PURCHASE AGREEMENT
This Agreement, effective September 30, 1999, is entered into among each of
COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (herein referred to as
"COYOTE SYSTEMS"), AMERICAN GATEWAY TELECOMMUNICATIONS, INC., a Texas
corporation (herein referred to as "AGTI"), COYOTE GATEWAY, LLC, a Colorado
limited liability company, doing business as "AMERICAN GATEWAY
TELECOMMUNICATIONS" (herein referred to as "AGT"), PRINVEST CORP., a New Jersey
corporation (herein referred to as "PVC" in the context of a single corporate
entity, or collectively as "PRINVEST" when viewed collectively with its
affiliated subsidiary corporation, PRINVEST FINANCIAL CORP.), PRINVEST FINANCIAL
CORP., a New Jersey corporation (herein referred to as "PFC" in the context of a
single corporate entity, or collectively as "PRINVEST" when viewed collectively
with its parent corporation, PRINVEST CORP.), and XXXXXX X. XXXXXXX, an
individual (herein referred to as "XXXXXXX").
BACKGROUND
A. WHEREAS, this Agreement pertains to the purchase and acquisition by
AGTI of the outstanding Membership Interest of COYOTE GATEWAY, LLC
("AGT"), presently owned by COYOTE SYSTEMS, and comprising Eighty
Percent (80%) of the voting units, and a roughly equivalent percentage
of the economic interests, all as more completely set forth in the AGT
Operating Agreement, a copy of which is attached as Exhibit "A" and is
incorporated by reference. This Agreement also sets forth the
respective performances, mutual promises, covenants, representations
and other actions to be taken by each of the parties hereto, all of
which constitutes the aggregate consideration to be exchanged by the
respective parties hereto to effect the transfer of the aforesaid
Eighty Percent (80%) Membership Interest of AGT from COYOTE SYSTEMS to
AGTI, and which aforesaid transfer of the Membership Interest in AGT
shall cause AGTI to become the ONE HUNDRED PERCENT (100%) owner and
sole Member of AGT, thereby making AGT a wholly-owned subsidiary of
AGTI.
B. WHEREAS, COYOTE GATEWAY, LLC conducts a telecommunications business
under the d/b/a "AMERICAN GATEWAY TELECOMMUNICATIONS" or "AGT".
C. WHEREAS, COYOTE SYSTEMS presently owns the Membership Interest in AGT
which is the subject of this acquisition transaction.
D. WHEREAS, AMERICAN GATEWAY TELECOMMUNICATIONS, INC. ("AGTI") is a
holding company, and AGTI is presently a Member of AGT under the terms
of Exhibit "A" hereto.
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E. WHEREAS, PRINVEST is in the business of providing commercial financing
and lending services to business borrowers.
F. WHEREAS, PRINVEST has previously established for the benefit of AGT, a
certain credit facility, whereby AGT has received to date advances,
including accrued interest and fees, from PRINVEST an amount
aggregating to NINE MILLION EIGHT HUNDRED SIXTY-EIGHT THOUSAND TWO
HUNDRED TWENTY-SEVEN DOLLARS AND TWENTY-ONE CENTS ($9,868,227.21) in
U.S. currency (herein referred to as the "Credit Facility"), as
evidenced by a certain Financing and Security Agreement, dated June
30, 1999, as entered into between AGT and PFC, as well as certain
Promissory Notes executed by AGT regarding such advances.
G. In connection with the Credit Facility and the advances provided by
PRINVEST to AGT, and as further collateral to secure the repayment
obligations owed by AGT to PRINVEST, COYOTE SYSTEMS pledged to
PRINVEST Seven Hundred Eight Thousand Six Hundred Ninety-Two shares
(708,692) of common stock in COYOTE SYSTEMS under a certain Pledge
Agreement (herein referred to as the "Pledged Collateral"), which
Pledged Collateral PRINVEST presently holds as collateral with regard
to the ongoing obligations of AGT as owed to PRINVEST.
