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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): November 17, 1997
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HICKORY TECH CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 0-13721 41-1524393
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
221 East Hickory Street, P.O. Box 3248, Mankato, MN 56002-3248
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (800) 326-5789
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 30, 1997, the Registrant acquired the assets of Datacomm Products
(Datacomm). Datacomm, a company with approximately $5 million in revenues based
in Brooklyn Park, Minnesota, will become a division of Collin Communications
Systems Co. (Collins). Collins is a subsidiary of the Registrant. The
acquisition was accounted for as a purchase of assets.
Datacomm has been in the data networking business for eleven years with a
customer base spanning the Midwest. Datacomm provides a consultative approach
to user hardware and networking needs as well as providing excellent ongoing
maintenance support. Robert D. Alton, President, CEO and Chairman of the Board
of the Registrant announced: "This acquisition will round out Collins
capabilities and enable them to extend their outstanding reputation for
excellent service in the telephony arena to the data world. Datacomm's strength
provides the keystone that will enable Collins to continue its growth in the
market place." The Registrant funded the acquisition through the use of internal
funds.
The Registrant's purchase price is scheduled to be paid over three years. Three
fixed payments totalling $2.6 million, including principal and interest, plus a
contingent payment estimated at $1.4 million will be paid over a period ending
November 1, 2000. The majority of the purchase price is being attributed to
intangible assets by the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information
Not Applicable
(c) Exhibits
2. Agreement For Purchase and Sale of Assets Dated As Of October 30,
1997 Between Gregory D. Paquette and Jacalyn P. Paquette Individually and Doing
Business As DATACOMM PRODUCTS And HICKORY TECH CORPORATION.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 17, 1997
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HICKORY TECH CORPORATION
By /s/ Robert D. Alton, Jr.
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Robert D. Alton, Jr., Chief Executive
Officer
By /s/ David A. Christensen
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David A. Christensen, Chief Financial
Officer
EXHIBIT INDEX
Exhibit No. Document Description
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2. Agreement For Purchase and Sale of Assets Dated As Of October 30,
1997 Between Gregory D. Paquette and Jacalyn P. Paquette
Individually and Doing Business As DATACOMM PRODUCTS And HICKORY
TECH CORPORATION.
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Exhibit 2
AGREEMENT FOR
PURCHASE AND SALE
OF ASSETS
DATED AS OF OCTOBER 30, 1997
BETWEEN
GREGORY D. PAQUETTE AND JACALYN P. PAQUETTE
INDIVIDUALLY AND DOING BUSINESS AS
DATACOMM PRODUCTS
AND
HICKORY TECH CORPORATION
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ASSET PURCHASE AGREEMENT
This Agreement made and entered into this 30th day of October, 1997, by and
between Hickory Tech Corporation, a Minnesota corporation, hereinafter called
("Buyer"), and Gregory D. Paquette and Jacalyn P. Paquette, individually and as
the sole proprietor of Datacomm Products, hereinafter called "Seller".
RECITALS
A. Seller owns and operates and is engaged in the business of providing
data networking services and related and incidental computer network services
(the "Relevant Business") under the name Datacomm Products to customers in
Minnesota and adjacent states. The Relevant Business is located in Brooklyn
Park, Minnesota.
B. Seller desires to sell and Buyer desires to purchase certain of
Seller's tangible and intangible assets used or held for use in the Relevant
Business.
C. In connection with this transaction, Seller has also agreed to enter
into a Non-Competition Agreement and Employment Agreement with Buyer.
D. In connection with this transaction, Seller has also agreed to enter
into a Lease with Buyer for the property occupied by the Relevant Business.
TERMS
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the parties have made the following
AGREEMENT.
ARTICLE I
PURCHASE OF SALE OF ASSETS
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement at the Closing (as defined in Section 2.7 thereof). Seller will
sell, convey, transfer and deliver to Buyer, and Buyer will purchase from Seller
all the assets and properties of every kind and description, tangible or
intangible (except those assets which are specifically set forth on Schedule
2.9, attached hereto) used or useful and comprising the Relevant Business
(collectively the "Purchased Assets"), free and clear of all liens, claims,
liabilities or other adverse legal or equitable interests. Without limiting the
generality of the foregoing, the Purchased Assets to be transferred at the
Closing shall include the following:
a. Licenses, permits, authorizations, approvals, variances, waivers or
consents, or applications, to the extent transferable to Buyer, for any of the
foregoing issued to Seller in the Relevant Business by any United States, state
or local governmental entity or municipality or subdivision thereof
(collectively, the "Governmental Authorities"). To the extent the
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same are not transferable, the parties agree that this Agreement and the Bill of
Sale to be delivered by Seller to Buyer at the Closing shall transfer to the
Buyer all of Seller's equitable rights therein;
b. Seller's inventory set forth on Schedule 1(b) attached hereto (the
"Inventory") including, without limitation, the new product inventory and
maintenance inventory;
c. Seller's machinery, equipment, furniture, tools, parts, trade fixtures
and other tangible personal property owned by Seller set forth on Schedule 1(c)
attached hereto (the "Equipment");
d. Prepaid expenses, except any insurance premium prepayments and
customer deposits of the Seller in the Relevant Business;
e. Know-how, trademarks, service marks, trade names, copyrights,
licenses, developments, designs, technology, processes, confidential information
(and applications for any of the foregoing and rights therein) and other
intellectual and intangible property rights, discoveries, business methods and
trade secrets owned by Seller;
f. All rights and benefits of Seller in, to and under contracts,
agreements, leases, commitments and undertakings set forth on Schedule 1(f)
attached hereto (the "Contracts");
g. All books, files, records, and computer tapes and disks used in or
relating to the Relevant Business or the Purchased Assets. Title to all of
Seller's records, documents and papers of every kind and nature pertaining to
the Relevant Business sold hereunder shall be delivered to Buyer, but any part
thereof which Seller may reasonably require for use in connection with any tax
audit or similar proceeding after the Closing Date shall either be delivered to
Seller or made available to him in such manner as may best meet the respective
needs of the parties. In any case the party receiving or retaining such records
shall make them available to the other during a period of five years following
the Closing Date. After the expiration of said five-year period either party
shall, before destroying any of such records received by it, offer them to the
other.
h. The business and goodwill of Seller as a going concern, including
lists of all of Seller's Customers ("Customer List").
ARTICLE II
PURCHASE PRICE, ADJUSTMENTS AND PAYMENTS
2.1 PURCHASE PRICE. In consideration of the sale, conveyance, transfer
and delivery to Buyer of the Customer List at the Closing, Buyer shall pay to
Seller, or to parties designated by Seller, the sum of $1,964,000.00, plus any
additional purchase price as provided in Section 2.3 below, in installments as
set forth in Section 2.2 below.
In consideration of the sale, conveyance, transfer and delivery to Buyer of
all of the other Purchased Assets at the Closing, Buyer shall pay to Seller, or
to parties designated by Seller, the sum of $636,000.00 in cash, wire transfer
or other immediately available funds at the Closing. The total amount paid
pursuant to this Section 2.1 is hereinafter referred to as the "Purchase Price".
