Document:

Prepared by MerrillDirect

Exhibit 10(n)

 

 

 

 

 

 

AGREEMENT FOR

PURCHASE AND SALE

OF ASSETS

DATED AS OF SEPTEMBER 29, 2000

BETWEEN

INTERNET CONNECTIONS, INC.,

AS SELLER

AND

HICKORY TECH CORPORATION,

AS BUYER

 

 

 

 

AGREEMENT FOR PURCHASE AND SALE OF ASSETS

          This
Agreement for Purchase and Sale of Assets is made and entered into as of the 29th
day  of September, 2000, by and between
Internet Connections, Inc., a Minnesota 
corporation ("Seller"), its principal stockholders, Yvonne
Karsten, also known as Yvonne Cariveau, Dale Karsten, John Pfeifer, George and
Elizabeth Pfeifer and Michael and Karen Green (“Stockholders”), and Hickory
Tech Corporation, a Minnesota corporation, 
("Buyer").

RECITALS

	 
  	
  A.
  	
  Seller
  is an Internet Service Provider (“ISP) and is in the business of providing
  internet connection services to business and residential customers, including
  leased line internet access (DSL, ISDN, T-1, Point-to-Point and similar high
  speed access service) and including dialup internet access (modem access
  service), routing of internet connections and traffic to backbone networks
  (collectively, the “ISP Business” and sometimes referred to as the “Internet
  Service Provider Business”) and Web Hosting and Design Services (web site
  services, including hosting web site files and information for third party
  customers on third party servers connected to the internet via backbone
  network, but excluding  all internet
  routing and traffic and excluding any internet access for such customers),
  all to residential and business consumers, wherever located; and
  
	 
  	 
  	 
  
	 
  	
  A.
  	
  Buyer
  desires to acquire Seller’s entire ISP Business, including the related
  customer base, employees, specified equipment, intangibles and selected
  accounts receivable, including  all
  assets, of any description, used or useful in the operation of Seller’s ISP
  Business, (excluding, however, Seller’s Web Hosting and Design Service
  business) and Seller wishes to sell, assign and transfer all of its ISP
  Business and related assets to Buyer.
  

          NOW,
THEREFORE, for and in consideration of the foregoing and the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer make the following

AGREEMENT.

ARTICLE 1

PURCHASE AND SALE OF ASSETS

          1.0     Sale and Transfer.     Upon the terms and subject to the
conditions hereinafter set forth, Seller agrees to sell, convey, transfer,
assign and deliver to Buyer all of Seller’s ISP Business and related assets
described below and as may be more specifically listed on Schedule 1.0,
attached  hereto (the
"Assets"). The items listed on Schedule 1.01, attached hereto (the
"Excluded Assets") shall be retained by Seller. Buyer agrees to
purchase, and Seller agrees to sell, the following Assets from Seller:

          1.1     Equipment, Tools, and Supplies.     All equipment, tools, and supplies, of
any description, used and or useful in the operation of Seller’s ISP Business,
as listed on Schedule 1.1.

          1.2      Software.     All of Seller’s rights, including rights to copyright and
rights to use, under any “shop right” or similar doctrine, computer software,
computer code, computer programs, program designs, program manuals used or
useful in the operation of the ISP Business, listed on Schedule 1.2.

          1.3      ISP Customer
Base.     The entire ISP
customer base of Seller, consisting of approximately 4,848 business and
residential ISP customers, wherever such customers may be located, including
Seller’s customer service database, user logs, radius logs, server usage data,
data assembled or organized under Ticket Que Software, and data assembled or
organized under Quickbooks software, as may be more specifically listed on
Schedule 1.3.

          1.4      ISP Contracts.     All contracts and contract rights of
Seller, including all rights of Seller pursuant to any “backbone” or similar
contract with MRNet or GoodNet or any similar internet traffic provider, that
relate in any way to Seller’s ISP business as may be more specifically listed
on Schedule 1.4.

          1.5
    Domain Names.     All domain names used or useful in the
operation of Seller’s ISP business as may be more specifically listed on
Schedule 1.5.

          1.6      Intangibles.     All franchises,  rights, patents, trademarks, licenses, copyrights, and brand
names, used or useful in the operation of Seller’s ISP business; and all
computer code, computer programs, program designs, product manuals, catalogs,
and price lists; and all documents relating to suppliers to Seller’s ISP
business; and all customer lists, catalogs, and marketing materials used by Seller
in the operation of its ISP business, listed on Schedule 1.6.

          1.7
    Accounts Receivable.     All rights to payment under any contract
receivable any under any account receivable no more than 90 days old as of
September 30, 2000, all related to Seller’s ISP business, as listed on Schedule
1.7.

          1.8      No General Assumption of Liabilities.     Except for Permitted Encumbrances listed
on Schedule 1.8,  Buyer shall not assume
and has not agreed to assume any of Seller’s liabilities.

 

Seller warrants that the assets described in
Sections 1.1 through 1.7, above, to be delivered to Buyer at the Closing,
comprise all tangible and intangible assets, of any description, required to
operate the ISP Business following closing, and the ISP network so transferred
by Seller is capable of supporting all customers included in the ISP Business.

ARTICLE 2

PRICE

          2.1     Purchase Price.  Buyer shall pay to Seller as full
consideration for the transfer of the Assets, a total purchase price equal to
the aggregate of the following:

	 
  	
  Base
  Price for the ISP Business, free and clear of all debts and liens 
  	
  $1,000,000.00
  
	 
  	 
  	 
  
	
  Plus
  	
  Base
  Price Adjustment for Annualized Run-Rate on Revenues in excess of
  $1,090,000.00 realized during the month of October 2000
  	
  TBD
  
	 
  	 
  	 
  
	
  Plus
  	
  Face
  value of ISP accounts receivable, not more than 90 days old at September 30,
  2000
  	
  TBD
  
	 
  	 
  	 
  
	
  Less
  	
  Amounts
  for customer deposits and customer advances for future service
  	
  TBD
  

          2.2     Adjustment for Annualized Run-Rate on
Revenues.  In the event Buyer
realizes from Seller’s existing ISP business an ISP revenue run rate during the
first full month following Closing, including pro-rata portion of advance
customer payments, at an annualized rate greater than $1,090,000.00, Buyer will
adjust the Base Price to eleven times that monthly billing figure.  No adjustment will be made to the Base Price
in the event the annualized run rate on revenues does not exceed $1,090,000.00
during the first full month following Closing. Any adjustment required by this
Section shall be paid to Seller no later than 60 days after Closing.  “Annualized Run Rate on Revenues” means
gross revenues derived from the ISP Business for a particular month, multiplied
by twelve.

