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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): DECEMBER 30, 1999
-------------------
MJD COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
DELAWARE 333-56365 13-3725229
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
521 EAST MOREHEAD STREET, SUITE 250, CHARLOTTE, NORTH CAROLINA 28202
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (704) 344-8150
---------------------
NONE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last
<PAGE>
Item 5. Other Events
On December 30, 1999, Thomas H. Lee Partners, L.P. ("THL") and Kelso
& Company ("Kelso") committed to invest up to $312 million and $70 million,
respectively, in MJD Communications, Inc., a Delaware corporation (the
"Company"). THL's initial investment would be in the form of nonvoting preferred
equity of the Company and Kelso's investment would be in the form of nonvoting
common equity of the Company. Both securities will convert to shares of the
Company's Class A Voting common stock, par value $.01 per share, upon the
receipt of all required regulatory approvals. Kelso is an existing stockholder
of the Company.
The Company intends to use its portion of the proceeds of the
investments to (i) fund the acceleration of its competitive local exchange
carrier business; and (ii) fund pending rural local exchange carrier
acquisitions.
On January 4, 2000, the Company executed definitive documentation
with respect to the commitments described above in the form of a Stock Purchase
Agreement (the "Stock Purchase Agreeement") entered into with affiliates of each
of THL (the "THL Parties") and Kelso (the "Kelso Parties") and the other parties
thereto. Pursuant to the Stock Purchase Agreement, on January 20, 2000, the THL
Parties acquired approximately $282 million of the Company's Series D Preferred
Stock, the Kelso Parties acquired $70 million of the Company's Class B Common
Stock and certain institutional investors acquired $56 million of the Company's
Class C Common Stock. The shares were purchased from both the Company, which
received aggregate proceeds of approximately $173 million, and existing
stockholders, who received aggregate proceeds of approximately $235 million.
On January 20, THL committed to invest up to an additional $50
million in the Company.
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Item 7. Exhibits
10.1 Stock Purchase Agreement, dated as of January 4,
2000, by and among the Company, the THL Parties, the
Kelso Parties and the other parties thereto.
99.1 Press Release, dated January 3, 2000
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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.
MJD COMMUNICATIONS, INC.
By: /s/ Walter E. Leach, Jr.
-------------------------------------
Walter E. Leach, Jr.
Senior Vice President, Chief
Financial Officer and Secretary
Date: February 4, 2000
S-1
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EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
10.1 Stock Purchase Agreement, dated as of January 4,
2000, by and among the Company, the THL Parties, the
Kelso Parties and the other parties thereto.
99.1 Press Release, dated January 3, 2000
S-2
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Exhibit 10.1
================================================================================
ACQUISITION OF STOCK
OF
MJD COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
Dated as of January 4, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................3
ARTICLE II ACQUISITION OF CAPITAL STOCK..............................12
2.1 Series D Preferred Stock Exchange Transactions............12
2.2 Issuance of Capital Stock by the Company..................12
2.3 Acquisition of Series D Preferred Stock by THL;
Exchange of Class B Common Stock..........................13
2.4 Closing...................................................14
2.5 Representations and Warranties of the Company.............15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
BUYERS....................................................15
3.1 Status....................................................15
3.2 Authorization and Binding Obligation......................16
3.3 No Conflicts, etc.........................................16
3.4 Brokers, Finders, etc.....................................16
3.5 Acquisition for Investment................................16
3.6 Investment Suitability; Accredited Investor...............17
3.7 Stockholder Representative................................17
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF THE
SELLING STOCKHOLDERS......................................17
3A.1 Status....................................................17
3A.2 Authorization and Binding Obligation......................18
3A.3 No Conflicts, etc.........................................18
3A.4 Brokers, Finders, etc.....................................18
3A.5 Title to Capital Stock....................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY...................................................19
4.1 Authorization and Binding Obligation......................19
4.2 Title to Shares...........................................20
4.3 Capital Stock.............................................20
4.4 Status....................................................21
4.5 No Conflicts, etc.........................................22
4.6 Governmental Approvals and Authorizations.................23
4.7 Compliance with Laws......................................24
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4.8 Real Property.............................................24
4.9 Title to and Condition of Personal Property...............26
4.10 Intellectual Property.....................................26
4.11 Contracts.................................................27
4.12 Personnel Information.....................................28
4.13 Employee Benefit Plans....................................29
4.14 Litigation................................................30
4.15 Transaction with Affiliates...............................31
4.16 Financial Statements, etc.................................31
4.17 Absences of Undisclosed Liabilities.......................31
4.18 Absence of Changes or Events..............................31
4.19 Insurance.................................................33
4.20 Taxes.....................................................33
4.21 Environmental Matters.....................................34
4.22 Investment Company Act....................................35
4.23 Investments...............................................35
4.24 Pending Acquisitions......................................35
4.25 Broker, Finders, etc......................................36
4.26 Bank Accounts.............................................36
4.27 Local Exchange Related Matters............................36
4.28 Tariffs...................................................36
4.29 Year 2000.................................................36
4.30 Disclosure................................................37
ARTICLE V COVENANTS.................................................37
5.1 Information Prior to Closing..............................37
5.2 Conduct of Business.......................................38
5.3 Third-Party Consents......................................40
5.4 Conversion of Shares......................................40
5.5 Renewal of Contracts......................................40
5.6 No Inconsistent Action....................................40
5.7 No Solicitation...........................................41
5.8 Financial Statements......................................41
5.9 Estoppel Certificates; Consent and Waiver.................41
5.10 Consummation of Pending Acquisitions......................41
5.11 Notice of Material Developments...........................42
5.12 Repurchase of Warrants....................................42
5.13 Further Actions...........................................42
5.14 Kelso Purchased Class B Shares............................42
ARTICLE VI CONDITIONS PRECEDENT TO THE BUYERS'
OBLIGATION TO CLOSE.......................................42
ii
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6.1 Representations, Warranties and Covenants.................42
6.2 Governmental Consents.....................................43
6.3 Third-Party Consents......................................43
6.4 Updated Tariff Schedule...................................43
6.5 Certificates..............................................43
6.6 Adverse Proceedings.......................................44
6.7 Waiver of Rights..........................................44
6.8 Management, Financial Advisory and Severance
Arrangements..............................................44
6.9 Equity Documents..........................................44
6.10 No Material Adverse Effect................................44
6.11 Reconstitution of Boards of Directors.....................44
6.12 Transaction and Advisory Fees.............................44
6.13 Amended and Restated Certificate of Incorporation and
Certificate of Designation................................45
6.14 No Default................................................45
6.15 Termination of Agreements.................................45
6.16 Noncompetition Agreement..................................45
6.17 Bank Waiver...............................................45
6.18 Total Indebtedness........................................45
6.19 Termination of Consulting Agreement.......................45
6.20 Institutional Subscription and Stockholders Agreements....45
6.21 FairPoint Option Exchange.................................46
6.22 Fairness Opinion..........................................46
6.24 Silverman Release.........................................46
6.25 Deliveries................................................46
ARTICLE VIA CONDITIONS PRECEDENT TO THE
SELLING STOCKHOLDERS' OBLIGATION TO CLOSE.................47
6A.1 Representations, Warranties and Covenants.................47
6A.2 HSRA Consents.............................................47
6A.3 Certificates..............................................47
6A.4 Adverse Proceedings.......................................47
6A.5 Termination of Existing Stockholders' Agreement...........47
6A.6 Deliveries................................................48
ARTICLE VII CONDITIONS PRECEDENT TO THE COMPANY'S
OBLIGATION TO CLOSE.......................................48
7.1 Representations, Warranties and Covenants.................48
7.2 HSRA Consents.............................................48
7.3 Certificates..............................................48
7.4 Adverse Proceedings.......................................48
7.5 Equity Documents..........................................49
iii
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7.6 Bank Waiver...............................................49
7.7 Fairness Opinion..........................................49
7.8 Deliveries................................................49
ARTICLE VIII THE CLOSING...............................................49
8.1 Documents to be Delivered by the Company..................49
8.2 Documents to be Delivered by the Buyers...................50
8.3 Documents to be Delivered by the Selling Stockholders.....50
ARTICLE IX TAXES, FEES AND EXPENSES..................................51
ARTICLE X SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.................................................51
ARTICLE XI INDEMNIFICATION...........................................52
11.1 Indemnification by .......................................52
11.2 Indemnification Procedures................................54
11.3 Claims Termination Date...................................55
11.4 Exclusive Remedy..........................................55
11.5 No Contribution...........................................56
11.6 Form of Consideration.....................................56
ARTICLE XII TERMINATION RIGHTS........................................56
12.1 Termination...............................................56
12.2 Liability.................................................57
ARTICLE XIII OTHER PROVISIONS..........................................57
13.1 Publicity.................................................57
13.2 Compliance with HSRA......................................57
13.3 Benefit and Assignment....................................57
13.4 No Third-Party Beneficiaries..............................58
13.5 Entire Agreement..........................................58
13.6 Waiver....................................................58
13.7 Headings..................................................58
13.8 Severability..............................................58
13.9 Arbitration...............................................58
13.10 Choice of Law.............................................59
13.11 Notices...................................................59
13.12 Counterparts..............................................62
13.13 Further Assurances........................................62
13.14 Payments..................................................62
iv
<PAGE>
SCHEDULES
A Other Stockholders
4.3 Capital Stock
4.4 Status
4.5 No Conflicts
4.6 Governmental Approvals and Authorizations
4.8 Real Property
4.9 Title to Personal Property
4.10 Intellectual Property
4.11 Contracts
4.12 Personnel Information
4.13 Employee Benefit Plans
4.14 Litigation
4.15 Transaction with Affiliates
4.16 Financial Statements
4.17 Absence of Undisclosed Liabilities
4.18 Absence of Changes or Events
4.19 Insurance
4.20 Taxes
4.21 Environmental Matters
4.23 Investments
4.24 Pending Acquisitions
4.26 Bank Accounts
4.27 Access Lines
4.28 Tariffs
5.2(b) Conduct of Business
5.9 Estoppel Certificates
5.10 Consummation of Pending Acquisitions
6.3 Third-Party Consents
11.1(b) Indemnification
EXHIBITS
Exhibit A THL Related Parties
Exhibit B Founders' Shares
Exhibit C Management Stockholder's Shares
Exhibit D Kelso Shares
Exhibit E THL Management Services Agreement
Exhibit F Kelso Amended and Restated Financial Advisory Agreement
Exhibit G Registration Rights Agreement
v
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Exhibit H Stockholders' Agreement
Exhibit I Second Amended and Restated Certificate of Incorporation
Exhibit J Certificate of Designation of Series D Preferred Stock
Exhibit K Noncompetition Agreement
vi
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 4th day of January,
2000, among MJD Communications, Inc., a Delaware corporation (the "COMPANY"),
Thomas H. Lee Equity Fund IV, L.P., a Delaware limited partnership ("THL FUND
IV") and certain parties related to THL Fund IV listed on EXHIBIT A hereto (the
"THL RELATED PARTIES", and together with THL Fund IV "THL"), and Kelso
Investment Associates V, a Delaware limited partnership ("KIA V"), and Kelso
Equity Partners V, L.P., a Delaware limited partnership ("KEP V", and together
with KIA V, "KELSO"), and the stockholders of the Company listed on EXHIBIT B
hereto (the "FOUNDERS"), the stockholders of the Company listed on EXHIBIT C
hereto (the "MANAGEMENT STOCKHOLDERS") and Carousel Capital Partners, L.P., a
Delaware limited partnership ("CAROUSEL").
RECITALS
WHEREAS, Carousel owns an aggregate of 697,788 shares (the
"CAROUSEL COMMON SHARES") of the Company's Class A Common Stock, par value $.01
per share (the "CLASS A COMMON STOCK"), and desires to exchange (the "CAROUSEL
EXCHANGE") each such share of Class A Common Stock for one share of a series of
preferred stock of the Company to be created in connection with the transactions
contemplated hereby entitled "Series D Non-Voting Convertible Preferred Stock",
par value $.01 per share (the "SERIES D PREFERRED STOCK") (collectively, the
"CAROUSEL PREFERRED SHARES"), on the terms and conditions described in this
Agreement;
WHEREAS, each of the Founders owns or, upon the exercise of
the warrants set forth opposite such Founder's name on EXHIBIT B hereto at
Closing, will own the number of shares of Class A Common Stock set forth
opposite such Founder's name on EXHIBIT B hereto (collectively, the "FOUNDERS
COMMON SHARES"), and each Founder desires to exchange (the "FOUNDERS EXCHANGE")
each Founders Common Share held by such Founder for one share of Series D
Preferred Stock (collectively, the "FOUNDERS PREFERRED SHARES"), on the terms
and conditions described in this Agreement;
WHEREAS, each of the Management Stockholders owns or, upon the
exercise of the warrants and/or options set forth opposite such Management
Stockholder's name on EXHIBIT C hereto, will own the number of shares of Class A
Common Stock set forth opposite such Management Stockholder's name on EXHIBIT C
hereto (collectively, the "MANAGEMENT COMMON SHARES"), and each Management
Stockholder desires to exchange (the "MANAGEMENT EXCHANGE") each Management
Common Share held by such Management Stockholder for one share of Series D
Preferred Stock (collectively, the "MANAGEMENT SHARES"), on the terms and
conditions described in this Agreement;
<PAGE>
WHEREAS, the Company desires to issue, and THL desires to
acquire, an aggregate of 297,215 shares of Series D Preferred Stock (the "THL
PREFERRED SHARES") in the amounts set forth on EXHIBIT A hereto and on the terms
and conditions and for the consideration described in this Agreement;
WHEREAS, the Company desires to issue, and Kelso desires to
acquire, an aggregate of 54,653 shares of Series D Preferred Stock (the "KELSO
PREFERRED SHARES") in the amounts set forth on EXHIBIT D hereto and on the terms
and conditions and for the consideration described in this Agreement;
WHEREAS, the Company desires to issue, and Kelso desires to
acquire, an aggregate of up to 212,183, but not less than 193,127 shares of a
class of common stock of the Company (the "KELSO PURCHASED CLASS B SHARES") to
be created in connection with the transactions contemplated hereby entitled
"Class B Non-Voting Common Stock", par value $.01 per share (the "CLASS B COMMON
STOCK"), in the amounts set forth on EXHIBIT D hereto and on the terms and
conditions and for the consideration described in this Agreement;
WHEREAS, Kelso desires to assign an aggregate of 54,653 shares
of the Series D Preferred Stock it acquires from the Company pursuant to the
terms of this Agreement to the Founders (the "FOUNDERS ASSIGNED SHARES");
WHEREAS, Carousel desires to sell, and THL desires to acquire,
all of the Carousel Preferred Shares in the amounts set forth on EXHIBIT A
hereto on the terms and conditions and for the consideration described in this
Agreement;
WHEREAS, the Founders desire to sell, and THL desires to
acquire, the Founders Preferred Shares and the Founders Assigned Shares, and the
Management Stockholders desire to sell, and THL desires to acquire, the
Management Shares (together with the THL Preferred Shares, the Carousel
Preferred Shares, the Founders Assigned Shares, the Founders Preferred Shares
and the Management Shares, the "THL SHARES"), in the amounts set forth on
EXHIBIT A hereto and on the terms and conditions and for the consideration
described in this Agreement; and
WHEREAS, Kelso desires to exchange 415,000 shares of Class A
Common Stock owned by it (the "KELSO CLASS A SHARES") for 415,000 shares of
Class B Common Stock (the "KELSO EXCHANGED CLASS B SHARES", and together with
the Kelso Purchased Class B Shares, the "KELSO SHARES") on the terms and
conditions and for the consideration described in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
covenants, representations and warranties made herein and of the mutual benefits
to be derived herefrom, the parties hereto intending legally to be bound agree
as follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
The following terms when used herein have the meanings
assigned to them below. The singular shall include the plural, and the masculine
shall include the feminine and neuter, as the context requires. "Includes" or
"is including" shall mean "including, but not limited to".
1.1 "Affiliate" means a Person that (I) directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person specified or (II) is a member of the
immediate family of the Person specified.
1.2 "Agreement" means this Stock Purchase Agreement, including
the Exhibits and Schedules hereto.
1.3 "Applicable Law" means all applicable provisions of all
(I) constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any Governmental
Authority, (II) Governmental Approvals and (III) orders, decisions, rulings,
injunctions, judgments, awards and decrees or consents of or agreements with any
Governmental Authority.
1.4 "Business Day," whether or not initially capitalized,
means every day of the week excluding Saturdays, Sundays and federal holidays.
1.5 "Buyers" means THL and Kelso, collectively.
1.6 "Buyers Indemnitees" has the meaning set forth in Section
11.1(a) hereof.
1.7 "Carousel" has the meaning set forth in the preamble to
this Agreement.
1.8 "Carousel Common Shares" has the meaning set forth in the
preamble to this Agreement.