2.2 a. PAYMENT OF BALANCE OF PURCHASE PRICE. In addition to the partial
Purchase Price payment of $636,000.00 as set forth in Section 2.1 above,
the Purchase Price for the Customer List shall be paid in cash, wire
transfer or other immediately available funds as follows:
At the Closing $ 964,000.00
On December 31, 1998 $ 500,000.00
On December 31, 1999 $ 500,000.00
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TOTAL $ 1,964,000.00
No interest shall accrue under this Agreement on any installment payment.
b. DEFAULT. In the event Buyer shall fail to pay any installments
required by this Section 2.2 or Section 2.3 when due, or should Seller, in
good faith, reasonably determine that there has been a material change in
Buyer's financial circumstances which impairs the Buyer's ability to pay
any outstanding installments required by this Section 2.2 or Section 2.3,
Seller may provide Buyer with written notice of such default or impairment,
and Buyer shall have 10 days from the date of actual receipt of Seller's
written notice to cure such default, or, in the event Seller has deemed
impaired Buyer's ability to pay any outstanding installments required by
this Section 2.2 or Section 2.3, Buyer may place in escrow an amount equal
to all future installments due, to cure such impairment. In the event
Buyer fails to so cure the default or impairment, any remaining
installments required to be paid by this Section 2.2 or Section 2.3 shall
become immediately due and payable. In the event the installment described
in Section 2.3 is accelerated pursuant to this Section 2.2b., the
installment shall be placed in escrow and the adjustment to such
installment shall continue to be made as contemplated by Section 2.3 below,
and the escrow agent shall be obligated to return to Buyer a portion of
such installment in the event the Cumulative Gross Profit is less than
$5,500,000.00 as set forth in such Section 2.3; otherwise, the escrow
balance shall be paid to Seller on its due date as set forth in Section
2.3. The failure of Seller to exercise his remedies under this paragraph
at any particular time shall not constitute a waiver of his right to
subsequently exercise these remedies.
In the event Seller shall commence litigation or any other legal action or
proceeding to enforce his remedies under this Section 2.2 or Section 2.3,
and shall thereafter obtain judgment against Buyer for the obligations due
Seller under this Section 2.2 or Section 2.3, Buyer shall be obligated to
pay all of Seller's costs of collection, including reasonable attorney
fees.
In the event any escrow agent is necessitated as described above, Norwest
Bank Minnesota, N.A. shall be designated as such escrow agent. Buyer shall
be responsible for all fees and other costs charged by such escrow agent
and shall execute any escrow agreement required by such escrow agent.
Buyer shall be entitled to any interest earned on any escrowed funds.
2.3 POTENTIAL ADDITIONAL PURCHASE PRICE. Buyer agrees to pay to
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Seller, on November 1, 2000, as additional Purchase Price, the amount of
$1,400,000.00, which may be adjusted as described below, provided that the
Cumulative Gross Profit of the Relevant Business for the 36 month period
commencing on the Closing Date is $5,500,000.00. "Cumulative Gross Profit"
shall be defined as all revenues derived from the Relevant Business during the
36 month period commencing on the Closing Date, less the cost of sales and
materials used. The parties intend to use the same method used by Seller in
determining gross profit from the Relevant Business prior to the Closing Date to
determine gross profit for the purposes of this adjustment. The exact amount of
such additional Purchaser Price shall be adjusted or calculated as follows:
For each dollar that Cumulative Gross Profit is above $5,500,000.00, the
final additional Purchase Price payment to Seller shall be adjusted upwards by
forty-five cents ($0.45). Thus, for example, a Cumulative Gross Profit of
$6,000,000, would result in a final additional Purchase Price installment
payment of $1,625,000, payable to Seller on November 1, 2000.
For each dollar that Cumulative Gross Profit is less than $5,500,000.00,
the final additional Purchase Price payment to Seller shall be adjusted downward
by $1.00, to a maximum downward adjustment of $1,400,000.00. Thus, for a
Cumulative Gross Profit of $4,100,000 or less, the additional Purchase Price
installment payment due on November 1, 2000 will be $0.
In the event a dispute arises between Buyer and the Seller with respect to
any accounting under this Section, the parties shall employ an auditing firm of
regional reputation to audit and analyze appropriate records of the Relevant
Business with respect to the accuracy of the calculations. Any such audit shall
begin within thirty days of Buyer's receipt of a written request to audit signed
by Seller and shall be conducted during normal business hours at a time to be
mutually agreed upon by the parties. In the event the audit reveals a
discrepancy greater than $220,000.00 in Buyer's method of calculating Cumulative
Gross Profit, Buyer shall pay for the cost of the audit, otherwise Seller shall
pay for the cost of the audit.
2.4 PAYMENT INSTRUCTIONS Each of the installments of the Purchase Price
will be paid to Seller by one or more wire transfers of immediately available
funds, in such amounts and to such payee accounts as shall be designated by
Seller. Such designation shall be made not less than five (5) business days
prior to the payment due date.
2.5 ALLOCATION. The Purchase Price shall be allocated as set forth on
Schedule 2.5 which Schedule shall be subject to final, good faith negotiation
between Seller and Buyer prior to the Closing. Buyer and Seller agree to be
bound by the allocation and will not take any position inconsistent with such
allocations and will file all returns and reports with respect to the
transaction contemplated by this Agreement, including all federal, state and
local tax returns, on the basis of such allocations.
2.6 TAXES. Seller shall be responsible for and shall pay all applicable
state sales or transfer taxes, if any, arising out of the transactions
contemplated by this Agreement.
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2.7 CLOSING. The closing (the "Closing") of the transactions provided for
herein shall take place at the offices of the Buyer in Mankato, Minnesota, at
8:30 a.m. on November 3, 1997, or at such other time and place as the parties
may agree to in writing (the "Closing Date").
2.8 LIABILITIES. Seller shall retain and Buyer shall not assume or in any
way be responsible or liable with respect to, any liabilities or obligations of
Seller whether arising out of or in connection with the Relevant Business, the
Purchased Assets or otherwise, whether fixed, contingent or otherwise, or
whether known or unknown, except for the liabilities and obligations of Seller
under the Contracts set forth on Schedule 1(f), including all costs of sales and
materials normally invoiced to Seller's customers in the ordinary course of the
Relevant Business relating to such Contracts which have not been paid for by
Seller and not invoiced to customers, and the Licenses, if any, described in
Section 1(a).
2.9 EXCLUDED ASSETS Seller's cash in bank and, except as set forth in
paragraph 2.10 below, Seller's accounts receivable have not been sold to Buyer
as part of this Transaction. In addition, Seller has excluded certain other
assets from this Transaction, which are specifically listed on the list of the
Excluded Assets, attached as Schedule 2.9.
2.10 REIMBURSABLE COSTS. In addition to that portion of the Purchase
Price to be paid to Seller at the Closing pursuant to Section 2.2 of this
Agreement, Buyer shall reimburse Seller for Seller's out-of-pocket project costs
at Closing, provided that such costs are supported by evidence of Seller's
payment thereof. "Out-of-pocket project costs" is defined as any unreimbursed
direct costs of sales and materials, excluding labor and overhead incurred by
Seller, normally invoiced to customers of the Relevant Business for jobs
contracted for by Seller which have not been completed prior to the date of
Closing and which have not yet been invoiced to customers of the Relevant
Business. Buyer shall be responsible for all costs of sales and materials
normally invoiced to Seller's customers in the ordinary course of the Relevant
Business relating to jobs contracted for by Seller which (i) have not been
completed prior to the date of Closing, (ii) have not been paid for by Seller,
and (iii) have not been invoiced to customers of Seller.
ARTICLE 3
RELATED AGREEMENTS
3.1 EMPLOYMENT AND NONCOMPETITION AGREEMENT WITH SELLER. The transaction
contemplated by this Agreement shall be closed concurrently with an Employment
and Noncompetition Agreement between Buyer and Seller, which Buyer shall cause
to be executed and delivered to Seller at the Closing hereof. The Employment
and Noncompetition Agreement shall be in substantially the same form as the
agreement attached as Exhibit 3.1. Buyer does not have the right to
purchase and Seller does not have the obligation to sell the Assets comprising
the Relevant Business other than together with the closing of the transactions
contemplated by this Agreement, the Employment and Noncompetition Agreement
described in this Section, the Consulting Services Agreement described in
Section 3.2 below, and the Lease Agreement described in Section 3.3 below (the
"Related Agreements").
