ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made as of the 13th day
of June, 1995, by and among United Telemanagement Services, Inc., a Delaware
corporation with an office at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("UTS"), Quest United, Inc., a newly-formed Delaware corporation with a
mailing address at c/o UTS, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Newco"), Quest America Management, Inc., a Delaware corporation with an office
at 00 Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("QAM"), Xxxxxx X. Xxxxx,
Xx. ("Xxxxx"), residing at 000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxxx Xxxxx, Xxxxxxx
00000, J. Xxxxxx Xxxxxxx ("Xxxxxxx"), residing at 0 Xxxxxxxxx Xxxxx Xxxxx, Xxx
Xxxxxxxxx, Xxxxx 00000, and Quest America, LP, a Delaware limited partnership
with an office at 00 Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (including
its successors and assigns, "Quest").
WITNESSETH:
----------
WHEREAS, QAM and Quest West, Inc., a Washington corporation with an office
at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000 ("QWI"), are the
general partners of Quest;
WHEREAS, Xxxxxxx and Xxxxx are the sole stockholders of QAM;
WHEREAS, UTS is a majority-owned subsidiary of United USN, Inc., a Delaware
corporation with an office at 00 Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000 ("USN"), and Newco is a wholly-owned subsidiary of UTS;
WHEREAS, USN, Quest, QAM, Xxxxx, and Xxxxxxx have entered into that certain
letter agreement, dated as of December 15, 1994, as amended by that certain
letter agreement dated as of January 15, 1995, as further amended and restated
by that certain letter agreement dated February 10, 1995 (as so amended and
restated, the "Letter Agreement"), pursuant to which they agreed to negotiate in
good faith to reach an agreement whereby Quest would assign certain of its
assets, subject to stated liabilities, to Newco in exchange for shares of Common
Stock (as hereinafter defined) (the "Asset Purchase Transaction"), and UTS would
contribute up to $4,000,000 to Newco (including, without limitation, those
certain eight (8) promissory notes of Quest, each in the principal amount of
$75,000 due March 31, 1995 in favor of USN (the "Notes"));
WHEREAS, upon the execution of this Agreement, Quest shall issue to USN a
demand note (the "Demand Note") in the form attached hereto as Exhibit A, in the
principal amount equal to the outstanding principal and accrued interest owed to
USN under the Notes, the Replacement Note (as such terms are defined in the
Letter Agreement), if any, and those certain demand notes, dated April 12, 1995,
April 27, 1995, May 15, 1995, and May 26, 1995 respectively, in the principal
amounts of $100,000, $75,000, $100,000, and $75,000 respectively (collectively,
the "1995 Notes"), which Demand Note shall be jointly and severally
2
guaranteed by Xxxxxxx and Xxxxx, and USN shall surrender and cancel the Notes,
the Replacement Note, if any, and the 1995 Notes; and
WHEREAS, USN shall (i) assign the Demand Note and the Additional Demand
Notes (as defined below) to UTS in exchange for shares of Common Stock and
shares of Preferred Stock (as hereinafter defined) (the "USN Assignment"), and
(ii) subscribe for additional shares of Common Stock and additional shares of
Preferred Stock to provide up to $4,000,000, less the amounts (including accrued
interest), if any, due under the Demand Note and the Additional Demand Notes, to
UTS at the times and in the amounts, if any, authorized by the UTS Board for
investment in Newco.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations, warranties, and conditions contained
herein, the parties hereto, intending to be legally bound, agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" of any particular person or entity means any person or
entity controlling, controlled by, or under common control with such particular
person or entity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
3
"Common Stock" means the common stock of UTS, $0.0001 par value per
share.
"E&L Agreement" shall have the meaning set forth in Section 2.7
hereof.
"Employment Agreements" means the duly executed employment and
personal service agreements of each of Xxxxxxx and Xxxxx, in the forms attached
hereto as Exhibits B and C, respectively.
"Environmental Law" means all federal, state and local laws relating
to pollution or protection of the environment, and rules and regulations
promulgated pursuant thereto, including laws relating to manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, effluent, or hazardous substances or wastes into the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata) including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Clean Air Act, as amended, and the Clean Water
Act, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
including the rules and regulations of the Commission promulgated thereunder.
"Instructions" means the irrevocable instructions of Quest to issue to
QAM, the then sole remaining partner of Quest, the shares of Common Stock which
Quest is to receive in exchange for the sale of the Assigned Business to Newco,
and the irrevocable instructions of QAM to issue such shares of Common Stock to
Xxxxx and Xxxxxxx, the sole stockholders of QAM, thus giving effect to the
Related Transactions.
4
"Mid-Com Distribution Agreement" means the distribution agreement
between Quest and Mid-Com Communications, Inc., dated December 28, 1993, as the
same may be amended.
"Newco Board" means the Board of Directors of Newco.
"Options" has the meaning set forth in Section 2.6 of this Agreement.
"Partnership Agreement" means the First Amended and Restated Agreement
of Limited Partnership of Quest.
"Preferred Stock" means the preferred stock of UTS, having a
liquidation preference of $1,000 per share.
"PSC" means the Public Service Commission of the State of New York.
"PSC Approval" means the PSC's approval of the issuance of the shares
of Common Stock contemplated by and pursuant to the terms of this Agreement.
"Retained Assets" has the meaning set forth in Section 2.1.9 of this
Agreement.
"QWI Note" means that certain note, in the principal amount of
$155,610, made by Quest and currently held by QWI.
"QWI/Newco Redemption Note" has the meaning set forth in Section 2.1
of this Agreement.
"Schiff Demand Notes" means those certain notes, in the aggregate
principal amount of $835,000, made by Quest and currently held by Northwood
Ventures and its affiliates (collectively, "Northwood").
"Securities Act" means the Securities Act of 1933, as amended,
including the rules and regulations of the Commission promulgated thereunder.
5
"Stated Liabilities" has the meaning set forth in Section 2.1 of this
Agreement.
"Stockholders" means Xxxxxxx and Xxxxx.
"Stockholders' Agreement" means the UTS stockholders' agreement dated
as of April 20, 1994, as amended by a First Amendment to Stockholders Agreement
dated as of June 10, 1994, as further amended by a Second Amendment and Joinder
to Stockholders Agreement dated as of July 22, 1994, as further amended by a
Third Amendment to Stockholders Agreement dated as of September 29, 1994 (all of
which previously has been furnished to the parties to this Agreement), and as
possibly further amended on the Closing Date (as defined below) by the
Stockholders' Agreement Amendment (as defined below) as provided in Section 2.7
hereof.
"Stockholders' Agreement Amendment" shall mean the Fourth Amendment
and Joinder to the Stockholders' Agreement, in the form attached hereto as
Exhibit D.
"Tax" or "Taxes" means any federal, state, local, foreign or other
taxes (including, without limitation, income (net or gross), gross receipts,
profits, alternate or add-on minimum, franchise, license, capital, capital
stock, intangible, services, premium, transfer, sales, use, ad valorem, payroll,
wage, severance, employment, occupation, property (real or personal), windfall
profits, import, excise, custom, stamp, withholding or governmental charges of
any kind whatsoever (including interest, penalties, additions to tax or
additional amounts with respect to such items).
"USN Board" means the Board of Directors of USN.
"UTS Board" means the Board of Directors of UTS.
6
SECTION 2. SALE OF ASSETS; CAPITALIZATION OF NEWCO; ISSUANCE OF COMMON STOCK;
RELATED TRANSACTIONS; STOCK OPTIONS; STOCKHOLDERS' AGREEMENT.
2.1 Transfer of Assets by Quest. Subject to the terms and conditions
contained herein, and in consideration for the shares of Common Stock to be
issued by UTS (and delivered by Newco) to Xxxxxxx and Xxxxx pursuant to the
Instructions and in accordance with Section 2.4 hereof, the $738,000 promissory
note of Newco (the "QWI/Newco Redemption Note") and the assumption of the Stated
Liabilities (as hereinafter defined), Quest shall sell, assign, transfer, convey
and deliver to Newco all of Quest's right, title and interest in and to all
businesses, properties, contracts and assets of Quest (other than Retained
Assets, as hereinafter defined) (collectively, the "Assigned Business"),
including, but not limited to, those assets set forth below in this Section 2.1,
and subject only to those duties, obligations, liabilities and responsibilities
of Quest set forth on Schedule 2.1 hereto (the "Stated Liabilities").
2.1.1 Machinery, Equipment and Supplies. All tangible personal
property, machinery, equipment and supplies (including, but not limited to,
office equipment, furniture, fixtures and leasehold improvements, computer
equipment, telephone equipment, production machinery, tools, and all maintenance
and other operating supplies, including small tools and spare parts and other
expendables or non-inventoried items which may not have been treated as assets
for accounting purposes in past years, including, without limitation, those
listed on Schedule 2.1.1) owned or leased by Quest and used or useful in the
operation of the Assigned Business.
7
2.1.2 Books and Records. All files, books, records, invoices,
accounts and surveys used or useful in connection with the ownership and/or
operation of the Assigned Business, including, without limitation, all current
supplier and customer lists relating to the Assigned Business, including,
without limitation, those listed on Schedule 2.1.2.
2.1.3 Intangibles. All of Quest's right, title and interest in and to
(i) all contracts and agreements, including, without limitation, the Mid-Com
Distribution Agreement, and all other service contracts, employment contracts,
contracts with suppliers and distributors, and insurance policies, including,
without limitation, those insurance policies set forth on Schedule 2.1.3 hereto,
and all rights and benefits accruing to Quest under such contracts and
agreements; (ii) all trademarks, tradenames, servicemarks, copyrights, patents
and applications therefor; (iii) all permits, certificates, leases, subleases,
licenses, franchises and privileges, including, without limitation, all
governmental licenses, certificates and other authorizations presently issued to
Quest which are required to operate the Assigned Business; (iv) all software in
development and source codes, flow charts, notes or outlines relating thereto,
proposals, bids and other documents and information, or copies thereof, relating
to any marketing or promotional efforts undertaken in connection therewith; (v)
all goodwill associated with the Assigned Business; (vi) all right, title and
interest in the name "Quest", whether presently owned by Quest, QAM, QWI,
Xxxxxxx or Xxxxx; (vii) all causes of action, judgments, claims and demands of
whatever nature of Quest against other persons or entities; and (viii) all other
intangible assets owned by Quest and/or used or useful in connection with the
Assigned
8
Business, or held for the benefit of Quest, including, without limitation, the
intangibles described on Schedule 2.1.3 hereto.
