PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") dated July 15, 1999, by and between
x.XX, Inc., a Delaware corporation ("ETV") with offices at 00000 Xxxx Xxx
Xxxxxxx, Xxxxxxxx 000, Xxxxxxxxxxxx, Xxxxxxx 00000 and The Free Network LLC, a
Michigan limited liability company ("TFN") with offices at 0000 Xxx Xxxxxx Xxxx,
Xxxxx 000, Xxxx, Xxxxxxxx 00000.
Recitals
TFN has agreed to acquire certain independent network marketing sales
representatives, customers and obligations of ETV and ETV will aid TFN in the
successful transition of said representatives, customers and obligations.
Neither TFN or ETV is subject to any agreement or understanding which would
prevent any aspect of this Agreement, except as set forth herein.
Now, therefore, in consideration of the foregoing recitals, which are true
and correct and are incorporated herein, and the mutual covenants and promises
contained herein, the parties agree as follows:
1) Definitions
(a) "Customer" shall mean one who authorizes an Independent
Representative of TFN to maintain or switch their long distance
telephone service and/or Internet service to the carrier of TFN's
choice, the long distance telephone service carrier for purposes of
this Agreement is Unidial Communications, Inc., a Kentucky corporation
("Unidial").
(b) "TFN Representative" shall mean one who executes a TFN Independent
Representative agreement and abides by the TFN Independent
Representative policies and procedures.
(c) "Purchased Assets" shall mean the ETV network of Independent
Representatives and a list of customers of Unidial's long distance
telephone services signed up by ETV's Independent Representatives
which will be encouraged to become TFN Independent Representatives,
there being no requirement, obligation, or guaranty that the customers
will remain Unidial customers or the ETV Independent Representatives
will become and/or remain TFN Independent Representatives, and ETV's
right title and interest in and to that certain Agent's Agreement, as
amended and restated, between ETV and Unidial (the "Unidial
Agreement").
(d) "Independent Representative" shall mean an independent network
marketing sales representative.
2) Purchase Price
(a) The aggregate purchase price for the Purchased Assets shall be
$250,000.00 (the "Purchase Price"). The Purchase Price shall be
deposited into an escrow account at closing in the form of a wire
transfer of immediately available funds and held pursuant to that
certain Escrow Agreement of even date herewith (the "Escrow
Agreement") among TFN, ETV and Certilman Balin Xxxxx & Xxxxx, LLP, as
escrow agent (the "Escrow Agent").
(b) ETV will, following confirmation of the Escrow Agent's receipt of
the Purchase Price, supply a computer diskette containing a hierarchy
report listing ETV's Independent Representatives and their respective
customers billing telephone numbers to TFN at closing.
(c) While this Agreement is in effect, and for a period of two (2)
years after its termination, ETV shall not, whether as principal,
agent, partner, joint venturer or in any other capacity and whether
acting in its own name or through any other person, corporation or
entity in which ETV has or will have an interest, compete with TFN its
owners, subsidiaries, affiliates or their successors or assigns, in
any way in the "Network Marketing" or "Multilevel" arena in the United
States.
(d) ETV will assign ETV's rights under its Agent's Agreement with
UniDial to TFN, subject to Unidial's consent thereto.
3) Right to Purchase Inventory
(a) TFN shall have an option for 45 days from the date of this
Agreement to purchase a maximum of 500 units of ETV's inventory of TV
set-top boxes produced by Boca Research, Inc. (the "Inventory") for a
purchase price of $200.00 per unit on terms and conditions to be
determined by ETV and TFN upon notice of TFN's intent to purchase the
Inventory (the "Option").
(b) In the event that TFN exercises its Option, ETV agrees that each
unit purchased by TFN will be properly programmed to comply with TFN's
internet provider. All costs and expenses of the purchase of the
Inventory by ETV from Boca Research, Inc. and programming of the
Inventory shall be paid by ETV.