          2.3     Earnest Money.  Upon execution of this Agreement and subject
to the terms of the “Earnest Money Escrow Agreement” attached hereto as Exhibit
2.3, Buyer will deliver to Wells Fargo Bank Minnesota, N.A. (the “Escrow
Agent”) the amount of One Hundred Thousand Dollars ($100,000.00) which,
together with all interest thereon, shall be referred to as the “Buyer
Deposit”.   The Buyer Deposit shall be
held by the Escrow Agent pursuant to the Earnest Money Escrow Agreement, and
subject to the following:

In the event the Closing shall not occur as a
result of any default by Seller, Seller shall not be entitled to any portion of
the Buyer Deposit and, promptly after termination of this Agreement, the Buyer
Deposit (together with all interest earned thereon) shall be promptly returned
to Buyer.

In the event the Closing shall not occur as a
result of any default by Buyer, Buyer shall not be entitled to any portion of
the Buyer Deposit and, promptly after termination of this Agreement, the Buyer
Deposit (together with all interest earned thereon) shall be promptly delivered
to Seller.

At the Closing, the Purchase Price, less the
Buyer Deposit,  shall be payable to
Seller in cash by wire transfer of immediately available funds to such bank
account(s) as Seller shall designate prior to Closing.

          2.4     Allocation of the Purchase Price.  The Purchase Price shall be allocated as set
forth on Schedule 2.4.

Seller agrees to negotiate in good faith any
suballocations or reallocations reasonably requested by Buyer.  Buyer and Seller shall exchange at Closing
IRS Form 8594, Asset Allocation Statement, and the Buyer and Seller agree to
report this transaction for tax purposes in accordance with such allocation,
and to attach the applicable asset allocation statement to their respective
income tax returns for the taxable year of reporting this transaction.

          2.5.    Taxes.  Seller shall pay any and all sales, use, transfer, stamp,
conveyance, value added or similar taxes, duties, excises or governmental
charges imposed by any taxing jurisdiction, including all recording fees,
notarial fees and other similar costs incurred in connection with the sale,
transfer or assignment of the Assets or otherwise on account of this Agreement.

          2.6.    Costs.  Each party shall  pay at
Closing its own Brokerage and Attorneys' fees incurred in connection with the
sale of the Assets to Buyer.

 

ARTICLE 3

CLOSING

          3.1     Closing.  Provided that all conditions precedent have been satisfied or
waived prior to then, the Closing of the purchase and sale of the Assets (the
"Closing") shall take place at the offices of Blethen, Gage &
Krause, 127 South Second Street in the City of Mankato, Minnesota on October 9,
2000, at 10:00 o'clock a.m., local time, or on such other date as the parties
mutually agree, but in no event shall Closing occur later than that date.  The date that the Closing actually occurs is
referred to as the "Closing Date". Provided that the Closing actually
occurs, the effective time of Closing shall in all events be deemed to have
occurred for all purposes as of the close of Seller’s business on September 30,
2000.

          3.2     Deliveries by Seller to Buyer.  At or prior to the Closing, Seller will
deliver to Buyer the following documents (the "Transaction
Documents") and purchased assets:

a.                 Certified
copies of all of Seller's resolutions pertaining to the authorizations of this
Agreement and the consummation of the transactions referred to in this
Agreement (the "Transactions") by Seller, including all necessary
shareholder consents;

b.                 Duly
executed bills of sale, assignments, and other instruments of transfer, in form
sufficient to convey to Buyer all of the rights, title and interest of Seller
in and to the Assets in accordance with the terms hereof.  The Bill of Sale, shall substantially
conform to Exhibit 3.2b,  attached
hereto and made a part hereof.  The Bill
of Sale will include all assets and goods of every description described in
Sections 1.1 through 1.7 above, 
excluding all accompanying liability excepting only Permitted
Encumbrances listed on Schedule 1.8.  If
any such assets or rights thereto are not assignable because of the provisions
thereof or under law, the Seller will use its best efforts to obtain the
necessary consents thereto.  If consent
cannot be obtained, the Seller shall retain the right. The Buyer's accountants
shall determine an appropriate reduction of the purchase price for the rights
retained by the Seller, and the Buyer shall purchase the remaining Assets for
the reduced price;

c.                 UCC-3 
Termination Statements substantially in the same form as Exhibit 3.2c,
terminating the security interests of all creditors who may have any interest
in the Assets to be conveyed to the Buyer by this Agreement.  Seller represents that the creditors listed
on Schedule 5.2f is a full and complete list of its creditors existing as of
September 1, 2000.

d.                 Releases
of Tax Liens, releasing any liens imposed by any taxing authorities upon the
Assets or the ISP Business at any time prior to the completion of the transfer
of the Assets to Seller;

e.                 All
customer files, customer service databases, userlogs, radius logs, server usage
data, data assembled or organized under Ticket Que Software, data assembled or
organized under Quickbooks software, customer histories, customer lists , sales
data, and literature used and/or useful in the ISP Business.

f.                  A
certificate of Seller certifying as to certain corporate matters with respect
to Seller, together with all of the attachments referred to therein; and

g.                 Opinion
of Counsel, substantially in the same form as Exhibit 3.2g attached hereto; and

h.                 Such
other certificates and documents as Buyer or its counsel may reasonably
request.

          3.3     Deliveries by Buyer to Seller.  At or prior to the Closing, Buyer will
deliver to Seller:

a.                 The
balance of the Purchase Price, as required by Section 2.3;

b.                 Certified
copies of Buyer's resolutions pertaining to the authorization of this Agreement
and the consummation of the Transactions by Buyer;

c.                 A
certificate of Buyer certifying as to the accuracy of Buyer's representations
and warranties on and as of the Closing Date and that Buyer has performed and complied
with all of the terms, provisions and conditions to be performed and complied
with on or before the Closing Date;

d.                 A
certificate of Buyer certifying as to certain corporate matters, together with
all of the attachments referred to therein;

e.                 Such
other certificates and documents as Seller or its counsel may reasonably
request.

          3.4     Records to be Retained by Seller.         Title
to all of Seller's records, documents and papers of every kind and nature
pertaining to the ISP Business sold hereunder shall remain in Seller, but any
thereof which Buyer may reasonably require for use in connection with the
operation of the ISP Business after the Closing Date shall either be delivered
to Buyer or made available to it in such manner as may best meet the respective
needs of the parties.  To the extent
that Seller’s records commingle information related to Seller’s Web Hosting or
Web Design customers, Seller specifically prohibits Buyer’s access thereto to
the extent of such commingling.  In any
case the party receiving or retaining such records shall make them available to
the other during a period of five years following the Closing Date.  After the expiration of said five-year
period either shall, before destroying any of such records received by it,
offer them to the other.