H. WHEREAS, PVC is a Fifty-Three and Three Quarters Percent (53.75%)
shareholder of AGTI.
I. WHEREAS, XXXXXXX is a Forty-Six and One Quarter Percent (46.25%)
shareholder of AGTI. XXXXXXX is also an officer and employee of AGT.
BINDING AGREEMENT OF THE PARTIES HERETO
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, including the mutual promises and covenants exchanged
herein, as well as the promised performances as also set forth herein, and
intending to be legally bound hereby, all of the parties hereto agree as
follows:
1. TRANSFER BY COYOTE SYSTEMS OF ITS ENTIRE MEMBERSHIP INTEREST IN AGT TO
AGTI.
As a result of its execution of this Agreement, COYOTE SYSTEMS
transfers and endorses to the order of AGTI, all of COYOTE SYSTEMS'
Membership Interest in AGT. By virtue of its execution of this
Agreement, AGTI, as the recipient of the transfer and as a Member of
AGT, hereby consents to the transfer.
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2. COYOTE SYSTEMS' REPRESENTATION AND WARRANTIES
COYOTE SYSTEMS hereby represents and warrants that the Membership
Interest is free and clear of any liens, encumbrances, or pledges, and
that the transfer of said interest is not in material violation of any
contract of COYOTE SYSTEMS, and has been duly authorized by COYOTE
SYSTEMS' Board of Directors, and is being executed by an officer of
COYOTE SYSTEMS. COYOTE SYSTEMS makes no further representations or
warranties whatsoever regarding AGT.
3. SURETYSHIP AGREEMENT TO BE EXECUTED BY AGTI REGARDING THE OBLIGATIONS
OWED BY AGT TO PRINVEST UNDER THE CREDIT FACILITY.
Contemporaneously with the execution of this Agreement, AGTI shall
execute a Suretyship Agreement with PRINVEST in such form as required
by PRINVEST or its legal counsel, and AGTI (as a surety for AGT) thus
becomes directly liable to PRINVEST for all of the outstanding
repayment obligations of AGT owed to PRINVEST under the Credit
Facility, which amount of indebtedness aggregates in the amount of
NINE MILLION EIGHT HUNDRED SIXTY-EIGHT THOUSAND TWO HUNDRED
TWENTY-SEVEN DOLLARS AND TWENTY-ONE CENTS ($9,868,227.21) as of the
date hereof. AGTI shall not be required to make any separate cash
payment, or other down payment, to any other party hereto in
connection with transactions described in this Agreement.
4. RETURN OF ALL OF THE PLEDGED COLLATERAL BY PRINVEST TO COYOTE SYSTEMS.
Contemporaneously with the execution of this Agreement, PRINVEST shall
return and deliver to COYOTE SYSTEMS the Pledge Agreement marked
cancelled, and all of the Pledged Collateral, specifically the Seven
Hundred Eight Thousand Six Hundred Ninety-Two shares (i.e., 708,692)
of common stock of COYOTE SYSTEMS, which Pledged Collateral had been
previously pledged by COYOTE SYSTEMS to PRINVEST under the aforesaid
Pledge Agreement as further collateral to secure the repayment
obligations of AGT to PRINVEST under the Credit Facility. As soon as
practicable after the execution of this Agreement, PRINVEST will
prepare and deliver to COYOTE SYSTEMS such UCC Termination Statements
(i.e., UCC-3 forms) as is necessary for COYOTE SYSTEMS to file the
same with all such applicable governmental recording authorities,
which UCC-3 forms shall terminate and extinguish any and all security
interests as was previously granted to PRINVEST regarding the
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aforesaid Pledged Collateral, and as may have been evidenced by any
and all UCC-1 Financing Statements, if any, as may have been filed by
PRINVEST regarding said Pledged Collateral.
5. COYOTE SYSTEMS TO RECEIVE FROM AGT A MONTHLY MARGIN PARTICIPATION
PAYMENT OF $0.0025 PER MINUTE FOR NETWORK TRAFFIC GENERATED OVER AGT'S
SWITCHES FOR THE 18 MONTH PERIOD: OCTOBER 1ST, 1999 THROUGH MARCH 31,
2001.