2.1.4 Cash. All of Quest's cash or cash equivalents on hand, on
deposit or in transit. Schedule 2.1.4 attached hereto contains a list of all
cash and cash equivalents on hand, on deposit or in transit as of April 11,
1995.
2.1.5 Inventories. All inventory items held by Quest on the Closing
Date (as hereinafter defined), including, without limitation, all raw materials,
work in process, and finished goods. Schedule 2.1.5 attached hereto contains a
list of the inventories valued at the lower of cost or fair market value as of
March 28, 1995.
2.1.6 Accounts Receivable. All of Quest's receivables for products
sold or services rendered which are not collected as of the Closing Date.
Schedule 2.1.6 attached hereto contains a complete list of the accounts
receivable as of March 28, 1995.
2.1.7 Prepaid Items. All of Quest's prepaid items as of the Closing
Date. Schedule 2.1.7 attached hereto is a complete list of all of the prepaid
items as of March 28, 1995.
2.1.8 All Assets Scheduled. The assets described in this Section 2.1
(other than Section 2.1.8) are hereinafter referred to as the "Assigned Assets."
At the request of UTS, any
9
of the Schedules set forth in this Agreement shall be updated to a date within
three (3) days of the Closing Date and delivered to Newco at or prior to the
Closing.
2.1.9 Retained Assets. It is understood and agreed that those assets
listed on Schedule 2.1.9 attached hereto (the "Retained Assets") shall not be
included in the Assigned Assets.
2.2 Assumption of Stated Liabilities. Subject to the terms and conditions
of this Agreement, Newco shall undertake, assume and agree to satisfy and
perform, pay or discharge, to the extent not satisfied or performed, paid or
discharged prior to the Closing, all of the Stated Liabilities.
2.3 UTS Contribution. As from time to time authorized by the UTS Board,
and subject to the terms and conditions contained herein, UTS shall assign,
transfer and convey to Newco as a capital contribution cash in the aggregate
amount of up to $4,000,000, less the outstanding principal and accrued interest
owed to UTS under the Demand Note and the Additional Demand Notes (as defined
below), if any. The Demand Note and the Additional Demand Notes, if any, shall
be assumed by Newco from Quest, and shall be surrendered, cancelled and
contributed to the capital of Newco by UTS.
10
2.4 Issuance of Common Stock.
2.4.1 In partial consideration for the transfer of the Assigned
Business and Assigned Assets by Quest to Newco pursuant to Section 2.1, and
pursuant to the Instructions, UTS shall issue (and Newco shall deliver) to
Xxxxxxx and Xxxxx up to an aggregate of 230,000 shares of Common Stock, at the
times and in the amounts set forth on Schedule 2.4 hereto; provided, however, if
either Xxxxxxx or Xxxxx is terminated for "cause" (as such term is defined in
their respective Employment Agreements) or voluntarily resigns, such terminated
person shall not be entitled to receive any shares of Common Stock pursuant to
this Section 2.4 which, in accordance with Schedule 2.4 and pursuant to the
Instructions, were not scheduled to be issued prior to the date of such
termination or resignation; and provided, further, if either Xxxxxxx or Xxxxx is
terminated without cause, then, notwithstanding the distribution schedule set
forth in Schedule 2.4, on the date of such termination, such terminated person
shall receive all shares of Common Stock which are to be delivered to such
terminated person pursuant to this Agreement (other than shares of Common Stock
issuable upon the exercise of the Options). Notwithstanding the foregoing, at
the Closing the 230,000 shares of Common Stock issuable to Xxxxxxx and Xxxxx as
above set forth shall be increased or decreased so that such shares constitute
7.2% of the Then Fully Diluted UTS Shares Outstanding and Schedule 2.4 shall be
adjusted accordingly. "Then Fully Diluted UTS Shares Outstanding" shall mean (i)
the issued and outstanding Common Stock on the date hereof, plus (ii) all
options for the purchase of unissued shares of Common Stock (including the
Options), plus (iii) shares of Common Stock issuable to the existing
shareholders of UTS upon conversion of $3,650,000 of loans made to UTS (of which
$3,500,000 has been or will be loaned by USN) but not including shares of Common
11
Stock issuable upon conversion of any loans in excess of such principal amount
(including the additional $l,000,000 to be loaned by UISN to UTS as approved at
the June 8, 1995 Board of Directors meeting of UTS), plus (iv) the shares of
Common Stock issuable in order to obtain the up to $4,000,000 to be invested in
Newco less $525,000 advanced from UTS Working Capital. Any other shares of
Common Stock issued shall not be included in Then Fully Diluted UTS Shares
Outstanding.
2.4.2 The issuance of the shares of Common Stock pursuant to Section
2.4.1 hereof is subject to obtaining the PSC Approval. UTS covenants to promptly
apply for the PSC Approval. Until the earlier of the Closing (as defined below)
or UTS being notified by the PSC that the PSC Approval shall not be forthcoming,
UTS shall make bi-weekly loans to Quest to fund the continuing operations of
Quest (the "Bi-Weekly Loans") which, individually, shall not exceed $75,000
(unless otherwise agreed to by UTS, in its sole discretion) and, in the
aggregate, shall not exceed $4,000,000 (less the amounts (including accrued
interest), if any, due under the Demand Note and the Additional Demand Notes),
and each of which shall be evidenced by demand notes in the form annexed hereto
as Exhibit E (the "Additional Demand Notes") and shall be jointly and severally
guaranteed by the Stockholders; provided, however, UTS's obligation to the Bi-
Weekly Loans as provided in this Section 2.4.2 shall terminate if (i) upon
demand for payment by UTS, Quest is in default under the Demand Note or any of
the Additional Demand Notes, or (ii) UTS terminates this Agreement as provided
in Section 12 hereof.
12
2.5 Related Transactions.
2.5.1 Immediately following the consummation of the Asset Purchase
Transaction, (A) Quest shall redeem QWI's partnership interest in Quest,
purchase the QWI Note, and deliver to QWI cash in the aggregate amount of
$100,000 and assign the QWI/Newco Redemption Note; (B) Quest shall redeem the
sole limited partnership interest in Quest for $60; (C) Quest shall liquidate
and distribute its shares of Common Stock to QAM and thereafter shall dissolve;
and (D) QAM shall liquidate and distribute its shares of Common Stock to Xxxxxxx
and Xxxxx and thereafter shall dissolve (collectively, the "Related
Transactions").
2.5.2 For purposes of this Agreement, the parties hereto agree that
the Asset Purchase Transaction and the Related Transactions all shall be deemed
to be consummated concurrently and none shall be completed until all are
completed.
2.6 Stock Options. Upon the consummation of the Asset Purchase
Transaction, UTS shall grant to Xxxxx and Xxxxxxx, in the aggregate, options to
purchase up to 115,000 shares of Common Stock at $2.50 per share, upon such
terms and conditions as shall be specified by the UTS Board (the "Options"). The
Options shall vest at the rate of twenty percent (20%) per year over a five (5)
year period, commencing with the first anniversary of the Closing Date. The
Options automatically shall terminate if the optionee is terminated for cause
(as such term is defined in such optionee's Employment Agreement) or voluntarily
resigns, and the Option shall become fully-vested if the optionee is terminated
without cause. Notwithstanding the foregoing, at the Closing the Options for up
to 115,000 shares of Common Stock to be granted to Xxxxx
13
and Xxxxxxx shall be adjusted to an amount which is equal to 50% of the number
of shares of Common Stock issuable to Xxxxxxx and Xxxxx pursuant to Section
2.4.1 hereof, as such number of shares are therein adjusted.
2.7 Stockholders' Agreement/E&L Agreement. Concurrently with the
consummation of the Asset Purchase Transaction, the Stockholders' Agreement
Amendment shall be executed and delivered by the parties thereto; provided,
however, in UTS's sole discretion, in lieu of the Stockholders' Agreement
Amendment, UTS, Xxxxxxx and Xxxxx shall execute and deliver an agreement, in
form and substance satisfactory to UTS, containing substantially similar terms
and conditions (but somewhat different parties) as the Stockholders' Agreement,
except that paragraphs 1 and 9 of the Stockholders' Agreement shall be deleted
(the "E&L Agreement"). UTS agrees that upon and in the event of the execution
and delivery of the E&L Agreement, (i) Xxxxxxx and Xxxxx, as a group, shall have
the right to designate one director for election to the Newco Board and (ii)
UTS shall obtain a USN undertaking to vote for one nominee of Xxxxxxx and
Xxxxx, as a group, for election to the UTS Board for so long as Xxxxxxx and
Xxxxx are employed by UTS and retain in the aggregate, at least the requisite
number of shares of UTS Common Stock as provided in paragraph l(d) of the
Stockholders' Agreement Amendment as if the Stockholders' Agreement Amendment
had been executed.
SECTION 3. CLOSING
3.1 The closing of the transactions contemplated herein shall take place
at the offices of Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, 750 Lexington Avenue,
New York, New York
14
10022, within five (5) days after receipt of the PSC Approval (the "Closing
Date"), or on such other date as the parties hereto shall agree (the "Closing").
3.2 At the Closing, Quest, QAM, Xxxxxxx and Xxxxx shall deliver to Newco
and UTS:
3.2.1 A duly executed xxxx of sale (the "Xxxx of Sale") and a duly
executed assignment and assumption agreement (the "Assignment and Assumption
Agreement") (collectively, the "Sale Documents").
3.2.2 In addition to the Sale Documents, such other certificates and
instruments of transfer, sale, transfer, conveyance, assignment and/or
confirmation as may be necessary or desirable to transfer, assign and convey all
of Quest's right, title, and interest in and to the Assigned Business and all of
the Assigned Assets to Newco, free and clear of all mortgages, liens,
encumbrances, liabilities, title defects or claims, except Stated Liabilities.