          Seller
shall promptly forward to Buyer all correspondence, mail, payments, and
documents received by Seller after the Closing Date which relate to the
operations of the ISP Business occurring prior to or after the Closing Date.  Buyer shall have the right to endorse in the
name of Seller all checks or other forms of payments which it is entitled to
retain hereunder.

          Buyer
shall promptly forward to Seller all correspondence, mail, payments, and
documents not related to the operation of the ISP Business, such as matters
concerning the Seller's web weaving business, income taxes, corporate charter,
or corporate governance.

ARTICLE 4

CONDITIONS

          4.1     Conditions to Buyer's Obligations.  The obligation of Buyer to consummate the
Transactions shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may, to the extent
allowed by law, be waived by Buyer:

          a.       No Material Inaccuracy.  There shall be no material inaccuracy in the
representations and warranties of Seller or its Stockholders set forth in
section 5 and these representations and warranties shall be true and correct in
all material respects as of the Closing Date as though made on and as of that
date, and Buyer shall have received a certificate dated the Closing Date from
Seller and the Stockholders to that effect. 
No later than two business days prior to Closing, Buyer and Seller shall
deliver to the other updated Schedules necessary to maintain the accuracy of
the Schedules, and the representations and warranties made in this Agreement.

          b.       Performance of Covenants.  Seller and its Stockholders shall have
performed all obligations required to be performed by them under this Agreement
prior to the Closing Date, and Buyer shall have received from Seller and its
Stockholders a certificate dated the Closing Date to that effect.

          c.       Certificates;
Documents.  Seller shall
have delivered the certificates and other documents required by Section 3.2.

          d.       Release of Liens.  Seller shall have obtained a release of any
and all tax liens and security interests in the Assets and shall have delivered
transfer documents satisfactory in form to counsel for Buyer assigning and
conveying all the Assets free and clear of any and all liens and encumbrances.

          e.       Corporate Approvals.  The Transactions shall have received all
necessary corporate approvals by Seller.

          f.        Opinion of Counsel.  Buyer shall have received an opinion of
counsel for Seller, satisfactory in scope and substance to counsel for Buyer,
to the effect that:

    i.        Seller is a corporation duly organized
and in good standing under the laws of the State of Minnesota.

    ii.        Seller has full corporate power to carry
out the transaction provided for in this Agreement; all corporate and other
proceedings required to be taken by or on the part of Seller to authorize it to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement have been duly and validly taken; and this
Agreement has been duly and validly authorized, executed and delivered by
Seller and its stockholders, and is a legally binding obligation of each
enforceable in accordance with its terms.

    iii.       Seller has taken all steps required to
comply with all provisions of the security interests of any and all creditors
in the Assets have been duly and validly released.

    iv.       Counsel
does not know of any facts that by the consummation of this Agreement will (i)
give rise to or cause any default under any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license agreement, or any
other instrument or obligation to which Seller is a party or by which it or any
of its properties or the Assets may be bound, or (ii) violate any court order,
writ, injunction, or decree applicable to Seller or any of its properties or
Assets.

          g.       No Adverse Proceedings.  No action or proceeding against Buyer or
Seller or the Stockholders shall have been instituted or threatened that, if
successful, could prohibit consummation or require substantial rescission of
the transactions contemplated under this Agreement.

          h.       No Material Adverse Change.  There shall have been no material adverse
change to the ISP Business since July 1, 2000.

          4.2     Conditions to Seller's Obligations.  The obligations of Seller to consummate the
Transactions shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may, to the extent
allowed by law, be waived by Seller:

          a.       Representations and Warranties.  All representations and warranties of Buyer
made in this Agreement shall be true and correct in all material respects on
and as of the Closing Date as though made at such time, other than changes
contemplated by this Agreement or approved by Seller in writing, and there
shall have been delivered to Seller a Certificate of Buyer to that effect,
dated the Closing Date, signed by authorized officers of Buyer.

          b.       Covenants.  Buyer shall have performed and complied with
all covenants and agreements required by the Transaction Documents to be
performed by it on or prior to the Closing Date.

          c.       Corporate Approvals.  The Transactions shall have received all
necessary corporate and Board of Director approval(s).

          d.       Certificates;
Documents.  Buyer shall
have delivered the certificates and other documents required under Section 3.3.

          4.3.    Delivery of Possession; Destruction or
Damage to Property Prior to Closing: 
Force Majeure.   At the time
of Closing, all property agreed to be sold hereunder shall be delivered to
Buyer at Closing, and shall be delivered to Buyer in the same condition as at
the close of business on July 1, 2000, except for ordinary use and wear
thereof, changes occurring in the ordinary course of business between July 1,
2000, and the Date of Closing, and damage or loss from causes beyond the
reasonable power and control of Seller; provided, however, that if at the time
of Closing the machinery, equipment, and other tangible property to be sold
hereunder shall have suffered loss or damage on account of fire, flood,
accident, act of war, civil commotion, or any other cause or event beyond the
reasonable power and control of Seller (whether or not similar to the
foregoing), to an extent that substantially affects the value of the property
to be sold hereunder, Buyer shall have the right at its election to complete
the purchase, in which event it shall be entitled to all insurance proceeds
(excluding use and occupancy insurance proceeds) collectible by reason of such
loss or damage or, if it does not so elect, it shall have the right, which
shall be in lieu of any other right or remedy whatsoever, to terminate this
Agreement.  In the latter event all
parties shall be released from liability hereunder.  If such loss or damage does not substantially affect the value of
such property, Buyer shall complete the sale but shall be entitled to all
insurance proceeds (excluding use and occupancy insurance proceeds) collectible
by reason of such loss or damage.  In
any case where Buyer shall become entitled to insurance proceeds by reason of
loss or damage to assets agreed to be sold hereunder as above provided, the
purchase price of the Assets so lost or damaged shall not be reduced because of
such loss or damage.  Loss or damage
shall be considered to affect substantially the value of said property within
the meaning of this paragraph if the book value of the Assets so lost or
damaged exceeds ten per cent in book value of all such tangible Assets.