(c) The parties acknowledge that if TFN does not purchase the
Inventory pursuant to the Option, ETV shall have a substantial risk of
loss since in all likelihood it will be unable to sell the Inventory
without its Independent Representatives for which ETV has negotiated
an increased Purchase Price to compensate for this risk. TFN
acknowledges that ETV is relying on TFN's performance of its
obligations in entering into this Agreement upon the terms and
conditions hereof.
4) Survival
(a) The terms of this Agreement shall survive for the periods set
forth herein and the representations and warranties shall survive
until the expiration of their applicable statutes of limitation except
that the terms of Section 2(c) and Sections 8 through 19 shall survive
indefinitely.
(b) TFN shall not be liable to ETV for loss of profits or damages of
any kind whatsoever or for any kind of compensation on account of or
arising directly or indirectly from termination of this Agreement in
accordance with the terms hereof, or for any expenditures, investments
or commitments made by ETV, and all rights and claims of that nature
as may otherwise exist are hereby unconditionally and irrevocably
waived by ETV.
(c) Notwithstanding any other provision of this Agreement, upon
termination of this Agreement the parties will comply with all
requirements of law applicable to such termination.
5) Representations and Warranties of ETV
(a) ETV represents and warrants to the TFN that the following
representations and warranties are true and correct on the date of
this Agreement:
(i) Corporate Organization and Authorization. ETV is duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware, with all requisite
corporate power and authority to own, operate and lease its
properties (including the Purchased Assets) and to carry on
its business as is now being conducted, and is qualified or
licensed to do business in each jurisdiction in which the
property owned, leased or operated by it in connection with
its business or the nature of its business makes such
qualification or licensing necessary. ETV has all requisite
corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized
by all necessary corporate action of ETV.
(ii) Title to the Purchased Assets. ETV has all right, title
and interest in the Purchased Assets free and clear of any
liens, security interests, charges and encumbrances.
(iii) Material Contracts. ETV is not in default under, and
has received no notice of default with respect to, any
material contracts, leases, purchase orders and other
agreements in effect on the date hereof which materially
affect any of the Purchased Assets, except as set forth in
Schedule 5(a)(iii).
(iv) Tax Returns and Payments. ETV has received no notice
from any taxing authority of any material obligation that
may constitute or result in any lien or encumbrance on the
Purchased Assets.
(v) Binding Agreement. This Agreement has been duly executed
and delivered by ETV. This Agreement, assuming it is the
valid and binding agreement of TFN, is the valid and binding
obligation of ETV enforceable against ETV in accordance with
its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable
principles. The execution and delivery by ETV of this
Agreement and the consummation by ETV of the transactions
contemplated hereby (i) will not violate ETV's Articles of
Incorporation or ByLaws or, assuming the obtaining of
necessary consents, any material contract, agreement or
other instrument to which ETV is a party or by which it is
bound, or, to ETV's knowledge, any judgment, order or decree
of any court to which ETV is subject or any law or
regulation of any governmental authority to which ETV is
subject, the violation of which could reasonably be expected
to have a material adverse effect on the Purchased Assets
and (ii) will not result in the creation or imposition of
any lien or encumbrance against any of the Purchased Assets.
(vi) No Litigation. There is no litigation, proceeding or
governmental investigation pending or, to the knowledge of
ETV, threatened against ETV relating to any of the Purchased
Assets which could reasonably be expected to have a
materially adverse effect on the consummation of the
transactions contemplated hereby or result in any material
adverse effect on the Purchased Assets.
(vii) Permits and Licenses. To the knowledge of ETV, ETV is
in possession of all material permits, licenses or other
authorizations of governmental authorities required for the
conduct of its business and its business has been conducted
in accordance with the material requirements of such
permits, licenses or other authorizations of governmental
authorities in effect on the date hereof.
(viii) No Condemnation Pending. ETV has not received any
notice from any Federal, state, county or municipal agency
or authority with respect to the taking of any of the
Purchased Assets and there is no proceeding pending or, to
the knowledge of ETV, threatened with respect thereto.
(ix) Brokers. ETV has not paid or become obligated to pay
any fee or commission to any broker, finder, investment
banker or other intermediary in connection with the
transactions contemplated by this Agreement.
