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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) SEPTEMBER 13, 1996
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PREFERRED NETWORKS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27658 58-1954892
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
850 CENTER WAY, NORCROSS, GEORGIA 30071
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (770) 582-3500
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5300 OAKBROOK PARKWAY, SUITE 320, NORCROSS, GEORGIA 30093
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OF ASSETS.
On September 13, 1996, Preferred Networks, Inc. ("PNI")
acquired substantially all the assets of Big Apple Paging Corporation ("Big
Apple") pursuant to an Asset Purchase Agreement dated June 19, 1996, and
amended as of September 5 and September 13, 1996, for a purchase price
("Purchase Price") of $2,600,000. As consideration for the acquisition of the
assets, PNI has paid ninety percent of the Purchase Price, $1,430,000 of which
was paid in cash and the remainder of which was paid by issuance of 125,598
shares of common stock of PNI. In addition to the Purchase Price, additional
consideration ("Additional Consideration") could be due and payable by PNI to
Big Apple based on certain defined increases in Big Apple's business through
September 6, 1996. The remainder of the Purchase Price and the Additional
Consideration will be payable in a combination of cash and PNI stock. PNI used
working capital to fund the cash portion of the acquisition.
Big Apple is a reseller in the New Jersey, New York and
Connecticut markets engaged in the operation of one-way paging and personal
signaling. PNI acquired Big Apple's assets in order to expand its presence in
the Northeast and intends to operate Big Apple's paging and personal signaling
business on the PNI Network and Technical Control Center in Poughkeepsie, New
York.
PNI intends to account for the acquisition as a purchase and
will include the results of Big Apple's operations in its consolidated
financial statements as of September 14, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
As of the date of filing of this Current Report on Form
8-K, it is impracticable for PNI to provide the
financial statements required by this Item 7(a). In
accordance with Item 7(a)(4) of Form 8-K, such
financial statements will be filed under cover of Form
8 no later than 60 days after September 28, 1996.
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(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form
8-K, it is impracticable for PNI to provide the
financial information required by this Item 7(b). In
accordance with Item 7(b) of Form 8-K, such financial
information will be filed under cover of Form 8 no
later than 60 days after September 28, 1996.
(c) Exhibits.
The following exhibits are filed as part of this
Current Report on Form 8-K:
2.1 Asset Purchase Agreement, dated as of June 19,
1996 and amended as of September 5, 1996 and
as of September 13, 1996, by and among Big
Apple Paging Corporation, Preferred Networks,
Inc. and Gary Hencken. The exhibits and
schedules to this Asset Purchase Agreement
have been omitted from this Exhibit 2.1. PNI
agrees to furnish supplementally such
exhibits and schedules to the Securities and
Exchange Commission upon request.
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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.
PREFERRED NETWORKS, INC.
Date: September 27, 1996 By: /s/ Kim Smith Hughes
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Kim Smith Hughes
Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential Page No.
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<S> <C>
2.1 Asset Purchase Agreement, dated as of June 19, 1996 and amended as of September 5,
1996 and as of September 13, 1996, by and among Big Apple Paging Corporation,
Preferred Networks, Inc. and Gary Hencken. The exhibits and schedules to this
Asset Purchase Agreement have been omitted from this Exhibit 2.1. PNI agrees to
furnish supplementally such exhibits and schedules to the Securities and Exchange
Commission upon request.
</TABLE>
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ASSET PURCHASE AGREEMENT
AGREEMENT made this ____ day of ________, 1996, between PREFERRED
NETWORKS, INC., a Delaware corporation ("Buyer"), BIG APPLE PAGING CORPORATION,
a New York corporation ("Seller"), and Gary Hencken, an individual resident of
the State of New York ("Shareholder").
ARTICLE I
SALE AND TRANSFER OF ASSETS
1.01 Identification of the Assets. Subject to the terms and conditions
hereafter stated, Seller agrees to sell to Buyer and Buyer agrees to buy from
Seller the following described assets owned by Seller and used in its one-way
paging or personal signaling business ("Business") located in the local
exchange areas of:
Nassau, New York
New York, New York
Suffolk, New York
Burlington, New Jersey
Belle Meade, New Jersey
Brooklyn, New York
Atlantic City, New Jersey
Queens, New York
Rennselear, New York
Greenville, New York
Orange, New York
Ulster, New York
Albany, New York
Stanford, Connecticut
(a) The antennas, transmitters and terminals used exclusively in
connection therewith, described in Exhibit "A" hereto ("Equipment");
(b) Seller's interest or right to use control terminal software
and any updates used in connection with the operation of the equipment
("Software");
(c) The licenses granted by the Federal Communications Commission
("FCC") described in Exhibit "B" hereto ("Licenses");
(d) Seller's interest in and rights under any leases described in
Exhibit "C" hereto ("Leases");
(e) Seller's interest, if any, in the customers using its paging
services in the local exchange areas described in Section
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1.01 and the list of such customers ("Customer List");
(f) The inventory and supplies of the Business owned by the Seller
(collectively the "Inventory");
(g) All furniture, fixtures, and equipment, and all other personal
property of seller used in this operations of the Business ("The Tangible
Assets"); and
(h) All of Seller's right, title, and interest in the trademarks,
trade names and the name "Big Apple Paging" (collectively, the "Intangible
Property").
The assets referred to in this Section 1.01 are sometimes referred to
hereafter collectively as the Purchased Assets.
1.02 Earnings and Liabilities Subsequent to Execution. Prior to the
date of the Second Closing (as hereafter defined), the earnings, assets,
liabilities, liens, and encumbrances generated by the Business shall be the
sole property of and responsibility of the Seller, subject to transfer as below
set forth with respect to the Purchased Assets. From and after the Second
Closing, the earnings, assets, liabilities, liens and encumbrances generated or
incurred by the Business shall be the sole responsibility of and property of
Buyer except as otherwise set forth in Exhibit "D". Seller and Shareholder
shall strictly adhere to Section 7.01, Operation of Business Pending Second
Closing.
ARTICLE II
PURCHASE PRICE
2.01 Purchase Price. Except as otherwise set forth in Section 4.01(c),
the purchase price for the Purchased Assets shall be Two Million Six Hundred
Thousand and no/100 Dollars ($2,600,000.00) to be paid in the $.0001 par value
common stock ("Common Stock") of the Buyer in the amount of One Million, Nine
Hundred Thousand and no/100 Dollars ($1,900,000) and Seven Hundred Thousand and
no/100 Dollars ($700,000) in cash or readily available funds. ("Cash") (The
Cash and Common Stock hereinafter collectively referred to as the "Purchase
Price"). The Purchase Price shall be paid by Buyer to Seller as follows:
(a) Twenty two and one/half percent (22.50%) of the Cash shall be
paid by Buyer at the First Closing (as hereinafter defined);
(b) Ninety percent (90%) of the Common Stock and sixty seven and
one/half percent (67.5%) of the Cash shall be due and payable at the Second
Closing. Forty five percent (45%) of the Common
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Stock due and payable to Seller at the Second Closing shall be calculated
pursuant to section 3.01 based on the Determination Date for the First Closing.
The remaining forty five percent (45%) of the Common Stock due and payable to
Seller shall be calculated pursuant to section 3.01 based on the Determination
Date for the Second Closing.
(c) The remaining ten percent (10%) of the Cash and Common Stock
shall be due and payable as set forth in Section 4.01(c).
2.02 Additional Consideration. In addition to the Purchase Price as
set forth in Section 2.01, PNI agrees to pay as additional consideration
("Additional Consideration") in Common Stock of Buyer according to the terms
and conditions as set forth herein.
For purposes of computing the Additional Consideration, the following terms are
defined as follows:
(a) Revenue per unit ("RPU") is defined as revenue billed on or
about the end of a month divided by the number of units in billing as of the
same date.
(b) Gross Additions ("Gross Additions") is defined as the number
of units billed as of August 31, 1996, minus the number of units billed on or
about June 30, 1996.
(c) Gross Additions RPU ("Gross Addition RPU") refers to the RPU,
as defined above, for the Gross Additions, defined above. For purposes of
computing Gross Additions RPU, subscriber revenue for Net Additions shall be
grossed-up to reflect a full month's revenue.
(d) Net Additions ("Net Additions") is defined as the total number
of units in billing as of August 31, 1996, minus Twenty Six Thousand (26,000)
units in billing.
(e) "September Billing" refers to the billing for the total number
of units in billing and associated revenues as of August 31, 1996.
Subject to the restriction outlined below, the total possible Additional
Consideration shall consist of a price to be paid per Net Addition, according
the following schedule:
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<TABLE>
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ADDITIONAL CONSIDERATION
GROSS ADDITION PER NET ADDITION
RPU UNIT
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$ 2.50 & Greater $ 80.00
$ 2.25 - $2.49 $ 70.00
$ 2.00 - $ 2.24 $ 60.00
$ 1.75 - $ 1.99 $ 50.00
$ 1.50 - $ 1.74 $ 40.00
Less than $ 1.50 $ 30.00
</TABLE>
Notwithstanding the foregoing, the Additional Consideration shall be
reduced by a percentage equal to the percentage of revenues from the September
Billing that has been uncollected by the Buyer pursuant to the Agency Agreement
by and between the parties hereto, sixty (60) days following the date of
September Billing.
Except as otherwise set forth in Section 4.01(c), ninety percent (90%)
of the Additional Consideration shall be paid seventy five (75) days following
the date of September Billing. ("Third Closing")
ARTICLE III
CALCULATION OF
PURCHASE PRICE
3.01 Purchase Price. The number of shares of Common Stock to be
issued to Seller at each of the First Closing, Second Closing, and Third
Closing, respectively, shall be calculated five trading days ("Determination
Date") prior to each of the First Closing, Second Closing and Third Closing,
respectively, based on the average of the closing price of the Common Stock for
the immediately preceding twenty (20) trading days.