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3.2 CONSULTING SERVICES AGREEMENT WITH JACALYN P. PAQUETTE. The
transaction contemplated by this Agreement shall be closed concurrently with a
Consulting Services Agreement between Buyer and Jacalyn P. Paquette. In
connection of the purchase of the Assets of the Relevant Business and for
independent consideration, Buyer and Jacalyn P. Paquette shall cause to be
executed and delivered to one another at the Closing hereof a Consulting
Services Agreement in substantially the same form as Exhibit 3.2. Buyer does
not have the right to purchase and Seller does not have the obligation to sell
the Assets comprising the Relevant Business other than together with the closing
of the transactions contemplated by this Agreement, the Consulting Services
Agreement described in this Section, and the Employment and Noncompetition
Agreement described in Section 3.1 above, and the Lease Agreement described in
Section 3.3 below.
3.3. LEASE. The transaction contemplated by this Agreement shall be
closed concurrently with a 36-month lease for the existing Relevant Business
office and warehouse facility located at 3217 85th Avenue North in Brooklyn
Park, Minnesota, to be made between Seller, as
Lessor, and Buyer, as Lessee ("the "Lease"). The monthly base rent for the
facility will be $4,583 per month. Buyer will be responsible for utilities,
real estate taxes and common area maintenance expenses. Renewal options under
similar terms and an option for the Buyer to purchase the Relevant Business site
will be incorporated into the Lease. Buyer and Seller shall cause to be
executed and delivered to one another at the Closing hereof a Lease in
substantially the same form as Exhibit 3.3. Buyer does not have the right to
purchase and Seller does not have the obligation to sell the Assets comprising
the Relevant Business other than together with the closing of the transactions
contemplated by this Agreement, the Lease described in this section, the
Consulting Services Agreement described in Section 3.2 above, and the Employment
and Noncompetition Agreement described in Section 3.1 above.
3.4 ASSIGNMENT AND ASSUMPTION AGREEMENT. The transaction contemplated by
this Agreement shall be closed concurrently with an Assignment and Assumption
Agreement in which Seller assigns and Buyer assumes certain obligations of the
Relevant Business. Buyer and Seller shall cause to be executed and delivered to
one another at the Closing hereof an Assignment and Assumption Agreement in
substantially the same form as Exhibit 3.4. Buyer does not have the right to
purchase and Seller does not have the obligation to sell the Assets comprising
the Relevant Business other than together with the closing of the transactions
contemplated by this Agreement the Lease described in Section 3.3, the
Consulting Services Agreement described in Section 3.2, the Employment and
Non-competition Agreement described in Section 3.1, and the Assignment and
Assumption Agreement described in this paragraph.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer each of the following:
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a. AUTHORITY. Seller has all requisite power and authority to own the
properties and to conduct the Relevant Business as currently conducted, and to
enter into and perform his obligations under this Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and constitutes the valid and binding obligation of
Seller enforceable in accordance with its terms.
b. NO RESTRICTIONS AGAINST PERFORMANCE. Except as set forth on Schedule
4.1(b), the execution and delivery of this Agreement by Seller and the
performance by Seller of the transactions contemplated herein will not violate
or conflict with, or constitute a breach or default under, or result in the
creation or imposition of any lien under (i) any applicable statute, law,
regulation or rule, or (ii) any contract, instrument, agreement, lease,
mortgage, judgment, order, decree or other restriction to which Seller is a
party or by which Seller is bound.
c. ASSET OWNERSHIP Set forth on Schedule 1(c) attached hereto are
true and complete lists of all tangible personal property used and/or useful in
connection with the Relevant Business. Seller has exclusive, good and marketable
title to (or in the case of Purchased Assets that are leased, valid leasehold
interests in) the Purchased Assets. The Purchased Assets together with the
Excluded Assets are all of the assets of Seller necessary to conduct the
Relevant Business substantially as it is being conducted on the date of this
Agreement. The Purchased Assets are free and clear of all encumbrances of any
kind or nature, except such Encumbrances as are disclosed in Schedule 4.1(c),
which will be removed or otherwise released of record effective at or prior to
the Closing, or for which executed releases in a form approved by the Buyer will
be delivered to Buyer at Closing. The Equipment and Inventory are in good and
operable condition and repair, ordinary wear and tear excepted, and are suitable
and adequate for continued use in the manner they are presently used.
d. COMPLIANCE WITH LAWS The ownership and use of the Purchased Assets as
they are currently owned and used in the conduct of the Relevant Business as it
is currently conducted do not violate any order, rule or regulation of any
Governmental Authority, which violation, individually or in the aggregate, would
have a material adverse effect on the Relevant Business. Seller has not
received any notice claiming any such violation by Seller.
e. LEGAL PROCEEDINGS Except as set forth on Schedule 4.1(e), there is no
judgment or order outstanding, or any action, suit, complaint, proceeding or
investigation pending against Seller or the Relevant Business, by or before any
Governmental Authority or any arbitrator pending, or threatened, involving or
affecting all or any part of the Purchased Assets or the Relevant Business.
f. PATENTS, TRADEMARKS AND COPYRIGHTS Seller does not possess any
patent, patent right, trademark or copyright used and/or useful in connection
with the Relevant Business, and there is no application pending with any
Governmental Authority for any of the foregoing.
g. INSURANCE. Set forth on Schedule 4(g) is a list and description of
all insurance policies maintained by Seller. Seller maintains policies
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of fire, casualty, liability and other forms of insurance in such amounts and
against such risks and losses as are reasonable and adequate for the Business.
All of the Purchased Assets and the building occupied by the Relevant Business
owned or managed by Seller as of the date hereof are insured under such
insurance policies in an amount not less than the actual replacement value
thereof against all risks usually insured against by persons operating similar
businesses.
h. EMPLOYMENT MATTERS Seller will provide Buyer a list of names and
positions of all employees engaged in the Relevant Business and a description of
their benefits. Seller has paid to all employees employed in the Relevant
Business all compensation including salaries, commissions, bonuses, deferred
compensation, severance, insurance, pensions, profit sharing, vacation, sick pay
and other compensation or benefits to which they are entitled for all periods
prior to Closing. Any of the above items which have not been paid by Seller by
the Closing will remain the responsibility of Seller, whether or not the
respective employee is hired by Buyer on or after Closing. Seller is in
material compliance with all federal and state laws respecting employment and
employment practices.
i. CONTRACTS. Attached hereto as Schedule 1(f) is a true and complete
list and current copies (or summaries in the case of oral agreements) of all
Contracts related to the Relevant Business or the Purchased Assets. Each of
such Contracts has been entered into in the ordinary course of business and is a
valid and binding agreement of the parties thereto enforceable against the
parties thereto in accordance with its terms. Neither Seller nor any other
party to any such Contract is in default under the terms of any such Contract,
nor has any event occurred, which, with the passage of time or giving of notice,
would constitute such a default of Seller or any such other party.
j. TAXES. All federal, state and other tax returns and reports required
to be filed in connection with the Purchased Assets or the Relevant Business
have been duly filed by Seller and all taxes and other assessments and levies
(including all interest and penalties) including, without limitation, income,
franchise, real estate, sales, gross receipts, use and excise taxes and employee
withholding taxes, owed in connection with the Purchased Assets or the operation
of the Relevant Business have been paid by Seller. Seller has not waived any
statute of limitation with respect to any tax or other assessment or levy
applicable to Seller or the Purchased Assets and all such taxes and other
assessments and levies which Seller is required by law to withhold or to collect
have been duly withheld and collected and have been paid over to the proper
Governmental Authorities or segregated and set aside for such payment and, if so
segregated and set aside, shall be so paid by Seller as required by law.