(x) Compliance with Law. ETV is in substantial compliance in
all material respects with all applicable Federal, state and
local laws, ordinances and published rules and regulations
of any governmental entity having jurisdiction over its
business and any judgments, injunctions, orders or decrees
applicable to its business except in all cases for
noncompliance that could not reasonably be expected to have
a material adverse effect on the Purchased Assets.
(xi) Bankruptcy, etc. ETV has not commenced proceedings
under any bankruptcy, reorganization, arrangement, debt or
receivership law, been deemed insolvent, or consented to the
appointment of a receiver or assignment for the benefit of
creditors.
6) Representations and Warranties of TFN
(a) TFN represents and warrants to ETV that the following
representations and warranties are true and correct on the date
of this Agreement:
(i) Organization, Good Standing and Power. TFN is a limited
liability company duly organized, validly existing and in
good standing under the laws of the State of Michigan and
has all requisite power and authority to own its properties
and to carry on its business as it is presently being
conducted. TFN has all requisite power and authority to
purchase and own the Purchased Assets and perform the other
covenants and agreements of TFN under this Agreement. The
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have
been duly authorized by all necessary action of TFN.
(ii) Binding Agreement. This Agreement has been duly
executed and delivered by TFN. This Agreement, assuming it
is the valid and binding agreement of ETV, is a valid and
binding obligation of TFN, enforceable against TFN in
accordance with its terms, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable
principles. The execution and delivery of this Agreement by
TFN and the consummation by TFN of the transactions
contemplated hereby will not violate the Articles of
Organization or Operating Agreement of TFN or any material
contract, agreement or other instrument to which TFN is a
party or by which it or any of its properties are bound, or,
to TFN's knowledge, any judgment, order or decree of any
court to which TFN is subject or any law or regulation of
any governmental authority to which TFN is subject, the
violation of whic could reasonably be expected to have a
material adverse effect on TFN.
(iii) Required Consents. There are no governmental or other
third party consents or approvals required to be obtained by
TFN or any legal, contractual or other limitations on TFN's
purchase of the Purchased Assets.
(iv) Brokers. TFN has not paid or become obligated to pay
any fee or commission to any broker, finder, investment
banker or other intermediary in connection with the
transactions contemplated by this Agreement. TFN represents
that ETV shall have no obligations whatsoever to any broker
resulting from this Agreement or the transactions
contemplated hereby.
7) Conditions of Closing
(a) The obligations of TFN under this Agreement are subject to
the satisfaction of all the following conditions as of the date
of this Agreement, any of which may be waived in writing by TFN:
(i) all representations and warranties of ETV contained in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement; and
(ii) ETV shall have performed in all material respects all
of its covenants and agreements hereunder and shall deliver
or cause to be delivered the required documents,
information, files, and instruments as set forth in this
Agreement.
(b) The obligations of ETV hereunder are subject to the
satisfaction of all of the following conditions as of the date of
this Agreement, any of which may be waived in writing by ETV:
(i) all representations and warranties of TFN contained in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement;
(ii) TFN shall have performed in all material respects all
of its covenants and agreements hereunder and shall deliver
or cause to be delivered the required documents,
information, files, and instruments as set forth in this
Agreement; and
(iii)the payment of the Purchase Price described in Section
1 shall have been paid by TFN.