1.9 "Carousel Exchange" has the meaning set forth in the
preamble to this Agreement.
1.10 "Carousel Preferred Shares" has the meaning set forth in
the preamble to this Agreement.
1.11 "Carousel Preferred Shares Purchase Price" has the
meaning set forth in Section 2.3(a) of this Agreement.
3
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1.12 "Claims Termination Date" means the date which is nine
(9) months after the Closing Date.
1.13 "Class A Common Stock" means the Company's Class A common
stock, par value $.01 per share.
1.14 "Class B Common Stock" has the meaning set forth in the
preamble to this Agreement.
1.15 "Closing" has the meaning set forth in Section 2.4
hereof.
1.16 "Closing Date" means the date on which the Closing
occurs.
1.17 "Code" means the Internal Revenue Code of 1986, as
amended, together with all regulations and rulings issued thereunder by any
Governmental Authority.
1.18 "Collective Bargaining Agreements" means the collective
bargaining and other labor agreements set forth on SCHEDULE 4.12 PART(B) hereto.
1.19 "Company" has the meaning set forth in the preamble to
this Agreement.
1.20 "Computer Programs" means all computer software,
firmware, programs and source disks, program documentation, tapes, manuals,
forms, guides and other materials with respect thereto.
1.21 "Contracts" means (I) all contracts, agreements,
commitments and orders for the sale, purchase or barter of materials, supplies,
goods or services or any combination of the foregoing, relating to the assets or
business of the Company or any Subsidiary or to which the Company or any
Subsidiary is a party (A) not entered into in the ordinary course of business or
(B) pursuant to which the Company or any Subsidiary is required to pay more than
$100,000 annually, or by (C) which the Company or any Subsidiary receives more
than $100,000 annually, (II) all leases for the use of personal property in
connection with the assets or business of the Company or any Subsidiary or to
which the Company or any Subsidiary is a party (A) not entered into in the
ordinary course of business or (B) pursuant to which the Company or any
Subsidiary is required to pay more than $100,000 annually, (III) all franchise
or similar agreements relating to the assets or business of the Company or any
Subsidiary or to which the Company or any Subsidiary is a party, (IV) all Real
Property Leases (A) not entered into in the ordinary course of business or (B)
pursuant to which the Company or any Subsidiary is required to pay more than
$100,000 annually, (V) all loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, notes, guarantees or other
4
<PAGE>
instruments relating to the assets or business of the Company or any Subsidiary
or to which the Company or any Subsidiary is a party, (VI) all partnership,
joint venture or other arrangements involving a sharing of profits or expenses
relating to the assets or business of the Company or any Subsidiary or to which
the Company or any Subsidiary is a party, (VII) all contracts, agreements or
other arrangements to which the Company or any Subsidiary is a party with any
holder of any capital stock or other equity interest of the Company or any such
Subsidiary (other than the Company or another Subsidiary), (VIII) all
employment, consulting and severance contracts, agreements or other arrangements
to which the Company or any Subsidiary is a party, (IX) all leases, easements,
rights of way, pole attachment agreements, license agreements for joint use of
poles, and other property rights to such earth stations, utility poles, real
property, fixtures and other similar items which pertain to the assets or
business of the Company or any Subsidiary (A) not entered into in the ordinary
course of business or (B) pursuant to which the Company or any Subsidiary is
required to pay more than $100,000 annually and (X) all other written or oral
contracts and agreements of whatever nature which pertain to the assets or
business of the Company or any Subsidiary or to which the Company or any
Subsidiary is a party, including, but not limited to, those contracts and
agreements set forth on SCHEDULES 4.8, 4.11 AND 4.12 hereto (A) not entered into
in the ordinary course of business or (B) pursuant to which the Company or any
subsidiary is required to pay more than $100,000 annually. Notwithstanding the
foregoing, the term "Contract" shall not include any purchase order, related
group of purchase orders or contracts entered into in the ordinary course of
business which provide for payment of less than $100,000 in the aggregate.
1.22 "Credit Agreement" means the Credit Agreement dated March
30, 1998, as amended, among the Company, the lenders party thereto and Bankers
Trust Company, as Administrative Agent.
1.23 "Environmental Laws" means all applicable local, state
and federal statutes and regulations, all applicable judicial and administrative
orders and determinations and all common law relating to pollution, the
protection of human health from injury by environmental pollutants, and worker
health and safety.
1.24 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, together with the regulations and rulings issued thereunder
by any Governmental Authority.
1.25 "Executive Officers" means the Chairman, the Vice
Chairman, the President, the Chief Executive Officer, the Chief Financial
Officer, the Chief Operating Officer, the Vice Presidents and the Treasurer of
the Company and each Subsidiary.
1.26 "Existing Stockholders' Agreement" has the meaning set
forth in Section 3A.5 of this Agreement.
5
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1.27 "Financial Statements" means (I) the audited consolidated
balance sheet of the Company and its subsidiaries as of December 31, 1998 and
the related statements of operations and cash flows for the fiscal year then
ended, audited by KPMG Peat Marwick L.L.P. and (II) the unaudited consolidated
balance sheets of the Company and its subsidiaries as of March 31, 1999, June
30, 1999 and September 30, 1999 and the related statements of operations for the
fiscal quarters then ended.
1.28 "Founders" has the meaning set forth in the preamble to
this Agreement.
1.29 "Founders Assigned Shares" has the meaning set forth in
the preamble to this Agreement.
1.30 "Founders Assigned Shares Purchase Price" has the meaning
set forth in Section 2.3(b) of this Agreement.
1.31 "Founders Common Shares" has the meaning set forth in the
preamble to this Agreement.
1.32 "Founders Exchange" has the meaning set forth in the
preamble to this Agreement.
1.33 "Founders Preferred Shares" has the meaning set forth in
the preamble to this Agreement.
1.34 "Founders Preferred Shares Purchase Price" has the
meaning set forth in Section 2.3(d) of this Agreement.
1.35 "GAAP" means United States generally accepted accounting
principles consistently applied.
1.36 "Government Approvals" has the meaning set forth in
Section 4.6 hereof.
1.37 "Governmental Authority" means any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, but not limited to, any government
authority, agency, board, commission, court, department or instrumentality of
the United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator of competent jurisdiction, and any
self-regulatory organization.
1.38 "Hazardous Substance" means petroleum, any
asbestos-containing material and any and all hazardous or toxic substances,
materials or wastes as defined or
6
<PAGE>
listed under the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Comprehensive Environmental Response, Compensation and
Liability Act or any comparable state statute or any regulation promulgated
under any of such federal or state statutes or under any other Environmental
Law.
1.39 "HSRA" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations adopted thereunder.
1.40 "Indebtedness" means with respect to the Company or any
Subsidiary (I) all indebtedness of the Company or such Subsidiary for money
borrowed (including the current portion of any long-term indebtedness) or for
the deferred purchase price of property, (II) any other indebtedness of the
Company or such Subsidiary which is evidenced by a note, bond, debenture or
similar instrument, (III) all interest, fees, premiums and other charges or
amounts payable of any kind with respect to any indebtedness referred to in
clauses (i) and (ii) above, (IV) all guarantees and arrangements of the Company
or such Subsidiary guaranteeing or intending to guarantee any indebtedness of
any other Person and (V) all obligations of the Company or such Subsidiary under
any lease of property, real or personal, the obligations in respect of which are
required in accordance with GAAP to be capitalized on a balance sheet of the
lessee.
1.41 "Indemnification Limitation" has the meaning set forth in
Section 11.1(b)(i).
1.42 "Indemnified Party" has the meaning set forth in Section
11.2(a) hereof.
1.43 "Intellectual Property" means United States (federal and
state) trademarks, service marks, trade names, trade dress, copyrights, and
similar rights, including registrations and applications to register or renew
the registration of any of the foregoing, United States patent and patent
applications, and inventions, processes, designs, formulae, trade secrets,
know-how, confidential business and technical information, Computer Programs,
data and documentation, and all similar intangible property rights, tangible
embodiments of any of the foregoing (in any medium including electronic media),
and licenses or permits to use any of the foregoing.
1.44 "Intellectual Property Assets" has the meaning set forth
in Section 4.10 hereof.
1.45 "Investor Management Services Agreements" means (i) the
Management Services Agreement, dated as of the Closing Date, between the Company
and THL Equity Advisors, substantially in the form of EXHIBIT E hereto, and (ii)
the Amended and Restated Financial Advisory Agreement, dated as of the Closing
Date, between the Company and Kelso & Company, L.P., substantially in the form
of EXHIBIT F hereto.
7
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1.46 "Kelso" has the meaning set forth in the preamble to this
Agreement.
1.47 "Kelso Class A Shares" has the meaning set forth in the
preamble to this Agreement.
1.48 "Kelso Exchanged Class B Shares" has the meaning set
forth in the preamble to this Agreement.
1.49 "Kelso Preferred Shares" has the meaning set forth in the
preamble to this Agreement.
1.50 "Kelso Preferred Shares Purchase Price" has the meaning
set forth in Section 2.2(b) of his Agreement.
1.51 "Kelso Purchased Class B Shares" has the meaning set
forth in the preamble to this Agreement.
1.52 "Kelso Purchased Class B Shares Purchase Price" has the
meaning set forth in Section 2.2(c) of this Agreement.
1.53 "Kelso Shares" has the meaning set forth in the preamble
to this Agreement.
1.54 "KEP V" has the meaning set forth in the preamble to this
Agreement.
1.55 "KIA V" has the meaning set forth in the preamble to this
Agreement.
1.56 "Knowledge of the Company" means the actual knowledge of
the Executive Officers.
1.57 "Leach" has the meaning set forth in the preamble to this
Agreement.
1.58 "Liens" means all debts, liens, security interests,
mortgages, pledges, judgments, trusts, adverse claims, liabilities, encumbrances
and other impairments of title, other than, in the case of Sections 4.5, 4.9,
4.10 and 5.2(b)(v) hereof only, any Permitted Encumbrance.
1.59 "Losses" has the meaning set forth in Section 11.1
hereof.
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1.60 "Management Common Shares" has the meaning set forth in
the preamble to this Agreement.
1.61 "Management Exchange" has the meaning set forth in the
preamble to this Agreement.
1.62 "Management Shares" has the meaning set forth in the
preamble to this Agreement.
1.63 "Management Shares Purchase Price" has the meaning set
forth in Section 2.3(c) of this Agreement.
1.64 "Management Stockholders" has the meaning set forth in
the preamble to this Agreement.
1.65 "Material Adverse Effect" means (I) a material adverse
effect on the business, assets, properties, liabilities, revenues, costs and
expenses, income before provision for income taxes, operations, prospects or
condition, financial or otherwise, of the Company and the Subsidiaries, taken as
a whole, (II) any material impairment (x) to the value of the Company or any of
its Subsidiaries or to the equity securities of the Company, (y) to the rights
of any Buyer under this Agreement or the other agreements that will be executed
and delivered in connection with the transactions contemplated hereby, or (z)
any Buyer's ability to fully exercise or enforce its rights under this Agreement
and the other agreements that will be executed and delivered in connection with
the transactions contemplated hereby, including without limitation, its Board
representation and other rights under the Stockholders' Agreement or of the
ability of any party hereto to consummate the transactions contemplated by this
Agreement or (iii) material to any Buyer's ability to own (or the Company's
ability to issue) the Series D Preferred Stock or Class B Common Stock hereunder
or the Class A Common Stock (including those shares issuable upon conversion of
the Series D Preferred Stock or Class B Common Stock). In determining whether
any individual event would result in a Material Adverse Effect, notwithstanding
that such event does not of itself have such effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
1.66 "Multiemployer Plan" has the meaning set forth in Section
4.13 hereof.
1.67 "Owned Real Property" means all real property and
interests in real property owned by the Company or any Subsidiary, together with
all structures, facilities, improvements, fixtures, equipment and items of
property located thereon or attached or appurtenant thereto, and all easements
and other appurtenances for the benefit thereof.
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1.68 "Permitted Encumbrances" means (I) liens for Taxes,
assessments, water and sewer charges, license fees, and all other fees, special
assessments and charges assessed or imposed by a public body upon the Company's
or any Subsidiary's assets or any part thereof or the operation thereof,
provided such fees, assessments or Taxes are not yet due and payable (or such
Taxes are being contested in good faith in appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP), (II) Liens on
the Company's or any Subsidiary's assets or properties pursuant to the terms of
any Indebtedness and (III) other encumbrances which do not materially impair or
adversely affect the use for which the asset or business in question is
currently utilized or the value of such asset or business.
1.69 "Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including any Governmental Authority.
1.70 "Plan" has the meaning set forth in Section 4.13 hereof.
1.71 "Real Property Lease" means any lease, sublease, license
or occupancy agreement, including any amendments thereto, pursuant to which the
Company or any Subsidiary is the lessee, sublessee, licensee or occupant of real
property, together with all easements and other appurtenances for the benefit
thereof.
1.72 "Registration Rights Agreement" means the Registration
Rights Agreement, dated as of the Closing Date, among the Company, THL Fund IV,
KIA V, KEP V, and the other stockholders of the Company party thereto,
substantially in the form of EXHIBIT G hereto.
1.73 "Securities Act" means the Securities Act of 1933, as
amended.
1.74 "Selling Stockholders" means the Founders, the Management
Stockholders and Carousel, collectively.
1.75 "Series D Preferred Stock" means the Company's Series D
NonVoting Convertible Preferred Stock, par value $.01 per share.
1.76 "Stockholders" shall mean Kelso, the Selling Stockholders
and the parties listed on SCHEDULE A hereto.
1.77 "Stockholders' Agreement" means the Stockholders'
Agreement, dated as of the Closing Date, among the Company, THL Fund IV, the THL
Related Parties, KIA V, KEP V, the Founders, Daniel G. Bergstein, and the other
stockholders of the Company party thereto, substantially in the form of EXHIBIT
H hereto.
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1.78 "Subsidiary" means each corporation, partnership, limited
liability company or other entity of which the Company owns, directly or
indirectly, at least a majority of the securities or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors or other person performing similar functions of such
corporation, partnership, limited liability company or other entity.
1.79 "Tax" means any federal, state or local income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
unincorporated business, capital stock, profits, windfall profits, gross
receipts, sales, use, value added, transfer, registration, stamp, premium,
excise, customs duties, severance, environmental (including taxes under section
59A of the Code), real property, personal property, ad valorem, occupancy,
license, occupation, employer, old age, employment, payroll, social security,
FICA, survivors and disability insurance, hospital insurance, medicare,
unemployment, workers' compensation, withholding, estimated or similar tax,
duty, fee, assessment or other governmental charge or deficiencies thereof
(including all interest and penalties thereon and additions thereto).
1.80 "THL" has the meaning set forth in the preamble to this
Agreement.
1.81 "THL Equity Advisors" means THL Equity Advisors IV, LLC,
a Massachusetts limited liability company.
1.82 "THL Fund IV" has the meaning set forth in the preamble
to this Agreement.
1.83 "THL Preferred Shares" has the meaning set forth in the
preamble to this Agreement.
1.84 "THL Preferred Shares Purchase Price" has the meaning set
forth in Section 2.2(a) of this Agreement.
1.85 "THL Related Parties" has the meaning set forth in the
preamble to this Agreement.
1.86 "THL Representative" has the meaning set forth in Section
3.7 of this Agreement.
1.87 "THL Shares" has the meaning set forth in the preamble to
this Agreement.
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ARTICLE II
ACQUISITION OF CAPITAL STOCK
2.1 SERIES D PREFERRED STOCK EXCHANGE TRANSACTIONS. Subject to
the terms and conditions hereof, at the Closing:
(a) the Company shall issue to Carousel, in exchange for the
Carousel Common Shares, the Carousel Preferred Shares;
(b) the Company shall issue to each of the Founders, in
exchange for the number of Founders Common Shares set forth opposite
such Founder's name on EXHIBIT B hereto, the number of Founders
Preferred Shares opposite such Founder's name on EXHIBIT B hereto; and
(c) the Company shall issue to each of the Management
Stockholders, in exchange for the number of Management Common Shares
set forth opposite such Management Stockholder's name on EXHIBIT C
hereto, the number of Management Shares opposite such Management
Stockholder's name on EXHIBIT C hereto.