ARTICLE IV
THE CLOSING
4.01 Closing.
(a) Subject to the terms and conditions set forth herein, each
closing ("Closing") shall take place on or before 10:00 a.m. local time, at the
office of Preferred Networks, Inc., 5300 Oakbrook Parkway, Suite 320, Norcross,
Georgia 30093, or at such other time and place as may be mutually agreed upon
in writing by the parties hereto. The dates of each closing (collectively, the
"Closings") shall be as follows: (i) the First Closing ("First Closing") shall
take place on or before June 30, 1996 the Second Closing ("Second Closing")
shall take place no later than five (5) business days after receipt of a final
nonappealable order from the
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FCC and the approval of any state regulatory authority, if necessary,
authorizing the transfer of the Licenses. The Third Closing shall take place
pursuant to Section 2.02 above.
(b) Delivery of Closing Documents. At the Closings, Seller and
Buyer shall deliver or cause to be delivered the documents and instruments as
required herein.
(c) Payment of Purchase Price. As set forth in Sections 2.01 and
2.02 above:
(i) Ninety percent (90%) of each of the Common Stock, Cash, or
Additional Consideration, in shares of Common Stock or Cash shall be paid at
each of the Closings. The remaining ten percent (10%) of the Common Stock,
Cash, and Additional Consideration ("Final Payment") shall be paid by Buyer to
Seller two hundred days (200) following the date of the Second Closing ("Final
Payment Date"). The Final Payment due and payable by Buyer to Seller shall be
adjusted and reduced as set forth herein. If Gross Additions RPU declines more
than five percent (5%) ("Base Amount"), as of one hundred eighty days (180)
days following the Second Closing, then Seller and Stockholder acknowledge and
agree that Buyer will not pay an amount equal to ten percent (10%) of the Final
Payment for every one percent (1%) decrease in Gross Additions RPU in excess of
the Base Amount. For purposes of this provision, Gross Additions and RPU are
defined in Section 2.02.
(ii) At the sole and exclusive discretion of Seller, the
Final Payment due and payable on the Final Payment Date shall be paid by Buyer
to Seller in Cash or Common Stock, or a combination thereof. Cash shall be an
amount not to exceed one hundred percent (100%) of the Final Payment, with the
remainder of the Final Payment, if any, due and payable to Seller in Common
Stock, in the number of shares equal to dividing the remainder of the Final
Payment, if said Final Payment were paid in Cash, by the share price determined
in Section 3.1 for the Second Closing.
4.02 Bulk Sales Act, Indemnity.
(a) Seller and Stockholder agree to discharge all of the
obligations to trade creditors, employees, taxing authorities, or other debts
or claims of the Business which arise prior to the Second Closing; and Seller
and Stockholder agree to and shall indemnify and hold Buyer harmless from any
claims, liability, loss or costs of whatsoever nature, including but not
limited to attorneys fees and all costs of defense, arising out of or relating
to any obligations or activities of Seller or of the Business prior to the
Closing. Such indemnification shall also be evidenced at the Second Closing in
the form of a separate Indemnification
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Agreement. In consideration for such indemnification, Purchaser agrees to waive
compliance with the New York, New Jersey, and Connecticut Bulk Sales Act.
(b) Buyer shall give written notice to the Seller of any claim
which might give rise to a claim against Buyer, for which the Seller has agreed
to indemnify him within ninety (90) days of such claim being made known to him.
The notice shall state the claimant, the nature and basis of such claim and the
amount thereof to the extent known and shall include copies of documentation
asserting such claim against Buyer.
(c) In the event any action, suit or proceeding is brought against
Buyer with respect to which the Seller may have liability under this section
4.02, the action, suit or proceeding shall be defended by the Seller upon the
written acknowledgment by the Seller that it is obligated to indemnify pursuant
to this section. In the event that the Seller deems that it is not obligated to
indemnify Buyer pursuant to the terms of this section, then Buyer shall have
the right to contest and or settle such action, suit, or proceeding without
waiving any rights he may otherwise have against the Seller. Seller shall have
the right to employ his own counsel in all cases, but the fees and expenses of
such counsel shall be at Seller's own expense.
4.03 Obligations at Closing.
(a) At the First Closing, Seller and Shareholder will deliver to
Buyer the following:
(i) Executed applications for assignment of the Licenses
in a form reasonably satisfactory to Buyer's FCC counsel, for filing with the
FCC and any applicable state regulatory authority; and
(ii) That certain Agency Agreement by and between Seller
and Buyer, of even date herewith, attached hereto as Exhibit "E", attached
hereto and incorporated by reference herein.
(iii) Seller shall provide Director and Shareholder
resolutions duly attested by secretarial certificates, authorizing the
transaction, in a form acceptable to Buyer, and that same shall be without
limitation in compliance with laws of the State of incorporation of Seller.
(iv) The opinion of Seller's counsel, of even date
herewith, as set forth in section 9.04.
(b) At the Second Closing, Seller and Shareholder will deliver
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to Buyer the following:
(i) Bills of sale warranting that Seller's title to the
Equipment, Tangible Assets, and Software is free and clear of any
material liens, encumbrances or rights of other parties;
(ii) An assignment of Seller's interest, if any, in the
Customer List;
(iii) Assignments of Seller's rights and obligations under
each of the Leases;
(iv) Assignments of each of the Licenses;
(v) Assignments of all Intangible Property;
(vi) Evidence of consents, licenses, easements or other rights
of access, if any, obtained in favor of Buyer relating to the
Equipment;
(vii) The Registration Rights Agreement by and between the
Seller and the individual shareholders of Buyer according to the terms
and conditions as set forth in Exhibit "F";
(viii) purchase documents, maintenance and repair records,
technical manuals and other records relating to the Equipment;
(ix) system engineering studies, schematics, network
configurations and other documents and records relating to the use of the
Equipment;
(x) correspondence with the FCC relating to the Licenses;
(xi) to the extent such information is relevant to the
acquisition of the Assets or the ongoing operation of the Purchased Assets,
correspondence with all governmental or regulatory authorities relating to the
Equipment or the Business;
(xii) to the extent such information is relevant to the
acquisition of the Purchased Assets or the ongoing operation of the Purchased
Assets, any correspondence with customers relating to the Business; and
(xiii)Seller and Stockholder shall have executed and delivered
to Buyer an Affidavit reaffirming the representations and covenants
specifically set forth in this Agreement effective and updated as of the date
of the Second Closing.
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(xiv)Seller and Stockholder shall execute and deliver the
Indemnification Agreement regarding claims and liabilities arising prior to the
Second Closing.
(xv) Covenants not to compete executed by Seller and
Shareholder, according to the terms, conditions and provisions set forth in
Exhibit "G", attached hereto and incorporated by reference herein.
(xvi) Tax clearance certificates issued by the applicable
city, state, or federal governments in the name of Seller providing that all
taxes, assessments, or other charges, including but not limited to all social
security, sales and use, unemployment, net worth, or franchise taxes, will be
paid or adequately provided for up to the date of the Second Closing.
(xvii)That Certain Management Agreement by and between Seller
and Buyer, attached hereto as Exhibit "H", attached hereto and incorporated by
reference herein.
(xviii)That certain Employment Agreement, by and between Buyer
and Shareholder, attached hereto as Exhibit "I", attached hereto and
incorporated by reference herein.
(xx) The parties hereto agree to execute such additional
documents as may reasonably be required to effectuate the Closings. Any
additional Closing documents required or requested by Buyer to be executed by
Seller or the Stockholder as part of Closings should be prepared by Buyer's
attorney at Buyer's sole cost and expense.
(xxi)Seller shall deliver all accounting records and MIS
reports utilized in the preparation of reseller and customer billings,
including but not limited to Pager Recurring Charges by Account, as of July 31,
1996, and Pager Analysis Report for gross additions for the month of July,
1996.
(xxi) The opinion of Seller's counsel, dated as of the Second
Closing, as set forth in section 9.05.
(c) At the Third Closing, Seller and Shareholder will deliver to
Buyer the following:
(i) Customer Aging Report Collection Data as of thirty (30)
days after the date of August billing;
(ii) Pager Recurring Charges by account as of the
Determination Date.
(d) At each Closing, Buyer shall deliver to Seller the
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following:
(i) the consideration as specified in Section 2.01 and 2.02,
as adjusted in Section 4.01(c);
(e) At the First Closing, Buyer shall deliver to Seller an opinion
of Seller's counsel, of even date herewith, as set forth in section 10.03.
(f) At the Second Closing, Buyer shall deliver to Seller the
following:
(i) documents in form and substance reasonably satisfactory to
Seller to evidence Buyer's assumption of the Assumed Liabilities (as
hereinafter defined).
4.03 Form 8594. Seller and Buyer shall cooperate in obtaining the
information necessary for the completion and filing of Form 8594, Asset
Acquisition Statement, under Section 1060 of the Internal Revenue Code of 1986,
as amended ("Code")
4.04 Prorations. As of the close of business on the Second Closing,
Buyer and Seller shall prorate, to the extent practicable, customer revenues,
commissions, lease payments, personal property taxes, if any and other
assessments with respect to the Purchased Assets; provided, however, that
personal property taxes, to the extent accrued but unpaid, shall be prorated as
and when a tax bill is received for such property and Seller shall pay to Buyer
within ten (10) days of notice from Buyer the prorated portion of such taxes
allocable to the Purchased Assets. In the event it is not practical to make any
prorated payment required hereby at the Second Closing, the party required to
make a prorated payment shall do so within ten (10) days following notice of
the amount payable hereunder.
4.05 Liabilities. As of the Second Closing, Buyer assumes Seller's
liabilities as provided in Section 4.04, Seller's obligations to customers on
the Customer List, including, but not limited to, any of Seller's obligations
to provide personal signaling services pursuant to any tariffs or contracts or
agreements with customers that were in place on or before the Second Closing,
and Seller's obligations under the Leases assigned pursuant to this Agreement.