          If
the Seller is unable to complete the sale hereunder in accordance with its terms
for any reason beyond the Seller's power and control, the Buyer may elect to
accept as full performance such partial performance as Seller can make.  If the Buyer rejects the Seller's partial
performance, the Buyer's sole and exclusive remedy shall be to terminate this
Agreement and Seller shall promptly return all earnest money to Buyer upon such
termination.  In the latter event all
parties shall be released from all liability hereunder.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

          5.1     Buyer's Representations and Warranties.  Buyer represents and warrants to Seller
that:

 

          a.       Organization. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Minnesota and Buyer has full corporate power and authority
to execute and deliver the Transaction Documents, to consummate the
Transactions and to perform all of its obligations under the Transaction
Documents. Buyer has obtained all corporate approvals necessary to consummate
the Transactions and authorize the execution, delivery and performance of the
Transaction Documents.

          b.       Corporate Authority. When executed
by Buyer, each of the Transaction Documents shall be duly and validly executed
and delivered by Buyer. Each of the Transaction Documents, when executed by
Buyer, shall constitute a valid and binding agreement of Buyer enforceable
against Buyer in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to creditors' rights
generally and by principles of equity.

          c.       Funds. On the Closing Date, Buyer
shall have sufficient funds available to pay the Purchase Price and to
consummate the Transactions.

          5.2     Seller's Representations and Warranties.  Seller represents and warrants to Buyer
that:

          a.       Organization.  Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Minnesota
and has full power and authority to execute and deliver the Transaction
Documents.

          b.       Authorization, Execution and Delivery.  When executed by Seller each of the
Transaction Documents shall be duly and validly executed and delivered by
Seller.  Each of the Transaction
Documents, when executed by Seller, shall constitute a valid, legal, and
binding agreement by Seller enforceable against Seller in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to creditors' rights generally and by principles of equity.

          c.       Title to Assets.  Except as shown on Schedule 5.2c., Seller
has good and marketable title to all Assets listed or described in Article 1,
some of which are more specifically described in Schedules 1.1 through 1.7, and
which are to be sold or delivered to Buyer pursuant to this Agreement, free and
clear of all mortgages, liens, pledges, charges, or encumbrances of any nature
whatsoever.  Seller has no other assets
similar to those listed on Schedules 1.1 through 1.7 that would be useful to
the ISP Business or usable in the operation of the ISP Business.

          d.       Litigation and Claims.  Except as described on Schedule 5.2d., there
are no (a) legal, administrative, arbitration, or other proceedings pending
against Seller that will adversely affect the Assets sold herein by the Seller
to the Buyer.  To the best knowledge of
the Stockholders of Seller, Seller has substantially complied with and is not
in default in any material respect under any laws, ordinances, requirements,
engineering standards, regulations, or orders applicable to the ISP Business,
including without limitation, all applicable safety and pollution, laws or
regulations.

          e.       Tax Matters.  As of the Closing Date there will be no
liens for federal, state or local taxes upon the Assets.  All taxes of any kind whatsoever due and
payable by the Seller with respect to the Assets through the Closing Date will
have been paid in full.  There are no
liens for federal, state or local taxes upon the Assets, except for statutory
liens for taxes or assessments not yet delinquent or the validity of which is
being contested in good faith by appropriate proceedings.

                    Seller
has filed, or will cause to be filed, all federal, state and local tax returns
and reports of any kind (including, without limitation, income, franchise,
sales, use, excise, employment and real and personal property) which Seller is
obligated to file with respect to the Assets for all periods up to and
including the Closing Date and shall pay all taxes due on such returns prorated
as of the Closing Date based on the current year's valuation and mill levies,
which proration shall be final and conclusive.

          f.        Creditors.  Attached to this Agreement as Schedule
5.2f  is a true and correct list of all
creditors of Seller affecting the ISP Business, including the names, addresses,
and amounts owed as of August 31, 2000, and any collateral or security
applicable to the indebtedness owed to each of these creditors.  As of the date hereof, and as of the Date of
Closing, Seller had and shall not have any liability of any nature affecting
the Assets, whether absolute, accrued, or contingent, and whether due or to
become due that are not reflected on Schedule 5.2f, and Seller does not know of
any basis for the assertion against it of any such liability.

          g.       Equipment in Good Operating Condition.  All Assets listed on Schedule 1.1 are in
good operating condition and repair and will continue to be in good operating
condition and repair as of the Closing. 
Seller has not received a citation to the effect that these Assets do
not comply with any applicable governmental law or regulation.

          h.       No Adverse Conditions.  There are no adverse conditions or
circumstances that may interfere with Buyer’s use and enjoyment of or
opportunity to resell or encumber any of the Assets of Seller to be purchased
by this Agreement or that might otherwise impede Buyer’s ability to use these
Assets or to conduct the ISP Business using these Assets.

          i.        Operable Network.  The assets described in Sections 1.1 through
1.7, to be delivered to Buyer at the Closing, comprise all tangible and
intangible assets, of any description, required to operate the ISP Business
following closing, and the ISP network so transferred by Seller is capable of
supporting all customers included in the ISP Business.

          j.        No Omissions or Misrepresentations.  No representation, warranty, or statement of
Seller or Stockholders omits or will omit to state any material fact necessary
to make each representation or warranty or statement in this Agreement accurate
and not misleading in any material respect.

 

ARTICLE 6

COVENANTS

          6.1     Covenants of Buyer.  Buyer hereby covenants and agrees that from
the execution date hereof to the Closing Date:

          a.       Continued Efforts.  Buyer will use its continual best efforts
to:

	
  (I)
  cause to be fulfilled and satisfied all of the conditions to the Closing to
  be performed or satisfied by Buyer;

  
	
  (ii)
  cause to be performed all of the matters required of Buyer at the Closing;
  and

  
	
  (iii)
  take such steps and do all such acts as may be necessary to make all of its
  warranties and representations true and correct as of the Closing Date with
  the same effect as if the same had been made, and this Agreement had been
  dated, as of the Closing Date.
  