8) Confidentiality and Nonuse of Proprietary Information
The parties acknowledge that in connection with this Agreement, each party
may have disclosed or may disclose information to the other party, in written,
oral, visual or other form, relating to technical information, drawings,
descriptions, specifications, techniques, manuals, and marketing and sales
information (all such information being referred to as the "Confidential
Information"), provided, however, that the term Confidential Information shall
not include such portions thereof which (i) ar or become generally available to
the public through no fault of the parties or materials such as general
informational brochures that are prepared by the parties for distribution to the
public, (ii) such information that becomes available to the other party on a
nonconfidential basis from a source which is not prohibited from disclosing such
information to the other party, (iii) is required to be disclosed pursuant to
court or administrative agency orders or subpoena, (iv) is required to be
disclosed by law, rule or regulation or the rules and regulations of any
governmental or quasi-governmental agency, or self-regulating organization,
including without limitation, the NASDAQ Stock Market, or (v) other disclosures
made in accordance with Section 19(a) hereof. Each party agrees that they will
not, without the other party's prior written consent, disclose any Confidential
Information to any other person and will not use any of the Confidential
Information for any purpose. Each part will disclose the Confidential
Information only to the other party's employees and others within that party's
organization who need to know for the purpose of this Agreement and each party
will assure compliance by such persons with the terms of this Agreement. Each
party's respective Confidential Information will remain the property of that
party and each party agrees to return all Confidential Information, including
copies thereof, to the other party on demand. In addition to other remedies,
each party shall be entitled to specific performance and injunctive and
equitable relief as a remedy for any breach of this Section 8. Upon expiration
or termination of this Agreement, each party shall return the Confidential
Information to the other party immediately without need for demand.
9) Governing Law
This agreement shall be interpreted, construed, governed and enforced
according to the internal laws of the State of Michigan without regard to
conflict or choice of laws of Michigan or any other jurisdiction. This Agreement
shall be executed in Michigan and is intended to be performed in Michigan.
10) Attorney's Fee
In the event of any arbitration or litigation or appeal process concerning
any controversy, claim, or dispute between the parties hereto, arising out of or
relating to this Agreement or the breach thereof, or the interpretation thereof,
the prevailing party shall be entitled to recover from the non-prevailing party
reasonable expenses, and attorney's fee and costs incurred therein whether by
judgment or settlement or in the enforcement or collection of any judgment or
award rendered therein. The term "prevailing party" means the party determined
by the court or arbitrator to have most substantially prevailed, even if such
party did not prevail in all matters.
11) Amendments
Any amendment or modification of this Agreement, or any waiver or consent
granted hereunder, must be in writing and signed by the party to be bound
thereby to be valid for purposes of this Agreement, and any such amendment,
modification, waiver or consent shall be valid only in the specific
circumstances for which it is given.
12) Successors and Assigns
Neither this Agreement, nor any of the rights and duties of ETV hereunder,
are assignable or transferable without the prior written consent of TFN and any
purported assignment or transfer by ETV without such consent shall be void. TFN
may assign its rights or delegate its performance hereunder, in whole or in
part, to any affiliated company.
13) No Waiver
If any party to this Agreement fails to, or elects not to enforce any
rights or remedy to which it may be entitled hereunder or by law, such right or
remedy shall not be waived, nor shall such non-action be construed to confer a
waiver as to any continued or future acts, nor shall any other right or remedy
be waived as a result thereof. No right under this Agreement shall be waived
except as evidenced by a written document signed by the party waiving such
right.
14) Arbitration
Any dispute, controversy or claim arising out of or related to this
Agreement, or the breach, termination, or invalidity hereof, that is not
resolved amicably by the parties shall be finally determined and settled by the
American Arbitration Association in accordance with the arbitration rules in
effect the date of the Agreement, with such arbitration taking place in Oakland
County, Michigan. The American Arbitration Association shall be the appointing
authority. The number of arbitrators shall be one. The judgment of such
arbitration proceeding shall be binding upon the parties and may be entered and
enforced in any jurisdiction within or without the United States. The arbitrator
shall, in his or her decision, state all relevant and material findings of fact
and conclusions of law necessary or desirable to explain and support said
decision. Actions seeking injunctive relief shall be non-arbitrable.
15) Injunction
It is mutually acknowledged, understood and agreed that the Confidential
Information and talents and abilities of, and the services to be rendered
hereunder by, TFN and ETV respectively are exceptional, unique and
irreplaceable, and that any breach, violation or evasion by ETV or TFN of the
terms of this Agreement will result in immediate and irreparable injury and harm
to TFN or ETV respectively. Accordingly, the parties hereto agree that in the
event of any breach, violation or evasion of this Agreement by ETV or TFN, TFN
or ETV respectively shall be entitled to the remedies of injunction and specific
performance as well as to all other legal or equitable remedies to which TFN or
ETV respectively may legally be entitled, including, without limitation, the
immediate termination of this Agreement.