Neither the IRS nor any other taxing authority is now asserting or, to the best
of Seller's knowledge, is threatening to assert against Seller any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith.
k. FINANCIAL INFORMATION. Attached hereto as Schedule 4.1(k) are the
financial statements of the Relevant Business (the "Financial Statements") for
the periods ended December 31, 1995 and December 31, 1996. Seller will deliver
to Buyer correct and complete copies of its most recent monthly financial
statements prior to Closing. Since January 1,
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1997 (i) the Relevant Business has been operated only in the ordinary course
(ii) Seller has not sold or disposed of any Relevant Business assets other than
in the ordinary course of business, and (iii) there has been no material adverse
change in, and no event has occurred which is likely, individually or in the
aggregate, to result in any material adverse change in, the business,
operations, assets, prospects or condition (financial or otherwise) of the
Relevant Business. The Financial Statements have been prepared by Seller in
accordance with accounting principles consistently applied and fairly present
the financial condition and results of operations of the Relevant Business as of
the dates and for the periods indicated thereon.
l. UNDISCLOSED LIABILITIES. Except as set forth on the Financial
Statements, there is no claim or liability of any nature whatsoever, whether
absolute, accrued, contingent or otherwise, which could have an adverse effect
upon the Purchased Assets or the Relevant Business.
m. DISCLOSURE No representation or warranty by Seller in this
Agreement or in any Schedule or Exhibit to this Agreement, or any statement,
list or certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material fact, or
omits or will omit any material fact which makes or would make the statements
contained therein misleading.
n. ACCOUNTS RECEIVABLE. Set forth on Schedule 4.1(n) attached hereto
is a true and complete list of the accounts receivable of Seller, setting
forth a description of the accounts receivable including the names of the
account debtors, the balance amount and aging as of the date indicated
therein. The accounts receivable and all other books, records and documents
relating to the accounts receivable are genuine and accurate. Each of the
accounts receivable represents an undisputed, bona fide sale and delivery of
equipment or services rendered. Seller is the lawful owner of the accounts
receivable. Seller shall keep his accounts receivable. In the event Buyer
receives payments on any of these accounts receivable, it shall immediately
forward such payments to Seller.
o. ENVIRONMENTAL AND SAFETY COMPLIANCE. The operation of the Relevant
Business or the Purchased Assets of Seller does not violate any applicable
federal, state or local law, regulation, rule or order relating to air, water,
or noise pollution, employee health and safety, or the production, storage,
labeling transportation or disposition of waste or hazardous or toxic substances
(collectively, "Environmental Laws"). Seller has timely obtained all licenses
and permits and timely filed all reports required to be filed under any
applicable Environmental Law. Seller has not, and, to the best of Seller's
knowledge, no other person has, stored any chemical or hazardous substances,
including any "Hazardous Substances", "Pollutants" or "Contaminants" (as such
terms are defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA")), asbestos, petroleum products, or
polychlorinated biphenyls (collectively referred to herein as "Hazardous
Substances"), on, beneath or about any of the owned or leased properties of
Seller. Seller knows of no condition relating to or resulting from a release or
discharge into the soil, surface waters, groundwaters, drinking water supplies,
navigable waters, land, surface or subsurface strata, ambient air or any other
environmental medium whether or not yet discovered which has resulted or
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could result in any damage, loss, cost, expense, claim, demand, order or
liability to or against Seller or Buyer by any Governmental Authority or other
third party relating to or resulting from the operation of the Relevant Business
or the Purchased Assets or otherwise related to any real property owned or
leased by Seller, irrespective of the cause of such condition. Seller has not
received any notice from any Governmental Authority or private or public entity
advising Seller that it is potentially responsible for response costs with
respect to a release or threatened release of any Hazardous Substances. Seller
has not, and, to the best of Seller's knowledge, no other person has, buried,
dumped or otherwise disposed of any Hazardous Substances on, beneath or about
any of the owned or leased properties of Seller or on, beneath or about any
other property. Seller has not received notice of any violation of any
Environmental Law or zoning or land use ordinance, law or regulation relating to
the operation of the Business including, but not limited to, CERCLA, the Toxic
Substances Control Act of 1976, as amended, the Resource Conservation Recovery
Act of 1976, as amended, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, or the Occupational Safety and Health Act of
1970, as amended, nor is Seller aware of any such violation.
p. BROKER'S FEES. Neither Seller nor anyone acting on his behalf has
retained any broker, finder or agent or agreed to pay any brokerage fee,
finder's fee or commission with respect to the transactions contemplated by this
Agreement. There will be no broker's or finder's fees succeeding to the
responsibility of the Buyer.
q. RECORDS. Title to all records of the Relevant Business and
documents and papers of every kind and nature pertaining thereto shall be
delivered to the Buyer at or prior to the Closing. Seller shall promptly
forward to Buyer all correspondence, mail, payments, and documents received
by Seller after the Closing Date which relate to the operations of the
Relevant Business.
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller each of the following:
a. ORGANIZATION AND QUALIFICATION Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Minnesota and has all
requisite corporate power and authority to carry on its business as currently
conducted and to own, lease, use and operate its assets.
b. AUTHORITY AND VALIDITY Buyer has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement. The execution and
delivery by Buyer of, the performance by Buyer of its obligations under, and the
consummation by Buyer of the transactions contemplated by, this Agreement and
the Related Agreements have been duly authorized by all requisite corporate
action of Buyer and this Agreement and the related other agreements constitutes
the valid and binding obligation of Buyer, enforceable in accordance with their
terms. Buyer has all requisite power and authority to own properties and to
conduct the Relevant Business as currently conducted, and to enter into and to
perform its obligations under this Agreement.
<PAGE>
c. NO RESTRICTIONS AGAINST PERFORMANCE. The execution and delivery of
this Agreement by Buyer and the performance by Buyer of the transactions
contemplated herein will not violate or conflict with, or constitute a breach or
default under, or result in the creation or imposition of any lien under (i) any
applicable statute, law, regulation or rule, or (ii) any contract, instrument,
agreement, lease, mortgage, judgment, order, decree or other restriction to
which Buyer is a party or by which Buyer is bound.
d. SELLER'S EMPLOYEES. Buyer is not obligated to hire Seller's
employees. After the execution of this Agreement, Buyer will interview the
employees and select the people it wishes to employ.
e. DISCLOSURE. No representation or warranty by Buyer in this Agreement
or in any Schedule or Exhibit to this Agreement, or any statement, list or
certificate furnished or to be furnished by Buyer pursuant to this Agreement,
contains or will contain any untrue statement of material fact, or omits or will
omit any material fact which makes or would make the statements contained
therein misleading.
ARTICLE V
COVENANTS AND OBLIGATIONS OF SELLER
Seller hereby covenants and agrees that, from the date of this Agreement
until the Closing Date, Seller will comply with the following:
5.1 ACCESS TO PREMISES AND RECORDS Between the date of this Agreement
and the Closing Date, Seller will give Buyer and its representatives reasonable
access at reasonable times to all the premises and books and records of the
Relevant Business, and to all the Purchased Assets and will furnish to Buyer and
its representatives all information regarding the Relevant Business and the
Purchased Assets as Buyer may from time to time reasonably request. Seller and
its employees will cooperate with and assist Buyer in its reasonable requests
for information Seller will afford Buyer and its counsel, accountants and other
representatives (collectively, "Representatives") reasonable access during
normal business hours to all properties, books, accounts, records, contracts,
and documents of or relating to the Purchased Assets or the Relevant Business in
the possession of Seller. Seller shall furnish or cause to be furnished to
Buyer and its Representatives all data and information concerning the Purchased
Assets and the Business as shall reasonably be requested by Buyer or its
Representatives.