3.2.3 A certificate of a general partner of Quest, (A) attaching a
copy of the Partnership Agreement and stating that it is in full force and
effect as of the Closing Date and has not been amended or otherwise modified or
supplemented, (B) attaching a copy of the written consent of the general
partners of Quest to the execution, delivery and performance of this Agreement
by Quest and the transactions and actions contemplated hereby, (C) attaching an
executed copy of the redemption agreement between Quest and QWI, in form and
substance satisfactory to UTS, whereby QWI surrenders and cancels the QWI Note,
conveys good title to its entire general partnership interest in Quest to Quest,
free and clear of all liens and
15
encumbrances, and releases Quest, USN, UTS and Newco from any and all claims it
may have against any of them or their directors, officers, employees, agents, or
Affiliates against payment by Quest to QWI of the cash and the QWI/Newco
Redemption Note (the "Redemption Agreement"), (D) attaching a release pursuant
to which Xxxx Xxxxxx, the sole limited partner of Quest (the "Limited Partner"),
releases Quest, USN, UTS and Newco from any and all claims he may have against
any of them or their directors, officers, employees, agents, or Affiliates (the
"Limited Partner Release"), and (E) attaching evidence satisfactory to UTS that
Quest has redeemed the Limited Partner's limited partnership interest in Quest
("Limited Partner Redemption Receipt").
3.2.4 Copies of resolutions adopted by the Board of Directors and the
stockholders of QAM authorizing the execution, delivery, and performance of this
Agreement by QAM and Quest and the transactions and actions contemplated hereby,
including, without limitation, the Redemption Agreement, certified to by the
Secretary of QAM.
3.2.5 A certificate of the Secretary of QAM, attaching a copy of
QAM's Certificate of Incorporation and By-laws, and stating that each is in full
force and effect as of the Closing Date and has not been amended or otherwise
modified or supplemented.
3.2.6 Copies of resolutions adopted by the Board of Directors and the
stockholders of QWI authorizing the execution, delivery, and performance of this
Agreement
16
by QWI and Quest and the transactions and actions contemplated hereby,
including, without limitation, the Redemption Agreement, certified to by the
Secretary of QWI.
3.2.7 A certificate of the Secretary of QWI, attaching a copy of
QWI's Certificate of Incorporation and By-laws, and stating that each is in full
force and effect as of the Closing Date and has not been amended or otherwise
modified or supplemented.
3.2.8 Duly executed Certificates of Dissolution of Quest and QAM (the
"Dissolution Certificates"), together with Quest's, QAM's, Xxxxxxx'x and Xxxxx'x
irrevocable instructions for Newco to file the Dissolution Certificates
concurrently with the consummation of the transactions contemplated herein.
3.2.9 Certificates of Good Standing of Quest and QAM in Delaware and
Massachusetts as of a date within ten (10) days of the Closing Date.
3.2.10 Certificate of Good Standing of QWI in the State of Washington
as of a date within ten (10) days of the Closing Date.
3.2.11 A certificate of a general partner of Quest certifying that
the closing conditions set forth in Sections 9.1.14 and 9.1.15 of this Agreement
have been satisfied.
17
3.2.12 An opinion of counsel to Quest, dated the Closing Date, in the
scope and form of Exhibit F attached hereto.
3.2.13 Copies of all consents, approvals and filings required in
connection with the consummation of the transactions hereunder.
3.2.14 The Instructions.
3.3 At the Closing, Xxxxxxx and Xxxxx each shall deliver
3.3.1 To Newco, a duly executed Employment Agreement.
3.3.2 To UTS and Newco:
A. A duly executed guaranty agreement in the form attached
hereto as Exhibit G (the "Guaranty Agreement").
B. A duly executed escrow agreement in the form attached
hereto as Exhibit H (the "Escrow Agreement") pursuant to which Xxxxxxx and Xxxxx
shall deposit their shares of Common Stock with Xxxxxxxx Xxxxx Singer &
Xxxxxxxxx, LLP as escrow agent (the "Escrow Agent") to secure payment of any
amounts due pursuant to their guaranty obligation set forth in the Guaranty
Agreement and pursuant to their indemnification obligation set forth in Section
11.2 of this Agreement.
18
C. A TRW Credit Report on each of Xxxxx and Xxxxxxx as of a
date within three (3) business days of the Closing Date (collectively, the
"Credit Reports").
3.3.3 To the Escrow Agent, a duly executed Escrow Agreement and stock
certificates, with stock powers attached, representing the shares of Common
Stock to be deposited with the Escrow Agent to secure payment of any amounts due
pursuant to the guaranty set forth in the Guaranty Agreement and pursuant to the
indemnification obligation set forth in Section 11.2 of this Agreement.
3.4 At the Closing, UTS shall deliver to Quest:
3.4.1 Copies of resolutions adopted by the UTS Board authorizing the
execution, delivery, and performance of this Agreement by UTS and the
transactions and actions contemplated thereby, certified to by the Secretary of
UTS.
3.4.2 A certificate of the Secretary of UTS, attaching a copy of
UTS's Certificate of Incorporation and By-laws, and stating that each is in full
force and effect as of the Closing Date and has not been amended or otherwise
modified or supplemented.
3.4.3 Certificates of Good Standing of UTS in Delaware and New York as
of a date within ten (10) days of the Closing.
19
3.4.4 A certificate of the President of UTS certifying that the
closing conditions set forth in Sections 9.2.2 and 9.2.5 of this Agreement have
been satisfied.
3.4.5 An opinion of counsel to UTS, dated the Closing Date, in the
scope and form of Exhibit I attached hereto.
3.5 At the Closing, UTS shall deliver to each of Newco, Quest, QAM,
Xxxxxxx and Xxxxx a copy of the PSC Approval;
3.6 At the Closing, Newco shall:
3.6.1 Deliver to Quest duly executed Assignment and Assumption
Agreement; and
3.6.2 Deliver to each of Xxxxxxx and Xxxxx:
A. A duly executed Employment Agreement; and
B. A certificate or certificates, each in definitive form,
representing the shares of Common Stock to be issued and delivered (as per the
Instructions) to each such Stockholder at the Closing pursuant to Schedule 2.4
hereto.
3.7 At the Closing, the Escrow Agent shall deliver a duly executed Escrow
Agreement to Newco, UTS, Xxxxxxx and Xxxxx.
20
SECTION 4. REPRESENTATIONS AND WARRANTIES OF QUEST AND QAM.
For the benefit of USN, UTS, U.S. Network Corporation ("Network"),
Phonenet/Ohio, Inc. ("Phonenet") and Newco, Quest and QAM hereby jointly and
severally represent and warrant as follows:
4.1 Organization, Standing and Qualification. Quest and QAM each are duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Quest and QAM each have all requisite power and authority to own its
property and assets and to conduct its business as now conducted, and are duly
qualified, in good standing and duly authorized to do business in all
jurisdictions in which the ownership of its property makes such qualification
necessary.
4.2 Execution, Delivery and Performance of this Agreement; No Conflict.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary partnership action on the part of Quest and by all necessary corporate
action on the part of QAM, and will not violate any provision of law or any
order of any court or other agency of government, and will not conflict with,
result in any breach of any of the provisions of, constitute (with due notice
and/or lapse of time) a default under or a violation of, the provisions of any
agreement or other instrument to which Quest or QAM is a party or by which Quest
or QAM or their respective property may be bound. This Agreement constitutes,
and upon execution the other agreements contemplated
21
hereby shall constitute, the legal, valid and binding obligation of each of
Quest and QAM, enforceable against each in accordance with its terms.
4.3 No Consents. Except as set forth on Schedule 4.3 hereto, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, or the giving of notice to, any public body or authority or other person
or entity, including, but not limited to, the Massachusetts Department of Public
Utilities, is necessary in connection with the execution, delivery and
performance by Quest and QAM of this Agreement, the agreements contemplated
hereby and transactions contemplated hereby and thereby.
4.4 Litigation. Except as set forth on Schedule 4.4 hereto, there are no
actions, suits, proceedings, investigations or claims pending, threatened
against or affecting Quest or QAM, at law or in equity, in any court or before
any foreign, federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality wherein an unfavorable
judgment, decree or order would (a) restrain, prohibit, invalidate, rescind or
make unlawful the execution, delivery and performance by Quest or QAM of this
Agreement or any of the agreements contemplated hereby, (b) result in a material
adverse change in the business, condition (financial or otherwise), assets,
liabilities, properties or prospects of Quest or QAM, (c) materially and
adversely affect the ability of Quest or QAM to conduct the Assigned Business as
presently conducted, (d) materially impact the ability of Quest or QAM to
perform this Agreement or the agreements contemplated hereby, or (e) apply to
the Assigned Business. Each of (a), (b), (c), (d) or (e) above, or any other
event or occurrence which results in a material
22
adverse change in the business, condition (financial or otherwise), assets,
liabilities, properties or prospects of Quest or QAM shall be referred to herein
as a "Material Adverse Effect".
4.5 Assigned Business. The Assigned Business is not conducted through any
affiliate of Quest. Except for the Retained Assets, the Assigned Assets and the
assets utilized in the Assigned Business under the agreements included in the
Stated Liabilities, constitute all of the assets of Quest. Quest is not a
coventurer in any joint venture or other business enterprise. Quest has complied
in all material respects with all laws, rules, regulations, ordinances, orders,
judgments and decrees (collectively, "Applicable Laws") applicable to the
Assigned Business or the properties used therein; neither the ownership of the
Assigned Business by Quest, nor the use of such properties by Quest, nor the
conduct of such business by Quest conflicts with the rights of any other person
or entity or violates any Applicable Laws. Quest has all approvals,
authorizations, consents, licenses, orders and other permits required to conduct
the Assigned Business as it is now operated and as it is contemplated to be
operated.