(a) Margin Participation Payment payable to COYOTE SYSTEMS by AGT.
Regarding all operational network traffic as may be generated by
AGT, or such other network traffic as may have originated from
sources other than AGT, but is nevertheless switched or otherwise
routed by AGT through AGT's telecommunications network
(collectively referred to as the "AGT Traffic"), and only for
such limited eighteen (18) month period from October 1, 1999
through March 31, 2001 (which aforesaid eighteen month period
shall not otherwise be tolled, suspended or extended beyond March
31, 2001), COYOTE SYSTEMS shall be entitled to receive from AGT
payable on a monthly basis, a margin participation payment equal
to $0.0025 per minute (i.e., one quarter [1/4] of one U.S. xxxxx
per minute) on all such AGT Traffic, which shall herein be
referred to as the "Margin Participation Payment".
(b) Timing of Payment to COYOTE SYSTEMS of the Margin Participation
Payment. AGT shall pay and deliver to COYOTE SYSTEMS the Margin
Participation Payment on a monthly basis for each said calendar
month commencing on October 1, 1999 and expiring on March 31,
2001 within ten (10) business days of each succeeding calendar
month following the close of the preceding calendar month for
which said Margin Participation Payment is payable (i.e., the
first Margin Participation Payment payable by AGT to COYOTE
SYSTEM for the month of October, 1999 shall be paid not later
than November 12, 1999.)
(c) Verification of Margin Participation Payment. In order to verify
and confirm the accuracy of the Margin Participation Payment
payable to COYOTE SYSTEMS by AGT, AGT shall deliver to COYOTE
SYSTEMS on a weekly basis copies of "Call Detail Reports", or
such other similar records, if any, which reports shall detail
monthly AGT Traffic. COYOTE SYSTEMS may, at its own expense, and
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no more than quarterly, request an audit of the AGT Traffic, with
which AGT agrees to cooperate fully. In the event that the audit
reveals an underpayment, AGT agrees to pay COYOTE SYSTEMS the
amount of the underpayment, plus interest calculated at 18% per
annum plus the cost of the audit.
6. MUTUAL LIMITED RELEASES AGAINST EACH OF THE PARTIES HERETO.
In consideration of the mutual agreements, promises, performances and
covenants contained herein, the receipt and sufficiency of which is
hereby acknowledged, each of COYOTE SYSTEMS, AGT, AGTI, PRINVEST,
XXXXXXX and their respective employees, officers, directors,
shareholders, affiliates, agents, assigns, representatives,
attorneys-in-fact, accountants, legal counsel, designees and other
appointees, do hereby release and forever discharge each and their
respective employees, officers, directors, shareholders, affiliates,
agents, assigns, representatives, attorneys-in-fact, accountants,
legal counsel, designees and other appointees, from any and all claims
of negligence in the performance of their respective duties in
connection with AGT and/or the Credit Facility, whether known or
unknown, from the beginning of time until the date hereof of this
Agreement.
7. COYOTE COMMUNICATION SERVICES TO PROVIDE MAINTENANCE AND TECHNICAL
SUPPORT SERVICES TO AGT ON A MONTH-TO-MONTH RENEWABLE BASIS UNDER THE
PARTIES' EXISTING MAINTENANCE AND SERVICING AGREEMENT.
(a) In accordance with the terms and conditions other than the
18-month original duration, including such performance and
quality assurance standards as set forth in the existing
Maintenance and Servicing Agreement, dated
___________________, 1999 entered into between AGT and
COYOTE COMMUNICATION SERVICES, INC., an affiliate of COYOTE
SYSTEMS, COYOTE COMMUNICATION SERVICES shall continue to
provide AGT with maintenance and technical support services
on a month-to-month (i.e., 30-day) renewable basis.