Other than such specified liabilities (collectively, "Assumed Liabilities"),
but the parties do not intend for Buyer to assume, and by its purchase of the
Purchased Assets Buyer shall not assume, any liabilities or obligations of
Seller, whether accrued or not accrued, fixed or contingent, or otherwise.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
5.01 Introduction. As an inducement to Buyer to enter into this
Agreement and the transaction contemplated hereby, Seller and Shareholder
hereby represent and warrant to Buyer (and each representation and warrants
shall be so construed) that each of the following representation and warranties
is true and correct.
5.02 Corporate Power and Authority. Seller has full power and
authority under its Certificate of Incorporation and Bylaws to sell, and has
taken all necessary corporate action to authorize the sale of, the Purchased
Assets to Buyer in accordance with the terms of this Agreement and to perform
its other obligations hereunder, and this Agreement constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms, except
insofar as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the rights
and remedies of creditors generally or by general principles of equity.
5.03 Title to Purchased Assets. SELLER HAS TITLE TO THE PURCHASED
ASSETS FREE AND CLEAR OF ANY LIENS, ENCUMBRANCES OR RIGHTS OF OTHER PARTIES.
SELLER IS NOT A PARTY OR, SUBJECT TO ANY CONTRACT, INSTRUMENT, LAW OR
REGULATION UNDER WHICH THE SALE OF THE PURCHASED ASSETS TO BUYER IN ACCORDANCE
WITH THE TERMS OF THIS AGREEMENT WOULD RESULT IN ANY LIEN OR ENCUMBRANCE ON ANY
OF THE PURCHASED ASSETS.
5.04 No Violations. The execution and performance of this Agreement by
Seller will not violate any provision of, or result in the breach of, or
constitute a default under, or, except for the consents of the FCC and as
otherwise set forth in Articles IX and X, require any consent under, any law,
or any order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal, or any contract, agreement or instrument by which Seller
is bound.
5.05 Litigation. There is no litigation or proceeding pending in any
jurisdiction or, so far as is known to Seller, threatened against Seller at law
or in equity before any court or other governmental agency that, if adversely
decided, could have an adverse effect on Seller's ability to perform its
obligations under this Agreement or result in any lien on any of the Purchased
Assets.
5.06 Condition of Purchased Assets.
(a) ALL OF THE TANGIBLE ASSETS ARE IN GOOD OPERATING CONDITION AND
REPAIR, SUBJECT ONLY TO ORDINARY WEAR AND TEAR.
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(b) Each Lease is in full force and effect and there is no default
thereunder, and no event that with notice or the passage of time or both would
become an event of default thereunder by either party. All rent and additional
rents due on such leases have been paid, Seller has been in peaceable
possession since the commencement of the original term of the lease, and
neither Seller nor lessors nor sublessor under the lease is in default
thereunder. No waiver, indulgences, or postponements of Seller's obligations
thereunder have been granted by lessors, or of the lessor's obligations by
Seller.
(c) Each License is in full force and affect and there is no
default thereunder or no event that with notice or the passage of time or both
would effect the validity of said Licenses.
(d) Except as otherwise set forth, Seller has operated its
Business in conformity with all applicable laws, regulations and ordinances,
except for violations or possible violations that are not, individually or in
the aggregate, reasonably likely to have a material effect on it or prevent or
materially impair its ability to consummate the transactions contemplated
hereby.
5.07 Contracts and Commitments. Neither Seller nor, to the best of
Seller's knowledge, any other party to any such contract is in default under
the terms of any contract or commitment. Seller is not subject to nor a party
to any written mortgage, lien, lease, agreement, contract, instrument, order
judgment or decree or any other restriction of any kind or character which
would prevent the continued operation of the Business by Buyer on substantially
the same basis as theretofore operated.
5.08 All Assets. The Purchased Assets constitute the material
properties with which Seller has conducted the Business for the twelve-month
period prior to the First Closing.
5.09 Insurance. The insurance policies maintained by the Seller in
its ordinary course of business are in full force and effect as of the date
hereof and all applicable premiums thereon have been paid in full. Such
insurance is adequate in amount of coverage and is consistent with industry
practice. The Business will continue to maintain at its own expense the
insurance coverage afforded by such policies in full force and effect up to and
including the date of this Agreement and the Second Closing.
5.10 Litigation and Administrative Proceedings. Except as set forth
on Exhibit "J" attached hereto, there are no actions, suits, proceedings, or
judgments which are outstanding, pending, or have been served on Seller or to
Seller's knowledge, threatened against or which affect the Business, at law or
in equity, by or before any
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federal, state or municipal court or any other governmental department,
commission, board, bureau, agency or instrumentality.
5.11 Books and Records. Seller and the Business have maintained
books and records in accordance with reasonable business practices. From the
date hereof until the Second Closing, Buyer and Buyer's representatives shall
have full access to the Seller's properties, books and records.
5.12 Financial Statements. Attached hereto as part of Exhibit "K"
are the Statement of Financial Condition (the "Balance Sheets") of Seller as of
December 31, 1995 and March 31, 1996, and the compiled Profit and Loss
Statement of Seller for the period beginning January 1, 1996 and ending March
31, 1996, and calendar year 1995 (the "Profit and Loss Statements") (the
Balance Sheets, Profit and Loss Statements, and the notes thereto are herein
referred to collectively as the "Financial Statements"). The Financial
Statements have been prepared by Seller's independent accountants, in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise stated in the Financial Statements and include all
adjustments (consisting only of normal recurring accruals) that are necessary
for the fair presentation of the financial position of Seller and the results
of operations and cash flows except as otherwise stated in the Financial
Statements. The Balance Sheets fairly present the condition of Seller as of
December 31, 1995 and March 31, 1996 and reflects all known debts and
liabilities of Seller as of such date. The Profit and Loss Statements fairly
present the results of the operations of the Business of Seller for the period
it covers. The Financial Statements fairly present the financial condition and
results of operations of Seller.
5.13 Additional Liabilities. Since the date of the Balance Sheet,
Seller has not incurred any additional liabilities on account of the Business
conducted by the Buyer except in the ordinary course of business, and as
included on Exhibit "L" attached hereto and acknowledged by the parties.
5.14 Material Changes. Since March 31, 1996, other than as
disclosed on Exhibit "M", there has not been:
(a) any material change in the condition, financial or otherwise,
of the Business, other than changes in the ordinary course of business, none of
which has been materially adverse;
(b) damage, destruction or loss, whether or not covered by
insurance, materially or adversely affecting the Purchased Assets or the
Business;
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(c) except with respect to employees who have received merit or
cost of living salary increases, any increase in the compensation payable or to
become payable by Seller to any of its employees or agents employed in
connection with the operation of the Business, or any bonus payment or
arrangement made to or with any thereof with the exception of increased
compensation paid to the Shareholder or Employee; or
(d) any labor dispute with respect to or affecting the Business.
5.15 Judgments and Decrees. The Business is not subject to any order,
judgment or decree with respect to the Business or any of the Purchased Assets
or to any mortgage, lease, agreement, instrument, or order, judgment or decree
which would prevent the consummation of any of the transactions contemplated
hereunder, or compliance by Seller and the Business with the terms, conditions
and provisions hereof.
5.16 Employee Plans, Bargaining Agreements, Etc. The Seller shall have
sole responsibility for and shall hold Buyer harmless for any liability, cost
or expense related to any pension, retirement, profit-sharing or savings plan,
bonus, incentive, deferred compensation, group health insurance, or group life
insurance plans or obligations or any collective bargaining agreement or any
other contract, written or oral, with any trade or labor union, employees'
association or similar organization. There are no strikes or labor disputes
pending or threatened, or any attempts at union organization by any of the
employees of the Business. All salaries and wages paid by the Business are in
compliance with all applicable federal, state and local laws. Seller shall pay
all salaries and wages accrued and owing to employees of the Business as of the
Closing.
5.17 Employees, Consultants and Agents. The Business and Seller are
not parties to any written consulting or employment agreement or any other
written agreements with respect to individual employees, consultants, or
agents.
5.18 Brokerage. There are no claims for brokerage commissions or
finder's fees in connection with the transactions contemplated hereunder
arising from or connected with any action taken by Seller.
5.19 Taxes. All social security, withholding, sales and
unemployment insurance taxes to the city, state and federal governments will be
paid or adequately provided for up to the date of closing. The 1996 property
taxes if any, applicable to Seller's assets being sold hereunder shall be
prorated at the closing (based
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on the Closing) between Buyer and Seller.
5.20 Ordinary Course of Business. During the period from the date
hereof to and including the First Closing and Second Closing, respectively,
Seller will conduct the Business solely in the usual and ordinary manner and
will refrain from any transaction not in the ordinary course of business or
except as otherwise permitted hereunder, unless the prior written consent of
Buyer to such transaction has been obtained. Seller shall cooperate with and
assist Buyer in making a smooth transition in Buyer's acquiring of the
Business.
5.21 Maintenance of Business Relationships. From the date hereof
until the First Closing and Second Closing, respectively, Seller will utilize
its best efforts to keep the Business intact and preserve its relationship with
suppliers, subscribers and others with whom Seller has business relations,
including, but not by way of limitation, lines of credit or other credit of the
Business as well as the regular conduct of the Business pursuant to ARTICLE VII
hereof. Along these lines, Seller agrees to cooperate with Buyer in making
contacts, solicitations, introductions and the like at Buyer's reasonable
request and during reasonable office hours during the period from the execution
of this Agreement through the Second Closing and for sixty (60) days after the
Second Closing.
5.22 Omission of Material Fact. All information necessary to make
any representation herein contained not materially misleading has been
disclosed to Buyer.
5.23 Solvency. Seller is solvent; that is, it has the ability to pay
its debts when they become due in the ordinary course of business, and its
assets exceeds its liabilities. The Seller will not be rendered insolvent as a
result of the transactions contemplated herein.