4.6 Financial Statements; No Material Adverse Effects.
4.6.1 Quest has delivered to UTS and Newco an unaudited balance sheet
of Quest as of December 31, 1994 and the related statement of income for the
twelve-month period then ended (the "Quest Financial Statements"). The Quest
Financial Statements are in accordance with the books and records of Quest
(which, in turn, are accurate and complete in all material respects), and have
been prepared in accordance with generally accepted accounting principles,
consistently applied in accordance with the past practice of Quest, and are
true,
23
correct and complete in all respects and fairly present the financial position
of Quest as of the date thereof and the results of operations for the period
covered thereby. Since the date of the Quest Financial Statements, there have
been no Material Adverse Effects. As of the date thereof, the Quest Financial
Statements reflect, and any other financial statements furnished to UTS and
Newco by Quest shall reflect, the Assigned Assets. The amounts reflected with
respect to such Assigned Assets are, and in the case of financial statements
delivered after the date hereof shall be, stated in accordance with generally
accepted accounting principles and reflect all Assigned Assets that, in
accordance with such principles, are required to be reflected in the Quest
Financial Statements and such other financial statements. All assets reflected
in the Quest Financial Statements constitute Assigned Assets, except for the
Retained Assets.
4.6.2 Quest has delivered to UTS copies of its monthly financial
statements, commencing with the financial statements for January, 1995. Such
financial statements fairly present the financial condition of Quest as of the
date thereof and the results of operations for the period covered thereby.
4.7 Books and Records. Quest's books and records are, and until the
Closing will be, maintained currently and in good order so that Newco and/or its
representatives may inspect the same and use the same, immediately upon and
after the Closing, to conduct the Assigned Business.
24
4.8 Capitalization.
4.8.1 As of the Closing Date, (i) QAM and QWI are the only general
partners of Quest and the Limited Partner is the only limited partner of Quest,
each having a percentage interest in Quest as set forth in the Partnership
Agreement (the "Quest Interest"); (ii) QAM, QWI and the Limited Partner own
their respective Quest Interests free and clear of any and all liens, pledges,
encumbrances, charges, agreements, or claims, whatsoever; and (ii) no options,
warrants, or other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any partnership
interests of Quest have been granted or entered into by Quest, QWI, QAM, Xxxxxxx
or Xxxxx or the Limited Partner.
4.8.2 As of the Closing Date, the authorized capital stock of QAM
shall consist of 100 shares of common stock, $0.01 par value per share (the "QAM
Stock"), all of which shall be issued and outstanding. All shares of QAM Stock
are owned beneficially and of record by Xxxxx and Xxxxxxx and are duly
authorized, validly issued, fully paid and nonassessable. As of the Closing
Date, no options, warrants, or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert any obligation
into, any shares of capital stock of QAM have been granted or entered into by
QAM, Xxxxxxx or Xxxxx.
4.9 Liabilities. Quest has no debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due, that is not reflected or reserved against and fully shown in the
Quest Financial Statements, except for those (i) that may have been incurred
after the date of the applicable Quest Financial Statements, or (ii) that
25
are not required by generally accepted accounting principles consistently
applied in accordance with the past practice of Quest to be included in the
Quest Financial Statements (including the footnotes thereto). All debts,
liabilities and obligations not set forth in the Quest Financial Statements
and/or incurred after the date of the Quest Financial Statements (x) were
incurred in the ordinary course of business of Quest consistent with its past
practice, and are usual and normal in type and in amount, and (y) are listed and
described in Schedule 4.9 hereto to the extent any such item exceeds $1,000 or
the aggregate of such items exceeds $5,000.
4.10 Absence of Certain Changes or Events. Except as set forth on Schedule
4.10 attached hereto, or except as authorized in writing by UTS, Quest has
heretofore conducted and shall hereafter conduct the Assigned Business only in
the ordinary course and has not:
4.10.1 incurred any obligation or liability, absolute, accrued,
contingent or otherwise whether due or to become due, except liabilities or
obligations incurred in the ordinary course of the business of Quest and
consistent with its prior practice;
4.10.2 mortgaged, pledged or subjected to lien, charge or security
interest or any other incumbrance or restriction any of the property, business
or assets, tangible or intangible, of Quest, including any Assigned Assets;
26
4.10.3 sold, transferred, leased to others or otherwise disposed of
any of the assets of Quest, or committed to do any of the foregoing, including
the payment of any loans owed to any affiliate;
4.10.4 cancelled or compromised any debt or claim, or waived or
released any right of substantial value, except in the ordinary course of
business and consistent with its prior practice;
4.10.5 suffered any damage, destruction or loss (whether or not
covered by insurance) which has resulted in a Material Adverse Effect;
4.10.6 modified, amended or terminated any material contract,
including, but not limited to, the Mid-Com Distribution Agreement;
4.10.7 made any change in the rate of compensation, commission, bonus
or other direct or indirect remuneration payable, or paid, agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to any salesperson or employee of Quest,
except in the ordinary course of business consistent with prior practice;
4.10.8 created any capital expenditures or capital additions or
betterments in excess of 1,000 or $5,000 in the aggregate;
27
4.10.9 instituted any litigation, action or proceeding before any
court or governmental body relating to it or its property or waived or
compromised any right of a substantial value to the Assigned Business, except
for litigation, actions or proceedings instituted and waivers and compromises
given in the ordinary course of business and consistent with its prior practice;
or
4.10.10 suffered any Material Adverse Effect.
4.11 Property.
4.11.1 The Assigned Assets to be transferred hereunder constitute all
of the properties, assets, rights, contracts, leases, easements, licenses, and
real and personal property utilized by Quest in the conduct of the Assigned
Business, except for the Retained Assets, and no other assets, whether tangible
or intangible, are required to engage in the Assigned Business as presently
conducted by Quest. Quest has good and marketable title to all of the Assigned
Assets, and has the ability to transfer and shall transfer the Assigned Assets
to Newco free and clear of any adverse claims, conditional bills of sales,
chattel mortgages, security agreements, financing statements or other security
interests or liens of any kind, except as provided in Schedule 4.11.1 hereto.
4.11.2 The property owned or leased by Quest is in good order and
proper repair and meets all standards, clearances and ratings in effect on the
date hereof in respect of those rules and regulations promulgated by federal,
state and municipal agencies and departments
28
applicable thereto, except for (i) items of machinery and equipment which will
require replacement in the ordinary course of business, the temporary lack of
use of which will not materially disrupt normal operations, and (ii) minor
defects which do not, individually or collectively, interfere in a material way
with the continued use thereof.
4.11.3 All property used in the Assigned Business is owned by Quest,
free and clear of all liens and encumbrances, except as set forth in Schedule
4.11.1, and none of such property is leased except as set forth in Schedule
4.11.3.
4.11.4 All books, records, files, client lists and other documents
and instruments delivered or required to be delivered to Newco hereunder are
true, complete and correct originals or copies thereof. There will not exist at
Closing any duplicates, summaries, extracts or synopses of the foregoing.
4.12 Intangibles. All licenses, patents, patent rights, patent
applications, trademarks, trademark applications, tradenames, service marks,
service xxxx applications, copyrights, and other intangibles, if any, owned by
Quest (collectively, the "Intangible Properties") are listed in Schedule 2.1.3
attached hereto, and no other intangible property is required by Newco to
operate the Assigned Business after the Closing. Quest has good title to all of
the Intangible Properties, free of all liens and encumbrances, other than as
described on Schedule 4.11.1, and Quest's rights to the Intangible Properties
are valid and enforceable. Other than as set forth on Schedule 4.12, no license
has been granted with respect to, and no third party has any rights to
29
or in, any of the Intangible Properties. No claim is pending, or, to the
knowledge of Quest, QAM, Xxxxxxx or Xxxxx, has been made to the effect that the
present or past Assigned Business operations of Quest or the use by Quest of any
of the Intangible Properties infringe or conflict with any rights of others.
4.13 Contracts. Schedule 4.13 attached hereto sets forth a true and
complete list and summary description of all contracts, leases, agreements and
other instruments to which Quest is party or otherwise affecting the Assigned
Business (each, a "Contract"). Each Contract is valid, binding and enforceable
against the parties thereto in accordance with its terms, and is in full force
and effect as of the date hereof. Quest has performed all obligations required
to be performed by it to date under each Contract; Quest is not in default in
respect of any Contract; no Contract is the subject of any default or
termination notice by any party thereto; Quest does not know of any existing
state of facts which, with due notice or lapse of time or both, would constitute
an event of default or give rise to termination rights by any of the parties to
any Contract; and Quest has not received any notice from any party to any
Contract with respect to such party's unwillingness or inability to perform
thereunder. Except as set forth on Schedule 4.13 hereto, all Contracts are
assignable to Newco and such assignment will not create any default thereunder
or constitute an act which with the giving of notice or passage of time or both,
would become a default thereunder.
4.14 Accuracy of Representations and Warranties. None of Quest's or QAM's
representations, warranties or statements contained in this Agreement, or in the
exhibits or
30
schedules hereto, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make any of such representations,
warranties or statements not misleading. All information relating to Quest, the
Assigned Business or the Assigned Assets which is known or, on reasonable
inquiry, would be known to Quest or QAM and which may be material to a purchaser
for value of all of the assets, businesses and operations of Quest has been
disclosed in writing to UTS and Newco, and any such information arising on or
before the Closing Date forthwith will be disclosed in writing to UTS and Newco.
4.15 Compliance with Laws. Quest has complied with all applicable statutes
and regulations of the United States, the States of Delaware and Massachusetts,
and all municipalities and agencies thereof, with respect to the conduct of its
operations, and has not received any notice or notices of violations of any such
statutes or regulations which have not been cured, which violations could have a
material adverse effect on the business, financial condition or prospects of
Quest or on the Assigned Business or the Assigned Assets.