2.2 ISSUANCE OF CAPITAL STOCK BY THE COMPANY. Subject to the
terms and conditions hereof, at the Closing:
(a) the Company shall issue all of the THL Preferred Shares to
THL and THL shall acquire all of the THL Preferred Shares from the
Company at a purchase price of $262.33 per share for an aggregate
purchase price of $77,968,411 (the "THL PREFERRED SHARES PURCHASE
PRICE"), payable in cash at the Closing in the respective amounts set
forth on EXHIBIT A hereto and in the manner set forth in Section 2.4
hereof;
(b) the Company shall issue all of the Kelso Preferred Shares
to Kelso and Kelso shall acquire all of the Kelso Preferred Shares from
the Company at a purchase price of $262.33 per share for an aggregate
purchase price of $14,337,121 (the "KELSO PREFERRED SHARES PURCHASE
PRICE"), payable in cash at the Closing in the respective amounts set
forth on EXHIBIT D hereto and in the manner set forth in Section 2.4
hereof;
(c) the Company shall issue all of the Kelso Purchased Class B
Shares to Kelso and Kelso shall acquire all of the Kelso Purchased
Class B Shares from the Company at a purchase price of $262.33 per
share for an aggregate purchase price to be determined at Closing based
on the number of shares of Class B Common Stock to be purchased by
Kelso at Closing as provided in the notice described in Section 5.14
hereof (the "KELSO PURCHASED CLASS B SHARES PURCHASE PRICE"), payable
in cash at the Closing in the respective amounts set forth on EXHIBIT D
hereto and in the manner set forth in Section 2.4 hereof; and
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(d) Kelso shall assign all of its right, title and interest in
and to the Founders Assigned Shares to the Founders.
2.3 ACQUISITION OF SERIES D PREFERRED STOCK BY THL; EXCHANGE
OF CLASS B COMMON STOCK. Subject to the terms and conditions hereof, at the
Closing:
(a) Carousel shall sell all of the Carousel Preferred Shares
to THL and THL shall buy all of the Carousel Preferred Shares from
Carousel at a purchase price of $262.33 per share for an aggregate
purchase price of $183,050,726 (the "CAROUSEL PREFERRED SHARES PURCHASE
PRICE"), payable in cash at the Closing in the respective amounts set
forth on EXHIBIT A hereto and in the manner set forth in Section 2.4
hereof;
(b) the Founders shall sell all of the Founders Assigned
Shares to THL and THL shall buy all of the Founders Assigned Shares
from the Founders at a purchase price of $262.33 per share for an
aggregate purchase price of $14,337,121 (the "FOUNDERS ASSIGNED SHARES
PURCHASE PRICE"), payable in cash at the Closing in the respective
amounts set forth on EXHIBIT B hereto and in the manner set forth in
Section 2.4 hereof;
(c) the Management Stockholders shall sell all of the
Management Shares to THL and THL shall buy all of the Management Shares
from the Management Stockholders at a purchase price of $262.33 per
share for an aggregate purchase price of $6,588,680 (the "Management
Shares Purchase Price"), payable in cash at the Closing in the
respective amounts set forth on EXHIBIT C hereto and in the manner set
forth in Section 2.4 hereof;
(d) the Founders shall sell all of the Founders Preferred
Shares to THL and THL shall buy all of the Founders Preferred Shares
from the Founders at a purchase price of $262.33 per share for an
aggregate purchase price of $30,557,772 (the "FOUNDERS PREFERRED SHARES
PURCHASE PRICE"), payable in cash at the Closing in the respective
amounts set forth on EXHIBIT B hereto and in the manner set forth in
Section 2.4 hereof; and
(e) the Company shall issue to Kelso, in exchange for the
number of Kelso Class A Shares set forth on EXHIBIT D hereto, the
number of Kelso Exchanged Class B Shares set forth on EXHIBIT D hereto.
THL Fund IV agrees that if any THL Related Party fails to
purchase any shares of capital stock to be purchased by it at Closing, THL Fund
IV shall be obligated to purchase any such shares, provided that any or all of
such shares may actually be purchased by one or more other THL Related Parties.
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2.4 CLOSING. The closing of the transactions contemplated
hereby (the "CLOSING") shall take place at the offices of Debevoise & Plimpton,
875 Third Avenue, New York, New York 10022 at 10:00 a.m. on the next Business
Day that is five days after the condition set forth in Section 6.3 hereof has
been satisfied (or waived by the Buyers), or on such other date as the parties
may agree to in writing. At the Closing:
(a) the Company shall deliver to (i) Carousel, free and clear
of any Liens, stock certificates representing the Carousel Preferred
Shares, (ii) the Founders, free and clear of any Liens, stock
certificates representing the Founders Preferred Shares, (iii) THL,
free and clear of any Liens, stock certificates representing the THL
Preferred Shares, (iv) Kelso, free and clear of any Liens, stock
certificates representing the Kelso Preferred Shares, the Kelso
Purchased Class B Shares and the Kelso Exchanged Class B Shares and (v)
the Management Stockholders, free and clear of any Liens, stock
certificates representing the Management Shares;
(b) the Founders shall deliver to (i) the Company, free and
clear of any Liens, stock certificates representing the Founders Common
Shares and (ii) THL, free and clear of any Liens, stock certificates
representing the Founders Assigned Shares and the Founders Preferred
Shares, in each case, duly endorsed in blank or with separate executed
stock transfer powers attached;
(c) the Management Stockholders shall deliver to (i) the
Company, free and clear of any Liens, stock certificates representing
the Management Common Shares and (ii) THL, free and clear of any liens,
stock certificates representing the Management Shares in each case,
duly endorsed in blank or with separate executed stock transfer powers
attached;
(d) Carousel shall deliver to (i) the Company, free and clear
of any Liens, stock certificates representing the Carousel Common
Shares and (ii) THL, free and clear of any Liens, stock certificates
representing the Carousel Preferred Shares, in each case duly endorsed
in blank, or with separate executed stock transfer powers attached;
(e) THL shall pay (i) the THL Preferred Shares Purchase Price
to the Company for the THL Preferred Shares so delivered by the
Company, (ii) the Carousel Preferred Shares Purchase Price to Carousel,
for the Carousel Preferred Shares so delivered by Carousel, (iii) the
Founders Assigned Shares Purchase Price to the Founders for the
Founders Assigned Shares so delivered by the Founders, (iv) the
Founders Preferred Shares Purchase Price for the Founders Preferred
Shares so delivered by the Founders and (v) the Management Shares
Purchase Price to the Management Stockholders, for the Management
Shares so delivered by the Management Stockholders, in each case by
wire transfer of
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immediately available funds to an account designated in writing by the
recipient of such funds at least two business days prior to the Closing
Date; and
(f) Kelso shall (i) deliver to the Company, free and clear of
any Liens, stock certificates representing the Kelso Class A Shares
duly endorsed in blank or with separate executed stock transfer powers
attached and (ii) pay the Kelso Preferred Shares Purchase Price and the
Kelso Purchased Class B Shares Purchase Price to the Company for the
Kelso Preferred Shares and the Kelso Purchased Class B Shares so
delivered by the Company, by wire transfer of immediately available
funds to the account of the Company designated in writing at least two
business days prior to the Closing Date.
2.5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to (i) Carousel that, upon the Carousel Exchange,
the Carousel Preferred Shares shall be validly issued, fully paid and
non-assessable, (ii) the Founders that, upon the Founders Exchange, the Founders
Preferred Shares shall be validly issued, fully paid and non-assessable and
(iii) the Management Stockholders, upon the Management Exchange, the Management
Shares shall be validly issued, fully paid and non-assessable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Each of the Buyers severally as to itself represents and
warrants to the Company as follows:
3.1 STATUS. To the extent a Buyer is not an individual, such
Buyer has been duly incorporated, organized or formed, is validly existing and
is in good standing under the laws of the state of its incorporation,
organization or formation.
3.2 AUTHORIZATION AND BINDING OBLIGATION. To the extent a
Buyer is not an individual, such Buyer has all necessary corporate, partnership
or trust power and authority to enter into and perform its obligations under
this Agreement, the Stockholders' Agreement, the Registration Rights Agreement
and the transactions contemplated hereby and thereby. Each Buyer that is an
individual has the full power and authority to enter into and perform his or her
obligations under this Agreement and the Stockholders' Agreement and the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Stockholders' Agreement and the Registration
Rights Agreement by each Buyer that is not an individual has been duly and
validly authorized by all necessary corporate, partnership or trust action on
its part and this Agreement has been duly executed and delivered by such Buyer.
This Agreement constitutes, and once executed by such Buyer the Stockholders'
Agreement and the Registration Rights Agreement will constitute, the legal,
valid and binding
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obligation of such Buyer, enforceable against such Buyer in accordance with
their respective terms, except as limited by laws affecting the enforcement of
creditors' rights generally or equitable principles.
3.3 NO CONFLICTS, ETC. The execution, delivery and performance
by such Buyer of this Agreement, the Stockholders' Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with, contravene,
result in a violation or breach of or default under (with or without the giving
of notice or the lapse of time, or both), create in any other Person a right or
claim of termination, amendment, modification, acceleration or cancellation of,
or result in or require the creation of any Lien (or any obligation to create
any Lien) on any of the properties or assets of such Buyer under (A) any
Applicable Law, (B) with respect to any Buyer that is not an individual, any
provision of the certificate of incorporation, certificate of limited
partnership, bylaws, agreement of limited partnership or trust agreement of such
Buyer, or (C) any contract, agreement or other instrument to which such Buyer is
a party or by which its properties or assets may be bound, except, in the case
of clause (c), for violations, breaches and defaults that, individually and in
the aggregate, would not cause a Material Adverse Effect.
3.4 BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of such Buyer or any of its
Affiliates in such manner as to, and the transactions contemplated hereby will
not otherwise, give rise to any valid claim against the Company, any Subsidiary
or any Selling Stockholder for any brokerage or finder's commission, fee or
similar compensation, except as otherwise provided in this Agreement and the
agreements contemplated hereby.
3.5 ACQUISITION FOR INVESTMENT. Except with respect to the
Kelso Preferred Shares to be transferred to the Founders, as to which no
representation or warranty is made, such Buyer is acquiring such shares of
capital stock of the Company as provided in this Agreement solely for
investment, with no present intention to resell such shares in violation of
applicable securities laws. Such Buyer hereby acknowledges that such shares (and
any shares of Class A Common Stock issuable upon conversion of the Series D
Preferred Stock and the Class B Common Stock) have not been registered pursuant
to the Securities Act and may not be transferred in the absence of such
registration or an exemption therefrom under such Act.
3.6 INVESTMENT SUITABILITY; ACCREDITED INVESTOR. Such Buyer
has sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its investment in the shares
of capital stock of the Company such Buyer is acquiring pursuant to this
Agreement, and such Buyer is capable of bearing the economic risks of such
investment, including a complete loss of its investment in such shares. Such
Buyer is an "accredited investor" within the meaning of Regulation D of the
Securities Act.
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3.7 STOCKHOLDER REPRESENTATIVE. To facilitate the consummation
of the transactions contemplated by this Agreement before, at and after the
Closing, each THL Related Party (and their successors and assigns) hereby
irrevocably consents to the appointment of, and does hereby appoint and empower,
THL Equity Advisors (and THL Equity Advisors does hereby accept such
appointment) as the sole and exclusive representative (the "THL REPRESENTATIVE")
of the THL Related Parties (and their successors and assigns) to make all
decisions and determinations on behalf of them (and their successors and
assigns) that the THL Representative may deem necessary or appropriate to
accomplish the intent, and implement the provisions, of this Agreement. All
decisions of the THL Representative shall be final and binding on all of the THL
Related Parties (and their successors and assigns). The parties to this
Agreement other than THL (and their successors and assigns) shall be entitled to
rely upon, without independent investigation, any decision of the THL
Representative and shall be fully protected in connection with any action or
inaction taken or omitted to be taken in reliance thereon.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Each Selling Stockholder severally as to itself only and not as to any
other Selling Stockholder represents and warrants in Sections 3A.1 through 3A.4
and the applicable subsection of Section 3A.5 to the Buyers and the Company as
follows:
3A.1 STATUS. To the extent a Selling Stockholder is not an
individual, such Selling Stockholder has been duly incorporated, organized or
formed, is validly existing and is in good standing under the laws of the state
of its incorporation, organization or formation.
3A.2 AUTHORIZATION AND BINDING OBLIGATION. To the extent a
Selling Stockholder is not an individual, such Selling Stockholder has all
necessary corporate or partnership power and authority to enter into and perform
its obligations under this Agreement and the transactions contemplated hereby.
Each Selling Stockholder that is an individual has the full power and authority
to enter into and perform his or her obligations under this Agreement and the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each Selling Stockholder that is not an individual has been
duly and validly authorized by all necessary corporate or partnership action on
its part and this Agreement has been duly executed and delivered by such Selling
Stockholder. This Agreement constitutes the legal, valid and binding obligation
of such Selling Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, except as limited by laws affecting the enforcement
of creditors' rights generally or equitable principles.
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3A.3 NO CONFLICTS, ETC. The execution, delivery and
performance by such Selling Stockholder of this Agreement and the consummation
of the transactions contemplated hereby, do not and will not conflict with,
contravene, or result in a violation or breach of or default (with or without
the giving of notice or the lapse of time, or both), under (A) any Applicable
Law (except that such Selling Stockholder makes no representation or warranty as
to whether such Selling Stockholder will be required to comply with the
requirements of the HSRA prior to the Closing Date), (B) with respect to any
Selling Stockholder that is not an individual, any provision of the certificate
of incorporation, certificate of limited partnership, bylaws or agreement of
limited partnership, as applicable, of such Selling Stockholder, or (C) any
contract, agreement or other instrument to which such Selling Stockholder is a
party or by which its properties or assets may be bound, except, in the case of
clause (c), with respect to the provisions of the Existing Stockholders'
Agreement or for violations, breaches and defaults that, individually and in the
aggregate, would not prevent or restrict (i) the ability of such Selling
Stockholder to sell its shares of capital stock pursuant to this Agreement or
(ii) the right of the Buyers to purchase and own such shares.
3A.4 BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of such Selling Stockholder or
any of its Affiliates in such manner as to, and the transactions contemplated
hereby will not otherwise, give rise to any valid claim against the Company, any
Subsidiary or any Buyer for any brokerage or finder's commission, fee or similar
compensation, except as otherwise provided in this Agreement and the agreements
contemplated hereby and except for the fee due to First Union Securities, Inc.
3A.5 TITLE TO CAPITAL STOCK. (a) Carousel has good and valid
title to the Carousel Common Shares, free and clear of all Liens, other than any
Liens created by the provisions of the Stockholders' Agreement dated as of July
31, 1997, as amended, by and among the Company, Kelso, Carousel and the other
parties thereto (the "EXISTING STOCKHOLDERS' AGREEMENT"). Upon delivery to the
Company of stock certificates representing the Carousel Common Shares duly
endorsed for transfer, the Company will have acquired good and valid title to
the Carousel Common Shares, free and clear of all Liens, other than any Liens
created pursuant to the Existing Stockholders' Agreement or the Stockholders'
Agreement or Liens created by the Company. Immediately prior to the sale of the
Carousel Preferred Shares to THL at the Closing, Carousel will have good and
valid title to the Carousel Preferred Shares, free and clear of all Liens, other
than any Liens created pursuant to the Existing Stockholders' Agreement or the
Stockholders' Agreement or Liens created by the Company.
(b) Each Founder has good and valid title to the Founders
Common Shares held by such Founder, free and clear of all Liens, other than any
Liens created by the provisions of the Existing Stockholders' Agreement. Upon
the Founders Exchange at
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the Closing duly endorsed for transfer, the Company will have acquired good and
valid title to the Founders Common Shares held by such Founder, free and clear
of all Liens. Upon the Founders Exchange at the Closing, each Founder will have
good and valid title to the Founder's Preferred Shares set forth opposite such
Founder's name on EXHIBIT B hereto, free and clear of all Liens.
(c) Each Management Stockholder has good and valid title to
the Management Common Shares held by such Management Stockholder, free and clear
of all Liens, other than any Liens created by the provisions of the Existing
Stockholders' Agreement. Upon the Management Exchange at the Closing, the
Company will have acquired good and valid title to the Management Shares held by
such Management Stockholder, free and clear of all Liens. Upon the Management
Exchange at the Closing as provided in this Agreement, each Management
Stockholder will have good and valid title to the Management Shares set forth
opposite such Management Stockholder's name on EXHIBIT C hereto, free and clear
of all Liens.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Buyers as
follows:
4.1 AUTHORIZATION AND BINDING OBLIGATION. Subject to the
receipt of the requisite approval of the Company's stockholders of the Amended
and Restated Certificate of Incorporation and the Certificate of Designation of
Series D Preferred Stock described in Section 6.13, the Company has all
necessary corporate power and authority to enter into and perform its
obligations under this Agreement, the Stockholders' Agreement, the Registration
Rights Agreement and the Investor Management Services Agreements and the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Stockholders' Agreement, the Registration
Rights Agreement and the Investor Management Services Agreements by the Company
has been duly and validly authorized by all necessary corporate action on its
part and this Agreement has been duly executed and delivered by the Company.
This Agreement constitutes, and once executed by the Company, the Stockholders'
Agreement, the Registration Rights Agreement and the Investor Management
Services Agreements will constitute, the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their respective
terms, except as limited by laws affecting the enforcement of creditors' rights
generally or equitable principles.