5.24 Investment Interest. Seller will acquire the Buyer Common
Stock, for its own account, to hold for investment, and with no present
intention of dividing its participation with others or reselling or otherwise
participating, directly or indirectly, in a distribution of the Buyer Common
Stock, and Seller will not make any sale, transfer, or other disposition of the
Buyer Common Stock, and Seller will not make any sale, transfer, or other
disposition of the Buyer Common in violation of the Securities Act or any
applicable state securities laws (the "State Acts"). Seller agrees that there
will be placed on the certificate for its Buyer Common Stock, or any
substitutions for it, a legend stating in substance:
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THE SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS IN RELIANCE ON ONE OR MORE
EXEMPTIONS THEREUNDER AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT THEREUNDER.
5.25 Access to Information. Seller has been given access to all
material and relevant information concerning Buyer, thereby enabling Seller to
make an informed investment decision concerning the Buyer Common Stock. Seller
has relied solely upon an independent investigation made by it and their
representatives, if any, and has, prior to the date hereof, been given access
to and the opportunity to examine data and information relating to Buyer. In
making its investment decision to acquire the Buyer Common Stock pursuant to
this Agreement, Seller is not relying on any oral or written representations or
assurances from Buyer or any other person or any representative of Buyer or any
other person other than as set forth in this Agreement. Without limiting the
foregoing, Seller has reviewed Buyer's Registration Statement on Form S-1,
effective February 27, 1996, and Buyer's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996. Seller is an "accredited investor" as defined in
Rule 501 of Regulation D under the Securities Act.
5.26 Economic Risk. Seller represents that it is able to bear the
economic risk of an investment in the Buyer Common Stock, which Seller
acknowledges is currently illiquid and may remain illiquid indefinitely,
including a possible total loss of its investment. In making this statement,
Seller hereby represents and warrants to Buyer that it has adequate means of
providing for his current needs and contingencies; it is able to afford to hold
the Buyer Common Stock for an indefinite period and it further represents that
he has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment in the Buyer
Common Stock. Further, such Shareholder represents that it has not present
need for liquidity in the Buyer Common Stock and is willing to accept such
investment risks.
5.27 Tax Advice. Seller has reviewed with its tax advisor the U.S.
federal, state, local and foreign tax consequences of an investment in the
Buyer Common Stock and the transactions contemplated by this Agreement. Seller
is relying solely on such advisors and not on any statements or representations
of Buyer or any of its agents and understands that it (and not Buyer ) shall be
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responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
5.28 Ownership of Shares. Shareholder is the sole shareholder and
owner of record of all of the issued and outstanding stock of Seller. Such
Shareholder owns all right, title, and interest in and to such shares free and
clear of all liens (including those for federal or state, estate or inheritance
taxes), options, rights of refusal, or similar rights of other transfer
restrictions of any nature whatsoever (including any arising from any pending
or threatened litigation.)
5.29 Governmental Authorization and Compliance with Laws. Seller
and its Subsidiaries have been and are in compliance with all laws, ordinances,
regulations, policies, orders or rules ("Laws") of all (collectively, the
"Governmental Entities") applicable to Seller or its business, properties or
assets. Seller holds all licenses, permits, certificates, franchises,
registrations, consents, authorizations or other rights filed with, granted,
issued by, or entered by any Governmental Entity, including without limitation,
the FCC, any state or local regulatory authorities and any state or local
public service commission or public utility commission asserting jurisdiction
over the radio facilities of Seller (each, a "State Authority"), that are
required for the conduct of its business as now being conducted (collectively,
"Seller Licenses"). The Seller Licenses are set forth on Exhibit "N" and are
valid, in full force and effect, and the terms of said Seller Licenses are not
subject to any restrictions or conditions that materially limit or would
materially limit the operations of the business of Seller as presently
conducted, other than restrictions or conditions generally applicable to
licenses of that type. The Seller Licenses granted, issued or entered by the
FCC are subject to the Communications Act. There are no proceedings pending or,
to the best knowledge of Seller, complaints or petitions by others, or
threatened proceedings, before the FCC or any other Governmental Entity
relating to the business or operations of Seller or the Seller Licenses, and
there are no facts or conditions that reasonably could be expected to
constitute grounds for the FCC to revoke, terminate, suspend, deny, annul, or
impose conditions on any renewal of any Seller Licenses, or materially impair
the ability of Seller to consummate the transactions contemplated hereby or to
impose any fines, forfeitures or other penalties on Seller. Exhibit "N"
contains a true and complete list of each application of Seller pending before
the FCC (the "Seller Applications"), and each of the Seller Licenses issued by
the FCC (collectively, the "Seller FCC Authorizations"). Exhibit "N" also
contains a true and complete list of all licenses, permits, certificates,
franchise registrations, consents, approvals and
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Authorizations of Seller pending before or issued by any State Authority (the
"Seller State Certificates"). The Seller FCC Authorizations and the Seller
State Certificates are the only such federal, state or local licenses, permits,
certificates, franchise registrations, consents and Authorizations that are
required for the conduct of the business and operations of Seller as currently
conducted. Upon consummation of the Merger, Purchaser shall, through its
ownership of all of the stock of the Surviving Corporation, have the right to
utilize in its business all of the Seller FCC Authorizations and Seller State
Certificates.
5.30 Absence of Undisclosed Liabilities. Except as set forth in the
balance sheet as of March 31, 1996, Seller (i) did not have, as of March 31,
1996, debts, liabilities or obligations, whether accrued, absolute, contingent
or otherwise and whether due or to become due (including without limitation any
uninsured liabilities resulting from failure to comply with any Laws); (ii) has
not incurred since March 31, 1996, any such debts, liabilities or obligations
(other than debts, liabilities or obligations incurred in the ordinary and
usual course of business after March 31, 1996), or (iii) since March 31, 1996,
has not conducted its business otherwise than in the ordinary and usual course.
5.31 Tax Matters. All taxes arising under the Code, or any Law
promulgated thereunder, or arising under any federal, state, local or foreign
Law, including, without limitation, any income, profits, employment, sales,
use, occupation, excise, real property, personal property or ad valorem taxes
or any license or franchise fee or tax and all penalties and interest related
thereto (collectively, "Taxes"), due and payable by Seller have been paid or
provided for in the Seller Financial Statements and are not delinquent. All
Taxes not yet due have been fully accrued on the books of Seller and adequate
reserves have been established therefor. The charges, accruals and reserves
which have been provided in the Seller Financial Statements in respect of Taxes
for all fiscal periods prior to and ending at March 31, 1996, are sufficient
for the payment of all unpaid Taxes, whether or not disputed, that are accrued
or applicable for the period ended March 31, 1996, and for all years and
periods ended prior thereto. There are no pending claims asserted for Taxes
against Seller or outstanding agreements or waivers extending the statutory
period of limitation applicable to any tax return of Seller for any period.
Seller has duly and timely filed all federal, state, local and foreign tax
returns and all other returns heretofore required to be filed ("Tax Returns")
with respect to all Taxes. Seller has delivered to Purchaser true and correct
copies of all Tax Returns for its 1993, 1994 and 1995 taxable years. Seller has
made all estimated income tax deposits and all other required Tax payments or
deposits and has complied for all prior periods in all material
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respects with the Tax withholding provisions of all applicable federal, state,
local and other Laws.
5.32 Insider Interests. No affiliate (an "Affiliate"), as that term
is defined in Rule 405 of Regulation C promulgated under the Securities Act of
1933, as amended (the "Securities Act"), officer, director or Shareholder of
Seller (i) has any agreement with Seller or any interest in any property, real
or personal, tangible or intangible, including without limitation trade names
or trademarks used in or pertaining to the business of Seller, except for the
normal rights as a stockholder or (ii) has any claim or cause of action against
Seller, except for accrued compensation and benefits, expenses and similar
obligations incurred in the ordinary course of business (including
reimbursement of medical expenses pursuant to Employee Plans) with respect to
employees of Seller.
5.33 Intellectual Property. Seller owns all patents, trademarks,
service marks, trade names, copyrights or applications for the foregoing, and
all computer programs, firmware and documentation relating thereto, and trade
secrets and other intellectual properties (collectively, the "Intellectual
Property") that are or were used in the conduct of the business of Seller.
Seller has and has had the unrestricted right to produce, market, license and
sell all of the products and services produced, marketed and licensed by it and
the consummation of the transactions contemplated by this Agreement will not
alter or impair any such rights. Exhibit "O" lists all of the Intellectual
Property other than trade secrets, which have been separately disclosed to
Purchaser, and lists all licenses or other agreements (other than licenses of
generally available software programs for personal computers) pursuant to which
Seller has any right to use or enjoy any Intellectual Property that is owned by
others or pursuant to which Seller is under a duty of confidentiality with
respect to any Intellectual Property owned by others (the "Intellectual
Property Agreements"). Except as disclosed on Exhibit "P", all of the
Intellectual Property is owned free and clear of all assignments, licenses,
sublicenses, and Liens, including claims of employees, former employees or
independent contractors of Seller, and Seller has not received notice that the
use of any of the Intellectual Property in the business of Seller, any of the
products or services of Seller or any products held for future sale or license
by Seller violates or infringes upon the claimed rights of others and there is
no valid basis for such a claim. As to the Intellectual Property Agreements,
except as set forth on Exhibit "Q", (i) all are in full force and effect; (ii)
Seller is not, nor to the best of the knowledge of Seller or the Shareholders,
is any other party thereto, in default under any Intellectual Property
Agreement; (iii) Seller is not obligated to make any royalty, transfer or
similar payments under any Intellectual Property Agreement, (iv)
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the rights of Seller under the Intellectual Property Agreements will not be
affected by the consummation of the transactions provided for herein, and (v)
the exercise by Seller of its respective rights under any Intellectual Property
Agreement will not infringe upon the claimed rights of others.