(b) As soon as practicable after the execution of this
Agreement, each of AGTI, AGT, COYOTE SYSTEMS and/or COYOTE
COMMUNICATION SERVICES shall identify and designate their
respective personnel, employees, representatives or other
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designees, which persons shall interface, jointly work with
and/or communicate with each other on a frequent and regular
basis in order to fully perform and discharge their
respective duties, rights and obligations under the
aforesaid Maintenance and Servicing Agreement.
8. COYOTE SYSTEMS TO BE THE EXCLUSIVE SWITCHING SUPPLIER TO AGT FOR THE
18 MONTH PERIOD, OCTOBER 7, 1999 THROUGH APRIL 6, 2001; AGT TO RECEIVE
A 50% PURCHASE DISCOUNT FROM COYOTE SYSTEMS DURING SAID PERIOD.
(a) For the eighteen (18) month period commencing on October 7,
1999 and expiring on Xxxxx 0, 0000, XXX hereby agrees that
it shall purchase from COYOTE SYSTEMS to the exclusion of
any other switch supplier, additional switches, if any,
deployed by AGT. However, if COYOTE SYSTEMS cannot timely
deliver and make operational such additional switch as
needed by AGT within 30 days of such request, AGT may
purchase such needed switch from any other switch supplier
without any monetary obligation owing to COYOTE SYSTEMS.
(b) In exchange for such exclusive relationship and during the
aforesaid eighteen (18) month period commencing on October
7, 1999 and expiring on Xxxxx 0, 0000, XXX shall receive a
Fifty Percent (50%) purchase discount from COYOTE SYSTEMS
(i.e., which 50% purchase discount shall be applied to
COYOTE SYSTEMS' full retail list price policies) on all
switches as may purchased by AGT from COYOTE SYSTEMS. This
discount shall not apply to any OEM equipment distributed,
but not manufactured by COYOTE SYSTEMS.
9. NO PUBLIC STATEMENTS OR OTHER PRESS RELEASES, IF ANY, MADE BY COYOTE
SYSTEMS REGARDING THIS TRANSACTION SHALL MAKE ANY REFERENCE TO
PRINVEST NAME.
COYOTE SYSTEMS shall neither make any public statement, nor shall
COYOTE SYSTEMS release into the public domain any press release,
mentioning the name of PRINVEST and, concerning any portion or part of
this transaction described herein in this Agreement unless required by
law, statute, regulation, ordinance, order of court of competent
jurisdiction or other rule of any governmental or administrative
agency.
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10. GOVERNING LAW AND WAIVER OF JURY TRIAL.
This Agreement shall be governed by the laws of the State of New
Jersey, and shall be interpreted and enforced in accordance with New
Jersey law without regard to principles of conflicts of laws. In the
event that any matter of dispute under this Agreement may subsequently
arise between the parties hereto, which dispute may proceed to
litigation, all parties to this Agreement hereby waive and relinquish
all rights to have such dispute adjudicated by a jury trial.
11. COUNTERPART SIGNATURES.
This Agreement may be executed in several counterparts, and as so
executed shall constitute one single Agreement, binding on all of the
parties hereto, notwithstanding that all parties are not signatory to
the original or the same counterpart.
12. SEVERABILITY.
If any portion of this agreement is declared by a court competent
jurisdiction to be void or unenforceable, such portion shall be deemed
severed from the Agreement, and the balance of the Agreement shall
remain in effect.
COYOTE NETWORK SYSTEMS, INC. PRINVEST CORP
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------- --------------------------
Title: President Title: President
-------------------------- --------------------------
AMERICAN GATEWAY PRINVEST FINANCIAL CORP
TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------- --------------------------
Title: President and CEO Title: President
-------------------------- --------------------------
COYOTE GATEWAY, LLC d/b/a AMERICAN XXXXXX X. XXXXXXX
GATEWAY TELECOMMUNICATIONS
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxx
-------------------------- ----------------------------------
Title: Manager Xxxxxx X. Xxxxxxx
--------------------------
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