4.2 TITLE TO SHARES. Upon the delivery of and payment for the
Kelso Shares and the THL Preferred Shares at the Closing as provided for in this
Agreement, each of the Buyers will acquire good and valid title to all such
shares of capital stock being sold to it by the Company, free and clear of all
Liens, other than any Liens created
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by the provisions of the Stockholders' Agreement or by such Buyer, and all such
shares of capital stock being acquired by the Buyers will be duly authorized,
validly issued, fully paid and nonassessible. On or prior to the Closing, the
Company shall have duly reserved for issuance a sufficient number of shares of
Class A Common Stock for the full conversion of the Series D Preferred Stock and
the Class B Common Stock issued and sold pursuant to this Agreement. The shares
of Class A Common Stock issuable upon conversion of the Series D Preferred Stock
and the Class B Common Stock will be duly authorized, validly issued, fully paid
and nonassessable. Upon consummation of the Carousel Exchange, Carousel will
acquire good and valid title to the Carousel Preferred Shares, free and clear of
all Liens, other than Liens created pursuant to the provisions of the Existing
Stockholders' Agreement or by Carousel.
4.3 CAPITAL STOCK. Immediately prior to the Closing, the
authorized capital stock of the Company will consist of 3,000,000 shares of
Common Stock, of which 1,810,147 shares will be issued and outstanding and
owned of record by the Persons indicated on SCHEDULE 4.3 hereto, and 300,000
shares of Preferred Stock, par value $.01 per share, of which no shares will
be issued and outstanding. Immediately following the Closing and after giving
effect to the transactions contemplated by this Agreement and assuming that
Kelso will purchase 212,183 shares of the Kelso Purchased Class B Shares at
Closing, the authorized capital stock of the Company will consist of (i)
60,000,000 shares of Class A Common Stock, of which 571,117 shares will be
issued and outstanding on a fully-diluted basis and owned of record by the
Persons indicated on SCHEDULE 4.3 hereto, (ii) 50,000,000 shares of Class B
Common Stock, 627,183 of which shares will be issued and outstanding and
owned of record by Kelso, which if converted into shares of Class A Common
Stock at such time (assuming all shares of Series D Preferred Stock were
converted into Class A Common Stock simultaneously), would represent 26.2% of
the issued and outstanding Class A Common Stock (or 22.8% on a fully diluted
basis), (iii) 4,600,000 shares of Class C Common Stock, of which, except as
provided in the immediately following sentence, none will be issued and
outstanding, and (iv) 30,000,000 shares of Preferred Stock, par value $.01
per share, of which 1,191,258 shares of Series D Preferred Stock will be
issued and outstanding. To the extent any shares of Class C Common Stock are
to be issued at Closing in connection with the transaction contemplated by
Section 6.20, the Company will deliver to the Buyers a revised SCHEDULE 4.3
to reflect the issuance of such shares not later than the third business day
prior to the Closing Date. THL will own 1,191,258 shares of Series D
Preferred Stock, which if converted into shares of Class A Common Stock at
such time (assuming all shares of Class B Common Stock were converted into
Class A Common Stock simultaneously), would represent 49.8% of the issued and
outstanding Class A Common Stock (or 43.3% on a fully diluted basis).
SCHEDULE 4.3 hereto also lists (A) the authorized capital stock of each
Subsidiary and (B) all of the issued and outstanding capital stock and other
equity interests (including, without limitation, options, stock appreciation
rights, warrants and clawback shares) of the Company and the Subsidiaries,
together with the name and address of each holder thereof, the amount owned
by such holder and a designation indicating whether such capital stock or
other equity interests will be
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redeemed or otherwise canceled pursuant to the transactions contemplated by this
Agreement. All issued and outstanding capital stock and other equity interests
of the Company and the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are, and from the date hereof
through the Closing Date will be, owned beneficially and of record by the
Persons indicated on SCHEDULE 4.3 hereto, free and clear of all Liens or
restrictions on the ability of such Persons to vote such securities, if
applicable, or to transfer such securities, except as set forth on SCHEDULE 4.3
hereto. There are no preemptive or similar rights on the part of any holders of
capital stock or other equity interests of the Company or any Subsidiary, except
as set forth on SCHEDULE 4.3 hereto. Except as set forth in SCHEDULE 4.3 hereto,
no subscriptions, options, warrants, calls, conversions or other rights,
agreements, commitments, arrangements or understandings of any kind obligating
the Company or any Subsidiary, contingently or otherwise, to issue or sell, or
cause to be issued or sold, any capital stock or other equity interest of the
Company or any Subsidiary, or securities convertible into or exchangeable for
any capital stock or other equity interest of the Company or any Subsidiary, are
outstanding, and no authorization therefor has been given. Except as set forth
in SCHEDULE 4.3 hereto, there are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any of its
outstanding capital stock or other equity interests. Except as set forth in
SCHEDULE 4.3 hereto, no holder of any outstanding capital stock or other equity
interest of the Company or any Subsidiary has the right to cause the Company or
such Subsidiary to repurchase or redeem such capital stock or other equity
interest.
4.4 STATUS. (a) SCHEDULE 4.4 PART(A) hereto lists each
Subsidiary of the Company. The Company and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its respective state of formation or incorporation, as the case may be, which
state is set forth on SCHEDULE 4.4 PART(A) hereto, and has full partnership or
corporate power and authority, as the case may be, to conduct its business and
to own or lease and to operate its properties as and in the places where such
business is conducted and such properties are owned, leased or operated. The
Company was incorporated under the laws of the State of Delaware on February 25,
1991.
(b) Each of the Company and the Subsidiaries is duly qualified
or licensed to do business and is in good standing in each of the jurisdictions
specified in SCHEDULE 4.4 PART(B), which includes each jurisdiction in which the
nature of its business or the properties owned or leased by it makes such
qualification or licensing necessary.
(c) True and complete copies of the articles of incorporation,
by-laws and other organizational documents of the Company and each Subsidiary,
as amended to and including the date hereof, have been delivered to the Buyers.
Neither the Company nor any Subsidiary is in violation of any provision of its
articles of incorporation, by-laws or other organizational documents. The stock
books and stock transfer records of the Company and each Subsidiary, true and
complete copies of which have been made
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available to the Buyers, contain true and complete records of all issuances and
transfers of capital stock and other equity interests of the Company and the
Subsidiaries. The minute books, covering the last three fiscal years and the
period since the end of the last fiscal year, of the Company and each
Subsidiary, which have been made available to the Buyers, correctly reflect in
all material respects (I) all corporate actions taken by the stockholders of
each such entity that such stockholders were required by Applicable Law to take,
(II) all corporate actions taken by the board of directors of each such entity
that such board of directors was required by Applicable Law to take and (III)
all other corporate actions taken by the stockholders and the board of directors
of each such entity from the date of its formation to and including the date
hereof.
(d) SCHEDULE 4.4 PART(D) hereto lists the name of the officers
and directors of the Company and each Subsidiary.
(e) SCHEDULE 4.4 PART(E) hereto lists the principal business
activities of the Company and each Subsidiary and the principal geographical
area served by the Company and each Subsidiary.
4.5 NO CONFLICTS, ETC. Except as set forth in SCHEDULE 4.5
hereto, the execution, delivery and performance by the Company of this
Agreement, the Stockholders' Agreement, the Registration Rights Agreement and
the Investor Management Services Agreements and the consummation of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and ownership of the securities to be issued to the Buyers hereunder
and the receipt and exercise of the rights of the Buyers hereunder and
thereunder), do not and will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time, or both), create in any other Person a right or claim of
termination, amendment, modification, acceleration or cancellation of, or result
in or require the creation of any Lien (or any obligation to create any Lien) on
any of the properties or assets of the Company or any Subsidiary under (A) any
Applicable Law, (B) any provision of the certificate or articles of
incorporation, by-laws or other organizational documents, as the case may be, of
the Company or any Subsidiary, or (C) any Contract or any contract, agreement,
license or other instrument to which the Company or any Subsidiary is a party or
by which any of the Company's or any Subsidiary's properties or assets may be
bound, except, in the case of clause (c), for violations, breaches and defaults
that, individually and in the aggregate, would not cause a Material Adverse
Effect. Except for the requirements of the HSRA or as specifically disclosed in
SCHEDULE 4.6 hereto, no Governmental Approval or other consent of or
registration or filing with any Person is required to be obtained or made by the
Company or any Subsidiary in connection with the execution and delivery of this
Agreement, the Stockholders' Agreement, the Registration Rights Agreement and
the Investor Management Services Agreements or the consummation of the
transactions contemplated hereby or thereby.
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4.6 GOVERNMENTAL APPROVALS AND AUTHORIZATIONS. Except as set
forth in SCHEDULE 4.6 hereto and except for the requirements of the HSRA, all
approvals, permits, qualifications, authorizations, licenses, franchises,
consents, orders, registrations and other approvals of and registrations and
filings with all Governmental Authorities (collectively, the "GOVERNMENTAL
APPROVALS") which are (A) necessary in order to permit the Company and the
Subsidiaries to carry on their respective businesses or for the lawful
consummation of the transactions contemplated by this Agreement and the other
agreements contemplated hereby, including, without limitation the conversion of
the Series D Preferred Stock and Class B Common Stock into Class A Common Stock,
including, but not limited to, the Governmental Approvals of the state, counties
and municipalities served or anticipated to be served by the Company or any
Subsidiary after the Closing, or (B) applicable to the installation, conduct and
operation of the respective businesses of the Company and the Subsidiaries have
been obtained or made and are in full force and effect, except where the failure
to make any such registration or filing or to obtain or maintain any such
Governmental Approval in full force and effect would not cause a Material
Adverse Effect. Each such registration and filing and each of the Governmental
Approvals is listed in SCHEDULE 4.6 hereto and the Company has delivered or made
available to the Buyers true and complete copies of all such registrations and
filings and Governmental Approvals, including any and all amendments and other
modifications to such items. There has been no material violation, cancellation,
suspension, revocation or default of any Governmental Approval or any notice of
violation, cancellation, suspension, revocation, default or dispute affecting
any Governmental Approval, and, to the Knowledge of the Company, no basis exists
for any such action, including, but not limited to, as a result of the
consummation of the transactions contemplated by this Agreement.
4.7 COMPLIANCE WITH LAWS. Neither the Company nor any
Subsidiary is in conflict with or in violation or breach of or default in any
material respect under (I) any Applicable Law or (II) any provision of its
organizational documents. Neither the Company nor any Subsidiary has received
any written notice or, to the Knowledge of the Company, any other notice
alleging any such conflict, violation, breach or default. Without limiting the
generality of the foregoing, neither the Company nor any Subsidiary nor any of
their respective officers or directors, or, to the Knowledge of the Company, any
employee, stockholder or other representative of the Company or any Subsidiary,
has, directly or indirectly, made or authorized any payment, contribution, or
gift of money, property or services in violation of any Applicable Law (I) as a
kickback or bribe to any Person or (II) to any political organization or the
holder of, or any aspirant to, any elective or appointed office of any
Governmental Authority. There are no outstanding judgments, orders, writs or
decrees of any Governmental Authority binding upon the Company or any Subsidiary
or any of their respective assets.
4.8 REAL PROPERTY. (a) SCHEDULE 4.8 PART (A) hereto contains a
complete and correct list of all Owned Real Property with a book value in excess
of $100,000. Except as set forth in SCHEDULE 4.8 PART (A) hereto, the Company
and the
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Subsidiaries have good and marketable fee title in the Owned Real Property,
including the buildings, structures and other improvements thereon, free and
clear of all Liens, except for Permitted Encumbrances and for utility and
similar easements that do not individually or in the aggregate materially impair
or adversely affect the use for which such Owned Real Property is currently
utilized or the value of such Owned Real Property. The Company has delivered to
the Buyers true and correct copies of any material title insurance commitments,
title insurance policies and surveys in the Company's or any Subsidiary's
possession relating to each parcel of Owned Real Property.
(b) SCHEDULE 4.8 PART (B) hereto contains a complete and
correct list of all Real Property Leases (I) relating to real property on which
switching equipment is located, (II) which require annual rental or similar
payments of more than $50,000 or (III) which the Company deems material to the
business or operations of the Company or any Subsidiary, setting forth the
address, landlord and tenant for each such Real Property Lease, describing the
premises and all improvements leased pursuant to each such Real Property Lease,
listing the expiration date of, the current annual rent paid under each such
Real Property Lease and whether such Real Property Lease contains any renewal or
purchase options. Except for the Owned Real Property and the Real Property
Leases, no real property is used or occupied by the Company or any Subsidiary.
(c) Except as set forth on SCHEDULE 4.8 PART (C) hereto, each
parcel of Owned Real Property and the current use and operation of such real
property conform in all material respects to all restrictive covenants,
conditions, easements, building, subdivision, zoning and similar codes and
federal, state and local laws, regulations, rules, orders and ordinances and
neither the Company nor any Subsidiary has received any written notice of any
material violation or claimed violation of any such restrictive covenant,
condition or easement, or any building, subdivision, zoning or similar code, or
any federal, state or local law, regulation, rule, order or ordinance. Except as
set forth on SCHEDULE 4.8 PART (C) hereto, no current use of the Owned Real
Property by the Company or any Subsidiary is dependent on a non-conforming use
or other Governmental Approval, the absence of which would cause a Material
Adverse Effect. The improvements on the Owned Real Property are in good working
condition and repair, reasonable wear and tear excepted. Each parcel of Owned
Real Property is assessed for real estate tax purposes as a wholly independent
lot.
(d) Except as set forth on SCHEDULE 4.8 PART (D) hereto, the
improvements upon each parcel of real property leased by the Company or any
Subsidiary and the current use and operation of such real property conform in
all material respects to all restrictive covenants, conditions, easements,
building, subdivision, zoning and similar codes and federal, state and local
laws, regulations, rules, orders and ordinances and neither the Company nor any
Subsidiary has received any written notice of any violation or claimed violation
of any such restrictive covenant, condition or easement, or any building,
subdivision, zoning or similar code, or any federal, state or local law,
regulation, rule, order or ordinance. Except as set forth on SCHEDULE 4.8 PART
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(D) hereto, the premises which are the subject of the Real Property Leases are
zoned for the purposes for which they are currently being used by the Company
and the Subsidiaries. The improvements on the real property premises which are
the subject of the Real Property Leases are in good working condition and
repair.
(e) There is no pending or, to the Knowledge of the Company,
threatened or contemplated action to take by eminent domain or otherwise to
condemn any portion of the Owned Real Property or any portion of any premises
which are the subject of the Real Property Leases and neither the Company nor
any Subsidiary has received written notice thereof. There exists no writ,
injunction, decree, order or judgment, nor any litigation, pending or to the
Knowledge of the Company, threatened, relating to the ownership, use, lease,
occupancy or operation of the Owned Real Property or any of the premises which
are the subject of the Real Property Leases, except for the existence of which
would not individually or in the aggregate materially impair or adversely affect
the use for which such real property is currently utilized or the value of such
real property.
(f) Each Real Property Lease is (and following the
consummation of the transactions contemplated hereby, will continue to be)
legal, valid, binding, enforceable and in full force and effect in accordance
with its terms. Neither the Company nor any Subsidiary nor, to the Knowledge of
the Company, any other party is in material default, violation or breach under
any Real Property Lease, and, to the Knowledge of the Company, no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a material default, violation or breach
thereunder. No material amount payable under any Real Property Lease is past
due. Neither the Company nor any Subsidiary has received any written notice of a
material default, offset or counterclaim under any Real Property Lease or any
other communication asserting non-compliance with any Real Property Lease.
Except as set forth on SCHEDULE 4.8 PART(F) hereto, the Company and the
Subsidiaries have the exclusive right to use and occupy the premises leased
under each Real Property Lease. The Company and the Subsidiaries enjoy peaceful
and undisturbed possession of the premises leased by the Company and the
Subsidiaries under each Real Property Lease. Except as set forth on SCHEDULE 4.8
PART (F) hereto, the Company and each Subsidiary has good and valid title to the
leasehold estate under its respective Real Property Leases, free and clear of
all Liens, except for lessors' interests in the Real Property. The Company has
delivered to the Buyers complete and correct copies of the Real Property Leases
listed on SCHEDULE 4.8 PART (B) hereto, together, in the case of any subleases
or similar occupancy agreements, with copies of all overleases.
4.9 TITLE TO AND CONDITION OF PERSONAL PROPERTY. (a) The
Company and each Subsidiary has good and valid title to all tangible personal
property which it owns, including all tangible personal property reflected in
the unaudited consolidated balance sheet of the Company and subsidiaries as of
September 30, 1999 included in the Financial Statements as being owned by the
Company and such Subsidiary, except for
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tangible personal property disposed of in the ordinary course of business and
consistent with prior practice since September 30, 1999, in each case free and
clear of all Liens, except as set forth on SCHEDULE 4.9 hereto. Except as set
forth in SCHEDULE 4.9 hereto, the tangible personal property of the Company and
the Subsidiaries is, in the aggregate, all of the tangible personal property
required to conduct the business of the Company and the Subsidiaries as
presently conducted. The Company and the Subsidiaries have maintained all such
material tangible personal property in good repair, working order and operating
condition, subject only to ordinary wear and tear.