5.34 Major Customers. Exhibit "R" sets forth (i) the name of each
customer of Seller which during the year ended December 31, 1995 generated
revenue of $10,000 or more, (ii) the name of each customer of Seller which
during the three months ended March 31, 1996, generated annualized revenue of
$10,000 or more and (iii) the name of each customer of Seller which during the
year ended December 31, 1995, or during the three months ended March 31, 1996,
generated revenue or annualized revenue, respectively, of $10,000 or more and
as to which Seller has received a termination notice or otherwise has a
reasonable basis to believe that such customer will terminate its relationship
with Seller on or before December 31, 1996. The revenues generated during the
year ended December 31, 1995 or the annualized revenues generated during the
three months ended March 31, 1996, under contracts providing for recurring
revenues with Seller with respect to which Seller has received a termination
notice (or has been informed that such notice is forthcoming) since December
31, 1995 or March 31, 1996, as the case may be, did not exceed the estimated
revenues to be received during the year ending December 31, 1996 under new
contracts providing for recurring revenues with customers of Seller commencing
in 1996.
5.35 Environmental Matters.
(a) Seller has obtained all authorizations, kept all records and
made all filings required by applicable Environmental Laws (as defined below)
with respect to emissions or discharges into the environment and the proper
disposal of any hazardous wastes, hazardous substances, or other hazardous or
toxic materials as defined in the Environmental Laws. None of the properties
occupied or used by Seller has been contaminated with any such hazardous
wastes, hazardous substances, or other hazardous or toxic materials. The
Company has conducted its operations and will consummate the transactions
contemplated by this Agreement in compliance with all Environmental Laws and
all authorizations obtained pursuant thereto.
(b) Seller has not received any notice from the United States
Environmental Protection Agency that it is a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund Notice"), any citation from any Governmental Entity for
noncompliance with its requirements with respect to air, water or environmental
pollution, or the improper storage, use or discharge of any hazardous waste,
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other waste or other substance or material pertaining to its business
("Citations") or any written notice from any private party alleging any such
noncompliance or impropriety; and there are no pending or unresolved Superfund
Notices, Citations or written notices from private parties alleging any such
noncompliance or impropriety.
(c) The term "Environmental Laws" shall mean all Laws relating to
pollution or protection of the environment.
5.36 Investigation; Confidentiality.
(a) Buyer may, prior to the Effective Time, make or cause to be made,
such investigation of the business and properties of Seller and its financial
and legal condition as Buyer deems necessary or advisable to familiarize itself
therewith, provided that such investigations shall not unreasonably interfere
with normal operations of Seller. Seller agrees to permit Buyer and its
authorized representatives to have or cause them to be permitted to have, after
the date hereof, full access to the premises, books and records of Seller at
reasonable hours, and the officers of Seller will furnish Buyer with such
financial and operating data and other information with respect to Seller's
businesses and properties as Buyer shall from time to time reasonably request.
Seller will request its auditing firm to permit Buyer and its representatives,
including its auditing firm, to review the work papers of the auditing firm of
Seller relating to their examination of the Seller Financial Statements. No
investigation by Buyer heretofore or hereafter made shall affect the
representations and warranties of Seller, and each such representation and
warranty shall survive any such investigation, subject to Article 10.
(b) Except as contemplated by this Agreement or as necessary to
carry out the transactions contemplated hereby, all information or documents
furnished to Buyer shall be kept confidential by Buyer (and Buyer shall cause
its agents and representatives to maintain the confidentiality of such
documents) and in the event such transactions are not consummated, Buyer shall
return to Seller all information furnished hereunder and shall not thereafter
use the same for any purpose until such time as such information becomes
publicly available from sources other than parties to this Agreement, except to
the extent (i) it was known by Buyer prior to being received, (ii) it is or
thereafter becomes lawfully obtainable from other sources, (iii) Buyer is
legally required to disclose the same to any Governmental Entity having
jurisdiction over Buyer or as otherwise may be required by applicable law, or
(iv) such duty of confidentiality is waived by Seller.
5.37 Subscriber Units. Seller and Shareholder represents and
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warrants that Seller is providing one-way paging service and billing to twenty
six thousand (26,000) subscribers as of May 31, 1996.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.01 Corporate Power and Authority. Buyer has full power and authority
under its Charter and Bylaws to buy, and has taken all necessary corporate
action to authorize the purchase of, the Purchased Assets from Seller in
accordance with the terms of this Agreement and to perform its other
obligations hereunder, and this Agreement constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms except insofar as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the rights and remedies
of creditors generally or by the general principles of equity. The execution
and delivery of this agreement, and the consummation of the transaction
completed hereby, has been duly and validly approved by the Board of Directors
of the Buyer.
6.02 No Violations. The execution and performance of this Agreement by
Buyer will not violate any provision of, or result in the breach of, or
constitute a default under, or, except for the consents of the FCC and as
otherwise set forth in Articles IX and X, require any consent under, any law,
or any order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal, or any contract, agreement or instrument by which Buyer
is bound.
6.03 Litigation. There is no litigation or proceeding pending in any
jurisdiction or, threatened against Buyer at law or in equity before any court
or other governmental agency that, if adversely decided, could have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement or on Buyer's ability to operate the Purchased Assets in its paging
business, or result in any lien on any of the Purchased Assets. No regulatory
agency has initiated any proceeding, or, to the best knowledge of Buyer,
investigation into the business or operations of the Buyer. There is no
material, unresolved violation, criticism or exception by any regulatory agency
with regard to any report or statement filed by the Buyer with such agency.
6.04 Buyer has made available to the Seller the Buyer's form S-1
registration statement and its financial statements as of March 31, 1996. Such
statements fairly present the financial position of the Buyer as of the dates
thereof and comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto.
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The books and records of the Buyer have been and are being maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
ARTICLE VII
COVENANTS OF SELLER
7.01 Operation of Business Pending Closings. Seller agrees that
pending the First Closing and Second Closing, respectively, it will operate its
paging business in the local exchange areas described in Section 1.01 in the
ordinary course in the same manner as it is currently being operated, will use
its best efforts to maintain the quality of its service at not less than its
current level, will timely perform its obligations under each of the Leases,
and will perform, or have performed, all appropriate maintenance and repairs on
the Equipment in the same manner as the Equipment has been maintained.
7.02 Consents. Seller agrees to use all reasonable efforts to
obtain the consent of any party whose consent is required to consummate the
transactions contemplated herein, including without limitation, the consent of
the lessor under the Leases and the consent of each of the other parties under
the Contracts. In addition to any other conditions or contingencies to Buyer's
or Seller's obligations hereunder, Buyer's and Seller's obligations under this
Agreement are expressly contingent on and subject to Seller's fulfillment of
this Covenant and securing of the consents required hereby by each of the First
Closing and Second Closing, respectively.
7.03 Business Name. Within a reasonable time following the date of
this Agreement Buyer may obtain and file with the appropriate court,
governmental body or agency, instruments necessary under applicable law to
reserve for the benefit of Buyer the trade name "Big Apple Paging", and Seller
and Shareholder shall fully cooperate with Buyer and prepare and execute all
documentation required of or from Buyer in order that Buyer may operate under
the trade name "Big Apple Paging".
7.04 Access to Books and Records. From and after the First Closing,
Buyer and its authorized representatives shall have reasonable access, during
normal business hours upon reasonable notice, to inspect and examine and the
right to photocopy, at Buyer's expense, any books and records acquired by Buyer
hereunder that relate to the affairs and business of Seller conducted on or
prior to the Closings. Seller acknowledges and agrees to cooperate with Buyer,
or its authorized representatives, in the Audit of Seller's Financial
Statements. For a period of three years
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following the Closings, Buyer shall retain at no cost to Seller all books,
records and files transferred hereunder pertaining to the period prior to the
Closings. If Buyer thereafter chooses to dispose of or destroy some or all such
records, Buyer will provide reasonable advance notice of its intent to Seller.
Buyer may dispose of or destroy such books, records and files after three years
following the Closings unless Seller advises Buyer that it needs such
materials, in which event Buyer shall, at Seller's expense, deliver such
materials to Seller or permit Seller to take possession thereof.
7.05 Publicity. Seller agrees that it will not make any public
announcements or disclosures of this Agreement or the terms thereof without the
prior consent of Buyer, which consent shall not be unreasonably withheld.
7.06 Non-Competition. Seller and Shareholder agree that for a
period of three (3) years after the Second Closing it will not offer one-way
paging services in the local exchange areas described in Section 1.01 as a
landline carrier.
7.07 Shareholders' Meeting. As soon as practicable after the date
of this Agreement, Seller shall duly and properly call a special meeting of its
Shareholders for the purpose of approving this Agreement and all other matters
necessary to consummate the transactions contemplated hereby, and shall submit
all of the foregoing to its Shareholders for such approval as soon as
reasonably practicable and shall use its best efforts to obtain such approval.
The Shareholders may effect such approval by unanimous written consent in lieu
of a shareholders' meeting at any time after they have had a reasonable time
within which to review the Offering Memorandum and Proxy Statement prepared in
connection therewith.
7.08 Additional Financial Statements. Its soon as practicable after
the end if every month beginning with the month in which this Agreement is
signed but in no event later than the twentieth day of the following month
Seller will deliver to Buyer an unaudited balance sheet as of the end of such
month and a related statement of income for each month, each certified in any
officer of Seller as meeting the standardized financial statements set forth in
Section 5.12.
ARTICLE VIII
COVENANTS OF BUYER
8.01 Service After Second Closing. At and subsequent to the Second
Closing, Buyer agrees that it will assume all responsibility for provisioning
of one-way paging personal signaling service to
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customers.
8.02 Publicity. Buyer agrees that it will not make any public
announcement or disclosure of this Agreement or the terms thereof without the
prior consent of Seller, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Buyer can disclose the terms of this Agreement
without Seller's prior consent to:
(a) its counsel, accountants, and other professional advisors;
(b) commercial and investment banks; and
(c) any governmental authority.
8.03 Consents and Approvals. Buyer shall take all necessary
corporate and other action and use its reasonable best efforts to obtain all
consents, approvals, permits, licenses, certificates or other evidences of
authority required to carry out the transactions contemplated by this
Agreement.