          6.2     Covenants of Seller.  Seller hereby covenants and agrees that from
the execution date hereof to the Closing Date:

          a.       Continued Efforts.  Seller will use its continual best efforts
to:  (i) cause to be fulfilled and
satisfied all of the conditions to the Closing to be performed or satisfied by
Seller; (ii) cause to be performed all of the matters required of Seller at the
Closing.

          b.       Maintenance of Business.  From the date hereof and until the time of
Closing, Seller shall continue to operate and maintain its business in
substantially the same manner as it is presently carried out.  Seller shall maintain its books and records
in the normal and usual manner.  Seller
shall keep the Assets, taken as a whole, in a normal state of repair and
operating efficiency to enable the Buyer to operate the ISP Business following
Closing in the same manner as it is currently being conducted.

          c.       Right of Inspection.  Buyer may, prior to Closing, make or cause
to be made such investigation of the ISP Business and Assets of Seller to be
sold by this Agreement and of Seller’s financial and legal condition as respect
Seller’s sale of the Assets as  Buyer
deems necessary or advisable to familiarize itself with the ISP Business and
Assets.  Seller will permit Buyer and its
authorized representatives, to examine Seller’s premises and the books and
records with respect to the ISP Business at reasonable hours, and Seller’s
officers will furnish Buyer with such other information with respect to the ISP
Business and Assets to be purchased by this Agreement as Buyer shall from time
to time request.  No investigation by
Buyer shall affect the representations and warranties of Seller or the
Stockholders, and each such representation and warranty shall survive any such
investigation.

 

          d.       Maintenance of Assets.  Seller will maintain all the Assets to be
sold pursuant to this Agreement in customary repair, order, and condition,
reasonable wear and use, and damage by fire or unavoidable casualty excepted.

          e.       Corporate Existence.  Pending the Closing, Seller will maintain
its corporate existence and powers and will not dissolve and liquidate.

          f.        Payment of Taxes.  Except for taxes contested in good faith,
Seller will pay all ad valorem and other taxes and similar governmental charges
levied against it or upon its properties and business as they become due.

          g.       Disposition of Assets.  Except pursuant to the terms of any contract
executed on or before the date of this Agreement and made known to Buyer, or
upon the direction of Buyer, Seller will refrain from disposing of or
encumbering any of its Assets other than in the ordinary course of its
business, and it will not enter into or assume any obligation with respect to
any contract, agreement, lease, license, or commitment except in the ordinary
course of business or as contemplated by this Agreement prior to Closing.

          h.       No Breach of Existing Agreements.  Seller will not knowingly do any act or omit
to do any act that will cause a breach of any contract, agreement, obligation,
lease, license or commitment prior to Closing.

          I.        Notification of Buyer.  Seller will promptly notify Buyer in writing
of any threatened lawsuit, claim, or any adverse change or any projected or
threatened adverse change in its financial position.

          j.        Cancellation of Insurance.  Seller will not change or cancel any
insurance policy except in the ordinary course of business that would affect
the nature or amount of existing insurance coverage.

          k.       Consent of Creditors.  Seller and Stockholders will exercise their
best efforts to obtain any and all necessary consents of secured creditors  with respect to the transaction contemplated
by this Agreement.

          l.        Full Cooperation.  Seller and Stockholders will fully cooperate
with Buyer and its counsel and accountants in connection with any steps
required to be taken under this Agreement. 
Seller will instruct its accountants, agents, and employees to allow
Buyer and its representatives full access to any and all work papers and to
confer with any and all persons in connection with Buyer’s investigation of
Seller and the ISP Business.

 

          6.3     Mutual Covenants.

          a.       Confidentiality.  Each party to this Agreement agrees to hold
all information, whether received before or after entering into this Agreement,
in confidence (the "Confidential Information") until the Closing
Date, and agrees that until then each party will use the same solely for the
purposes of this Agreement.  Each party
agrees to make no more copies of such Confidential Information than is
reasonably necessary for the purposes, consistent with this Agreement, for
which it will be used.  Each party
agrees that it will not make disclosure of any such Confidential Information
received from the other party to anyone except as specifically permitted by
this Agreement and as required by law. 
Each party may disclose Confidential Information to its employees to
whom disclosure is necessary for the purposes set forth above, provided that
the disclosing party shall notify each such employee that disclosure is made in
confidence and instruct such employees that such Confidential Information shall
be kept in confidence by such employee in accordance with this Agreement.  Furthermore, each party may disclose such
Confidential Information to consultants and attorneys engaged by such party, to
partners and prospective partners, and to lenders, but only pursuant to a
written confidentiality agreement with such consultants and attorneys,
partners, prospective partners, and lenders, except that according to such
confidentiality agreement no further disclosure of the Confidential Information
shall be permitted.  Each party also
agrees that it will make requests for Confidential Information of the other
only if necessary to accomplish the purposes set forth in this Agreement.  The obligations set forth herein shall be
satisfied by each party through the exercise of the same degree of care used to
protect its own information of like importance.

          If
the Transactions are not consummated for any reason, each party agrees to
return to the other party all such Confidential Information, including all
copies thereof, immediately on request. 
The obligations arising under this section shall survive any termination
or abandonment of this Agreement.

          b.       Cooperation.  Each party covenants to use all reasonable
efforts, commencing promptly on the execution and delivery of this Agreement,
to take, or cause to be taken in good faith, all actions, and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations, expeditiously and practicably to consummate and make effective the
Transactions, including, but not limited to, using its reasonable efforts to
obtain all necessary actions, waivers, consents and approvals from third
parties or governmental or regulatory bodies.

ARTICLE 7

INDEMNIFICATION

          7.1     Indemnification of Buyer.  Seller shall, from and after the Closing,
indemnify and save Buyer harmless from and against any and all costs,
liability, or expense, including reasonable attorneys’ fees, arising out of (a)
any breach of warranty, covenant, agreement, or representation made by Seller
or Stockholders in this Agreement; (b) any nonfulfillment of any agreement of
Seller or Stockholders under this Agreement or any misrepresentation in or
omission from this Agreement or from any certificates or other instrument
furnished or to be furnished to Buyer; and (c) all actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses incident to any of the
foregoing.   Stockholders agree that if
Seller receives any claim from, or is named in any suit by, a creditor of
Seller, Stockholders will contact the creditor in writing advising the creditor
of the fact that Buyer has not assumed any liabilities or obligations of Seller
or will file an answer in the lawsuit on behalf of Buyer.  Seller shall give written notice as soon as
practicable to Buyer of the occurrence or nonoccurrence of any event or the
discovery by Seller of any circumstance against which Seller may be called upon
to indemnify Buyer under this Agreement.

 

          7.2     Indemnification of Seller.  Buyer shall, from and after the Closing,
indemnify and save Seller harmless from and against any and all costs,
liability, or expense, including reasonable attorneys’ fees, arising out of (a)
any breach of warranty, covenant, agreement, or representation made by Buyer in
this Agreement; (b) any nonfulfillment of any agreement of Buyer under this
Agreement or any misrepresentation in or omission from this Agreement or from
any certificates or other instrument furnished or to be furnished to Seller;
and (c) all actions, suits, proceedings, demands, assessments, judgments,
costs, and expenses incident to any of the foregoing.   Buyer agrees that if Buyer receives any claim from, or is named
in any suit by, a creditor of Seller, Buyer will contact the creditor in
writing advising the creditor of the fact that Buyer has not assumed any
liabilities or obligations of Seller or will file an answer in the lawsuit on
behalf of Buyer.  Buyer shall give
written notice as soon as practicable to Seller and Stockholders of the
occurrence or nonoccurrence of any event or the discovery by Buyer of any
circumstance against which Buyer may be called upon to indemnify Seller under
this Agreement.