4.16 Taxes. Except as set forth in Schedule 4.16 attached hereto, Quest
has filed all Tax returns which it is required to file under applicable laws and
regulations; all such returns are complete and correct in all material respects;
Quest has paid all Taxes due and owing by it and has withheld and paid over all
Taxes which it is obligated to withhold from amounts paid or owing to any
salesperson, employee, stockholder, creditor or other third party; Quest has not
waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency; the accrual
for current Taxes on Quest's unaudited
31
balance sheet dated as of December 31, 1994 (the "Latest Quest Balance Sheet")
would be adequate to pay all of Quests' current Tax liabilities if its current
Tax year were treated as ending on the date of the Latest Quest Balance Sheet;
the assessment of any additional Taxes for periods for which returns have been
filed shall not exceed the recorded liability therefor on the Latest Quest
Balance Sheet; no foreign, federal, state or local Tax audits are pending or
being conducted with respect to Quest, no information related to Tax matters has
been requested by any foreign, federal, state or local taxing authority, and no
notice indicating an intent to open an audit or other review has been received
by Quest from any foreign, federal, state or local taxing authority; and there
are no material unresolved questions or claims concerning Quest's Tax liability.
4.17 Employees. Schedule 4.17A to this Agreement sets forth an accurate
and complete list of all current employees of Quest, their dates of hire,
current rates of compensation, job titles and duties, the number of vacation
days and sick days due to each of them, and all written and oral employment
contracts and collective bargaining agreements and all other agreements or
arrangements providing for employee compensation to which Quest is a party or by
which Quest is bound. Each of Quest and QAM has complied in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other Taxes, and neither Quest nor QAM is
aware that it has any material labor relations problems (including any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Neither Quest, nor QAM, nor any of their respective
32
employees are subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of Quest or QAM,
respectively, except as set forth and described in Schedule 4.17B attached
hereto.
4.18 ERISA. Except as set forth on Schedule 4.18, neither Quest nor QAM
has any plan or arrangement that would constitute or is intended to qualify as
an employee benefit plan under Section 3(3) of the Employee Retirement Income
Security Agreement, as amended ("ERISA") or as an employee pension benefit plan
under Section 3(2) of ERISA or as an employee welfare benefit plan under Section
3(1) of ERISA. All plans or arrangements listed in Schedule 4.18 are in
compliance with all applicable laws.
4.19 Environmental Liability. Except as set forth on Schedule 4.19 hereto,
(i) Quest has obtained all permits, licenses and other authorizations which are
required with respect to the operation of the Assigned Business and Assigned
Assets under the Environmental Laws; (ii) Quest and QAM are in compliance with
all terms and conditions of the required permits, licenses and authorizations
required by the Environmental Laws; (iii) there is no civil, criminal or
administrative action, suit, demand, claim, hearing notice of violation,
proceeding, notice or demand letter pending relating to the Assigned Business or
Assigned Assets or threatened against Quest or QAM relating in any way to any
Environmental Laws or any regulation, code, plan, order, decree, judgment or
injunction issued, entered, promulgated or approved thereunder; (iv) to the best
knowledge of Quest, QAM, Xxxxxxx and Xxxxx, there are no investigations or
internal
33
or non-public agency proceedings pending against Quest or QAM which relate in
any way to any Environmental Laws or any regulation, code, plan, order, decree,
judgment or injunction issued, entered, promulgated or approved thereunder; and
(v) there has been no generation, production, refining, processing,
manufacturing, use, storage, disposal, treatment, shipment, emission, receipt or
release of a Hazardous Substance (as hereinafter defined) or petroleum or
petroleum by-product on, in or under such of the Assigned Assets constituting
real property which would subject the owner or operator of the real property or
business, or any past or future owner or operator of the real property to
liability for the removal, remediation or cleanup of the Hazardous Substance,
petroleum or petroleum by-product under the Environmental Laws or common law.
"Hazardous Substance" shall include, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes, toxic
substances, or related or similar materials, asbestos or any material containing
asbestos, or any other substance or material regulated by any Environmental Law
or the regulations adopted and publications promulgated pursuant thereto. Quest
shall deliver to UTS and Newco true and complete copies of all environmental
studies since its inception relating to the Assigned Business and Assigned
Assets. Except as set forth in Schedule 4.19 hereof, on the date hereof there
are and as of and at Closing there will be no materials or equipment forming
part of the Assigned Assets which are constituted, in whole or in part, of
Hazardous Substances or other materials which, if discharged as waste, would
constitute "hazardous waste", which term shall have the meaning set forth in the
Resource Conservation and Recovery Act and rules and regulations promulgated
thereunder. No Hazardous Substance has ever been spilled, released, leaked,
poured, leached,
34
dumped, discharged, placed or disposed of, or otherwise caused to be located at
any property which has at any time been owned, leased or used by Quest or QAM.
4.20 Credit Reports. Each of Xxxxxxx and Xxxxx has delivered to USN, UTS
and Newco a true and complete Credit Report as of a date prior to execution of
this Agreement and will deliver an updated Credit Report as of a date within
three (3) days prior to the Closing Date.
4.21 Brokerage. Except for Xxxxxxxx Xxxxxx, whose fees are as set forth in
the Stated Liabilities, there are no claims for brokerage commissions, finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding on Quest or QAM.
Quest shall pay, and shall hold USN, UTS, and Newco harmless against, any loss,
liability or expense (including without limitation, interest, penalties,
reasonable costs of defense and investigation, and reasonable attorneys' fees)
arising out of or in connection with any such claim.
4.22 Insurance Policies. Schedule 2.1.3 to this Agreement is a true and
complete schedule of all policies and binders of life, fire, liability,
workers' compensation, errors and omissions, vehicular, major medical, vision,
dental and other forms of insurance and performance bonds which are owned by
Quest which relate in any manner to the business of Quest. Schedule 2.1.3 sets
forth a brief description of each listed policy, including the insurance
carrier, policy number or covering note number with respect to binders, policy
limits, deductibles, expiration dates and any pending claims. There are no
disputes with underwriters
35
of any such policies or bonds, all premiums due and payable have been paid, and
Quest has not received any notice of cancellation or termination of any such
policies. Quest has not received notice from any insurance carrier that any
insurance premiums on the insurance policies set forth on Schedule 2.1.3 be
materially increased on the renewal thereof or that the insurance policies will
not otherwise be renewed on substantially the same terms as are now in effect.
4.23 Accredited Investor; Authorization, etc. Quest is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act.
Each of Quest and QAM has the individual, corporate, or partnership (as the
case may be) power and authority to enter into and perform this Agreement and to
purchase the shares of Common Stock.
4.24 Investment Knowledge. Quest and QAM each has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in UTS; and each is capable of bearing
the economic risks of such investments, including a complete loss of its
investment.
4.25 Opportunity to Discuss. Quest and QAM each has had an opportunity to
discuss the business, management, and financial affairs of UTS with UTS's
representatives.
4.26 Distribution. Quest and QAM each are acquiring the shares of Common
Stock for its own account for the purpose of investment and not with a view to
or for resale in connection with any distribution thereof or interest therein,
except at upon the dissolution of
36
Quest and QAM pursuant to Section 2.5.1 hereof Messrs. Xxxxxxx and Xxxxx will
receive the Common Stock.
4.27 Registration. Quest and QAM each understand that (i) the shares of
Common Stock have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof, (ii) the shares of Common Stock
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration, (iii) the shares
of Common Stock shall bear a legend to such effect, and (iv) UTS will make a
notation on its transfer books to such effect.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF UTS AND NEWCO.
Each of UTS and Newco hereby severally, not jointly, represent and warrant
as follows:
5.1 Organization, Standing and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to own its property
and assets and to conduct its business as now conducted, and is duly qualified,
in good standing and duly authorized to do business in all jurisdictions in
which the ownership of its property makes such qualification necessary.
5.2 Execution, Delivery and Performance of this Agreement; No Conflict.
The execution and delivery of this Agreement by UTS and Newco, respectively, and
the
37
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and approval of UTS and Newco,
respectively, and will not violate any provision of law or any order of any
court or other agency of government, and will not conflict with, result in any
breach of any of the provisions of, constitute (with due notice and/or lapse of
time) a default under or violation of, the provisions of any agreement or other
instrument to which it is a party or by which it or its property may be bound.
This Agreement constitutes, and upon execution the other agreements contemplated
hereby shall constitute, the legal, valid and binding obligation of UTS and
Newco, respectively, enforceable against each of them in accordance with its
terms.
5.3 No Consents. Except for the PSC Approval, no permit, consent, approval
or authorization of, or declaration, filing or registration with, or the giving
of notice to, any public body or authority or other person or entity is
necessary in connection with its execution, delivery and performance of this
Agreement, the agreements contemplated hereby and transactions contemplated
hereby and thereby.
5.4 Litigation. There are no actions, suits, proceedings, investigations
or claims pending, threatened against or affecting it, at law or in equity, in
any court or before any foreign, federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality wherein an
unfavorable judgment, decree or order would (a) restrain, prohibit, invalidate,
rescind or make unlawful its execution, delivery and performance of this
Agreement or any of the agreements contemplated hereby, (b) result in a
material adverse
38
change in its business, condition (financial or otherwise), assets, liabilities,
properties or prospects, or (c) materially impact its ability to perform this
Agreement or the agreements contemplated hereby.
5.5 Accuracy of Representations and Warranties. None of its
representations, warranties or statements contained in this Agreement, or in the
exhibits or schedules hereto, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make any of such
representations, warranties or statements not misleading.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF UTS.
6.1 UTS represents and warrants as follows:
6.1.1 Due Authorization; Valid Issuance. As of the Closing Date, the
shares of Common Stock to be issued and delivered to Xxxxxxx and Xxxxx as per
the Instructions and pursuant to Section 2.4 of this Agreement shall have been
duly authorized and, when issued in accordance with this Agreement, shall be
validly issued, fully paid, and nonassessable, with the rights and privileges as
set forth herein and in the Certificate of Incorporation of UTS, and, except as
provided herein or in the Stockholders' Agreement or the E&L Agreement, as the
case may be, will be free and clear of all liens, charges, restrictions, claims,
and encumbrances imposed by or through UTS. Except as provided in the
Stockholders' Agreement or the E&L Agreement, as the case may be, the issuance,
sale, and delivery of such shares of Common
39
Stock by UTS is not subject to any preemptive right of any stockholder of UTS or
to any right of first refusal or other right in favor of any person.