(b) On the Closing Date, the Company will own or have the
right to use, directly or indirectly, all assets, properties, rights,
franchises, claims and agreements of every kind and description necessary to
conduct the business and operations of the Company and the Subsidiaries as
presently conducted.
4.10 INTELLECTUAL PROPERTY. SCHEDULE 4.10 hereto contains a
complete and correct list and description of all Intellectual Property which is
used in, or otherwise material to, the business of the Company and the
Subsidiaries as presently conducted (the "INTELLECTUAL PROPERTY ASSETS"). Each
Intellectual Property Asset is either owned or validly licensed by the Company
and the Subsidiaries and SCHEDULE 4.10 hereto identifies which Intellectual
Property Assets are so owned, which are so licensed and which entity is the
owner or licensee of each such Intellectual Property Asset. The Company has
delivered to the Buyers copies of all material documents and true and complete
memoranda describing the terms of any oral agreements regarding Intellectual
Property Assets, if any, establishing such rights, licenses or other authority.
There is no pending or, to the Knowledge of the Company, threatened proceeding
or litigation affecting, or with respect to, any Intellectual Property Assets.
The Company and each Subsidiary is in material compliance with the terms of any
license of an Intellectual Property Asset and neither the Company nor any
Subsidiary has received any written notice of, and to the Knowledge of the
Company there is not, any infringement or unlawful use of the Intellectual
Property Assets. The conduct of the business of the Company and the Subsidiaries
has not and does not infringe in any material respect with the rights of any
third party in respect of any Intellectual Property. Except as disclosed in
SCHEDULE 4.10 hereto, each Intellectual Property Asset owned by the Company and
the Subsidiaries is owned free and clear of all Liens. Except as disclosed in
SCHEDULE 4.10 hereto, neither the Company nor any Subsidiary has sold, licensed
or otherwise disposed of any of the Intellectual Property Assets to any Person
and neither the Company nor any Subsidiary has agreed to indemnify any Person
for any patent, trademark or copyright infringement. SCHEDULE 4.10 hereto lists
all of the Intellectual Property Assets which have been registered with, filed
in or issued by, as the case may be, the United States Patent and Trademark
Office and United States Copyright Office or other filing offices, domestic or
foreign.
4.11 CONTRACTS. (a) SCHEDULE 4.11 hereto lists all Contracts
as of the date of this Agreement, except Real Property Leases which are listed
in SCHEDULE 4.8 PART
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(B) hereto, Collective Bargaining Agreements which are listed in SCHEDULE 4.12
PART(A) hereto, Contracts relating to employment or consulting which are listed
in SCHEDULE 4.12 PART(C) hereto, Plans which are listed in SCHEDULE 4.13 hereto
and the policies relating to insurance which are listed in SCHEDULE 4.19 hereto.
(b) The Company has delivered to the Buyers true and complete
copies of all written Contracts and true and complete memoranda describing the
terms of all oral Contracts listed in SCHEDULE 4.11 hereto, together with a
complete and correct copy or description, as the case may be, of all amendments
thereto. All material liabilities and obligations under such Contracts can be
ascertained from such copies or memoranda. Each Contract is (and following the
consummation of the transactions contemplated hereby will continue to be) valid,
in full force and effect, binding and enforceable by the Company or the
Subsidiary party thereto in accordance with its respective terms. The Company
and the Subsidiaries have complied in all material respects with the terms of
all Contracts, including, but not limited to, all such terms requiring the
filing of statements (financial or otherwise) and the payment of any amounts,
and are not in default under, and, to the Knowledge of the Company, no event has
occurred that with the giving of notice or passage of time or both would
constitute a default under, any Contract, except for defaults that, individually
and in the aggregate, would not be material to the Company, any Subsidiary or
the business of the Company or any Subsidiary. Except as set forth on SCHEDULE
4.11 hereto, neither the Company nor any Subsidiary has granted or been granted
any material waiver or forbearance with respect to any of the Contracts since
January 1, 1994. To the Knowledge of the Company, no other contracting party is
in material default under any of the Contracts. The Contracts which are listed
in SCHEDULES 4.8 PART (B), 4.11, 4.12, 4.13 AND 4.19 hereto include all those
Contracts, agreements, commitments and similar understandings necessary to
conduct the business and operations of the Company and the Subsidiaries as
presently conducted in all material respects.
(c) Except as set forth on SCHEDULE 4.11 PART (C), there are
no payments required to be made to any third parties, including, without
limitation, each existing stockholder of the Company and any Affiliate of such
stockholders, under any Contracts in connection with this Agreement and the
agreements contemplated hereby or the consummation of the transactions
contemplated hereby or thereby.
4.12 PERSONNEL INFORMATION. (a) SCHEDULE 4.12 PART (A) hereto
contains a true and complete payroll list of all individuals employed by the
Company or any Subsidiary and all officers, directors, sales representatives,
independent contractors and other personnel providing services to the Company or
any Subsidiary in connection with the operation of the business thereof as of
December 15, 1999.
(b) Except as set forth in SCHEDULE 4.12 PART(B) OR 4.13
hereto, neither the Company nor any Subsidiary is a party to or bound by any
collective bargaining or other labor agreement, and there are no labor unions or
other organizations representing,
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or, to the Knowledge of the Company, purporting to represent or attempting to
represent any employees employed by the Company or any Subsidiary. The Company
has provided to the Buyers true and complete copies of each collective
bargaining or other labor agreement listed in SCHEDULE 4.12 PART (B) hereto.
Except as set forth on SCHEDULE 4.12 PART (B) hereto, since January 1, 1997,
there has not occurred or, to the Knowledge of the Company, been threatened any
material strike, slowdown, picketing, work stoppage, concerted refusal to work
overtime or other similar labor activity with respect to any employees or former
employees of the Company or any Subsidiary. Except as set forth on SCHEDULE 4.12
PART (B) hereto, there are no material labor disputes currently subject to any
grievance procedure, arbitration or litigation and there is no representation
petition pending or, to the Knowledge of the Company, threatened with respect to
any employee of the Company or any Subsidiary. The Company and each Subsidiary
has complied in all material respects with all Applicable Laws pertaining to the
employment or termination of employment of its employees, including, but not
limited to, all such Applicable Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited discrimination
or distinction and other similar employment activities and no claims or actions
have been brought or, to the Knowledge at the Company, threatened, alleging
noncompliance by the Company or any Subsidiary with such Applicable Laws.
(c) Except as set forth on SCHEDULE 4.12 PART(C) hereto, there
are no Contracts between the Company or any Subsidiary, on the one hand, and any
employee, consultant, officer, director or other Person performing services for
the Company or any Subsidiary, on the other hand, relating to employment or
performance of services for the Company or any Subsidiary or compensation
therefor.
4.13 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.13 hereto contains a
true and complete list of each employee benefit plan, within the meaning of
section 3(3) of ERISA, and each other employment, severance, retention, change
in control, incentive or deferred compensation, stock or other equity based,
retirement, welfare, fringe benefit or other similar plan, program, agreement,
understanding, arrangement, trust or other funding arrangement, whether or not
subject to the provisions of ERISA, which is (X) maintained or contributed to by
the Company or any Subsidiary or to which the Company or any Subsidiary is a
party or is obligated to contribute or by which the Company or any Subsidiary is
bound and (Y) under which any employee, former employee or retiree of the
Company or any Subsidiary is eligible to participate or derive a benefit, other
than any such plan, program, agreement, understanding, arrangement, trust or
other funding arrangement (A) which may be terminated upon no more than 30 days'
notice without any liability or obligation of the Company or any Subsidiary or
(B) which provides for annual payments not exceeding $50,000 in the aggregate
(the "PLANS"). Except as set forth on SCHEDULE 4.13 hereto, (A) neither the
Company nor any Subsidiary has incurred or reasonably expects to incur (either
directly or indirectly, including as a result of any indemnification obligation)
any material liability or obligation under or pursuant to Title I or IV of ERISA
(including, without limitation, under section 4069 of ERISA or by reason
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of the termination of a plan subject to Title IV of ERISA maintained by any
Person who, at the time of such termination, was a member of the same controlled
group of corporations (within the meaning of section 414(b) and (c) of the Code)
as the Company or such Subsidiary) or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee pension benefit
plans and no event, transaction or condition has occurred or exists which could
result in any such liability of the Company or any Subsidiary or, following the
Closing, any of the Buyers, (B) each Plan intended to be qualified under section
401(a) of the Code, and the trust (if any) forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service as to its
qualification under the Code and no fact or condition exists which could
reasonably be expected to result in the disqualification of any such Plan, (C)
there are no material pending or, to the Knowledge of the Company, threatened
claims by or on behalf of any of the Plans, by or on behalf of any employee or
former employee of the Company or any Subsidiary or otherwise involving any such
Plan or the assets of any Plan (other than routine claims for benefits), (D) no
condition exists and no event has occurred with respect to any Plan that is a
multiemployer plan (as defined in section 4001(a)(3) of ERISA) (a "MULTIEMPLOYER
PLAN") which presents a risk of the incurrence by the Company or any Subsidiary
of any material complete or partial withdrawal liability under Subtitle E of
Title IV of ERISA and (E) no Multiemployer Plan is in "reorganization" or
"insolvent" within the meaning of section 4241 or 4245 of ERISA, respectively.
Each of the Plans has been operated and administered in all material respects in
accordance with all Applicable Laws, including but not limited to ERISA and the
Code. No Plan is a "multiple employer plan" within the meaning of section 4063
or 4064 of ERISA. All material contributions required to have been made by the
Company and each Subsidiary to or in respect of any Plan pursuant to Applicable
Law (including, but not limited to, ERISA and the Code) have been made within
the time prescribed thereby. All material Plan liabilities which are not fully
funded are insured or fully accrued on the Financial Statements. With respect to
each Plan that is subject to the minimum funding requirements of section 412 of
the Code or section 302 of ERISA, other than a Multiemployer Plan, the
"accumulated benefit obligations," within the meaning of the Financial
Accounting Standards Board Statement No. 87, under each such Plan, determined as
of September 30, 1999 on the basis of reasonable actuarial assumptions, did not
exceed the fair market value of the assets of such Plan, determined as of
September 30, 1999. The Company has provided or made available to the Buyers
true and complete copies of all written Plans, descriptions of all unwritten
Plans, and all trust, other funding arrangements and other material documents in
respect thereof.
With respect to each Plan (a) there have not been any
prohibited transactions (as defined in Section 406 of ERISA or Section 4975 of
the Code) that would involve any material liability for the Company or any
Subsidiary and (b) no fiduciary has any liability for breach of fiduciary duty
that would involve any material liability for the Company or any Subsidiary. No
proceeding has been commenced by the Pension Benefit Guaranty Corporation to
terminate any Plan. There is no contract, agreement, plan or arrangement
covering any current or former employee of the Company or any Subsidiary
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that individually or collectively provides for the payment by the Company or any
Subsidiary or any amount that (x) is not deductible under Section 162 or 404 of
the Code, or (y) is an "excess parachute payment" pursuant to Section 280G of
the Code. Neither the execution and delivery of this Agreement or the agreements
contemplated hereby or the consummation of the transactions contemplated hereby
or thereby will result in the acceleration or creation of any rights to any
person to benefits under any Plan or the acceleration of vesting of any benefits
under any Plan.
4.14 LITIGATION. Except as set forth in SCHEDULE 4.14 hereto,
there is no claim, litigation, proceeding or investigation pending or, to the
Knowledge of the Company, threatened, against or affecting the business or any
of the assets of the Company or any Subsidiary or which seeks to enjoin or
prohibit, or otherwise questions the validity of, any action taken or to be
taken in connection with this Agreement. Except as set forth in SCHEDULE 4.14
hereto, to the Knowledge of the Company, there has been no investigation of the
Company or any Subsidiary conducted by any grand jury, other investigative body
or Governmental Authority since January 1, 1992.
4.15 TRANSACTION WITH AFFILIATES. Except as set forth in
SCHEDULE 4.15 hereto, (i) neither Daniel G. Bergstein, any of the Founders nor
any of their Affiliates, nor any Affiliate of the Company or any Subsidiary
(other than the Company or another Subsidiary) owns any assets used or useful
in, or otherwise material to, the business of the Company and the Subsidiaries
as presently conducted or is a party to any Contract, (ii) there are no
agreements between the Company or any Subsidiary on the one hand and any of the
other Persons listed in clause (i) on the other hand and (iii) there are no
payment obligations on behalf of the Company or any Subsidiary with respect to
such Persons (other than regular salary and bonus payments to active full-time
employees).
4.16 FINANCIAL STATEMENTS, ETC. SCHEDULE 4.16 hereto contains
true and complete copies of the Financial Statements. The Financial Statements
are true and correct in all material respects and have been prepared in
accordance with GAAP. The Financial Statements contain adequate reserves for
uncollectible accounts receivable and accurately reflect and fairly present in
all material respects the financial condition, position, results of operations
and, as appropriate, cash flows of the Company and its subsidiaries as of the
dates and for the periods indicated.
4.17 ABSENCES OF UNDISCLOSED LIABILITIES. Except as
specifically disclosed in SCHEDULE 4.17 hereto and except for (A) liabilities as
and to the extent reflected or reserved against on the unaudited consolidated
balance sheets of the Company and its subsidiaries as of September 30, 1999
included in the Financial Statements, (B) immaterial liabilities incurred since
September 30, 1999, in the ordinary course of business, consistent with past
practice, of the Company and the Subsidiaries, (C) ordinary course liabilities
incurred under any Contract not required to be disclosed on any Schedule to this
Agreement because of any applicable dollar threshold contained in this
Agreement, and (D) liabilities incurred by the Company or any Subsidiary since
the date
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of this Agreement under any Contract entered into or renewed as permitted by
Section 5.2(b)(viii) hereof, neither the Company nor any Subsidiary has any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due.
4.18 ABSENCE OF CHANGES OR EVENTS. Except as disclosed in
SCHEDULE 4.18 hereto, since December 31, 1998, there has not been any material
adverse change in the business, assets, properties, liabilities, revenues, costs
and expenses, income, operations, value, prospects or condition, financial or
otherwise, of the Company and the Subsidiaries, taken as a whole. Without
limiting the foregoing, except as set forth on SCHEDULE 4.18 hereto, since
December 31, 1998, neither the Company nor any Subsidiary has:
(a) purchased, sold or leased, or agreed to purchase, sell or
lease, any material asset, except for sales of obsolete equipment in
the ordinary course of business, consistent with past practices;
(b) granted or committed to grant any bonus, commission or
other form of incentive compensation or increased or committed to
increase the compensation or fees payable to or in respect of any
employee, director, officer, sales representative, independent
contractor, consultant or Affiliate of the Company or any Subsidiary
except as set forth on SCHEDULE 4.12 hereto or to the extent required
under the express terms of any employment, consulting or management
agreement set forth on SCHEDULE 4.12 PART (C) hereto or any collective
bargaining agreement as in effect on the date hereof;
(c) entered into, adopted or amended, or committed to enter
into, adopt or amend, any employment, consulting, retention,
change-in-control, severance, collective bargaining, bonus or other
incentive compensation, profit-sharing, health or other welfare, stock
option or other equity, pension, retirement, vacation, severance,
deferred compensation or other employment, compensation or benefit
plan, policy, agreement, trust, fund or arrangement for the benefit of
any employee, officer, director, sales representative, independent
contractor, agent, consultant or Affiliate of the Company or any
Subsidiary (whether or not legally binding);
(d) made any loans to any Person, except advances to employees
and representatives of the Company or any Subsidiary in the ordinary
course of business for travel and similar purposes;
(e) written off any receivables, except in the ordinary course
of business, consistent with past practices;
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(f) declared, made, set aside or paid any dividend,
distribution, or payment on, or any purchase or redemption of, any
capital stock or other equity interests of the Company or any
Subsidiary, or made any commitment therefor;
(g) issued or sold any capital stock or other equity interests
of the Company or any Subsidiary, or any subscriptions, options,
warrants, calls, conversions or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Company or
any Subsidiary, contingently or otherwise, to issue or sell, or cause
to be issued or sold, any capital stock or other equity interest of the
Company or any Subsidiary;
(h) made any material change (for book or Tax purposes) in any
method of accounting or accounting practice;
(i) suffered the loss of any key employee or key independent
contractor or, other than in the ordinary course of business,
consistent with past practices, retained any new key employees or
independent contractors;
(j) allowed any material license or permit issued to the
Company or any Subsidiary to lapse or terminate; or
(k) entered into any material transaction not in the ordinary
course of business or agreed (whether or not in writing) to do any of
the foregoing.