8.04 Access to Books and Records. From and after the Closing,
Seller and its authorized representatives shall have reasonable access, during
normal business hours upon reasonable notice, to inspect and examine and the
right to photocopy, at Seller's expense, any books and records acquired by
Buyer hereunder that relate to the affairs and business of Seller conducted on
or prior to the Closing. For a period of three years following the Closing,
Buyer shall retain at no cost to Seller all books, records and files
transferred hereunder pertaining to the period prior to the Closing. If Buyer
thereafter chooses to dispose of or destroy some or all such records, Buyer
will provide reasonable advance notice of its intent to Seller. Buyer may
dispose of or destroy such books, records and files after three years following
the Closing unless Seller advises Buyer that it needs such materials, in which
event Buyer shall, at Seller's expense, deliver such materials to Seller or
permit Seller to take possession thereof.
8.05 Operation of Business Pending Closing. Buyer will, during the
period from the date of this agreement until the Second Closing, conduct its
business in the usual, regular and ordinary course consistent with past
practice and take no action which would reasonably be expected to adversely
affect or delay the ability of the Seller to obtain approvals of the FCC
required to consummate the transactions contemplated hereby.
ARTICLE IX
CONDITIONS TO CLOSING BY BUYER
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Buyer's obligations hereunder shall be subject to the satisfaction of
the following conditions:
9.01 FILINGS WITH THE FCC. SELLER SHALL HAVE FILED APPROPRIATE
APPLICATIONS TO TRANSFER TO BUYER EACH OF THE LICENSES WHERE SELLER HAS
AUTHORITY TO OFFER TARIFFED ONE-WAY PAGING PERSONAL SIGNALING SERVICE IN THE
STATES OF NEW YORK, NEW JERSEY, AND CONNECTICUT. THE PARTIES SHALL COOPERATE
WITH EACH OTHER AND USE REASONABLE BEST EFFORTS TO PROMPTLY PREPARE AND FILE
ALL NECESSARY DOCUMENTATION, APPLICATIONS, NOTICES AND FILINGS, TO OBTAIN AS
PROMPTLY AS PRACTICABLE ALL PERMITS, CONSENTS AND APPROVALS WHICH ARE NECESSARY
OR ADVISABLE TO CONSUMMATE THIS TRANSACTION.
9.02 Other Governmental Authority. Buyer shall have obtained all other
licenses, certificates, permits or other evidences of authority (including
approval of necessary tariffs) from federal, state and local governments
required for it to legally operate a paging service using the Purchased Assets
in the areas now served by Seller, and Seller shall have complied with all
governmental and regulatory matters related to this Agreement.
9.03 Compliance. All of the representations and warranties made by
Seller contained in Article V of this Agreement shall be true in all material
respects as of the time of the First Closing and Second Closing, respectively,
and Seller shall have performed or complied in all respects with all covenants
and conditions required by this Agreement to be performed or complied with by
Seller prior to or at the First Closing and Second. Buyer shall have been
furnished with a certificate of a Seller, dated the Second Closing, to the
foregoing effect.
9.04 Opinion of Counsel - SELLER. Seller shall have furnished Buyer an
opinion, dated the First Closing, of Berkman, Henoch, Peterson & Peddy, P.C.,
counsel to Seller, to the following effects:
(a) Seller has full power and authority under its Certificate of
Incorporation and Bylaws to sell, and has taken all necessary corporate action
to authorize the sale of, the Purchased Assets to Buyer in accordance with the
terms of this Agreement and to perform its other obligations hereunder, and
this Agreement constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except insofar as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the rights and remedies of creditors generally or
by general principles of equity.
(b) To the knowledge of such counsel after reasonable
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<PAGE> 26
investigation, Seller is not a party or subject to any contract, instrument,
law or regulation under which the sale of the Purchased Assets to Buyer in
accordance with the terms of this Agreement would result in any lien or
encumbrance on any of the Purchased Assets.
(c) To the knowledge of counsel after reasonable investigation,
the execution and performance of this Agreement by Seller will not violate any
provision of, or result in the breach of, or constitute a default under, or,
except for the consents of the FCC and as otherwise set forth in Articles IX
and X or other FCC regulatory matters, require any consent under, any law, or
any order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal, or any contract, agreement or instrument by which Seller
is bound.
(d) There is no litigation or proceeding pending in any jurisdiction
or, so far as is known to such counsel after reasonable investigation,
threatened against Seller at law or in equity before any court or other
governmental agency that, if adversely decided, could have an adverse effect on
Seller's ability to perform its obligations under this Agreement or result in
any lien on any of the Purchased Assets.
(e) The execution of performance of this Agreement and all
transfer instruments effectively conveys title to the Purchase Assets free and
clear of all liens, encumbrances, or rights of other parties.
(f) The execution and performance of this Agreement will not
violate any provisions of the New York, New Jersey, or Connecticut Bulk Sales
Act.
In rendering the foregoing opinion, such counsel may, as to matters of fact,
rely on certificates of officers of Seller, may state that such opinion
addresses only the laws of the State of New York and of the United States of
America, and may state that such counsel's opinion is solely for the benefit of
Buyer and may not be relied upon by any other person.
9.05 Opinion of Counsel - Seller. Seller shall have furnished Buyer an
opinion, dated the First Closing, of Schwartz, Woods & Miller, FCC counsel to
Seller, to the following effects:
(a) To the knowledge of such counsel after reasonable investigation,
Seller is not a party or subject to any contract, instrument, law or regulation
under which the sale of the Purchased Assets to Buyer in accordance with the
terms of this Agreement would result in any lien or encumbrance on any of the
Purchased
- 26 -
<PAGE> 27
Assets.
(b) The execution and performance of this Agreement by Seller will
not violate any provision of, or result in the breach of, or constitute a
default under, or, except for the consents of the FCC and as otherwise set
forth in Articles IX and X, require any consent under, any law, or any order,
writ, injunction or decree of any court, governmental agency or arbitration
tribunal, or any contract, agreement or instrument by which Seller is bound.
In rendering the foregoing opinion, such counsel may, as to matters of fact,
rely on certificates of officers of Seller, may state that such opinion
addresses only the laws of the State of New York and of the United States of
America, and may state that such counsel's opinion is solely for the benefit of
Buyer and may not be relied upon by any other person.
9.06 No Action or Proceeding. No action or proceeding shall have been
brought, or to the knowledge of Buyer threatened, before any court or
administrative agency to prevent the consummation of, or to seek damages by
reason of, the transactions contemplated hereby, and no governmental authority
shall have asserted that these transactions constitute a violation of law or
give rise to liability on the part of Buyer.
9.07 Audit of Seller Financial Statements. Prior to the Second
Closing, Buyer shall have completed an audit of Seller's Financial Statements
in accordance with all required Securities and Exchange Commission or other
regulatory requirements.
ARTICLE X
CONDITIONS TO CLOSING BY SELLER
The obligations of Seller hereunder shall be subject to the
satisfaction of the following conditions, any of which may be waived by Seller:
10.01 FILINGS WITH THE FCC. SELLER SHALL HAVE FILED APPROPRIATE
APPLICATIONS TO TRANSFER TO BUYER EACH OF THE LICENSES WHERE SELLER HAS
AUTHORITY TO OFFER TARIFFED ONE-WAY PAGING PERSONAL SIGNALING SERVICE IN THE
STATE OF NEW YORK, NEW JERSEY, AND CONNECTICUT.
10.02 Compliance. All of the representations and warranties made by
Buyer contained in Article VI of this Agreement shall be true in all material
respects as of the time of the First Closing and the Second, respectively, and
Buyer shall have performed or complied in all material respects with all
covenants and conditions required by this Agreement to be performed or complied
with by
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<PAGE> 28
Buyer prior to or at the First Closing and the Second Closing, respectively.
Seller shall have been furnished with certificate, dated the Closing, of Buyer
to the foregoing effect.
10.03 Opinion of Counsel. Buyer shall have furnished Seller an
opinion, dated the First Closing, of counsel, which counsel may be an employee
of Buyer, to the following effect:
(a) Buyer has full power and authority under its Charter and Bylaws
to buy, and has taken all necessary corporate action to authorize the purchase
of, the Purchased Assets from Seller in accordance with the terms of this
Agreement and to perform its other obligations hereunder, and this Agreement
constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms except insofar as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or similar laws relating
to or affecting the rights and remedies of creditors generally or by the
general principles of equity.
(b) The execution and performance of this Agreement by Buyer will
not violate any provision of, or result in the breach of, or constitute a
default under, or, except for the consents of the FCC and as otherwise set
forth in Articles IX and X, require any consent under any law, under any order,
writ, injunction or decree of any court, governmental agency or arbitration
tribunal, or under any contract, agreement or instrument known to such counsel
by which Buyer is bound.
(c) There is no litigation or proceeding pending in any
jurisdiction or, so far as is known to such counsel after reasonable
investigation, threatened against Buyer at law or in equity before any court or
other governmental agency that, if adversely decided, could have an adverse
effect on Buyer's ability to perform its obligations under this Agreement.
In rendering the foregoing opinion, such counsel may, as to matters of fact,
rely on certificates of officers of Buyer, may state that such opinion
addresses only the laws of the State of Georgia and of the United States of
America and may state that such counsel's opinion is furnished solely for the
benefit of Seller and may not be relied upon by any other person.
10.04 No Action or Proceeding. No action or proceeding shall have been
brought, or to the knowledge of Seller threatened, before any court or
administrative agency to prevent the consummation of, or to seek damages in a
material amount by reason of, the transactions contemplated hereby, and no
governmental authority shall have asserted that these transactions constitute a
violation of law or give rise to liability on the part of Seller.
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<PAGE> 29
10.05 Consents and Approvals. Seller shall have received from Buyer
evidence of the consents and approvals required to be obtained by Buyer from
the Commission, which shall be in form and substance reasonably satisfactory to
Seller.