6.1.2 Capitalization. As of the date hereof, the authorized capital
stock of UTS consists of 1,000,000 shares of Common Stock and 4,000 shares of
Preferred Stock. All outstanding shares of Common Stock and Preferred Stock are
duly authorized, validly issued, fully paid and nonassessable. As of the Closing
Date, the authorized capital stock of UTS shall be sufficient to consummate the
transactions contemplated by this Agreement. Except (A) for those shares of
Common Stock which may be issued to UTS stockholders pursuant to the exercise of
their preemptive rights as set forth in the Stockholders' Agreement or the E&L
Agreement, as the case may be, (B) those shares of Common Stock which may be
issued to USN, upon PSC Approval, pursuant to the conversion of convertible
promissory notes issued or to be issued by UTS to USN evidencing capital
contributions by USN to UTS of up to $4,500,000, and (C) as set forth on
Schedule 6.1.2 hereto, no options, warrants, or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of Common Stock have been granted or
entered into by UTS.
6.1.3 Financial Statements. UTS has delivered to Quest an audited
balance sheet of UTS as of December 31, 1994 and the related statement of income
for the twelve-month period then ended (the "UTS Financial Statements"). The UTS
Financial Statements are in accordance with the books and records of UTS (which,
in turn, are accurate and complete in all material respects), and have been
prepared in accordance with generally accepted accounting
40
principles, consistently applied in accordance with the past practice of UTS,
and are true, correct and complete in all respects and fairly present the
financial position of UTS as of the date thereof and the results of operations
for the period covered thereby.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS; RESTRICTIONS
ON TRANSFER.
7.1 Each Stockholder severally, not jointly, represents and warrants to
UTS and Newco that, as of the date hereof:
7.1.1 Good Title to QAM Shares; No Agreements. He has good and
marketable title in and to the shares of common stock of QAM owned beneficially
and of record by him (the "QAM Shares"), free and clear of all mortgages,
pledges, liens, encumbrances, claims and equities, whatsoever. Except for that
certain QAM stockholders' agreement, dated November 2, 1993, he is not a party
to any voting trust agreement or other contract, or agreement, arrangement,
commitment, plan or understanding restricting or otherwise relating to voting
rights with respect to the QAM Shares.
7.1.2 Execution, Delivery and Performance of this Agreement; No
Conflict. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and the performance under their respective
Employment Agreements will not violate any provision of law or any order of any
court or other agency of government, and will not conflict with, result in any
breach of any of the provisions of, constitute (with due notice and/or lapse
of time) a default under or a violation of, the provisions of any agreement
41
or other instrument to which such Stockholder is a party or by which such
Stockholder or his property may be bound. This Agreement constitutes, and upon
execution the other agreements contemplated hereby shall constitute, the legal,
valid and binding obligation of such Stockholder, enforceable against him in
accordance with its terms.
7.1.3 No Consents. No permit, consent, approval or authorization of,
or declaration, filing or registration with, or the giving of notice to, any
public body or authority or other person or entity, including, but not limited
to, the Massachusetts Department of Public Utilities, is necessary in connection
with his execution, delivery and performance of this Agreement, the agreements
contemplated hereby and transactions contemplated hereby and thereby.
7.1.4 Litigation. There are no actions, suits, proceedings,
investigations or claims pending, threatened against or affecting such
Stockholder, at law or in equity, in any court or before any foreign, federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality wherein an unfavorable judgment, decree or order would
(a) restrain, prohibit, invalidate, rescind or make unlawful such Stockholder's
execution, delivery and performance of this Agreement or any of the agreements
contemplated hereby, (b) materially and adversely affect the ability of such
Stockholder to conduct the Assigned Business as presently conducted, or (c)
materially impact the ability of such Stockholder to perform this Agreement or
the agreements contemplated hereby.
42
7.1.5 Accuracy of Representations and Warranties. To his actual
knowledge, none of the representations, warranties or statements contained in
this Agreement, or in the exhibits or schedules hereto, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make any of such representations, warranties or statements not
misleading.
7.1.6 Brokerage. Except for Xxxxxxxx Xxxxxx, whose fees are as set
forth in the Stated Liabilities, there are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding on
Quest, QAM, or the Stockholders. The Stockholders shall pay, and shall hold USN,
UTS, and Newco harmless against, any loss, liability or expense (including
without limitation, interest, penalties, reasonable costs of defense and
investigation, and reasonable attorneys' fees) arising out of or in connection
with any such claim.
7.1.7 Accredited Investor; Authorization, etc. He is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act,
and he has the individual, corporate, or partnership (as the case may be) power
and authority to enter into and perform this Agreement and to purchase the
shares of Common Stock.
7.1.8 Investment Knowledge. He has sufficient knowledge and experience
in financial and business matters so as to be capable of evaluating the risks
and merits of his
43
investment in UTS; and he is capable of bearing the economic risks of such
investments, including a complete loss of his investment.
7.1.9 Opportunity to Discuss. He has had an opportunity to discuss
the business, management, and financial affairs of UTS with UTS's
representatives.
7.1.10 Distribution. The shares of Common Stock are being acquired
for his own account for the purpose of investment and not with a view to or for
resale in connection with any distribution thereof or interest therein.
7.1.11 Registration. He understands that (i) the shares of Common
Stock have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof, (ii) the shares of Common Stock
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration, (iii) the shares
of Common Stock shall bear a legend to such effect, and (iv) UTS will make a
notation on its transfer books to such effect.
7.2 Restrictions. To insure compliance with the provisions of the
Securities Act and state securities laws, each Stockholder agrees:
44
7.2.1 Restrictive Legend. Unless and until otherwise permitted by
this Section 7.2, each Common Stock certificate issued to such Stockholder, or
its nominee, or to any subsequent transferee of such certificate, shall be
stamped or otherwise imprinted with the following restrictive legend:
"The securities represented by this Certificate have been acquired
for investment and have not been registered pursuant to the Securities
Act of 1933, as amended (the "Act"), or any applicable state statutes.
Such securities may not be sold, transferred, pledged, hypothecated,
or otherwise disposed of unless (i) a registration statement under the
Act or applicable state securities laws shall have become effective
with regard thereto, or (ii) an exemption from registration exists
under the Act (or the regulations promulgated thereunder) and
applicable state securities laws and such exemption is applicable
thereto."
7.2.2 Notice of Proposed Transfer. Subject to the foregoing and the
terms of the Stockholders' Agreement or the E&L Agreement, as the case may be,
prior to any transfer or sale of any of the shares of Common Stock, the holder
thereof desiring to effect such transfer or sale shall deliver to UTS (i) a
written notice briefly describing the manner of such transfer or sale, (ii) if
requested by UTS, a written opinion of counsel for such holder (provided that
such counsel, and the form and substance of such opinion, are reasonably
satisfactory to UTS) to the effect that such transfer or sale may be effected
without the registration of such shares of Common Stock under the Securities Act
and applicable state law, and (iii) the agreement of the transferee to the
provisions of this Section 7.2, and UTS shall thereupon permit or cause its
transfer agent (if any) to permit such transfer or sale to be effected.
45
7.2.3 Termination of Restrictions.
A. Notwithstanding the foregoing, the restrictions imposed by
this Section 7.2 upon the transferability of the shares of Common Stock shall
terminate when (1) such shares of Common Stock have been registered under the
Securities Act and sold by the holder thereof in accordance with such
registration, (2) a written opinion has been received from counsel for the
holder thereof (provided that such counsel, and the form and substance of such
opinion, are reasonably satisfactory to UTS) or counsel for UTS, to the effect
that such restrictions are no longer required or necessary under any federal or
state securities law or regulation, (3) such shares of Common Stock have been
sold without registration under the Securities Act in compliance with Rule 144
or Rule 144A promulgated under the Securities Act, (4) UTS is reasonably
satisfied that the holder of such shares of Common Stock, in accordance with the
terms of Subsection (k) of Rule 144 or of Rule 144A promulgated under the
Securities Act, shall be entitled to sell such shares of Common Stock pursuant
to such Subsection, or (5) a letter or an order has been issued to the holder
thereof by the staff of the Commission stating that no enforcement action shall
be recommended by such staff or taken by the Commission, as the case may be, if
such shares of Common Stock are transferred without registration under the
Securities Act in accordance with the conditions set forth in such letter or
order and such letter or order specifies that no subsequent restrictions on
transfer are required.
B. Whenever the restrictions imposed by this Section 7.2 shall
terminate as hereinabove provided, the holder of a certificate representing any
of the shares of Common Stock then outstanding as to which such restrictions
shall have terminated shall be
46
entitled to receive from UTS, without expense to such holder, one or more new
certificates for Common Stock not bearing the restrictive legend set forth in
Section 7.2.1.
SECTION 8. COVENANTS.
8.1 Liabilities. Newco hereby assumes and agrees to discharge the Stated
Liabilities. Except for the Stated Liabilities, Quest acknowledges that Newco
will have assumed no liabilities, known or unknown, due or to become due,
absolute or contingent, of Quest, and Quest, QAM, Xxxxx and Xxxxxxx jointly and
severally covenant to pay or cause to be paid all liabilities (except Stated
Liabilities) incurred by Quest as and when they come due. QAM acknowledges that
Newco will have assumed no liabilities, known or unknown, due or to become due,
absolute or contingent, of QAM, and QAM, Xxxxxxx and Xxxxx jointly and severally
covenant to pay or cause to be paid all liabilities of QAM as and when they come
due.
8.2 Consummation of Transactions. Each of Xxxxx and Xxxxxxx covenant and
agree that they shall use their best efforts (both individually and in their
capacity as the sole shareholders of QAM and otherwise) to cause QAM and Quest
to take, or cause to be taken, any and all actions and to do, or cause to be
done, any and all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement and the other
agreements and instruments contemplated hereby, including, but not limited to
satisfying all of the conditions precedent set forth in Section 9.1 hereof.
47
8.3 Conduct of Assigned Business Pending the Closing.
8.3.1 Elliott, Lavin, QAM and Quest shall not take any action (or
intentionally omit to take a required action) which shall cause Quest to operate
the Assigned Business other than in the ordinary course of business consistent
with Quest's past practice during the period commencing with the execution and
delivery of this Agreement and ending with the Closing Date, and shall avoid any
act that might injure or detract from the goodwill and reputation of the
Assigned Business. Quest, QAM, Xxxxxxx and Xxxxx shall not take any action (or
intentionally omit to take a required action) which shall adversely affect the
goodwill of the Assigned Business' suppliers, customers, distributors, sales
representatives and others having business relations with Quest.
