long distance or local telephone service in the United
States (the "Prohibited Business"). The foregoing restrictions shall not be
construed to prohibit the ownership by Seller of not more than five percent of
any class of securities of any corporation which is engaged in any of the
foregoing businesses having a class of securities registered pursuant to the
Securities Exchange Act of 1934; (b) solicit, call on, or in any way contact for
purposes of transacting any Prohibited Business, whether on behalf of Seller or
any other person or entity, any account, client, customer or supplier with whom
(or which) the Seller shall have dealt at any time for the two year period
immediately preceding the date hereof; (c) influence or attempt to influence any
supplier, customer or potential customer of
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Buyer to terminate or modify any written or oral agreement or course of dealing
with the Buyer; or (d) employ or retain, or arrange to have any other Person
employ or retain, any person who shall have been employed or retained by Seller
or Buyer as an employee, consultant, agent, distributor in a similar capacity at
any time during the Restricted Period or the two year period immediately
preceding the date hereof, or influence or attempt to influence any such person
to terminate or modify his employment, consulting, agency, distributorship or
other arrangement with Buyer.
6.2 Acknowledgment. Seller acknowledges that Seller has read and
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considered the provisions of Section 6.1 and that Seller has obtained legal
counsel in connection with this Agreement. Seller acknowledges that the
foregoing restrictions may limit Seller's ability to earn a livelihood in the
Prohibited Business, but Seller nevertheless believes that Seller has received
sufficient consideration in connection with this Agreement to justify such
restrictions, which restrictions Rossi does not believe would prevent him from
earning a living without otherwise violating the restrictions set forth herein.
6.3 Specific Enforcement. Seller acknowledges that any breach Seller
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of Section 6.1 will cause continuing and irreparable injury to Buyer for which
monetary damages would not be an adequate remedy. Seller shall not, in any
action or proceeding to enforce any of the provisions of Section 6.1, assert the
claim or defense that an adequate remedy at law exists. In the event of such
breach by Seller, Buyer shall have the right to enforce the provisions of
Section 6.1 of this Agreement by seeking injunctive or other relief in any
court, and this Agreement shall not in any way limit remedies of law or in
equity otherwise available to Buyer.
7. Miscellaneous. The obligations of JMR and Rossi under this Agreement
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shall be joint and several. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
person incurring such costs and expenses, i.e., by Buyer if incurred by Buyer
and by Seller if incurred by Seller. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the transaction contemplated hereby and shall not be amended or terminated
except by a written instrument duly executed by each of the parties hereto. Any
and all prior or contemporaneous agreements or understandings between the
parties regarding the subject matter hereof are superseded in their entirety by
this Agreement. This Agreement may be executed in one or more counterparts and
by facsimile, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
US WATS, INC.
By: /s/ Xxxxx Xxxxxxx
___________________________
Name: Xxxxx Xxxxxxx
Title: President
JMR MARKETING CORPORATION
By: /s/ Xxxxx X. Xxxxx
___________________________
Name: Xxxxx X. Xxxxx
Title: President
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
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