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification by Seller. Subject to Section 11.03 hereof,
Seller shall indemnify and hold harmless Buyer, and each officer, director,
employee or agent thereof, and their respective estates, successors, and
assigns, in respect of any and all claims, losses, damages, liabilities and
expenses (including, without limitation, settlement costs and any legal or
other expenses for investigating or defending any actions or threatened
actions) reasonably incurred by such indemnitee as a result of each and all of
the following or any claims or allegations with respect thereto:
(a) Any misrepresentation or breach of any warranty made by Seller
in this Agreement or in any certificate furnished by Seller pursuant to this
Agreement, or in any of the documents executed pursuant to this Agreement.
(b) The nonfulfillment or breach of any covenant, agreement or
obligation of Seller contained in this Agreement or any of the other documents
executed pursuant to this Agreement.
(c) Any claim, whether in contract or tort or by a governmental
agency or otherwise, asserted against such an indemnitee based upon an
occurrence prior to the First Closing and Second Closing, respectively, that
arises out of Seller's conduct of the Business.
11.02 Indemnification by Buyer. Subject to the provisions of Section
11.03, Buyer shall indemnify and hold harmless Seller and each officer,
director, employee or agent thereof, and their respective estates, successors
and assigns, in respect of any and all claims, losses, damages, liabilities and
expenses (including, without limitation, settlement costs and any legal or
other expenses for investigating or defending any actions or threatened
actions) reasonably incurred by such indemnitee as a result of each and all of
the following or any claims or allegations with respect thereto:
(a) Any misrepresentation or breach of any warranty made by Buyer
in this Agreement or in any certificate furnished by Buyer pursuant to this
Agreement, or in any of the documents executed pursuant to this Agreement.
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<PAGE> 30
(b) The nonfulfillment or breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or any of the other documents
executed pursuant to this Agreement.
(c) Any claim, whether in contract or tort or by a governmental
agency or otherwise, asserted against such an indemnitee based upon an
occurrence after the Closings or a condition existing after the Closings that
arises out of Buyer's conduct of the Business.
11.03 Limitation. Notwithstanding the foregoing, neither Seller nor
Buyer shall have any obligation to indemnify an indemnitee for any claim or
related series of claims involving, in the aggregate, less than $5,000.
11.04 Notification. Whenever any claim for indemnification shall arise
hereunder, the indemnified party shall notify the indemnifying party promptly
after such indemnified party has actual knowledge of the facts constituting the
basis for such claim. The notice to the indemnifying party shall specify, if
known, the amount or an estimate of the amount of the liability arising
therefrom. The indemnified party shall not settle or compromise any such claim
without the prior written consent of the indemnifying party unless suit shall
have been instituted against the indemnified party and the indemnifying party
shall have failed, within fifteen (15) days after notice of institution of the
suit, to take control of such suit as provided in Section 11.05.
11.05 Defenses of Actions. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the indemnifying
party, at its sole cost and expense, may, upon written notice to the
indemnified party, assume the defense of such claim or legal proceeding,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all expenses; except that any delay or failure by the
indemnified party to notify the indemnifying party of any claim for
indemnification shall relieve the indemnifying party of its obligations
hereunder but only to the extent, if at all, that it is prejudiced by reason of
such delay or failure. The indemnified party shall have the right to employ
separate counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless both the indemnified
party and the indemnifying party are named as parties and the indemnified party
shall in good faith determine that representation by the same counsel is
inappropriate. In the event that the indemnifying party, within ten days after
notice of any such action or claim, fails to assume the defense
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<PAGE> 31
thereof, the indemnified party shall have the right to undertake the defense,
compromise or settlement of such action, claim or proceeding for the account of
the indemnifying party, subject to the right of the indemnifying party to
assume the defense of such action, claim or proceeding with counsel reasonably
satisfactory to the indemnified party at any time prior to the settlement,
compromise or final determination thereof. Anything in this Section 11.05 to
the contrary notwithstanding, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise any action or
claim or proceeding for anything other than money damages paid by the
indemnifying party. The indemnifying party may, without the indemnified party's
prior written consent, settle or compromise any such action, claim or
proceeding or consent to entry of any judgment with respect to any such action
or claim that requires solely the payment of money damages by the indemnifying
party and that includes as an unconditional term thereof the release by the
claimant or the plaintiff of the indemnified party from all liability in
respect of such action, claim or proceeding. As a condition to asserting any
right under this Article XI, each Buyer's indemnified party must appoint Buyer,
and each Sellers' indemnified party must appoint Seller, as its sole agent for
all matters relating to any claim hereunder.
11.06 Payment. All indemnification hereunder shall be effected by wire
transfer in the amount of the indemnification liability or by set-off against
any amounts otherwise owed by Buyer to Seller or by Seller to Buyer, as the
case may be.
11.07 Exclusivity. Except for the provisions of Section 11.03, the
provisions of this Article XI shall be the exclusive basis for the assertion of
claims by or imposition of liability on the parties hereto arising under or as
a result of this Agreement; provided, however, nothing herein shall preclude
any party hereto from asserting a claim for equitable remedies.
11.08. Resolution of Disputes. Any dispute between Buyer and Seller
regarding obligations under this Article XI shall be settled by arbitration in
Atlanta, Georgia, before three arbitrators in accordance with the Rules then
obtaining of the American Arbitration Association; provided, however, that
Buyer on the one hand and Seller on the other shall each designate one
arbitrator and such designated arbitrators shall mutually agree on the
designation of a third arbitrator, except that, failing such agreement, the
third arbitrator shall be named by the American Arbitration Association. The
losing party in such arbitration shall bear all fees and expenses of the
arbitration except attorney's fees of the prevailing party, travel expenses of
the attorneys or witnesses of the prevailing party, or any fees paid by
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<PAGE> 32
the prevailing party to witnesses as compensation for time spent in connection
with the arbitration. The award of the arbitrators shall be a conclusive
determination of the matter and shall be binding upon Buyer and Seller and
shall not be contested by either of them.
ARTICLE XII
TERMINATION AND RIGHT TO CURE
12.01 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Second Closing:
(a) By mutual written consent of Buyer and Seller;
(b) By Buyer, if there has been a material violation or breach by
Seller of any of the agreements, representations or warranties contained in
this Agreement that has not been waived in writing, or if any of the conditions
set forth in Article IX hereof have not been satisfied by the Second Closing or
have not been waived in writing by Buyer.
(c) By Seller, if there has been a material violation or breach by
Buyer of any of the agreements, representations or warranties contained in this
Agreement that has not been waived in writing, or if any of the conditions set
forth in Article X hereof have not been satisfied by the Second Closing or have
not been waived in writing by Seller.
(d) By either Seller or Buyer if the Second Closing has not
occurred on or before November 15, 1996.
12.02 Effect of Termination. Except for the provisions of Sections
5.36, 7.05, 12.01, 12.02, 13.02, and 13.03, which shall survive any termination
of this Agreement, in the event of the termination and abandonment of this
Agreement pursuant to Article XII, this Agreement shall forthwith become void
and have not further effect, without any liability on the part of any party
hereto or its respective officers, directors or stockholders; provided,
however, that nothing in this Section 12.02 shall relieve any party from
liability for the knowing and intentional breach of its representations,
warranties, covenants or agreements set forth in this Agreement. Further,
Seller acknowledges and agrees to pay to Buyer all Cash paid to Seller by
Buyer, at the First Closing, within five (5) business days of the date of
termination of this Agreement, as set forth in Section 12.01.
12.03 Right to Cure. Notwithstanding any contrary provision in this
Agreement, Buyer and Seller have the right to cure any
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<PAGE> 33
claimed breach of their respective obligations under this Agreement. The party
claimed to be in breach of any obligation hereunder shall be entitled to
receive written notice from the other party of any such claimed breach. The
party claimed to be in breach shall have five (5) days from the date of such
written notice to either cure such breach or place in progress an appropriate
cure solution agreeable to the other party.
ARTICLE XIII
MISCELLANEOUS
13.01 Notices. All notices and other communications under this
Agreement shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) facsimile transmission; (iii) registered or
certified mail, postage prepaid, return receipt requested; or (iv) overnight
delivery service requiring acknowledgment of receipt. Any such notice or
communication shall be sent to the appropriate party at its address or
facsimile number given below (or at such other address or facsimile number for
such party as shall be specified by notice given hereunder):
If to Seller: Big Apple Paging Corporation
175 Sunnyside Boulevard
Plainview, New York 11803
Attention: Gary Hencken, President
Fax Number: (516) 576-1600
With Copy to: Berkman, Henoch, Peterson & Peddy, P.C.
777 Zeckendorf Boulevard
Garden City, New York 11530-2112
Attention: Gilbert Enoch Henoch
Fax Number: (516) 222-4920
If to Buyer: Preferred Networks, Inc.
5300 Oakbrook Parkway
Suite 320
Norcross, GA 30093
Attention: Mr. Michael J. Saner
Fax Number: (770) 806-6970
With Copy to: Sutherland, Asbill & Brennan
999 Peachtree Street N.E.
Atlanta, GA 30309-3996
Attention: Mark D. Kaufman
Fax Number: (404) 853-8487
13.02 Expenses. Buyer and Seller shall each pay their own costs and
expenses (including, without limitation, the fees and
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<PAGE> 34
expenses of their counsel, auditors and accountants and any finders' fees)
incidental to the preparation and carrying out of this Agreement and the
transactions contemplated hereby.
13.03 Finders' Fees. Each of the parties represents and warrants to
the other that it has not engaged any broker, finder or other person who would
be entitled to a brokerage or other fee or commission in respect of the
execution of this Agreement and the consummation of the transactions
contemplated hereby. Buyer shall indemnify and hold Seller harmless against and
in respect of any and all claims, liabilities or expenses that may be asserted
against Seller by any such broker or other person on the basis of any
arrangement or agreement made or alleged to have been made by Buyer, its agents
or employees; and Seller shall indemnify and hold Buyer harmless in respect of
any and all claims, liabilities or expenses that may be asserted against Buyer
by any such broker or other person on the basis of any such arrangement or
agreement made or alleged to have been made by Seller, its agents or employees.