ARTICLE
8

TERMINATION

          8.1     Termination By Buyer. If any
condition precedent to Buyer's obligation to effect the Closing, as set forth
in Section 4.1, is not satisfied and such condition is not waived, if waivable,
by Buyer on or prior to the Closing Date, Buyer shall not be obligated to effect
the Closing and may terminate this Agreement.

          8.2     Termination By Seller.  If any condition precedent to Seller's
obligation to effect the Closing, as set forth in Section 4.2, is not satisfied
and such condition is not waived, if waivable, by Seller on or prior to the
Closing Date, Seller shall not be obligated to effect the Closing and may
terminate this Agreement.

          8.3     Effect of Termination.  In the event of the termination of this
Agreement pursuant to Section 8.1 or 8.2, this Agreement shall thereafter
become void, without further liability on the part of any party hereto or its
respective shareholders, directors, officers or employees in respect thereof,
except that nothing herein shall relieve any party from liability for any
breach of this Agreement prior to termination under Section 8.1 or 8.2.

ARTICLE 9

POST CLOSING MATTERS

          9.1     Seller’s Name Not Sold:  Seller has retained the use of its name,
“Internet Connections” and has not sold that name to Buyer.

          9.2
    Public Announcements; Notice to
Trade and Accounts.  No publication
and/or press release of any nature shall be issued pertaining to this Agreement
or the transactions contemplated hereby without the mutual consent of Seller
and Buyer, or except as may be required by law.  Each party agrees that from and after the Closing for a
reasonable period, it will cooperate and cause its employees to cooperate with
the other in making such permitted announcements to the trade pursuant to this
Agreement, as the other reasonably may request with such mutual consent.

          9.3     Offers of Employment.   Seller agrees to make available to Buyer
the employees listed on Schedule 9.3, now employed by Seller in the ISP
Business, for the purpose of interviewing the same for employment by Buyer.

          9.4     Preferred Vendor Status   In conjunction with the sale and transfer of
the ISP Business to Buyer, and for a period of two years following the Date of
Closing, Buyer and Seller agree to grant to the other Preferred Vendor
status.  Buyer and Seller agree that a
“Preferred Vendor”  is a vendor to whom
efforts are made to give the first opportunity to fill outsourcing needs and to
whom efforts to refer business is made, provided that such vendor maintains
high quality service to its customers.

          9.5     Website Service Contract In conjunction with the sale and transfer of
the  ISP Business to Buyer, Buyer agrees
to execute and deliver to the Seller at the Closing a three-year website
service contract, substantially in the same form as Exhibit 9.5 attached
hereto.

          9.6     Seller’s Non-Compete Agreement.  For a period of two years from the Closing,
Seller agrees to be bound by the provisions of the Non-Competition Agreement, a
true and correct copy of which is attached hereto as Exhibit 9.6a.  Seller further agrees to deliver and cause
to be delivered to the Closing Non-Competition Agreements, duly executed by its
principals and stockholders Yvonne Karsten, also known as Yvonne Cariveau, Dale
Karsten, John Pfeifer, George and Elizabeth Pfeifer, Erik Green, Michael and
Karen Green, Daniel Green, Matt Green, Joel Green, Cynthia Huffman, Donna
Brown, Gordon and Yvonne Cariveau, and Dale Flo, substantially in the same form
as Exhibit 9.6b, attached hereto.

          9.7      Buyer’s Non-Compete Agreement.  For a period of two years from the Closing,
Buyer agrees to be bound by the provisions of the Non-Competition Agreement, a
true and correct copy of which is attached hereto as Exhibit 9.7.

          9.8     Billing Services.      In conjunction with the sale and transfer
of the ISP Business to Buyer, and at no additional cost to Buyer, Seller agrees
to provide billing services to Buyer for the ISP Business for two complete
billing cycles following the time of Closing.

          9.9     Transitional Support Services.     In conjunction with the sale and transfer
of the ISP Business to Buyer, and at no additional cost to Buyer, Seller agrees
to provide transitional support services to Buyer in accordance with the
provisions of the Memorandum of Understanding Regarding Transitional Support
attached as Exhibit 9.9 hereto.

ARTICLE
10

ARBITRATION

          10.1   Arbitrability.  All claims
by Buyer or Seller by one against the other arising out of or related in any
manner to this Agreement or Assets or the Transactions shall be resolved by
arbitration, as prescribed herein.

          10.2   Rules.  A single arbitrator engaged in the practice of law and who has at
least eight (8) years of litigation experience shall conduct the arbitration
under the then current commercial arbitration rules of the American Arbitration
Association ("AAA"), unless otherwise provided herein.  The arbitrator shall be selected in
accordance with AAA procedures.  The
arbitration shall be conducted in Mankato, Minnesota.

          10.3   Discovery; Damages; Expenses.  The Buyer and Seller shall allow and
participate in discovery in accordance with the Federal Rules of Civil
Procedure.  The arbitrator shall rule on
unresolved discovery disputes.  The
arbitrator shall only have authority to award contractual damages and shall not
have the authority to award punitive or exemplary  damages, other non-compensatory damages or any other form of
relief.  Each party shall bear its own
costs and attorneys' fees.  The
arbitrator's decision and award shall be final and binding, and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.

          10.4   Judicial or Administrative Action.  If any party files a judicial or
administrative action asserting claims subject to arbitration, as prescribed
herein, and the other party successfully stays such action and/or compels
arbitration of said claims, the party filing said action shall pay the other
party's costs and expenses incurred in seeking such stay and/or compelling
arbitration, including reasonable attorneys' fees.

ARTICLE 11

GENERAL

          11.1   Time of the Essence.  Time is of the essence with respect to each
and every term, condition, obligation and provision hereof, and failure to
timely perform or remedy any of the terms, conditions, obligations or
provisions hereof by either party shall constitute a material breach of and a
noncurable default under this Agreement by the party so failing to perform (but
which may be waived by the nonbreaching party).

          11.2   Survival of Representations and Warranties.  The representations and warranties made
herein shall not survive beyond the Closing Date or a termination of this
Agreement, and shall not merge into any document.