4.19 INSURANCE. The assets owned by the Company and the
Subsidiaries are insured against loss, damage or injury in amounts listed in
SCHEDULE 4.19 hereto, which shows all insurance policies held by the Company and
the Subsidiaries relating to the business of the Company and the Subsidiaries,
including, but not limited to, keyman life insurance policies, if any, on the
Company's or any Subsidiary's executive officers, together with the policy
limits, the type of coverage, the location of the property covered, annual
premium, premium payment dates and expiration date of each of the policies.
Copies of all such insurance policies have been furnished to the Buyers. All
such insurance policies are in full force and effect and all premiums due
thereon have been paid. The insurance coverage provided by such policies is
reasonably adequate for the business engaged in by the Company and each of the
Subsidiaries.
4.20 TAXES. (a) Except as set forth on SCHEDULE 4.20 PART (A)
hereto, (I) the Company and each Subsidiary have duly and timely filed all Tax
returns and forms required to be filed, (II) all such returns and forms are true
and correct in all material respects, (III) the Company and each Subsidiary have
paid in full or discharged all Taxes required to be paid or chargeable as a Lien
upon its assets (other than Taxes that are being contested in good faith in
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP) and (IV) the Company and each Subsidiary have duly and
timely withheld all Taxes required to be withheld in connection with the assets
or business of the Company and such Subsidiary, and such withheld Taxes have
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been either duly and timely paid to the proper Governmental Authority or
properly set aside in accounts for such purpose.
(b) Except as set forth in SCHEDULE 4.20 PART (B) hereto,
neither the Company nor any Subsidiary (I) is a party to or bound by or has any
obligation under any Tax allocation, sharing, indemnity or similar agreement or
arrangement, (II) is or has been a member of any group of companies filing a
consolidated, combined or unitary income Tax return, (III) is currently the
beneficiary of any extension of time within which to file any Tax return or (IV)
has waived any statute of limitations or otherwise agreed to any extension of
the period for assessment or collection with respect to Taxes, which waiver or
agreement is currently in force.
(c) Except as set forth on SCHEDULE 4.20 PART (C) hereto, (I)
neither the Company nor any Subsidiary is currently under audit with respect to
Taxes by any Governmental Authority and there has been no claim or issue (other
than a claim or issue that has been finally settled) concerning any liability
for Taxes of the Company or any Subsidiary asserted in writing by any
Governmental Authority and (II) there are no outstanding adjustments for income
Tax purposes applicable to the Company or any Subsidiary required as a result of
changes in methods of accounting.
(d) SCHEDULE 4.20 PART (D) hereto lists all income Tax returns
that have been filed with respect to the Company and any Subsidiary that have
not yet been audited or are currently the subject of audit.
(e) Except as set forth in SCHEDULE 4.20 PART (E) hereto,
neither the Company nor any Subsidiary will, as a result of the transactions
contemplated by this Agreement, make or become obligated to make any parachute
payment as defined in section 280(G) of the Code.
4.21 ENVIRONMENTAL MATTERS. (a) Except as set forth on
SCHEDULE 4.21 PART (A) hereto, the Company's and each Subsidiary's operation and
use of the Owned Real Property and the premises which are the subject of the
Real Property Leases have complied in all material respects with and are in
compliance in all material respects with all Environmental Laws. The Company and
the Subsidiaries have obtained all environmental, health and safety permits
material to the operation of the business of the Company and the Subsidiaries as
presently conducted, and all such permits are in full force and effect and the
Company and each Subsidiary is in material compliance with the terms and
conditions of each such permit. There are no outstanding Liens on any interest
in any of the Owned Real Property or Real Property Leases under any
Environmental Laws. Neither the Company nor any Subsidiary has received any
notice of, nor to the Knowledge of the Company are there, any administrative or
judicial proceedings or actions or, to the Knowledge of the Company,
investigations with respect to alleged or proven violations of or actual or
potential liability under Environmental Laws with respect to the Company or any
Subsidiary or any of its tenants or subtenants, or otherwise
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involving the Owned Real Property or the Real Property Leases or the operations
conducted on the premises subject to the Real Property Leases.
(b) Except as set forth on SCHEDULE 4.21 PART (B) hereto,
there has been no release (nor, to the Knowledge of the Company, is there any
substantial threat of a release) of any Hazardous Substance at or from the Owned
Real Property or the premises which are the subject of the Real Property Leases
in amounts or concentrations requiring remediation under or that would violate
current Environmental Laws or that would create any material liability to any
third Person. Except as set forth on SCHEDULE 4.21 PART (B) hereto, there are no
Hazardous Substances present on the Owned Real Property or the premises which
are the subject of Real Property Leases except for ordinary quantities of
properly stored Hazardous Substances found in consumer or commercial products
that are used in the normal course of the business of the Company and the
Subsidiaries. Except as set forth on SCHEDULE 4.21 PART (B) hereto, there are no
underground storage tanks, or underground piping associated with such tanks, on
the Owned Real Property or on the premises which are the subject of the Real
Property Leases. The Company has provided the Buyers with copies of all
environmental reports relating to the Owned Real Property or the premises which
are the subject of the Real Property Leases that are in the Company's or any
Subsidiary's possession.
(c) No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company, its Subsidiaries,
or any of their respective predecessors or Affiliates will prevent, hinder or
limit continued compliance with Environmental Laws, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental
Laws, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental Laws, including
without limitation any relating to onsite or offsite releases or threatened
releases of Hazardous Substances, personal injury, property damage or natural
resources damage.
(d) Except as set forth in SCHEDULE 4.21 PART(D) hereto,
neither the Company nor any of its Subsidiaries has assumed, undertaken or
otherwise become subject to any liability, including without limitation any
remedial obligation, of any other Person relating to Environmental Laws.
4.22 INVESTMENT COMPANY ACT. Neither the Company nor any
Subsidiary nor any Affiliate is a "registered investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4.23 INVESTMENTS. Except as set forth on SCHEDULE 4.23 hereto,
neither the Company nor any Subsidiary owns, directly or indirectly, any shares
of capital stock or other equity interests (or any interest convertible into
capital stock or other equity interest) in any corporation, partnership, joint
venture, limited liability company or other entity, or has any commitment to
contribute to the capital of, make loans to, or share in
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the losses of, any enterprise. Each investment set forth on SCHEDULE 4.23 is
fairly presented in the Financial Statements.
4.24 PENDING ACQUISITIONS. The Company has delivered to the
Buyers true and complete copies of all Contracts and transaction documents
relating to any pending acquisition by the Company or any Subsidiary. SCHEDULE
4.24 hereto lists all such pending acquisitions by the Company or any Subsidiary
and, as of the date hereof, their status and anticipated closing dates. All
representations and warranties made by or on behalf of the Company or any
Subsidiary in any such Contracts or transaction documents are true and correct
in all material respects on the date hereof with the same effect as though such
representations and warranties had been made on the date hereof. To the
Knowledge of the Company, all representations and warranties made in any such
Contracts or transaction documents by or on behalf of any party thereto other
than the Company or any Subsidiary are true and correct in all material respects
on the date hereof with the same effect as though such representations and
warranties had been made on the date hereof.
4.25 BROKER, FINDERS, ETC. Except for any fees due to First
Union Securities, Inc. in connection with the transactions contemplated by this
Agreement, all negotiations relating to this Agreement and the transactions
contemplated hereby have been carried on without the participation of any Person
acting on behalf of the Company or any Subsidiary or any of their respective
Affiliates in such manner as to, and the transactions contemplated hereby will
not otherwise, give rise to any valid claim against the Company or any
Subsidiary for any brokerage or finder's commission, fee or similar
compensation.
4.26 BANK ACCOUNTS. SCHEDULE 4.26 hereto sets forth a complete
and correct list in all material respects containing the names of each bank in
which the Company or any Subsidiary has an account or safe deposit or lock box
and the account or box number, as the case may be.
4.27 LOCAL EXCHANGE RELATED MATTERS. SCHEDULE 4.27 hereto sets
forth a list containing the name of the Company and each Subsidiary and the
number of access lines served by the Company and such Subsidiary as of October
31, 1999. The Company and the Subsidiaries served an aggregate of no fewer than
167,339 access lines, as of September 30, 1999, and no single end user of the
Company or any Subsidiary accounts for more than 10% of the Company's or such
Subsidiary's gross revenues. Except as set forth on SCHEDULE 4.27 hereto, no
other wireline telephone company, other access provider or other Person
competes, or to the Knowledge of the Company, has any plans to compete, with the
Company or any Subsidiary in any local exchange market served by the Company or
such Subsidiary. To the Knowledge of the Company, there are no pending or
proposed changes to any law, rule or regulation governing the Company or any
Subsidiary which, were such changes to become Applicable Law, would reasonably
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be expected to cause a Material Adverse Effect, except as set forth on SCHEDULE
4.27 hereto.
4.28 TARIFFS. SCHEDULE 4.28 hereto sets forth all material
tariffs, charges and rates on file with or imposed by the Federal Communications
Commission, the National Exchange Carrier Association, any public utility
commission or other Governmental Authority applicable to the Company or any
Subsidiary.
4.29 YEAR 2000. None of the Computer Programs, computer
software, computer hardware (whether general or special purpose), network
equipment, technical infrastructure or other similar or related items of
automated, computerized or software systems that are used or relied on by the
Company or its Subsidiaries in the conduct of its or their respective
businesses, and none of the products and services sold, licensed, rendered, or
otherwise provided by the Company or its Subsidiaries in the conduct of its or
their respective businesses, will malfunction, cease to function, generate
incorrect data, cause the disruption of any other automated or computerized
system or produce incorrect results when processing, providing or receiving (i)
date-related data from into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries.
Neither the Company nor any of its Subsidiaries has made any
representations or warranties regarding the ability of any product or service
sold, licensed, rendered, or otherwise provided by the Company or its
Subsidiaries in the conduct of its or their respective businesses to operate
without malfunction, to operate without ceasing to function, to generate correct
data or to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
4.30 DISCLOSURE. Neither this Agreement, the Offering
Memorandum prepared by First Union Securities, Inc. dated October 1999, nor any
of the exhibits, schedules, attachments, written statements, documents,
certificates or other items prepared and/or supplied to the Buyers by or on
behalf of the Company or any of its Subsidiaries with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading, it being understood that the Company makes no
representation with respect to any projections or other prospective financial
information. All of the documents made available for due diligence review in the
data room of the Company (maintained at the offices of Paul, Hastings, Janofsky
& Walker LLP) were true and correct original documents or unaltered copies of
such documents when reviewed by or on behalf of any of the Buyers. To the
Knowledge of the Company, there is no fact which the Company has not disclosed
to the Buyers in writing and which has had or could reasonably be expected to
have a Material Adverse Effect.
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ARTICLE V
COVENANTS
5.1 INFORMATION PRIOR TO CLOSING. During the period from the
date hereof to the Closing Date, the Company covenants and agrees to cause the
management of the Company and the Subsidiaries to be made available to the
Buyers and their authorized representatives and provide the Buyers and their
accountants, legal counsel and other authorized representatives reasonable
access during normal business hours to, and permit such Persons to review, the
properties, books, Contracts, accounts and records of the Company and the
Subsidiaries, and to provide such other information to the Buyers and their
authorized representatives as shall have been reasonably requested by the Buyers
or such authorized representatives concerning the Company, any Subsidiary or the
assets or business of the Company or any Subsidiary. The rights of the Buyers
under this Section shall not be exercised in such a manner as to interfere
unreasonably with the conduct of the business of the Company or any Subsidiary.
5.2 CONDUCT OF BUSINESS. (a) During the period from the date
hereof to the Closing Date, the Company covenants and agrees that, other than
the transactions contemplated hereby or in connection with the pending
acquisitions listed on SCHEDULE 5.2(B) hereto, it will and will cause the
Subsidiaries to carry on their businesses in, and only in, the ordinary course
of business, in substantially the same manner as heretofore conducted, and to
use their reasonable best efforts to preserve intact their present business
organization, keep available the services of their present officers and
significant employees, sales agents and independent contractors, and preserve
their relationships with customers, suppliers and others having business
dealings with them, to the end that their goodwill and going business shall be
maintained following the Closing.
(b) Without limiting the generality of the foregoing, except
as expressly permitted by this Agreement or with the prior written consent of
the Buyers or except as set forth on SCHEDULE 5.2(B) hereto, the Company
covenants and agrees that it will not and will not permit any Subsidiary, to do
or agree to do, on or after the date hereof, any of the following, on or before
the Closing:
(i) Amend its respective articles of incorporation, by-laws or
other organizational documents;
(ii) Issue, sell, transfer, assign, pledge, convey or dispose
of, any capital stock or equivalent equity interests, including, but
not limited to, any subscriptions, options, warrants, calls,
conversions or other rights, agreements, commitments, arrangements or
understandings of any kind obligating the Company or any Subsidiary,
contingently or otherwise, to issue or sell, or cause to
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be issued or sold, any capital stock or other equity interest of the
Company or any Subsidiary;
(iii) Repurchase or redeem any shares of capital stock or
declare any dividend or make any distribution with respect to its
capital stock or equivalent equity interests;
(iv) Sell, assign, lease or otherwise transfer or dispose of
any material assets, unless the same shall be replaced with assets of
equal or greater value and utility;
(v) Create, assume or permit to exist any Lien upon its
assets, except for those in existence on the date of this Agreement and
except for those additional Liens created in the ordinary course of
business consistent with past practice that constitute Permitted
Encumbrances;
(vi) Cause or permit by any act, or failure to act, any of the
Governmental Approvals to expire, be surrendered, adversely modified,
or otherwise terminated;
(vii) Waive any right under any Contract or license relating
to its assets or business as presently conducted, except in the
ordinary course of business consistent with past practice;
(viii) Enter into or renew any Contract other than (A) in the
ordinary course of business consistent with past practice or (B) any
Contract, the amount of which has been provided for in the consolidated
budget for the rural local exchange carrier business, dated November 5,
1999, of the Company or in the 1999 Section of the five (5) Year Plan
for the FairPoint Communications business, a copy of which has been
delivered to the Buyers; PROVIDED, HOWEVER, that any Contract entered
into or renewed under clause (A) or (B) will be listed on a Schedule to
be provided to the Buyers prior to the Closing;
(ix) Fail to timely make all material payments required to be
paid under any Contract when due and otherwise pay all liabilities and
satisfy all obligations (except those being contested in good faith by
appropriate proceedings, for which adequate reserves have been
created), in each case in a manner consistent with past practice;
(x) Fail to maintain its inventories of spare parts and
expendable supplies, if any, at levels consistent with past practice;
(xi) Increase or modify or agree to increase or modify the
compensation, bonuses or other benefits or perquisites for any of the
employees of
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the business of the Company or any Subsidiary, except in the ordinary
course of business consistent with past practice or pursuant to any
employment agreements, Plans or collective bargaining agreements as set
forth on SCHEDULE 4.11, 4.12 OR 4.13 hereto;
(xii) Fail to remove, cure, correct and repair prior to the
Closing any material deficiencies in its assets and any material
violations under applicable statutes, rules, regulations, engineering
standards or building, fire or zoning laws or regulations;
(xiii) Fail to maintain consistent with past practice
insurance policies on the business of the Company and the Subsidiaries
and their assets comparable in amount to that in effect on the date of
this Agreement;
(xiv) Fail to maintain its books and records in accordance
with GAAP;
(xv) Enter into or renew any Contract with the Company, any
Subsidiary, any of Daniel G. Bergstein, any Founder, or any of their
Affiliates, or any Affiliate of the Company or any Subsidiary;
(xvi) Enter into or adversely modify the terms of any
Contract, binding commitment or letter of intent relating to the
acquisition of the assets or securities of any Person;
(xvii) Incur any indebtedness for money borrowed in excess of
$5,000,000; or
(xviii) Take or fail to take any commercially reasonable
action that would cause any of its representations and warranties not
to be true and correct on the Closing Date in the manner required under
Section 6.1 hereof.
5.3 THIRD-PARTY CONSENTS. The Company covenants and agrees
that it will and will cause each Subsidiary to use all reasonable best efforts
to obtain the consent of any third parties or Governmental Authorities required
to be obtained or made in connection with the transactions contemplated by this
Agreement.
5.4 CONVERSION OF SHARES. The Company covenants and agrees
that it will and will cause each Subsidiary, to use all reasonable best efforts
after the Closing Date to obtain, as promptly as possible, the consent of all
Governmental Authorities necessary for the holders of Series D Preferred Stock
and Class B Common Stock to have their shares converted into Class A Common
Stock and for the Buyers to have the rights contemplated by Section 7 of the
Stockholders Agreement.
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5.5 RENEWAL OF CONTRACTS. The Company covenants and agrees
that it will and will cause each Subsidiary to use all reasonable best efforts
to renew any Contract which by its terms expires or terminates between the date
of this Agreement and the Closing Date, provided that any such renewal shall be
on terms and conditions which are consistent with past practice.