5.2 CONDUCT OF BUSINESS. Seller agrees that he will
(a) conduct the Relevant Business diligently, in the ordinary course
and in a prudent and businesslike manner;
(b) make reasonable efforts to maintain and preserve the Relevant
Business and keep available to Buyer the services of the present
employees of Seller;
(c) make reasonable efforts to maintain and preserve for Buyer
<PAGE>
the business relationships with suppliers, customers, subscribers and
others having business relationships with Seller;
(d) use the Purchased Assets in the ordinary course;
(e) maintain the Purchased Assets in good condition and repair and
maintain insurance with respect thereto of the same types now
currently in force; and
(f) timely renew all Licenses.
5.3 NEGATIVE COVENANTS. Seller agrees he will not:
(a) make any business decisions, other than in the ordinary course of
business, which could materially adversely affect the Relevant
Business or the Purchased Assets;
(b) sell, transfer or assign any of the Purchased Assets, other than
in the ordinary course of business, or permit the creation of any
material encumbrance on any of the Purchased Assets;
(c) permit the amendment or cancellation of any Contract which
affects or is applicable to the Relevant Business, other than in the
ordinary course of business;
(d) enter into any contract or commitment or incur any indebtedness
or other liability or obligation of any kind relating to or the
Relevant Business involving an expenditure in excess of $50,000, if
such contract, commitment, indebtedness, liability or obligation, by
its terms, will survive the Closing; or
(e) take or omit to take any action that would cause Seller to be in
breach of any of its representations or warranties in the Agreement.
5.4 REQUIRED CONSENTS As soon as practicable after execution of this
Agreement, the parties shall use their respective best efforts to obtain any
necessary consent, approval, authorization or order of, make any registration or
filing with or give notice to, any Governmental Authority or person as is
required to be obtained (a "Required Consent"), made or given by either party to
consummate the transactions contemplated by this Agreement. In no event will
Buyer be required to agree to any material adverse changes in, or the imposition
of any material adverse condition upon the transfer to Buyer of any Contract as
a condition to obtaining any Required Consent.
5.5 TAX RETURNS AND TAX CLEARANCE. Seller will prepare or cause to
be prepared all income, franchise, sales and other tax returns or reports
required by law and promptly make all tax payments which are required through
the Closing Date. In the event that any Governmental Authority or of any state,
municipality, country or other subdivision thereof shall at any time impose or
otherwise require or demand payment by or from either Seller or Buyer or any
state or local sales, use, transfer, excise, documentary or license taxes or
fees or any other charge (including
<PAGE>
filing fees) with respect to Seller's sale or transfer to Buyer of the Purchased
Assets, Seller and Buyer equally share the payment. Consistent with the
foregoing, Buyer shall deliver to Seller its Resale Certificate from the
Minnesota Department of Revenue, exempting the transfer of all inventory sold to
Buyer from Minnesota Sales Tax.
5.6 BEST EFFORTS. Seller will use his best efforts to:
(a) cause to be fulfilled and satisfied all of the conditions to the
Closing to be fulfilled and satisfied by Seller;
(b) cause to be performed all of the matters required of Seller at or
prior to the Closing; and
(c) take such steps and do such acts as may be necessary to make all
of its representations and warranties contained in this Agreement true
and correct as of the Closing Date, with the same effect as if the
same had been made, and this Agreement had been dated, as of such
date.
5.7 NON-SOLICITATION. So long as Buyer continues to use its best
efforts to conclude the transactions contemplated herein, Seller or any of
Seller's representatives or agents shall not directly or indirectly solicit or
engage in discussions or negotiations with, or provide any non-public
information or to otherwise cooperate with, any other person or entity which
seeks to, or expresses an interest in, acquiring all or any substantial part of
the Relevant Business or the Purchased Asset, nor will Seller directly or
indirectly enter into any agreement with or grant any option to any third person
or entity in connection with a transaction inconsistent with Buyer's acquisition
of the Relevant Business or the Purchased Assets; provided, however, that
nothing herein will limit Seller's right to engage in any activity, including
the disposition of any asset, in the ordinary course of business consistent with
past practice.
5.8 NOTIFICATION OF CERTAIN MATTERS Each party hereto shall promptly
provide to the other, copies of material notices or correspondence relating to
the transaction contemplated by this Agreement. Each party shall also promptly
notify the other of any fact, event, circumstance or action that, if known on
the date of this Agreement, would have been required to be disclosed to the
other pursuant to this Agreement or cause the representations or warranties
under this Agreement not to be correct and/or complete. In addition, either
party shall give prompt written notice to the other of any adverse development
causing a breach of its representations and warranties in this Agreement. No
disclosure pursuant to this Section 5.9, however, shall be deemed to amend or
supplement this Agreement or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.9 UPDATED SCHEDULES . Not more than four days after the Closing,
Seller will deliver to Buyer revised copies of Schedules which shall have been
updated to show any changes occurring between the date of this Agreement and the
date of delivery; provided, however, that for purposes of Seller's
representations and warranties and covenants in this Agreement, all references
to the Schedules will mean the version of the Schedules attached to this
Agreement on the date of signing; Provided,
<PAGE>
however, that such representations and warranties shall be subject to changes
resulting from transactions occurring in the ordinary course of the Relevant
Business from the date of signing to Closing.
5.10 USE OF SELLER'S NAME. Seller has sold its name, "Datacomm Products"
with the Relevant Business and Buyer may continue to operate the Relevant
Business using that name and Seller's other trade names and all derivations and
abbreviations of such names and related marks for an indefinite period after the
Closing Date.
5.11 SATISFACTION OF CONDITIONS. Each party will use its good faith
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement provided that Buyer will not be required to agree to any increase
in the amount payable with respect to, or any modification that makes more
burdensome in any material respect, any liability assumed by Buyer.
5.12 DUTY OF GOOD FAITH AND FAIR DEALING. The parties agree to act in good
faith with regard to all matters that are the subject of this Agreement, and
neither will intentionally nor knowingly take any action or omit to take any
action at any time for the primary purpose of depriving the other Party unfairly
of any right or benefit that the other Party has at such time under this
Agreement.
5.13 DISCUSSIONS WITH SELLER'S EMPLOYEES As soon as practicable as
determined by both Buyer and Seller, Buyer agrees to discuss individually with
Seller's employees the opportunities for employment with Buyer and the wages and
benefits which would be offered to such employees. Seller agrees to make such
employees reasonably available for discussions with Buyer about employment after
Closing. Buyer needs employees to establish and maintain the Relevant Business
and would like to consider Seller's current employees for such positions if such
employees are individually willing to discuss the possibilities of employment
with Buyer.
ARTICLE VI
COVENANT AND OBLIGATION OF BUYER
Buyer hereby covenants and agrees that, from the date of this Agreement
until the Closing Date, Buyer will use its best efforts to:
(a) cause to be fulfilled and satisfied all of the conditions to the
Closing to be fulfilled and satisfied by it;
(b) cause to be performed all of the matters required of it at or
prior to the Closing; and
(c) take such steps and do such acts as may be necessary to make all
of its representations and warranties contained in this Agreement true
and correct as of the Closing Date, with the same effect as if the
same had been made, and this Agreement had been dated, as of such
date.