16) Compliance With Laws
ETV and TFN shall at all times comply with applicable laws in connection
with this Agreement. ETV and TFN represent and warrant to each other that it is
fully authorized and qualified to perform its obligations set forth in this
Agreement in accordance with all applicable laws and agrees to maintain such
authorization and qualification at all times.
17) Indemnification
(a) ETV agrees to indemnify and hold harmless TFN and its
affiliates against all claims, demands, suits, liabilities,
losses, costs and expenses, including attorneys' fees and
disbursements, arising out of or from any acts or omissions
of any nature whatsoever of ETV or its shareholders,
directors, officers, agents, representatives or employees.
(b) TFN agrees to indemnify and hold harmless ETV and its
affiliates against all claims, demands, suits, liabilities,
losses, costs and expenses, including attorneys' fees and
disbursements, arising out of or from any acts or omissions
of any nature whatsoever of TFN or its shareholders,
directors, officers, agents, representatives or employees.
18) Notices
All notices given in connection with this Agreement shall be made in
writing, sent by certified, registered mail, express mail, or by courier,
messenger or overnight carrier addressed as follows or as may, from time to time
be designated in writing by either party:
x.XX, Inc.
X.X. Xxx 0000
Xxxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Chief Financial Officer
THE FREE NETWORK L.L.C.
0000 Xxx Xxxxxx Xx. Xxxxx #000
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxx Xxxxxxxxxxx
Notice shall be deemed given when served personally, or if either mailed
via certified mail, return receipt requested or surrendered to a federally
licensed common carrier for same or next day delivery, then two days after said
mailing or surrender. Either party to this contract/agreement can change their
address for purposes of receiving notice, in accordance with notice provision.
19) Miscellaneous
(a) Any public announcements or similar publicity with
respect to this Agreement or the transactions contemplated
hereby shall only be made at such time and in such manner as
the parties hereto shall agree in writing; provided,
however, that nothing herein shall prevent either party upon
notice to the other from making such public announcements as
such party's counsel may advise such party in writing to
make in order to satisfy any legal obligations of such
party.
(b) From time to time after the date of this Agreement, as
and when requested by either party hereto, TFN and ETV shall
execute and deliver, or cause to be executed and delivered,
such documents and instruments and shall take, or cause to
be taken, such further or other actions as ETV or TFN may
deem necessary or desirable to carry out the intent and
purposes of this Agreement, to convey, transfer, assign and
deliver to TFN, the Purchased Assets (or to evidence any of
the foregoing) and to consummate and give effect to the
other transactions, covenants and agreements contemplated
hereby.
(c) This Agreement sets forth the entire agreement and
understanding between the parties concerning the subject
matter hereof. In case any one or more of the rights or
obligations under this Agreement shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining rights and obligations
shall not in any way be affected or impaired thereby, and
such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or
enforceability of such rights and obligations under this
Agreement in any other jurisdiction.
(d) Neither ETV nor TFN shall authorize, permit or acquiesce
in any action, which would otherwise constitute a breach of
this Agreement if such action were taken by ETV or TFN
respectively, to be taken by (i) any person controlling,
controlled by or under common control with, ETV or TFN
respectively, or (ii) any relative of any such person, or
(iii) any other person in which or with whom ETV or TFN
respectively, or any such person or relative has a legal or
beneficial interest or arrangement
(c) The provisions of this Agreement are intended to be severable. In the
case one or more of the provisions contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained in this Agreement shall not
in any way be affected or impaired thereby.
(d) The titles appearing in this Agreement are for convenience only, and
shall have no effect on the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, TFN and ETV have caused this Agreement to be
executed by the undersigned officers, duly authorized on the date written above.
x.XX, Inc. The Free Network, L.L.C.
By: /s/ Xxxxx X. Xxxxxxxxx By:/s/ Xxxxxxxxx Xxxxxxxxxxx
-------------------------------- ---------------------------
Xxxxx X. Xxxxxxxxx Xxxxxxxxx Xxxxxxxxxxx
Its: Chief Financial Officer Its: President of Business
Development