5.6 NO INCONSISTENT ACTION. The Company covenants and agrees
that it will not and will not permit any Subsidiary to take any action, and each
Buyer and Selling Stockholder agrees that it will not take any action, which is
inconsistent in any material respect with their respective obligations under
this Agreement or that would hinder or delay in any material respect the
consummation of the transactions contemplated by this Agreement.
5.7 NO SOLICITATION. The Company covenants and agrees that it
will not and will not permit any Subsidiary to, directly or indirectly, (A)
solicit, initiate or encourage submission of any proposal or offer from any
Person relating to any acquisition or purchase of the business of the Company or
any Subsidiary, any assets of the Company or any Subsidiary (other than the sale
of assets in the ordinary course of business consistent with past practices) or
any capital stock or other equity interest of the Company or any Subsidiary or
(B) participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or otherwise cooperate in any way, or
assist or participate in, facilitate or encourage, any effort or attempt by any
Person to do or seek any of the foregoing. The Company covenants and agrees that
it will and will cause each Subsidiary, to promptly notify the Buyers in writing
if any such offer or proposal is made.
5.8 FINANCIAL STATEMENTS. The Company covenants and agrees
that it will and will cause each Subsidiary to deliver to the Buyers within 30
days after the end of each month until the Closing Date, unaudited consolidated
balance sheets of each of the Company, MJD Holdings Corp., MJD Services Corp.,
MJD Ventures, Inc., FairPoint Communications Corp. and ST Enterprises, Ltd. and
their respective Subsidiaries for the month then ended and the related
statements of operations for the month then ended. All financial statements
furnished pursuant to this Section shall be prepared in a manner consistent with
the Financial Statements and will be true and correct in all material respects
and fairly present in all material respects the financial condition, position,
results of operations and cash flows, as appropriate, as of the dates and for
the periods covered by such statements. The Company covenants and agrees that it
will and will cause each Subsidiary to furnish to the Buyers any and all other
information concerning the financial condition of the Company and any Subsidiary
that the Buyers may reasonably request.
5.9 ESTOPPEL CERTIFICATES; CONSENT AND WAIVER. The Company
covenants and agrees that it will and will cause each Subsidiary to use all
reasonable best efforts to obtain estoppel certificates containing customary
provisions and consents and waivers from any landlord with respect to the Real
Property Leases listed in SCHEDULE 5.9 hereto.
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5.10 CONSUMMATION OF PENDING ACQUISITIONS. Except as set forth
on SCHEDULE 5.10 hereto, the Company covenants and agrees that it will and will
cause each Subsidiary to use all reasonable best efforts to consummate the
pending acquisitions set forth on SCHEDULE 4.24 hereto on or prior to the
Closing Date in accordance with the terms of the existing acquisition
agreements.
5.11 NOTICE OF MATERIAL DEVELOPMENTS. From the date hereof
until the Closing, the Company covenants and agrees that it will give prompt
written notice to the Buyers of any (A) material development affecting the
business, assets, properties or results of operations of the Company or any
Subsidiary or (B) event or circumstance which would render any representation or
warranty of the Company contained in this Agreement untrue or inaccurate if made
on or as of the date thereof or as of the Closing Date. From the date hereof
until the Closing, each Buyer and each Selling Stockholder covenants and agrees
that it will give prompt written notice to the other parties hereto of any (A)
material development affecting such Buyer's or such Selling Stockholder's
ability to perform its obligations under this Agreement or (B) event or
circumstance which would render any representation or warranty of such Buyer or
such Selling Stockholder contained in this Agreement untrue or inaccurate if
made on or as of the date thereof or as of the Closing Date. No disclosure by
the Company, any Buyer or any Selling Stockholder pursuant to this Section 5.11
shall be deemed to amend or supplement any schedule hereto or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
5.12 REPURCHASE OF WARRANTS. The Company covenants and agrees
to use its reasonable best efforts to repurchase the warrants issued by ST
Enterprises, Ltd. held by Steve McGeeney and Sylvana Zoberg.
5.13 FURTHER ACTIONS. The Company covenants and agrees that it
will and will cause each Subsidiary to, and each Buyer and Selling Stockholder
covenants and agrees that it will, use all reasonable best efforts to take or
cause to be taken all actions, and to do or cause to be done all other things,
necessary, proper or advisable in order to fulfill and perform their respective
obligations in respect of this Agreement or otherwise to consummate and make
effective the transactions contemplated hereby.
5.14 KELSO PURCHASED CLASS B SHARES. At least five (5)
business days prior to Closing, Kelso shall deliver a notice to the Company
indicating the number of Kelso Purchased Class B Shares it will purchase at
Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO CLOSE
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The obligations of the Buyers hereunder are, at their option,
subject to satisfaction, at or prior to the Closing Date, of (i) the purchase by
each of the other Buyers of the shares to be purchased on the Closing Date and
(ii) each of the following conditions:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) All of the
representations and warranties of the Company and the Selling Stockholders
contained in or made pursuant to this Agreement and in any schedule, instrument,
certificate, agreement or document delivered pursuant to this Agreement shall be
true and correct in all material respects on the date hereof and on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such dates.
(b) All of the terms, covenants and conditions to be complied
with and performed by the Company or the Subsidiaries or the Selling
Stockholders on or prior to Closing Date shall have been complied with or
performed in all material respects.
6.2 GOVERNMENTAL CONSENTS. Any applicable waiting period under
the HSRA shall have expired or been earlier terminated without receipt of any
objection or the commencement or threat of any litigation by any Governmental
Authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement and the Company and its Subsidiaries
shall have received all other Governmental Approvals necessary in connection
with this Agreement, the agreements contemplated hereby and all the transactions
contemplated herein or therein (other than the conversion of the Series D
Preferred Stock and Class B Common Stock into Class A Common Stock).
6.3 THIRD-PARTY CONSENTS. The Company and the Subsidiaries
shall have obtained and shall have delivered to the Buyers (A) all and consents
of Governmental Authorities required in connection with this Agreement and the
agreements contemplated herein and the consummation of the transactions
contemplated hereby and thereby (other than the conversion of the Series D
Preferred Stock and Class B Common Stock into Class A Common Stock) and (B) all
third party consents listed in SCHEDULE 6.3 hereto, without any condition
adverse in any material respect to the Buyers, the Company or any of the
Subsidiaries.
6.4 UPDATED TARIFF SCHEDULE. The Company shall have delivered
to the Buyers an updated SCHEDULE 4.28 hereto, which shall be true and correct
in all material respects as of the Closing Date, and the Buyers shall be
reasonably satisfied that such updated schedule does not reflect the occurrence
of any events which would cause the condition contained in Section 6.11 hereof
not to be satisfied.
6.5 CERTIFICATES. The Company and each Selling Stockholder
shall have delivered to the Buyers a certificate in form and substance
reasonably satisfactory to the Buyers, dated the Closing Date and signed by an
authorized officer of the Company,
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each Selling Stockholder or an authorized officer of such Selling Stockholder to
the effect that the conditions relating to such party set forth in Section 6.1
hereof have been fulfilled.
6.6 ADVERSE PROCEEDINGS. No action, suit, proceeding,
litigation or investigation shall be pending before or threatened by any
Governmental Authority which questions the validity or legality of this
Agreement or any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby. No injunction or other
order issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated by this Agreement shall be in
effect.
6.7 WAIVER OF RIGHTS. Pursuant to documentation in form and
substance reasonably satisfactory to the Buyers, any stockholders of the Company
that have any pre-emptive rights, participation rights, rights of first refusal
or rights of first offer with respect to any of the transactions contemplated
hereby shall have waived all such rights.
6.8 MANAGEMENT, FINANCIAL ADVISORY AND SEVERANCE ARRANGEMENTS.
The Company shall have entered into the Investor Management Services Agreements,
substantially in the form of EXHIBITS E AND F to this Agreement, and, pursuant
to documentation in form and substance reasonably satisfactory to the Buyers,
the severance arrangements with John P. Duda, Eugene B. Johnson, Walter E.
Leach, Jr. and Jack H. Thomas shall have been amended to include employment
terms through December 31, 2003 and, in the case of Walter E. Leach, to
terminate his existing employment agreement with the Company dated September 24,
1994.
6.9 EQUITY DOCUMENTS. The Company shall have executed and
delivered to the Buyers the Stockholders' Agreement and the Registration Rights
Agreement and any related agreements.
6.10 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact,
condition, change, development or effect, including, but not limited to,
competitive, technological or federal, state, county or municipal regulatory
developments, shall exist or have occurred or come to exist since the date of
this Agreement that, individually or in the aggregate, has had or resulted in,
or could reasonably be expected to become or result in, a Material Adverse
Effect.
6.11 RECONSTITUTION OF BOARDS OF DIRECTORS. All actions shall
have been taken so that immediately following the Closing the board of directors
of the Company and the Subsidiaries shall be reconstituted in accordance with
the terms of the Stockholders' Agreement.
6.12 TRANSACTION AND ADVISORY FEES. THL Equity Advisors and
Thomas H. Lee Capital, LLC, a Delaware limited liability company, shall have
received
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by wire transfer of immediately available funds a transaction fee of $5,492,475
and $3,882,749 respectively in consideration of their services with respect to
the consummation of the transactions contemplated by this Agreement. THL Equity
Advisors shall have received by wire transfer of immediately available funds the
first pro rated quarterly payment in consideration of its services under its
Investor Management Services Agreement.
6.13 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
CERTIFICATE OF DESIGNATION. The Company shall have delivered to the Buyers a
copy of its Second Amended and Restated Certificate of Incorporation, in the
form of EXHIBIT I hereto, and a copy of its Certificate of Designation of Series
D Preferred Stock, in the form of EXHIBIT J hereto, both certified by the
Secretary of State of the State of Delaware. The Company shall have received the
requisite approval of the stockholders of the Company of the Amended and
Restated Certificate of Incorporation and the Certificate of Designation of
Series D Preferred Stock.
6.14 NO DEFAULT. The Company and its Subsidiaries shall not be
in default under any material agreement, license or permit.
6.15 TERMINATION OF AGREEMENTS. The Existing Stockholders'
Agreement, the Registration Rights Agreement, dated as of July 31, 1997, among
the Company, Kelso, Carousel and the other parties thereto, and the Financial
Advisory Agreement between the Company and Carousel, dated July 31, 1997, shall
have been terminated pursuant to documentation in form and substance reasonably
satisfactory to the Buyers.
6.16 NONCOMPETITION AGREEMENT. Daniel G. Bergstein, JED
Communications Associates, Inc. and Meyer Haberman shall have entered into a
Noncompetition Agreement with the Company substantially in the form of EXHIBIT K
hereto.
6.17 BANK WAIVER. The Company shall have obtained a waiver
from its lenders under the Credit Agreement, in form and substance reasonably
satisfactory to the Buyers, to consummate the transactions contemplated by this
Agreement.
6.18 TOTAL INDEBTEDNESS. The total indebtedness (as such term
is defined in the Credit Agreement) of the Company and its subsidiaries as of
December 31, 1999 shall not have been in excess of $465 million.
6.19 TERMINATION OF CONSULTING AGREEMENT. The Consulting
Agreement, dated as of July 31, 1997, between the Company and Bugger Associates,
Inc. shall have been terminated pursuant to documentation in form and substance
reasonably satisfactory to the Buyers.
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6.20 INSTITUTIONAL SUBSCRIPTION AND STOCKHOLDERS AGREEMENTS.
To the extent that certain members of the Company's or any Subsidiary's
management and other institutional investors are purchasing equity securities of
the Company simultaneously with the consummation of transactions contemplated by
this Agreement, such purchasers shall have entered into a subscription agreement
and a stockholders agreement with the Company, which agreements shall be in form
and substance reasonably satisfactory to the Buyers.
6.21 FAIRPOINT OPTION EXCHANGE. The Company shall have
obtained agreements from the employees of FairPoint Communications Corp. holding
stock options in FairPoint Communications Corp. whereby such individuals have
exchanged such options for stock options in the Company pursuant to
documentation in form and substance reasonably satisfactory to the Buyers.
6.22 FAIRNESS OPINION. The Company shall have received an
opinion from First Union Securities, Inc. that will provide in substance that
the issue and sale of the Kelso Shares is fair, from a financial point of view,
to the Company.
6.23 REPAYMENT OF STOCKHOLDER LOANS. Daniel Bergstein and
Meyer Haberman shall have repaid the loans owed under those certain promissory
notes dated October 29, 1998 issued by each of Daniel Bergstein and Meyer
Haberman in favor of Bankers Trust Company and all Liens granted in connection
therewith shall have been released, and the Company shall have been released
from any guarantees in connection therewith pursuant to documentation in form
and substance reasonably satisfactory to the Buyers.
6.24 SILVERMAN RELEASE. The Founders shall have obtained the
release from Jeffrey Silverman in connection with their obligations to him under
that certain letter agreement dated June 29, 1993 pursuant to documentation in
form and substance reasonably satisfactory to the Buyers.
6.25 DELIVERIES. The Company and the Selling Stockholders
shall have made all the deliveries set forth in Sections 8.1 and 8.3 hereof,
respectively.
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ARTICLE VIA
CONDITIONS PRECEDENT TO THE
SELLING STOCKHOLDERS' OBLIGATION TO CLOSE
The obligations of the Selling Stockholders are, at their
option, subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
6A.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) All
representations and warranties of the Buyers contained in or made pursuant to
this Agreement and in any schedule, instrument, certificate, agreement or
document delivered pursuant to this Agreement shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such dates.
(b) All the terms, covenants and conditions to be complied
with and performed by the Buyers on or prior to the Closing Date shall have been
complied with or performed in all material respects.
6A.2 HSRA CONSENTS. Any applicable waiting period under the
HSRA shall have expired or been earlier terminated without receipt of any
objection or the commencement or threat of any litigation by any Governmental
Authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
6A.3 CERTIFICATES. Each of the Buyers shall have delivered to
the Selling Stockholders a certificate, dated the Closing Date and signed by an
authorized officer or partner of each such Buyer, to the effect that the
conditions set forth in Section 6A.1 hereof have been fulfilled.
6A.4 ADVERSE PROCEEDINGS. No action, suit, proceeding,
litigation or investigation shall be pending before or threatened by any
Governmental Authority which questions the validity or legality of this
Agreement or any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby. No injunction or other
order issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated by this Agreement shall be in
effect.
6A.5 TERMINATION OF EXISTING STOCKHOLDERS' AGREEMENT. The
Existing Stockholders' Agreement shall have been terminated pursuant to
documentation in form and substance reasonably satisfactory to the Selling
Stockholders.
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6A.6 DELIVERIES. The Company and the Buyers shall have made
all the deliveries to the Selling Stockholders set forth in Sections 8.1 and 8.2
hereof, respectively.
ARTICLE VII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
The obligations of the Company are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) All
representations and warranties of the Buyers and Selling Stockholders contained
in or made pursuant to this Agreement and in any schedule, instrument,
certificate, agreement or document delivered pursuant to this Agreement shall be
true and correct in all material respects on the date hereof and on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such dates.
(b) All the terms, covenants and conditions to be complied
with and performed by the Buyers and Selling Stockholders on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
7.2 HSRA CONSENTS. Any applicable waiting period under the
HSRA shall have expired or been earlier terminated without receipt of any
objection or the commencement or threat of any litigation by any Governmental
Authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
7.3 CERTIFICATES. Each of the Buyers and Selling Stockholders
shall have delivered to the Company a certificate, dated the Closing Date and
signed by an authorized officer or partner of each such Person, to the effect
that the conditions set forth in Section 7.1 hereof have been fulfilled.
7.4 ADVERSE PROCEEDINGS. No action, suit, proceeding,
litigation or investigation shall be pending or threatened by any Governmental
Authority which questions the validity or legality of this Agreement or any
action taken or to be taken in connection herewith or the consummation of the
transactions contemplated hereby. No injunction or other order issued by a court
of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated by this Agreement shall be in effect.
7.5 EQUITY DOCUMENTS. Each of the Buyers shall have executed
and delivered to the Company the Stockholders' Agreement and the Registration
Rights Agreement and the applicable Investor Management Services Agreement.
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7.6 BANK WAIVER. The Company shall have obtained a waiver from
its lenders under the Credit Agreement, in form and substance reasonably
satisfactory to the Buyers, to consummate the transactions contemplated by this
Agreement.
7.7 FAIRNESS OPINION. The Company shall have received an
opinion from First Union Securities, Inc. that will provide in substance that
the issue and sale of the Kelso Shares is fair, from a financial point of view,
to the Company.
7.8 DELIVERIES. The Buyers and Selling Stockholders shall have
made all the deliveries set forth in Sections 8.2 and 8.3 hereof, respectively.