<PAGE>
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER. The obligations
of each party to consummate the transactions contemplated by this Agreement to
take place at the Closing are subject to the satisfaction or waiver, to the
extent permitted by applicable law, at or prior to the Closing Date, that no
action, suit or proceeding is pending or threatened by or before any
Governmental Authority and no law, rule or regulation has been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by a Governmental Authority, which would:
(a) prohibit Buyer's ownership of the Relevant Business or the
Purchased Assets;
(b) compel Buyer to dispose of or hold separate all or a material
portion of the Purchased Assets; or
(c) prevent or make illegal the consummation of any transactions
contemplated by this Agreement.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER REGARDING THE CLOSING. This
Agreement and the obligations of Buyer to consummate the transactions to be
consummated at the Closing shall be subject to the satisfaction of or waiver by
Buyer of the following conditions at or prior to the Closing:
a. All representations and warranties of Seller contained in this
Agreement shall have been true and correct at and as of the date
hereof, and shall be true and correct at and as of the Closing
with the same force and effect as though made at and as of that
time. Any changes to the schedules attached to this Agreement
will reflect transactions in the ordinary course of business from
the date of signing to the Closing. Seller shall have performed
and complied with all of its covenants and obligations under this
Agreement to be performed or complied with at or prior to the
Closing.
b. Seller shall have obtained and delivered to Buyer such consents
and approvals of third parties and Governmental Authorities as
may be required for the transfer of the Purchased Assets and the
consummation of the transactions contemplated by this Agreement.
c. The Relevant Business is located at 3217 85th Avenue South in
Brooklyn Park, MN in a 10,000 square foot building located on
approximately 5 acres of land. The land and building is owned by
Seller. Prior to, or at the Closing, Seller shall have agreed to
accept Buyer as a Lessee, pursuant to a written Lease,
substantially in the same form as Exhibit 3.3, attached hereto.
d. There shall not have been any material adverse change in the
Purchased Assets, the Relevant Business or the prospects of
continuing the Relevant Business as presently conducted.
<PAGE>
e. Seller shall have delivered to Buyer each of the documents
specified in Section 8.1 hereof.
f. Seller has delivered to Buyer evidence, in form and substance
satisfactory to Buyer, that all of the necessary consents have
been obtained or given are in full force and effect.
g. No action, proceeding or investigation has been instituted or
threatened prior to Closing by or before any court or
Governmental Authority which would, if determined adversely to
Buyer's interest, materially impair the ability of Buyer to
realize the benefits of the transactions contemplated by the
Agreement.
h. Seller has delivered releases, in forms reasonably satisfactory
to Buyer, of all encumbrances affecting any of the Purchased
Assets.
i. Seller has delivered by Buyer such other documents as Buyer may
reasonably request in connection with the transactions
contemplated by this Agreement.
j. Buyer will receive the opinion of Larkin Hoffman Daly and
Lindgren, counsel for Seller dated the Closing Date, in the form
of Exhibit 7.2j.
k. Buyer and Seller have negotiated and finalized the allocation of
the purchase price among the Purchased Assets as required by
Section 2.5 of this Agreement.
l. Substantially all of the existing employees of the Relevant
Business (excluding Jackie Paquette) have been interviewed and
received offers for employment by, and have been accepted to
begin work for Buyer's wholly owned subsidiary, Collins
Communications Systems Company.
7.3 CONDITIONS TO OBLIGATIONS OF SELLER REGARDING THE CLOSING. This
Agreement and the obligations of Seller to consummate the transactions to be
consummated at the Closing shall be subject to the satisfaction of or waiver by
Seller of the following conditions at or prior to the Closing:
a. All representations and warranties of Buyer contained in this
Agreement shall have been true and correct at and as of the date
hereof, and they shall be true and correct at and as of the
Closing with the same force and effect as though made at and as
of that time. Buyer shall have performed and complied with all of
its covenants and obligations under this Agreement, and the
Related Agreements, to be performed or complied with at or prior
to the Closing.
b. Buyer shall have delivered to Seller each of the documents
specified in Section 8.2 hereof.
c. Seller has received the opinion of Blethen, Gage & Krause, PLLP,
counsel for Buyer, or such other law firm, which Buyer in its
discretion chooses to use, dated the Closing Date, in the form of
<PAGE>
Exhibit 7.3c.
d. Buyer has delivered to Seller such other documents as Buyer may
reasonably request in connection with the transactions
contemplated by this Agreement.
e. Buyer has delivered to Seller a Resale Certificate from the
Minnesota Department of Revenue.
f. Buyer and Seller have negotiated and finalized the allocation of
the Purchase Price among the assets as required by Section 2.5 of
this Agreement.
g. No action, proceeding or investigation has been instituted or
threatened prior to Closing by or before any court or
Governmental Authority which would, if determined adversely to
Buyer's interest, materially impair the ability of Seller to
realize the benefits of the transactions contemplated by this
Agreement.
7.4 WAIVER OF CONDITIONS. Any party may waive any or all of the
conditions to its obligations under this Agreement.
ARTICLE VIII
DELIVERIES
The following deliveries will be made by the respective parties at the
Closing as specified below:
8.1 SELLER'S DELIVERIES AT THE CLOSING. Seller shall deliver to Buyer
each of the following items at the Closing:
a. One or more bills of sale, duly executed by Seller, conveying to
Buyer all of the Purchased Assets, free and clear of any and all
liens of any nature, together with an Assignment of Assumed Name
and a Withdrawal of Assumed Name enabling Buyer to register the
name, "Datacomm Products" with the Minnesota Secretary of State;
b. One or more Assignment and Assumption Agreements, duly executed
by Seller, assigning to Buyer the Contracts and Licenses, with
original copies of such Contracts and Licenses attached thereto;
c. Employment and Noncompetition Agreement in substantially the form
of Exhibit 3.1 attached hereto, executed by Seller;
d. Duly executed Lease substantially in the form of Exhibit 3.3
attached hereto, executed by Seller;
e. Consulting Services Agreement executed by Jacalyn P. Paquette,
substantially in the form of Exhibit 3.2;
f. Updated Schedules, to the extent necessary to reflect any changes
in the Purchased Assets, including such changes as may occur in
the ordinary course of the Relevant Business;
<PAGE>
g. A completed list of all Contracts between Seller and its
customers; and
h. Such other documents, assignments, bills of sale, instruments of
conveyance, and certificate as reasonable may be required by
Buyer to consummate this Agreement and the transactions
contemplated herein.
i. Evidence, in form and substance satisfactory to Buyer, that any
necessary consents have been obtained or given are in full force
and effect.
j. Releases, in forms reasonably satisfactory to Buyer, of all
Encumbrances affecting any of the Purchased Assets.
k. Opinion of Larkin Hoffman Daly and Lindgren, counsel for Seller
dated the Closing Date, in the form of Exhibit 7.2j.
8.2 BUYER'S DELIVERIES AT THE CLOSING. Buyer shall deliver to Seller
each of the following items at the Closing:
a. Current Funds in the amount of $1,600,000.00;
b. The Employment and Noncompetition Agreement executed by
Buyer;
c. Assignment and Assumption Agreements executed by Buyer;
d. Lease executed by Buyer;
e. Consulting Services Agreement executed by Buyer;
f. Opinion of Blethen Gage and Krause, PLLP, counsel for Buyer
dated the Closing Date, in the form of Exhibit 7.3c. and
f. Such other documents and instruments as reasonable may be
requested by Seller to consummate this Agreement and the
transactions contemplated herein.
ARTICLE IX
TERMINATION
9.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing:
a. by the mutual written consent of Buyer and Seller;
b. by Buyer or Seller, if the transactions contemplated by this
Agreement to take place at the Closing have not been consummated
on or before November 3, 1997, other than as extended by mutual
agreement of the parties.
9.2 LIABILITIES IN EVENT OF TERMINATION. Subject to the provisions of
Section 10.1, the termination of this Agreement will in no way limit any
<PAGE>
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement.
9.3 PROCEDURE UPON TERMINATION. In the event of the termination of this
Agreement by Buyer or Seller pursuant to this Article IX, notice of such
termination will promptly be given by the terminating party to the other unless
otherwise provided in Section 9.1(b), the liability of the parties following
termination shall be subject to Section 10.1.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Seller in this Agreement and in the documents and
instruments to be delivered by Seller pursuant to this Agreement will survive
for a period of four years and three months following the Closing.