8.3.2 Quest shall use its commercially reasonable best efforts to
keep available for Newco the services of its present salespeople and employees
whose primary activities relate to the Assigned Business.
8.3.3 Quest shall, and Xxxxxxx, Xxxxx and QAM shall cause Quest to:
A. at all times cause to be done all things necessary to
maintain, preserve and renew its existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses;
48
B. maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
C. pay and discharge when payable all Taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies which, if
unpaid, would by law become a lien upon any of its property, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with generally
accepted accounting principles, consistently applied) have been established on
its books with respect thereto;
D. comply with all other obligations which it incurs pursuant
to any contract or agreement, whether oral or written, express or implied, as
such obligations become due, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect thereto;
E. comply with all applicable laws, rules and regulations of
all governmental authorities, including the Federal Communications Commission
and the
49
Massachusetts Department of Public Utilities, the violation of which would
reasonably be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects of Quest;
and
F. maintain proper books of record and account which fairly
present its financial condition and results of operations, and make provisions
on its financial statements for all such proper reserves as in each case are
required in accordance with generally accepted accounting principles,
consistently applied.
G. give UTS and its representatives full access, during normal
business hours, to all of Quest's premises, books, records, employees, and
independent public accountants possessing any information relating in any manner
to Quest, its properties, assets or business, and shall furnish UTS and its
representatives such financial and operating data and other information with
respect to the business, assets and/or properties of UTS as Quest or its
representatives, from time to time, reasonably shall request.
8.4 Negative Covenants. Quest, QAM, Xxxxxxx and Xxxxx covenant that,
except as permitted by the written consent of UTS, Quest shall operate the
Assigned Business only in the ordinary course consistent with its past practice
and Quest shall not, and QAM shall not permit Quest to, take any of the
following actions:
50
8.4.1 propose or adopt any amendment to Quest's Agreement of Limited
Partnership, or declare or make any cash distributions to any of the partners of
Quest;
8.4.2 issue, sell, offer to issue or sell, or otherwise distribute
any partnership interests of Quest;
8.4.3 enter into any agreement (including any agreement in principle)
with respect to any merger, consolidation or business combination (other than
the transactions contemplated by this Agreement), any acquisition of a material
amount of assets or securities of any other entity, any disposition of a
material amount of its own assets or securities or any change in its
capitalization, or any release or relinquishment of any material contract right
not in the ordinary course of business consistent with past practice;
8.4.4 waive, release, grant or transfer any rights of value or modify
or change in any respect any existing license, lease, contract or document,
other than those which are cancelable within sixty (60) days for non-payment,
involve payments of less than $1,000, and are in the ordinary course of business
consistent with past practice;
8.4.5 fail to maintain its existing insurance coverage on the
Assigned Assets in effect on the date of this Agreement or, in the event any
such coverage shall be terminated or lapse, procure substantially similar
substitute insurance policies with financially sound and
51
reputable insurance companies in at least such amounts and against such risks as
are currently covered by such terminated or lapsed policies;
8.4.6 adopt or amend in any respect any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any of Quest's
partners or employees, or (except for normal increases in the ordinary course of
business consistent with past practices) increase in any manner the compensation
or fringe benefits of any partner, salesperson or employee, or pay any material
benefit not required by any existing plan or arrangement, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
8.4.7 make any capital expenditures or commitments for capital
expenditures in excess of $1,000 with respect to any single capital expenditure
or $5,000 in the aggregate;
8.4.8 fail to advise Newco in writing within three (3) business days
upon obtaining knowledge of any material change in the Assigned Business or
Assigned Assets;
8.4.9 incur any additional indebtedness for borrowed money or place a
lien on any Assigned Asset, or incur any other liabilities or indebtedness other
than in the ordinary course of business;
52
8.4.10 amend or terminate the Mid-Com Distribution Agreement; or
8.4.11 agree in writing or otherwise to take any of the foregoing
actions or any action which would constitute or result in a violation of this
Agreement or make any representation or warranty contained in this Agreement
untrue or incorrect in any material respect; or
8.4.12 enter into any agreement of whatever type or nature which (i)
is not cancelable without penalty on sixty (60) days notice and (ii) during its
non-cancelable term requires the payment of more than $1,000.
8.5 Employee Matters.
8.5.1 Newco shall offer employment to those individuals set forth on
Schedule 4.17A, on terms materially no less favorable (and, in any event, with
respect to non-management employees, initially the same cash compensation) than
the terms in effect on the date hereof. All such individuals who accept offers
of employment with Newco as of the Closing shall be referred to herein as
"Transferred Employees"; provided, however, employees who are disabled on the
Closing Date shall not be considered Transferred Employees until they report to
work for Newco. Quest, QAM, Xxxxxxx and Xxxxx shall assist Newco in effecting
such Transferred Employees' change of employment as of the Closing Date in an
orderly fashion.
53
8.5.2 Except as expressly set forth in Sections 2.2 and 4.18 hereof,
Newco shall not assume any assets or liabilities or any other obligation
whatsoever with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA) maintained at any time by Quest or to which contributions
were made or required to be made by Quest.
8.5.3 Newco shall give credit to each Transferred Employee for all
vacation or sick days due to such Transferred Employee arising from his
employment with Quest.
8.5.4 Each Transferred Employee shall become fully vested in his
accrued benefit in each Tax Qualified plan maintained by Quest as of the Closing
Date. Quest, QAM, Xxxxxxx and Xxxxx agree that they will take such steps as are
necessary to carry out the obligations of the first sentence of this paragraph
and, as promptly as practicable, shall supply to Newco evidence of the actions
taken and copies of the operative documents. Newco agrees that it shall confirm,
as of the Closing Date, the name of all Transferred Employees.
8.5.5 As soon as practicable after the Closing Date, and effective as
of the Closing Date, Newco shall make available the USN profit-sharing plan with
a salary reduction arrangement that covers Transferred Employees and meets the
requirements of Sections 401(a) and 401(K) of the Code.
54
8.6 Transfer Taxes. All transfer Taxes, realty Taxes, documentary Taxes,
stamp Taxes, and sales and use Taxes, if any, payable by reason of this
transaction or the sale, transfer or delivery of the Assigned Business shall be
paid and borne by Quest.
8.7 Bulk Sales Requirements. UTS and Newco hereby waive compliance by
Quest of any bulk sales notice requirements of applicable law, and Quest and
QAM, jointly and severally shall indemnify and hold USN, UTS and Newco harmless
from any and all losses, liabilities and expenses which shall arise against or
be incurred by USN, UTS or Newco for the failure to comply with such
requirements.
8.8 Registration Rights. If UTS shall grant piggyback registration rights
to its full-time executive officers with respect to any of the shares of Common
Stock owned personally by such executive officers, then UTS shall grant
substantially identical piggyback registration rights to Xxxxx and Xxxxxxx with
respect to the shares of Common Stock owned by each of Xxxxxxx and Xxxxx.
SECTION 9. CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Obligation of UTS and Newco. The obligations
of UTS and Newco to consummate the transactions hereunder are subject to the
satisfaction of, or the waiver by UTS and Newco of, the following conditions
prior to or contemporaneously with the Closing:
55
9.1.1 Related Transactions. Other than set forth in the Redemption
Agreement, the Related Transactions shall have been concurrently consummated.
9.1.2 Regulatory Approval. UTS shall have received the PSC Approval.
9.1.3 Guaranty Agreement. The Guaranty Agreement shall have been
executed and delivered by the parties thereto and shall be in full force and
effect.
9.1.4 USN Assignment. The USN Assignment shall have been consummated.
9.1.5 Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by the parties thereto and shall be in full force and effect, and
the shares of Common Stock owned by Xxxxxxx and Xxxxx shall have been deposited
with the Escrow Agent with stock powers attached.
9.1.6 Employment Agreements. Xxxxxxx and Xxxxx each shall have
executed and delivered to Newco their respective Employment Agreements, and each
shall be in full force and effect.
9.1.7 Schiff Demand Notes. Quest and Northwood shall have agreed to
the repayment of the Schiff Demand Notes on terms acceptable to UTS.
56
9.1.8 QWI Note. Quest and QWI shall have agreed to the repayment to
QWI of (i) the QWI Note and (ii) QWI's capital in Quest, each on terms
acceptable to UTS as provided in the Redemption Agreement.
9.1.9 Stockholders' Agreement Amendment; E&L Agreement. The
Stockholders' Agreement Amendment or the E&L Agreement, as the case may be,
shall have been executed and delivered by the parties thereto and shall be in
full force and effect.
9.1.10 Mid-Com Distribution Agreement. Except as otherwise agreed to
by Quest and UTS, Quest shall have obtained the consent to assign the Mid-Com
Distribution Agreement to Newco, and the Mid-Com Distribution Agreement shall
have been amended to UTS's reasonable satisfaction.
9.1.11 Redemption Agreement. The Redemption Agreement shall have been
executed and delivered by the parties thereto in form and substance acceptable
to UTS and shall be in full force and effect.
9.1.12 Limited Partner Release; Limited Partner Redemption Receipt.
The Limited Partner shall have executed and delivered the Limited Partner
Release, and UTS shall have received the Limited Partner Redemption Receipt.
57
9.1.13 Dissolution Certificates; Instructions. The Dissolution
Certificates and the Instructions shall have been executed and delivered to
Newco.
9.1.14 Representations and Warranties Are True. The representations
and warranties of Quest, QAM, Xxxxxxx and Xxxxx contained in this Agreement
shall be true and correct in all material respects as of the Closing Date as if
made at and as of the Closing Date.
9.1.15 Conditions and Agreements Performed. Quest, QAM, Xxxxxxx and
Xxxxx shall have performed and complied in all respects with all agreements,
covenants, and conditions contained in this Agreement which are required to be
performed or complied with by them prior to or at the Closing.