13.04 Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
13.05 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
13.06 Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.
13.07 Income Tax Or Other Charges. Seller shall pay all income taxes,
if any, assessed in connection with the asset sale transactions contemplated
herein. Seller shall pay all transfer, recording, or other such taxes or
charges assessable on account of the transactions contemplated herein.
13.08 Further Assurances. Upon reasonable request from time to time
the parties hereto will deliver and/or execute such further instruments which
are necessary to or appropriate with respect to the consummation of the
transactions contemplated by this Agreement. None of the documents or
instruments requested hereunder shall contain an undertaking or representation
not contained in this Agreement or inconsistent with the understandings and
representations contained in this Agreement.
13.09 Construction. Within this Agreement, the singular shall
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<PAGE> 35
include the plural and the plural shall include the singular, and any gender
shall include the other gender, all as the meaning in the context of this
Agreement shall require.
13.10 Survival. Each and every one of the representations, warranties,
covenants, agreements and indemnifications contained in this Agreement shall be
continuous and shall survive the Closings and delivery of the Purchased Assets
as consistent with the specific provisions herein; provided, however, that any
such representations and warranties, shall survive the Closings for a period of
twelve (12) months from Closings.
13.11 Further Assurances. Upon reasonable request from time to time
the parties hereto will deliver and/or execute such further instruments which
are necessary to or appropriate with respect to the consummation of the
transactions contemplated by this Agreement. None of the documents or
instruments requested hereunder shall contain an undertaking or representation
not contained in this Agreement or inconsistent with the understandings and
representations contained in this Agreement.
13.12 Cooperation. The parties hereto will cooperate fully with each
other and their respective counsel and accountants in connection with all steps
to be taken as part of their obligations under this Agreement.
13.13 Assignment. No party hereto shall assign this Agreement without
first obtaining the written consent of the other party, except that a party may
assign its rights under this Agreement to a wholly-owned subsidiary without
such consent so long as such party remains liable for all its liabilities and
obligations hereunder.
13.14 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
13.15 Language Construction. The language in all parts of this
Agreement shall be construed, in all cases, according to its fair meaning, and
not for or against any party hereto. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
13.16 Incorporation. All exhibits and schedules attached to
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<PAGE> 36
this Agreement are by reference incorporated herein and made an essential part
hereof.
[SIGNATURES CONTINUED ON THE NEXT PAGE]
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<PAGE> 37
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives on the day and year first above written.
PREFERRED NETWORKS, INC.
By:___________________________
Michael J. Saner, President
ATTEST:
By:_____________________________
Mark B. Jones, Secretary
[CORPORATE SEAL]
BIG APPLE PAGING CORPORATION
By:___________________________
Gary Hencken, President
ATTEST:
By:_____________________________
____________________,Secretary
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
WITNESS: SHAREHOLDER:
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<PAGE> 38
________________________________ By:_______________________________________
Gary Hencken, Individually
________________________________
Sworn to and subscribed
before me this ____ day
of ___________, 1996.
My commission expires:
________________________________
[NOTARY SEAL]
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<PAGE> 39
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
WHEREAS, the parties hereto entered into that certain Asset Purchase
Agreement ("Agreement") dated the 19th day of June, 1996, by and between
Preferred Networks, Inc., a Delaware corporation ("Buyer"), BIG APPLE PAGING
CORPORATION, a New York corporation ("Seller"), and Gary Hencken, and
individual resident of the state of New York.;
WHEREAS, the Second Closing of said Agreements was to take place no
later than five (5) business days after receipt of a final nonappealable order
from the FCC and the approval of any state regulatory authority, if necessary,
authorizing the transfer of the Licenses;
WHEREAS, the FCC approved the transfer of the Licenses on August 30,
1996;
NOW, THEREFORE, in consideration of the mutual promises and for other
valuable consideration, the adequacy and receipt of which is hereby
conclusively acknowledge by each party, the parties hereto do covenant and
agree as follows:
The undersigned parties hereto hereby acknowledge and agree that the
Second Closing of the Agreement shall be extended, and shall take place on or
before September 16, 1996.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of this _______ day of September 1996.
PREFERRED NETWORKS, INC.
By:
----------------------------------
Michael J. Saner, President
ATTEST:
By:
--------------------------------
Mark B. Jones, Secretary
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 40
BIG APPLE PAGING CORPORATION
By:
----------------------------------
Gary Hencken, President
ATTEST:
By:
--------------------------------
, Secretary
---------------------
[CORPORATE SEAL]
WITNESS: SHAREHOLDER:
- ------------------------------------ --------------------------------------
Gary Hencken, Individually
- ------------------------------------
Sworn to and subscribed
before me this day
--------
of , 1996.
--------------------
My commission expires:
- ------------------------------------
[NOTARY SEAL]
AMENDMNT
<PAGE> 41
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
This Second Amendment to Asset Purchase Agreement is entered into this
_______ day of September, 1996, by and between PREFERRED NETWORKS, INC., a
Delaware corporation ("Buyer"), and BIG APPLE PAGING CORPORATION, a New York
corporation ("Seller"), and Gary Hencken, a individual resident of the State of
New York ("Shareholder").
WITNESSETH
WHEREAS, the Seller, Buyer, and Shareholder entered into that certain
Asset Purchase Agreement ("Purchase Agreement") dated the 19th day of June,
1996, whereby Seller acknowledged and agreed to sell to Buyer and Buyer agreed
to purchase from Seller certain Purchased Assets (as defined as the Purchase
Agreement) utilized by Seller in its one-way paging or personal signaling
business located in certain local exchange areas in the States of New York, New
Jersey, and Connecticut.
WHEREAS, the parties mutually acknowledges and agree that to the
amendments to the Purchase Agreement set forth herein.
Article 2.01 Purchase Price, is amended in its entirety and
substituted with the revised Article 2.01 as follows:
2.01 Purchase Price. Except as otherwise set forth in Section 4.01(c),
the purchase price for the Purchased Assets shall be Two Million Six Hundred
Thousand and no/100 Dollars ($2,600,000.00) to be paid in the $.0001 par value
common stock ("Common Stock") of the Buyer in the amount of One Million, One
Hundred Thousand and no/100 Dollars ($1,100,000) and One Million, Five Hundred
Thousand and no/100 Dollars ($1,500,000) in cash or readily available funds.
("Cash") (The Cash and Common Stock hereinafter collectively referred to as the
"Purchase Price"). The Purchase Price shall be paid by Buyer to Seller as
follows:
(a) Twenty two and one/half percent (22.50%) of the Cash shall be
paid by Buyer at the First Closing (as hereinafter defined);
(b) Ninety percent (90%) of the Common Stock and sixty seven and
one/half percent (67.5%) of the Cash shall be due and payable at the Second
Closing. The Common Stock due and payable to Seller shall be calculated
pursuant to Article 3.01 based on the Determination Date for the Second
Closing.
(c) The remaining ten percent (10%) of the Cash and Common Stock
shall be due and payable as set forth in Section 4.01(c).
Article 2.02 Additional Consideration and Article 4.01 Closing are
amended as follows:
The parties hereto acknowledge and agree Buyer reserves the right, in
its sole and
<PAGE> 42
absolute discretion, that the payment of the Additional Consideration and the
Purchase Price due and payable to Seller, shall be in cash or readily available
funds, in the event the Common Stock issued to Seller in this transaction shall
result in an increase of five percent (5%) or greater interest, whether
directly or indirectly, of the issued and outstanding Common Stock of the
Seller, or would otherwise require the shareholder approval of Buyer, pursuant
to federal or state securities law, or pursuant to Delaware General Corporation
Law.
Article 4.01 Closing is amended in its entirety and substituted with
the revised Section 4.01 as follows:
4.01 Closing.
(a) Subject to the terms and conditions set forth herein, each
closing ("Closing") shall take place on or before 10:00 a.m. local time, at the
office of Preferred Networks, Inc., Norcross, Georgia 30071, or at such other
time and place as may be mutually agreed upon in writing by the parties hereto.
The dates of each closing (collectively, the "Closings") shall be as follows:
(i) the First Closing ("First Closing") shall take place on or before June 30,
1996. The Second Closing ("Second Closing") shall take place on Friday,
September 13, 1996. The Third Closing shall take place pursuant to Article
2.02.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives on the day and year first above written.
PREFERRED NETWORKS, INC.
By:
-----------------------------------
-----------------------------------
(name, title)
ATTEST:
By:
---------------------------------
Mark B. Jones, Secretary
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 43
BIG APPLE PAGING CORPORATION
By:
-----------------------------------
Gary Hencken, President
ATTEST:
By:
---------------------------------
,Secretary
-------------------
[CORPORATE SEAL]
WITNESS: SHAREHOLDER:
By:
- ------------------------------------ -----------------------------------
Gary Hencken, Individually
- ------------------------------------
Sworn to and subscribed
before me this day
---------
of , 1996.
-------------------------
My commission expires:
- ------------------------------------
[NOTARY SEAL]
<PAGE> 44
Exhibits to Asset Purchase Agreement
A. Seller's Equipment
B. Summary of Seller's FCC Licenses
C. Seller's lease interests
D. Earnings, assets, liabilities, liens and encumbrances incurred after
the Second Closing
E. Agency Agreement
F. Registration Rights Agreement
G. Agreement Not To Compete
H. Management Agreement
I. Employment Agreement
J. Litigation and Administrative Procedures pending against Seller
K. Seller's Statement of Financial Condition
L. Seller's Additional Liabilities since March 31, 1996
M. Material Changes since March 31, 1996
N. Seller's Licenses
O. Seller's encumbered Intellectual Property Agreements
P. Seller's encumbered Intellectual Property
Q. Intellectual Property other than trade secrets
R. Seller's Major Customers
<PAGE> 45
The exhibits and schedules to this
Asset Purchase Agreement have been omitted.
PNI agrees to furnish supplementally such exhibits and schedules
to the Securities and Exchange Commission upon request.