10.2 INDEMNIFICATION BY SELLER. Seller will indemnify, defend and hold
harmless Buyer and its shareholders and its and their respective affiliates, and
the shareholders, directors, officers, employees, agents, successors and assigns
of any of such persons, from and against:
a. all losses, damages, liabilities, deficiencies or obligations of or to
Buyer resulting from or arising out of (i) any breach of any then
surviving representation or warranty made by Seller in this Agreement,
(ii) any breach of any then surviving covenant, agreement or
obligation of Seller contained in this Agreement, (iii) any third
party claim with respect to any act or omission of Seller with respect
to Seller's operation of the Purchased Assets or Seller's conduct of
the Relevant Business, which act or omission occurred prior to or on
the Closing Date without regard to whether such third party claim with
respect to such act or omission is asserted before or after the
Closing Date, (iv) any liability or obligation of Seller not included
in the Assumed Liabilities, (v) any claim that the transactions
contemplated by this Agreement violate any bulk transfer or fraudulent
conveyance laws of any jurisdiction, (vi) Seller's failure to deliver
any Required Consent to Buyer, and (vii) any claim relating in any
manner to the operation of the Relevant Business prior to and on the
Closing Date.
b. all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from
any of the foregoing.
10.3 INDEMNIFICATION BY BUYER. Buyer will indemnify, defend and hold
harmless Seller, and the directors, officers, employees, agents, successors and
assigns of Seller, from and against:
a. all losses, damages, liabilities, deficiencies or obligations of
<PAGE>
or to Seller resulting from or arising out of (i) any breach of any
then surviving representation or warranty made by Buyer in this
Agreement, (ii) any breach of any then surviving covenant, agreement
or obligation of Buyer contained in this Agreement, (iii) any claim
that the transactions contemplated by this Agreement violate any bulk
transfer or fraudulent conveyance laws of any jurisdiction, (iv)
Buyer's failure to deliver any Required Consent to Seller, (v) any
third party claim with respect to any act or omission of Buyer with
respect to Buyer's operation of the Purchased Assets or Buyer's
conduct of the Relevant Business, which act or omission occurred after
the Closing date without regard to when such third party claim is
asserted, and (vi) any claim relating in any manner to the operation
of the Relevant Business after the Closing Date.
b. all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from
any of the foregoing.
10.4 THIRD PARTY CLAIMS. Promptly (and in any event within 30 days) after
the receipt of any party of notice of any claim, action, suit or proceeding by
any Person who is not a party to this Agreement (Collectively, an "Action"),
which Action is subject to indemnification under this Agreement, such party (the
"Indemnified Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The Indemnified Party
will be entitled, at the sole expense and liability of the Indemnifying Party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the Indemnifying Party, within a reasonable time (and in any event
within 30 days) after the giving of such notice by the Indemnified Party, (a)
admits in writing to the Indemnified Party the Indemnifying Party's liability to
the Indemnified Party for such Action under the terms of this Section 10, (b)
notifies the Indemnified Party in writing of the Indemnifying Party's intention
to assume such defense, (c) provides evidence reasonably satisfactory to the
Indemnified Party may be liable as a result of such Action, and (d) retains
legal counsel reasonably satisfactory to the Indemnified Party to conduct the
defense of such Action. The other party will cooperate with the party assuming
the defense, compromise or settlement of any such Action in accordance with this
Agreement in any reasonable manner. The Indemnified Party will have the right
to employ separate counsel and to participate in (but not control) the defense,
compromise or settlement of the Action, but the fees and expenses of such
counsel will be at the expense of the Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) any relief
other than the payment of money damages is sought against the Indemnified Party
or (iii) the Indemnified Party will have been advised by its counsel that there
may be one or more defenses available to it which are different from or
additional to those available to the Indemnifying Party, and in any such case
that portion of the fees and expenses of such separate counsel that are
reasonably related to matters covered by the indemnity provided in this Section
13 will be paid by the Indemnifying Party. No Indemnified Party will settle or
compromise any such Action for which it is entitled to indemnification under
this
<PAGE>
Agreement without prior written consent of the Indemnifying Party, unless the
Indemnifying Party has failed, after reasonable notice, to undertake control of
such Action in the manner provided in this Section 10.4. No Indemnifying Party
will settle or compromise any such Action (A) in which any relief other than
the payment of money damages is sought against any Indemnified Party of (B) in
the case of any Action relating to the Indemnified Party's liability for any
tax, if the effect of such settlement would be an increase in the liability of
the Indemnified Party for the payment of any tax for any period beginning after
the Closing Date, unless the Indemnified Party consents in writing to such
compromise or settlement.
10.5 CLAIMS. In the event of a third party claim which is subject to
indemnification under this Article X, the party subject to such claim
("Indemnified Party") shall notify the other party ("Indemnifying Party") in
writing as soon as practicable but in no event later than fifteen days after
receipt of such claim. The Indemnified Party's failure to do so shall not
preclude it from seeking indemnification hereunder unless such failure has
materially prejudiced the Indemnifying Party's ability to defend such claim.
The Indemnifying Party shall promptly defend such claim by counsel of its own
choosing and the Indemnified Party shall cooperate with the Indemnifying Party
in the defense of such claim including the settlement of the matter on the basis
stipulated by the Indemnifying Party (with the Indemnifying Party being
responsible for all costs and expenses of such settlement).
10.6 REMEDIES TO BE EXCLUSIVE. Except as provided in Section 11.10 herein,
the remedies to the Indemnified Party provided herein shall be the exclusive
remedies to which the Indemnified Party is entitled for any breach or
non-compliance by the other party with the provisions of this Agreement.
10.7 LIMITATIONS ON INDEMNIFICATION - SELLER. Seller will not be liable
for indemnification arising under this Agreement for (a) any losses, damages,
liabilities, deficiencies or obligations of or to Buyer or any other person
entitled to indemnification from Seller or (b) any claims, actions, suits,
proceedings, demands, judgments, assessments, fines, interest, penalties, costs
and expenses (including settlement costs and reasonable legal, accounting,
experts' and other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing (the items described in clauses (a) and (b)
collectively being referred to for purposes of this Section 10.7 as "Buyer
Damages"), unless and until the amount of Buyer Damages for which Seller would,
but for the provisions of this Section 10.7, be liable exceeds, on an aggregate
basis, the sum of $30,000.00 whereupon and whereafter Seller will be liable for
all Buyer Damages not to exceed the sum of $1,600,000.00, which will be due and
payable within 15 days after Seller's receipt of a statement therefor.
10.8 LIMITATIONS ON INDEMNIFICATION - BUYER. Buyer will not be liable for
indemnification arising under this Agreement for (a) any losses, damages,
liabilities, deficiencies or obligations of or to Seller or any other person
entitled to indemnification from Buyer or (b) any claims, actions, suits,
proceedings, demands, judgments, assessments, fines, interest, penalties, costs
and expenses (including settlement costs and reasonable legal, accounting,
experts' and other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing (the items
<PAGE>
described in clauses (a) and (b) collectively being referred to for purposes of
this Section 10.8 as "Seller Damages"), unless and until the amount of Seller
Damages for which Buyer would, but for the provisions of this Section 10.7, be
liable exceeds, on an aggregate basis, the sum of $30,000.00 whereupon and
whereafter Buyer will be liable for all Seller Damages not to exceed the sum of
$1,600,000.00, which will be due and payable within 15 days after Buyer's
receipt of a statement therefor.
ARTICLE XI
GENERAL PROVISIONS
11.1 CONFIDENTIALITY. (a) Except as provided below in this Section 11.1,
"Confidential Information" means (i) the terms and conditions of this Agreement,
and (ii) any other information including, without limitation, any technical
information and any information relating to the present and future business
operations or financial condition of the party disclosing the information (the
"Disclosing Party"), whether such information is written or oral, and which is
designated as confidential by the Disclosing Party at the time of disclosure to
the other party (the "Receiving Party"), or within fifteen (15) days thereafter.