          11.3   Notices.  All notices hereunder will be in writing and served by certified
mail, return receipt requested.  Notice
shall be deemed to have been duly given on the date mailed by the notifying
party.  Notice shall be sent as follows:

          If
to Seller:

	 
  	
  ATTN:
  Yvonne Karsten, President
  
	 
  	
  Internet Connections, Inc.
  
	 
  	
  Suite
  210
  
	 
  	
  209
  South Second Street
  
	 
  	
  Mankato,
  MN 56001
  

 

          with
a copy (which shall not constitute notice) to:

	 
  	 
  
	 
  	
  ATTN:
  Andrew Willaert, Esq.
  
	 
  	
  Gislason
  & Hunter, LLP
  
	 
  	
  Suite
  250
  
	 
  	
  424
  North Riverfront Drive
  
	 
  	
  Mankato,
  MN 56001
  

 

          If
to Buyer:

	 
  	
  Hickory
  Tech Corporation
  
	 
  	
  Office
  of the Chief Financial Officer
  
	 
  	
  David
  A. Christensen
  
	 
  	
  221
  East Hickory Street
  
	 
  	
  Mankato,
  MN 56001
  

 

          with
a copy (which shall not constitute notice) to:

	 
  	
  ATTN:  Michael C. Karp, Esq.
  
	 
  	
  Blethen
  Gage & Krause, PLLP
  
	 
  	
  127
  South Second Street
  
	 
  	
  P.O.
  Box 3049
  
	 
  	
  Mankato,
  MN  56001
  

 

          11.4   Waivers.  No failure of a party to enforce a provision of this Agreement
will be construed as a general or a specific waiver of that provision, or of a
party's right to enforce that provision, or of a party's right to enforce any
other provision of this Agreement.  No
waiver of any breach of any covenant or other provision herein contained shall
be deemed to be a waiver of any preceding or succeeding breach, or of any other
covenant or provision herein contained. 
No extension of time for performance of any obligation or act shall be
deemed to be an extension of the time for performance of any other obligation
or act.

          11.5   Headings; Capitalized Terms.  The subject headings of the sections and
subsections of this Agreement are included only for purposes of convenience,
and shall not affect the construction or interpretation of any of its
provisions.  All capitalized terms shall
have the meaning attributed to them in this Agreement.

          11.6   Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and when each of
the parties hereto has executed and delivered to the other party one or more
counterparts, this Agreement shall be binding and effective, even though no
single counterpart has been executed by both of the parties.

          11.7   Successors and Assigns.  This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their permitted successors and
assigns; provided, however, that no assignment shall be permitted except as
provided for in this Agreement.

          11.8   Assignment.  The rights and obligations of the parties to this Agreement or
any interest in this Agreement shall not be assigned, transferred,
hypothecated, pledged or otherwise disposed of without the prior written
consent of the non-assigning party, which consent may be withheld in such party's
sole discretion.

          11.9   Additional Instruments and Assistance.  Each party hereto shall from time to time
execute and deliver such further instruments, provide additional information
and render such further assistance as the other party or its counsel may
reasonably request in order to complete and perfect the Transactions.

          11.10 Governing Law.  This Agreement shall be construed in accordance with the laws of
the State of Minnesota.

          11.11 Severability.  If any term or provision of this Agreement is, to any extent,
held or deemed to be invalid or unenforceable when applied to any person or
circumstance, the remaining provisions of this Agreement and the enforcement of
such provision to other persons or circumstances, or to another extent, shall
not be affected thereby, and each provision of this Agreement shall be enforced
to the fullest extent allowed by law.

          11.12 Amendments.  This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived by a party, except by
written instrument signed by the party to be charged or by its agent duly
authorized in writing or as otherwise expressly permitted herein.

          11.13  No Construction Against the Drafting Party.  Each party hereto acknowledges the such
party and its counsel have reviewed this Agreement and participated in its
drafting.  This Agreement shall not be
construed against either party for having prepared it.

          11.14 Integration.  This Agreement, including all schedules and exhibits attached
hereto, constitutes the entire agreement between the parties, and there are not
agreements, understandings, warranties or representations between the parties
except as set forth or noted herein. 
This Agreement is not made for the benefit of any person, firm, corporation
or association other than the parties hereto. 
The parties do not intend to confer any benefit hereunder on any person,
firm or corporation other than the parties hereto.

          IN WITNESS WHEREOF, the parties to this
Agreement have executed it as of the date first above written.

	
  BUYER:
  	 
  	
  SELLER:
  
	 
  	 
  	 
  
	
  Hickory Tech Corporation   a Minnesota Corporation
  	 
  	
  Internet Connections, Inc.

  a Minnesota Corporation
  
	 
  
	 
  	 
  	 
  
	
  By:

  

  	 
  	
  By:

  

  
	 
  	
  Robert
  D. Alton

  Its: Chief Executive Officer
  	 
  	
  Yvonne Karsten

  Its: President
  
	 
  	 
  	 
  
	
  By:

  

  	 
  	
  By:

  

  
	 
  	
  David
  A. Christensen

  Its: Chief Financial Officer
  	 
  	
  

  Its: Secretary-Treasurer
  
	 
  	 
  	 
  
	
  Date:

  

  	 
  	
  Date:

  

  
	 
  	 
  	 
  
	 
  	 
  	
  STOCKHOLDERS:
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  Yvonne
  Karsten, a/k/a Yvonne Cariveau
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  Dale Karsten
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  John Pfeifer
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  George Pfeifer
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  Elizabeth Pfeifer
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  Michael Green
  
	 
  	 
  	 
  
	 
  	 
  	

  

  
	 
  	 
  	
  Karen Green
  
	 
  	 
  	
  Date:

  

  
	 
  	 
  	 
  

 

Index To Exhibits and Schedules

 

	
  Exhibit 2.3
  	
  Earnest Money Escrow Agreement
  
	
  Exhibit 3.2b
  	
  Bill of Sale
  
	
  Exhibit 3.2c
  	
  UCC-3 Termination Statements
  
	
  Exhibit 3.2g
  	
  Opinion of Counsel
  
	
  Exhibit 9.5
  	
  Website Service Contract
  
	
  Exhibit 9.6
  	
  Seller Noncompetition and Confidentiality
  Agreement
  
	
  Exhibit 9.6b
  	
  Investor 
  Noncompetition and Confidentiality Agreement
  
	
  Exhibit 9.7
  	
  Buyer 
  Noncompetition and Confidentiality Agreement
  
	
  Exhibit 9.9
  	
  Memorandum Regarding Seller’s Transitional
  Support
  
	 
  	 