9.1.16 No Actions, Suits or Proceedings. No action, suit, or
proceeding before any court or governmental regulatory authority shall be
pending, no investigation by any governmental regulatory authority shall have
been commenced, and no action, suit or proceeding by any governmental or
regulatory authority shall have been threatened against Quest, QAM, Elliott,
Lavin, USN, UTS or Newco or any of their principals, officers, directors or
partners seeking to restrain, prevent or change the transactions contemplated by
this Agreement or by any of the agreements contemplated hereby, or questioning
the legality or validity of any such transactions or agreements, or seeking
damages in connection with any such transactions or agreements.
58
9.1.17 Delivery of Books and Records. Newco shall have received all
books and records of the Assigned Business.
9.1.18 No Adverse Effect. Since the date of the Quest Financial
Statements, the financial condition and business prospects of Quest and the
ability of Quest to conduct the Assigned Business in the manner in which such
business was conducted on or prior to that date shall not have been materially
adversely affected in any manner or by any cause whatsoever, whether or not
beyond the control of Quest, QAM, Xxxxxxx or Xxxxx, and whether or not covered
by insurance.
9.1.19 General Partner's Certificate. UTS and Newco shall have
received the certificate of a general partner of Quest certifying that the
conditions specified in Sections 9.1.14 and 9.1.15 have been satisfied.
9.1.20 Legal Opinion. Quest shall have furnished Newco with an
opinion of counsel in the scope and form of Exhibit F attached hereto.
9.1.21 OWI Certificate. Newco shall have received a certificate of
the President of QWI substantially in the form attached hereto as Exhibit J,
stating that (i) QWI is aware of and has consented to the transactions
contemplated by this Agreement, (ii) QWI has received cash and the QWI/Newco
Redemption Note in connection with the redemption of its partnership interest in
Quest, and (iii) upon completion of the transactions contemplated by this
Agreement,
59
neither the Limited Partner nor QWI shall have any rights or interests in, or
claims against, Quest, USN, UTS, Network, Phonenet or Newco, or their respective
officers, directors, employees, agents or Affiliates, except (i) for payment of
the QWI/Newco Redemption Note and (ii) in the case of Quest, claims under the
Redemption Agreement.
9.1.22 Consent. Quest, QAM, Xxxxxxx and/or Xxxxx shall have obtained
copies of all consents required in connection with the transactions contemplated
hereunder, and shall have delivered copies of such consents to UTS and Newco.
9.1.23 Credit Reports. Newco and UTS shall have received the Credit
Reports, each as of date within three (3) days of the Closing Date and UTS shall
be satisfied with the content of such Credit Reports.
9.1.24 Northwood Release. UTS shall have received a general release
from Northwood in form and substance satisfactory to UTS pursuant to which
Northwood (on its own behalf and on behalf of its affiliates) shall release any
and all claims it may have against UTS and its affiliates.
9.2 Conditions Precedent to Obligations of Quest, QAM, Xxxxxxx and Xxxxx.
The obligation of Quest, QAM, Xxxxx and Xxxxxxx to consummate the transactions
contemplated hereby is subject to the satisfaction of, or the waiver by Quest,
QAM, Xxxxxxx and Xxxxx of, the following conditions prior to or
contemporaneously with the Closing:
60
9.2.1 Regulatory Approval. UTS shall have received the PSC Approval.
9.2.2 Representations and Warranties Are True. The representations
and warranties made by UTS and Newco in this Agreement shall be true and correct
in all material respects as of the Closing Date as if made at and as of the
Closing Date.
9.2.3 Stockholders' Agreement Amendment; E&L Agreement. The
Stockholders' Agreement Amendment or the E&L Agreement, as the case may be,
shall have been executed and delivered by the parties thereto and shall be in
full force and effect.
9.2.4 USN Assignment. The USN Assignment shall have been consummated.
9.2.5 Conditions and Agreements Performed. Each of UTS and Newco
shall have performed and complied in all respects with all agreements, covenants
and conditions contained in this Agreement which are required to be performed or
complied with by it prior to or at the Closing.
9.2.6 No Actions, Suits or Proceedings. No action, suit, or
proceeding before any court or governmental regulatory authority shall be
pending, no investigation by any governmental regulatory authority shall have
been commenced, and no action, suit or proceeding by any governmental or
regulatory authority shall have been threatened against Quest, QAM, Elliott,
Lavin, USN, UTS or Newco or any of their principals, officers, directors or
partners
61
seeking to restrain, prevent or change the transactions contemplated by this
Agreement or by any of the agreements contemplated hereby, or questioning the
legality or validity of any such transactions or agreements, or seeking damages
in connection with any such transactions or agreements.
9.2.7 Certificate of Incorporation. The Certificate of Incorporation
of Newco shall be in full force and effect under the laws of the State of
Delaware as of the Closing Date and shall not have been amended or modified.
9.2.8 Blue Sky Clearance. UTS shall have made all filings under
applicable state securities laws necessary to consummate the issuance of the
shares of Common Stock pursuant to this Agreement.
9.2.9 Officer's Certificate. Quest shall have received the
certificate of the President of UTS certifying that the conditions contained in
Sections 9.2.2 and 9.2.5 have been satisfied.
9.2.10 Legal Opinion. UTS shall have furnished Quest with an opinion
of counsel in the scope and form of Exhibit I attached hereto.
62
SECTION 10. POST-CLOSING COVENANTS.
Pursuant to the Instructions and except as otherwise provided herein,
UTS agrees to issue and Newco agrees to deliver to Xxxxxxx and Xxxxx, a
certificate or certificates, in the amounts and at the times set forth in
Schedule 2.4 hereto, each in definitive form, representing the shares of Common
Stock to be issued to Xxxxxxx and Xxxxx pursuant to Section 2.4 hereto.
SECTION 11. INDEMNIFICATION.
11.1 Indemnification by Ouest. Quest hereby agrees to indemnify, defend
and hold harmless each of UTS, Newco and their respective officers, directors,
shareholders, and agents from and against, and to pay for as incurred, any and
all losses, liabilities, damages or deficiencies (including, without limitation,
interest, penalties, reasonable costs of defense and investigation, and
reasonable attorneys' fees) (collectively, "Losses") arising out of or due to
(i) a breach of any of the representations, warranties or covenants of Quest
contained in this Agreement, or (ii) any claim, cause of action, or suit with
respect to the Assigned Business or the Assigned Assets, other than for the
collection of Stated Liabilities (collectively, the "Damages").
11.2 Indemnification by the Stockholders. The Stockholders, jointly and
severally, hereby agree to indemnify, defend and hold harmless each of UTS,
Newco, and their respective officers, directors, shareholders, agents from and
against, and to pay for as incurred, any and all Losses arising out of or due to
a breach of any of their representations, warranties or covenants contained in
this Agreement.
63
11.3 Security. The obligations contained in Section 11.1 hereof shall be
guaranteed by the Stockholders, with recourse only to the shares of Common Stock
deposited with the Escrow Agent, as more fully set forth in the Guaranty
Agreement. The Stockholders' guaranty obligations set forth in the Guaranty
Agreement, and their indemnification obligations set forth in Section 11.2
hereof shall be secured by the deposit of shares of Common Stock owned by
Xxxxxxx and Xxxxx with the Escrow Agent in accordance with the terms of the
Escrow Agreement.
11.4 Indemnification by UTS and Newco. UTS and Newco hereby agree to
indemnify, defend and hold harmless each of Quest, QAM, Xxxxxxx and Xxxxx from
and against, and to pay for as incurred, any and all Losses arising out of or
due to a breach of any of the representations, warranties or covenants of UTS or
Newco contained in this Agreement.
SECTION 12. TERMINATION.
UTS, in its sole discretion, may terminate this Agreement at any time:
12.1 On or after August 1, 1995 if any of the closing conditions set
forth in Section 9.1 of this Agreement have not been satisfied prior to August
1, 1995; or
12.2 Prior to the Closing if, on or before June 22, 1995, the
closing conditions set forth in Sections 9.1.7, 9.1.8, 9.1.10 and 9.1.11 have
not been satisfied.
64
SECTION 13. NOTICES.
All notices and other communications hereunder will be in writing and
will be given by personal delivery, telegram, telex, facsimile or other standard
form of telecommunication, or by registered or certified mail, return receipt
requested, to the parties at their respective addresses set forth above, with
copies as follows:
If to UTS or Newco, to:
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
If to Quest, Xxxxxxx, Xxxxx or QAM, to:
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as the recipient, by notice given pursuant hereto,
shall notify the other parties hereto.
SECTION 14. MISCELLANEOUS.
14.1 Survival. Except as otherwise specifically provided, the provisions
of this Agreement, including, but not limited to, all representations,
warranties and covenants (including, without limitation, the indemnification
obligations contained in Section 11 of this Agreement) contained herein, shall
survive the Closing.
65
14.2 Entire Agreement. This Agreement, together with the agreements
entered into in accordance with the terms hereof and contemplated hereby,
constitute the entire understanding between the parties hereto with respect to
the subject matter hereof and supersede any and all prior agreements between the
parties hereto with respect to the subject matter hereof.
14.3 Assignment. This Agreement is binding on the parties hereto and their
successors. This Agreement is not assignable and any purported assignment shall
be null and void and of no effect.
14.4 Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall 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 shall 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.
14.5 Effect of Headings. The Section headings contained herein are for
convenience only and shall not affect the construction hereof.
14.6 Governing Law. The provisions of this Agreement and all the rights
and obligations of the parties hereunder shall be governed by and construed in
accordance with the
66
substantive laws of the State of New York applicable to agreements negotiated
and executed wholly within such State.
14.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
United Telemanagement Services, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
----------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Chief Executive Officer
Quest United, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
----------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Chairman of the Board
Quest America Management, Inc.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------------
Xxxxxx X. Xxxxx, Xx., President
Quest America, LP
By: Quest America Management, Inc.
By /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------------
Xxxxxx X. Xxxxx, Xx., President
By: Quest West, Inc.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxx, Xx.
/s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------------------------
J. Xxxxxx Xxxxxxx
/s/ J. Xxxxxx Xxxxxxx
-------------------------------------------------
68