It is understood that the term "Confidential Information" does not include
information which:
(i) has been or becomes published or is now or is in the future in
the public domain through no action of the Receiving Party;
(ii) prior to disclosure hereunder, is within the legitimate
possession of the Receiving Party as evidenced by competent
written proof;
(iii) subsequent to disclosure hereunder, is lawfully received
from a third party having rights therein without restriction of
the third party's rights to disseminate the information and
without notice of any restriction against its further disclosure;
(iv) is independently developed or acquired by the Receiving Party
through persons who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(v) is disclosed with the prior written approval of the Disclosing
Party;
(vi) is obligated to be produced under order of a court of competent
jurisdiction or a valid administrative or congressional subpoena;
or
(vii) is disclosed by the Receiving Party after five (5) years
from the date of receipt.
(b) The Receiving Party hereby acknowledges that all of the Confidential
Information of the Disclosing Party is the exclusive proprietary property of the
Disclosing Party, and is being disclosed solely for the purpose of enabling the
parties to pursue the transactions contemplated by this Agreement. The
Receiving Party shall provide the same care to avoid disclosure or unauthorized
use of the Confidential
<PAGE>
Information as it generally provides to protect its own proprietary information.
The terms and conditions of this Section 11.1 shall survive any termination of
this Agreement.
(c) Each of the parties hereby acknowledges and agrees that money damages
would not be sufficient remedy for any breach of this Section 11.1 by it and
that the other party may seek injunctive or other equitable relief for remedy or
prevent any breach or threatened breach of this Section 11.1 by it. Such remedy
shall not be deemed to be the exclusive remedy for any such breach of this
Section 11.1 but shall be in addition to all other remedies available at law or
equity to the other party.
(d) Neither party will issue any press release or make any other public
announcement regarding this Agreement or the transactions contemplated hereby
without the consent of the other party. Each party will hold, and will cause
its employees, consultants, advisors and agents to hold, in confidence, the
terms of this Agreement and any non-public information concerning the other
party obtained pursuant to this Agreement. Notwithstanding the preceding, a
party may disclose such information to the extent required by law (including
disclosure requirements under federal and state securities laws), but the party
proposing to disclose such information will first notify and consult with the
other party concerning the proposed disclosure, to the extent reasonably
feasible. Each party also may disclose such information to employees,
consultants, advisors, agents and actual or potential lenders whose knowledge is
necessary to facilitate the consummation of the transactions contemplated by
this Agreement. Each party's obligation to hold information in confidence will
be satisfied if it exercises the same care with respect to such information as
it would exercise to preserve the confidentiality of its own similar
information.
11.2 EXPENSES. Buyer and Seller shall pay their own expenses including
attorneys' and brokers' fees in connection with the preparation of this
Agreement and the consummation of the transactions contemplated herein.
11.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Seller, Buyer and their respective successors and
assigns. Buyer specifically reserves the right to assign this Agreement to a
corporation owned by Buyer. In the event of any such assignment, Buyer shall
remain secondarily liable to Seller.
11.4 WAIVER. Buyer and Seller, by written notice to the other, may (a)
extend the time for performance of any of the obligations or other actions of
the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement, (c) waive compliance with any of
the conditions or covenants of the other contained in this Agreement, or (d)
waive or modify performance of any of the obligations of the other under this
Agreement; provided that neither party may without the consent of the other make
or grant such extension of time, waiver or inaccuracies or compliance, or waiver
or modification of performance with respect to its own obligations,
representations, warranties, conditions, or covenants hereunder. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement
shall be
<PAGE>
deemed to constitute a waiver of compliance with any representation, warranty,
covenant or agreement contained in this Agreement and shall not operate or be
construed as a waiver of any subsequent breach, whether of a similar or
dissimilar nature.
11.5 ENTIRE AGREEMENT. This Agreement (together with the Schedules and
Exhibits hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by Buyer or Seller relating to the matters
contemplated hereby. This Agreement (together with the Schedules and Exhibits
hereto) constitutes the entire agreement by and among the parties and there are
no agreements or commitments except as expressly set forth herein.
11.6 FURTHER ASSURANCES. Each of the parties hereto agrees to execute all
documents and instruments and to take or to cause to be taken all actions which
are necessary or appropriate to complete the transactions contemplated by this
Agreement.
11.7 RISK OF LOSS. Each of the parties hereto hereby acknowledges and
agrees that the risk of loss, damage or destruction of the Purchased Assets
shall be upon Seller prior to the Closing and after the Closing shall be upon
Buyer. In the event of such loss, damage or destruction prior to the Closing
Date, Seller shall promptly restore, replace or repair the damaged property to
its previous condition at its own cost or expense and Seller shall have the
right to use all insurance proceeds to effect such restoration, replacement or
repair and to retain all excess proceeds. In the event such a loss, damage or
destruction shall not be restored, replaced or repaired by the Closing Date,
Buyer may, at its option, restore, replace or repair the damaged property and
the cost thereof shall be payable by Seller to Buyer within five (5) business
days of receipt by Seller of written notice delivered by Buyer setting forth the
amount of such costs.
11.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally, by telex
or facsimile, the next day if by express mail, or five days after being sent by
registered or certified mail, return receipt requested, postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice provided that such notice shall be effective
only upon receipt thereof):
To Buyer at: Hickory Tech Corporation
221 East Hickory Street, P.O. Box 3248
Mankato, MN 56002
Attention: Robert D. Alton, Jr.
Telephone: (507) 387-1781
Telecopy: (507) 625-1919
With a copy (which will not constitute notice) transmitted by
telecopier to:
Blethen, Gage, Krause, PLLP
127 South Second Street, P.O. Box 3049
Mankato, MN 56002
Attention: Michael C. Karp or Silas Danielson
<PAGE>
Telephone (507) 345-1166
Telecopy: (507) 345-8003
To Seller at: Gregory D. Paquette
18544 145th St.
Elk River, MN 55330
Telephone: (612) 441-3177
With a copy (which shall not constitute notice) transmitted by
telecopier to:
Larkin Hoffman Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attention: Paul Plunkett
Telephone: (612) 896-3298
Telecopy: (612) 896-3333
Any party many change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 11.8. All
notices will be deemed to have been received on the date of delivery or on the
third business day after mailing in accordance with this Section, except that
any notice of a change of address will be effective only upon actual receipt.
11.9 TRANSITION. Buyer will not be unreasonable in its demands of Seller.
Seller shall cooperate in good faith with Buyer to assure a smooth transition of
the Purchased Assets and the operation of the Relevant Business after Closing.
11.10 RIGHT TO SPECIFIC PERFORMANCE. The parties acknowledge that the
unique nature of the Purchased Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by Seller or
Buyer of its obligations under this Agreement, and the parties agree that, in
the event of such breach, the parties will upon proper action instituted by it,
be entitled to a decree of specific performance of this Agreement.
11.11 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements, as may mutually be
determined by the parties hereto to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto.
11.12 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
UNDER IT WILL BE GOVERNED AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MINNESOTA.
11.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceability the remaining
rights of the person intended to be benefited by such provision or any other
provisions of this Agreement.
<PAGE>
11.14 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
11.15 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
(SIGNATURE PAGE FOLLOWS)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
HICKORY TECH CORPORATION
By /s/ Robert D. Alton
-------------------------------------------
Robert D. Alton, President and CEO
SELLER:
/s/ Gregory D. Paquette
---------------------------------------------
Gregory D. Paquette, Individually and as
proprietor of Datacomm Products
Jacalyn P. Paquette
---------------------------------------------
Jacalyn P. Paquette, Individually and as
proprietor of Datacomm Products