  
	
  Schedule 1.0
  	
  Assets
  
	
  Schedule 1.01
  	
  Excluded Assets
  
	
  Schedule 1.1
  	
  Equipment, Tools &supplies
  
	
  Schedule 1.2
  	
  Software
  
	
  Schedule 1.3
  	
  Customers
  
	
  Schedule 1.4
  	
  Contracts
  
	
  Schedule 1.5
  	
  Domain Names
  
	
  Schedule 1.6
  	
  Intangibles
  
	
  Schedule 1.7
  	
  Accounts Receivable
  
	
  Schedule 1.8
  	
  Permitted Encumbrances
  
	
  Schedule 2.4
  	
  Purchase Price Allocation
  
	
  Schedule 5.2c
  	
  Exceptions to Good Title
  
	
  Schedule 5.2d
  	
  Litigation
  
	
  Schedule 5.2f
  	
  Creditors
  
	
  Schedule 9.3
  	
  EmployeesEXHIBIT 10.1

                            K-TEL INTERNATIONAL, INC.

                            STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT made as of the 28th day of February 2001, by
and between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company")
and K-5 Leisure Products, Inc., a Nevada corporation ("K-5").

     WHEREAS, K-5 has offered to purchase shares of common stock of the Company
and the Company has agreed to issue and sell to K-5 such shares of common stock
upon the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and of the terms and
conditions hereinafter set forth, the parties agree as follows:

     1. SALE AND PURCHASE OF COMMON STOCK. Subject to the terms and conditions
hereof, the Company agrees to sell to K-5 and K-5 agrees to purchase from the
Company 3,333,333 shares of its common stock (the "Shares") at a purchase price
of $.15 per share. The purchase price shall be paid by cancellation of $500,000
of the Company's indebtedness to K-5 (the "Indebtedness").

     2. CLOSING. The closing (the "Closing") shall occur at the offices of the
Company on or before March 31, 2001 or at such other date as may be mutually
agreed upon (the "Closing Date"). At the Closing, the Company will deliver to
K-5 a certificate representing the Shares, registered in the name of K-5 (or in
the name of its nominee as may be specified to the Company at least 48 hours
prior to such Closing Date), against delivery to the Company of documentation
evidencing a $500,000 reduction of the Indebtedness.

     3. REPRESENTATIONS AND WARRANTIES BY COMPANY. The Company represents and
warrants to K-5 that:

     a. ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the requisite corporate power and authority to own its
property and to carry on its business in all material respects as it is now
being conducted. The Company has the requisite corporate power and authority to
issue the Shares and to otherwise perform its obligations under this Agreement
and this Agreement. Copies of the Articles of Incorporation and Bylaws of the
Company delivered to K-5 prior to the execution of this Agreement are true and
complete copies of the duly and legally adopted Articles of Incorporation and
Bylaws of the Company in effect as of the date of this Agreement.

     b. CAPITAL STOCK. The authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value $.0l per share and 4,000,000
undesignated preferred stock, par value $.01 per share. All of the outstanding
shares of the Company were duly authorized, validly issued and are fully-paid
and non-assessable. The Shares, when issued and paid for as provided herein,
will be duly authorized and validly issued, and fully-paid and non-assessable.
No holder of any securities of the Company is entitled to any preemptive or
similar rights to purchase securities from the Company in connection with the
transactions contemplated herein. All outstanding securities of the Company have
been issued in compliance with an exemption or exemptions from registration
under the Securities Act and from registration or qualification under applicable
state securities laws.

<PAGE>

     c. AUTHORITY. This Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, and has been duly executed and
delivered by authorized officers of the Company. All corporate action necessary
to the authorization, creation, issuance and delivery of the Shares has been
taken on the part of the Company or will be taken by the Company on or prior to
each Closing Date. This Agreement is a valid and binding agreement of the
Company enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
enforcement and other equitable remedies).

     4. Representations and Warranties of K-5. K-5 represents and warrants that:

     a. INVESTMENT INTENT. The Shares to be acquired by K-5 hereunder are being
purchased for K-5's own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act. K-5 acknowledges that the Shares have not and will not be
registered under the Securities Act or any applicable state securities laws by
reason of their issuance or contemplated issuance in a transaction exempt from
registration under the Securities Act and such laws, and that reliance of the
Company and others upon this exemption is predicated in part upon the
representations contained herein. K-5 acknowledges that the Shares may not be
transferred or resold without (i) registration under the Securities Act and any
applicable state securities laws, or (ii) an exemption from the registration
requirements of the Securities Act and applicable state securities laws.

     b. ACCREDITED INVESTOR. K-5 acknowledges that it is an accredited investor
within the meaning of Rule 501 under the Securities Act. K-5 further represents
that it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment to be made
hereunder. K-5 further acknowledges that it has had access to all of the
Company's material books and records and access to the Company's executive
officers and has been provided such information with respect to the Company and
its business as he has reasonably requested.

     c. ACTS AND PROCEEDINGS. This Agreement has been duly authorized by all
necessary action on the part of K-5 and constitutes the valid and binding
agreement of K-5 enforceable in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except for judicial limitations on the enforcement of the
remedy of specific performance and other equitable remedies.

     5. NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered, or
mailed, postage prepaid, registered or certified mail,

     a. if to K-5, addressed to K-5 at 220 Saulteaux Crescent, Winnipeg,
Manitoba, Canada, R3J 3W3;

     b. if to the Company, addressed to the Company at 2605 Fernbrook Lane
North, Plymouth, Minnesota 55447-4736;

and such notices or other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally when received, or if sent by mail, on the second day after mailing.

     6. SURVIVAL OF REPRESENTATIONS. All representations contained herein shall
survive the execution and delivery of this Agreement, any investigation at any
time made by K-5, and the sale and purchase of the Shares and payment therefor.

     7. HEADINGS. The headings of the Sections and paragraphs of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.

                                        2
<PAGE>

     8.  CHOICE OF LAW.  It is the intention of the parties that the laws of
Minnesota, without regard to the conflicts of laws provisions thereof, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.

     IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.

                          K-TEL INTERNATIONAL, INC.

                          By: /s/ Dennis W. Ward
                          ----------------------
                          Dennis W. Ward
                          Its Chief Financial Officer

                          K-5 Leisure Products, Inc.

                          By: /s/ Philip Kives
                          --------------------
                          Philip Kives
                          Its President

                                       3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00022-of-00352.parquet"}]]