ARTICLE VIII
THE CLOSING
8.1 DOCUMENTS TO BE DELIVERED BY THE COMPANY. At the Closing,
the Company shall deliver or cause to be delivered the following:
(a) to the Buyers, certificates representing the shares of
capital stock as provided in Section 2.4 hereof;
(b) to the Buyers, a certificate of the Company, dated the
Closing Date, in form and substance reasonably satisfactory to the
Buyers, certifying to the fulfillment of the conditions set forth in
Section 6.1 hereof;
(c) to the Buyers and the Selling Stockholders, opinions of
(I) Paul, Hastings, Janofsky & Walker LLP, (II) Meyer, Capel,
Hirschfeld, Muncy, Jahn & Aldeen, P.C., (III) James M. Caplinger,
Chartered, (IV) Devine, Millimet & Branch PA, (V) Moss & Barnett PA,
(VI) Miller, Eggleston & Cramer, Ltd., (VII) Preti, Flaherty, Beliveau
& Pachios, LLC, (VIII) Gorsuch Kirgis L.L.C., (IX) Huber, Lawrence &
Abell, (X) Blooston, Mordkofsky, Jackson & Dickens, (XI) Doerner,
Saunders, Daniel & Anderson, L.L.P. and (XII) Lane Powell Spear Lubesky
L.L.P., counsel to the Company, dated the Closing Date, in form and
substance reasonably satisfactory to the Buyers and the Selling
Stockholders, as applicable;
(d) to the Buyers, certified copies of all corporate
proceedings of the Company in connection with the transactions
contemplated by this Agreement and all documents and instruments
incident thereto, in form and substance reasonably satisfactory to the
Buyers and their counsel; and
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(e) to the Buyers, such other documents and legal opinions as
may reasonably be requested by the Buyers' counsel.
8.2 DOCUMENTS TO BE DELIVERED BY THE BUYERS. At the Closing,
the Buyers shall deliver or cause to be delivered the following:
(a) to the Company and the Selling Stockholders, immediately
available wire-transferred funds as provided in Section 2.4 hereof;
(b) to the Company and the Selling Stockholders, a certificate
of each of the Buyers, dated the Closing Date, in form and substance
reasonably satisfactory to the Company, certifying to the fulfillment
of the conditions specified in Section 7.1 hereof;
(c) to the Company, an opinion of Kirkland & Ellis, counsel to
THL Fund IV, dated the Closing Date, in form and substance reasonably
satisfactory to the Company;
(d) to the Company, an opinion of Debevoise & Plimpton,
counsel to Kelso, dated the Closing Date, in form and substance
reasonably satisfactory to the Company; and
(e) to the Company, such other documents as may be reasonably
requested by the Company's counsel.
8.3 DOCUMENTS TO BE DELIVERED BY THE SELLING STOCKHOLDERS. At
the Closing, the Selling Stockholders shall deliver or cause to be delivered the
following:
(a) to the Company and the Buyers, certificates representing
the shares of capital stock as provided in Section 2.4 hereof;
(b) to the Company and the Buyers, a certificate of each of
the Selling Stockholders, dated the Closing Date, in form and substance
reasonably satisfactory to the Company and the Buyers, certifying to
the fulfillment of the conditions specified in Section 6A.1 hereof;
(c) to the Company, an opinion of Kennedy Covington Lobdell &
Hickman, L.L.P., counsel to Carousel, dated the Closing Date, in form
and substance reasonably satisfactory to the Company and the Buyers;
(d) to Carousel, an Internal Revenue Service form W-9
completed by each Founder; and
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(e) to the Company and the Buyers, such other documents as may
reasonably be requested by the Company's or Buyers' counsel.
ARTICLE IX
TAXES, FEES AND EXPENSES
The Company shall pay all of the reasonable fees and expenses
incurred by each party hereto in connection with the preparation, negotiation
and closing of this Agreement and the transactions contemplated hereby, whether
or not the transactions contemplated hereby shall be consummated. Without
limiting the generality of the foregoing, (A) all use, stamp, stock transfer and
registration taxes and fees, (B) all governmental filing or grant fees,
including, but not limited to, the HSRA filing fee, (C) all accountants' and
attorneys' fees and (D) all recordation and transfer taxes and fees, including,
but not limited to, realty transfer, and documentary taxes and fees, incurred in
connection with the execution, delivery or performance of this Agreement and the
transactions contemplated hereby, shall be paid by the Company.
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
Except as otherwise specifically set forth herein, the
representations and warranties contained in this Agreement or in any
certificate, document or instrument delivered pursuant to this Agreement shall
survive the Closing and continue in effect through the Claims Termination Date.
All covenants of the parties to this Agreement and the agreements contemplated
hereby and the representations and warranties contained in Sections 3A.2, 3A.5,
4.1, 4.2, 4.3, 4.20 and 4.21 shall survive the Closing and the Claims
Termination Date and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations); provided that with respect
to Carousel and any liability of Carousel hereunder (other than under Section
11.4), the representations and warranties contained in Sections 4.20 and 4.21
shall survive only through the Claims Termination Date. Any investigation by or
on behalf of any party hereto shall not constitute a waiver as to enforcement of
any representation, warranty or covenant.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION BY THE STOCKHOLDERS. (a) Notwithstanding
the Closing and subject to the limitations set forth herein, each of the
Stockholders, severally
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and not jointly, covenants and agrees to defend, indemnify and hold harmless in
the proportions set forth in Section 11.1(b)(i) hereof the Buyers, their
respective Affiliates (excluding the Company and the Subsidiaries) and the
officers, directors, partners, employees, agents, advisers and representatives
of each such Person (collectively, the "BUYERS INDEMNITEES") from and against,
and pay or reimburse (on an as incurred basis) the Buyers Indemnitees for, any
and all claims, demands, liabilities, obligations, losses, diminution of value,
fines, costs, expenses, royalties, proceedings, deficiencies or damages (whether
or not resulting from third party claims), including interest and penalties with
respect thereto and out-of-pocket expenses and reasonable attorneys' and
accountants' fees and expenses incurred in the investigation or defense of any
of the same or in asserting, preserving or enforcing any of their respective
rights hereunder (collectively, "LOSSES"), resulting from or arising out of:
(i) any inaccuracy of any representation or warranty when made
or deemed made by the Company herein or in any schedule hereto or any
certificate, document or other instrument delivered by the Company at
the Closing in connection herewith;
(ii) any inaccuracy of any representation or warranty when
made or deemed made by a Selling Stockholder herein or in any
certificate, document or other instrument delivered by a Selling
Stockholder at the Closing in connection herewith;
(iii) any failure of the Company or a Selling Stockholder to
perform any covenant or agreement hereunder or fulfill any other
obligation in respect hereof; PROVIDED, HOWEVER, that with respect to
Losses attributable to any failure on the part of the Company (A)
Carousel shall only be required to indemnify the Buyers Indemnitees for
Losses attributable to any such failure occurring on or before the
Closing Date and (B) other than any failure on the part of the Company
to perform any covenant or agreement set forth in Section 5.4, the
Stockholders shall only be required to indemnify the Buyers Indemnitees
for any failure of the Company to perform any covenant or agreement
hereunder or fulfill any obligation in respect hereof occurring on or
before the Claims Termination Date. Notwithstanding anything in this
Agreement to the contrary, (1) in the event a Buyers Indemnitee does
not recover in full from the Stockholders for any Loss resulting from
or arising out of a failure of the Company described in this Section
11.1(a)(iii), then such Buyers Indemnitee may seek indemnification for
any remaining Losses from the Company and (2) the Company shall be
obligated to indemnify the Buyers Indemnitees for Losses attributable
to any such failure after the Claims Termination Date. Any such
indemnification by the Company will be made without a gross-up to the
Buyers.
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(b) Notwithstanding anything in this Agreement to the
contrary, the Stockholders' obligation to indemnify the Buyers Indemnitees shall
be subject to Section 11.4, Section 13.14 and all of the following limitations:
(i) Except as provided in Sections 11.1(b)(ii), 11.1(b)(iii),
11.4 or 13.14, the parties agree that any amounts owed to the Buyers
Indemnities by the Stockholders pursuant to Section 11.1(a) shall be
limited (the "Indemnification Limitation") to (A) $60,000,000 in the
aggregate and (B) with respect to each individual Loss, the obligation
of each Stockholder to indemnify the Buyers' Indemnitees shall be
limited to the amount of such Loss multiplied by the percentage of
Class A Common Stock set forth opposite such Stockholder's name on
SCHEDULE 11.1(B) hereto; PROVIDED, HOWEVER, that Carousel shall have no
liability hereunder in connection with any claim for indemnification
with respect to (1) the representations and warranties contained in
Sections 4.20 and 4.21 after the Claims Termination Date; (2) any
failure of the Company or a Selling Stockholder to perform any covenant
or agreement hereunder or fulfill any other obligation in respect
hereof after the Closing Date, (3) the pending acquisitions described
on Schedule 4.24 hereto or (4) any inaccuracy of any representation or
warranty when made or deemed made by the Company in any certificate,
document or other instrument (other than this Agreement and the
Schedules hereto and the certificate of the Company to be delivered
pursuant to Section 6.5 hereof) delivered by the Company at the Closing
in connection herewith and the Indemnification Limitation of each
Stockholder other than Carousel shall be increased by an amount equal
to such Stockholder's pro rata share of Carousel's portion of the
Indemnification Limitation as provided on SCHEDULE 11.1(B) hereto. The
parties further agree that the Buyers Indemnitees related to Kelso and
the Buyers Indemnitees related to THL shall share ratably, in
proportion to Kelso's ownership of the Kelso Purchased Class B Shares
and THL's ownership of the THL Shares, in any proceeds paid to any
Buyers Indemnitee in connection with this Article XI ;PROVIDED HOWEVER,
that if any Loss affects only THL or Kelso but not both, then only the
Buyers Indemnitees suffering a Loss shall be entitled to receive any
indemnification proceeds payable in connection with this Article XI.
The parties further agree that any amounts owed the Buyers Indemnitees
by the Company pursuant to Section 11.1(a)(iii)(2) shall be limited to
an amount equal to $60,000,000 less any amounts paid or payable to the
Buyers Indemnitees pursuant to this Article XI.
(ii) Notwithstanding anything in this Agreement to the
contrary, in the event that a Loss results from or arises out of any
inaccuracy of any representation or warranty made pursuant to Article
3A hereof or the failure by one or more Selling Stockholders to perform
any covenant or agreement hereunder or fulfill any other obligation in
respect hereof, the Buyers Indemnitees shall seek indemnification
solely from the Selling Stockholder or Selling Stockholders
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whose misrepresentation or breach of warranty or failure to perform
caused such Loss.
(iii) Notwithstanding anything in this Agreement to the
contrary, the parties agree that the University of North Carolina at
Charlotte Foundation, Inc. shall have no obligation to make any
payments pursuant to this Article XI and Eugene Johnson agrees to make
any payments (in addition to making any payments he is responsible for)
the University of North Carolina at Charlotte Foundation, Inc. would
have been required to make pursuant to this Article XI but for the
agreement contained in this sentence.
(iv) Neither the Stockholders nor the Company shall be
required to make any indemnification under Section 11.1(a) hereof until
the aggregate amount of Losses resulting from or arising out of the
matters referred to in Section 11.1(a) hereof exceeds $5,000,000;
PROVIDED that if the aggregate amount of such Losses exceeds such
amount, the Stockholders or the Company, as applicable, shall be
required to indemnify the Buyers Indemnitees for all Losses
indemnifiable under Section 11.1(a) hereof without regard to such
$5,000,000 limitation.
(v) Carousel shall have no obligation to indemnify the Buyers
Indemnitees for any Losses attributable to (A) the pending acquisitions
described on Schedule 4.24 hereto or (B) any inaccuracy of any
representation or warranty when made or deemed made by the Company in
any certificate, document or other instrument (other than this
Agreement and the schedules hereto and the certificate of the Company
to be delivered pursuant to Section 6.5 hereto) delivered by the
Company at the Closing in connection herewith.
11.2 INDEMNIFICATION PROCEDURES. (a) In the case of any claim
asserted by a third party against a party entitled to indemnification under this
Agreement (the "INDEMNIFIED PARTY"), notice shall be given by the Indemnified
Party to the Stockholders or the Company, as applicable, promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and the Indemnified Party shall permit the Stockholders or the Company,
as applicable (at the Stockholders' or the Company's expense, as applicable), to
assume the defense of any claim or any litigation resulting therefrom, provided
that (I) the counsel for the Stockholders or the Company, as applicable, who
shall conduct the defense of such claim or litigation shall be reasonably
satisfactory to the Indemnified Party, (II) the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and (III) the
omission by any Indemnified Party to give notice as provided herein shall not
relieve any Stockholder or the Company, as applicable, of such Stockholder's or
the Company's indemnification obligation under this Agreement except to the
extent that such omission results in a failure of actual notice to such
Stockholder or the Company, as applicable, and the Stockholder or the Company,
as applicable, is damaged as a result of such failure to give notice. Except
with the prior
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written consent of the Indemnified Party, the Stockholders, or the Company, as
applicable, in the defense of any such claim or litigation, shall not consent to
entry of any judgment or order, interim or otherwise, or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such Indemnified Party of a release
from all liability with respect to such claim or litigation. In the event that
the Indemnified Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Stockholders or the Company, as applicable,
might be expected to affect adversely the Indemnified Party's tax liability or
the ability of the Company or any of the Subsidiaries to conduct its business,
or that the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Stockholders in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right to take over and
assume control over the defense, settlement, negotiations or litigation relating
to any such claim at the sole cost of the Stockholders or the Company, as
applicable, provided that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Stockholders, or the Company, as applicable, such
consent not to be unreasonably withheld. In the event that the Stockholders or
the Company, as applicable, do not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. Notwithstanding the foregoing, the Stockholders or the
Company, as applicable, shall still provide indemnification to the Indemnified
Party. In any event, the Stockholders or the Company, as applicable, and the
Indemnified Party shall cooperate in the defense of any claim or litigation
subject to this Section 11.2(a) and the relevant records of each shall be
available to the other with respect to such defense.
(b) In case any event shall occur which would otherwise
entitle any party to assert any claim for indemnification hereunder, no Loss
shall be deemed to have been sustained by such party to the extent of any
proceeds received by such party from any insurance policies with respect
thereto, net of any increase in premiums or other costs associated with such
insurance recovery.
11.3 CLAIMS TERMINATION DATE. All claims for indemnification
under this Agreement must be asserted on or prior to the Claims Termination Date
EXCEPT that claims for indemnification with respect to covenants of the parties
to this Agreement and the agreements contemplated hereby and claims for
indemnification with respect to the representations and warranties contained in
Sections 3A.2, 3A.5, 4.1, 4.2, 4.3, 4.20 and 4.21 may be made at any time before
or after the Claims Termination Date (subject to any applicable statutes of
limitations); provided that with respect to Carousel and any liability of
Carousel hereunder (other than under Section 11.4), the representations and
warranties contained in Sections 4.20 and 4.21 shall survive only through the
Claims Termination Date.
54
<PAGE>
11.4 EXCLUSIVE REMEDY. The indemnification provisions of this
Article XI shall be the sole and exclusive remedy of the Buyers Indemnitees with
respect to any Loss under this Agreement except for any action for fraud against
any party committing such fraud or any other party to this Agreement with actual
knowledge of such fraud at any time on or prior to the Closing.
11.5 NO CONTRIBUTION. Each of the Stockholders and the Company
hereby waives any right of contribution it may have with respect to its
obligations under this Article XI.
11.6 FORM OF CONSIDERATION. Each Stockholder shall use good
faith efforts to satisfy its indemnification obligations to the Buyers
Indemnitees hereunder in cash; PROVIDED, HOWEVER, that if any Stockholder (other
than Carousel) is unable to satisfy such obligation in cash, such Stockholder
may satisfy such obligation by delivery of a number of shares of Class A Common
Stock or Class B Common Stock equal to the amount of such obligation divided by
$262.33.
ARTICLE XII
TERMINATION RIGHTS
12.1 TERMINATION. (a) This Agreement may be terminated by
either THL or Kelso, on the one hand, or the Company, on the other hand, if the
party seeking to terminate is not in material default or breach of this
Agreement, upon written notice to the other upon the occurrence of any of the
following:
(i) by either THL, Kelso or the Company:
(A) if the Closing has not occurred by February 29,
2000; PROVIDED that in the event the Closing has not occurred
by February 29, 2000 solely as a result of the failure to
receive any Governmental Approval required for the lawful
consummation of the transactions contemplated by this
Agreement without any condition adverse in any material
respect to the Buyers, the Company or any of the Subsidiaries,
any party hereto may extend such termination date to a date no
later than March 31, 2000;
(B) if there shall be in effect any final judgment,
final decree or order that would prevent or make unlawful the
Closing; or
(C) if any event shall occur or exist that otherwise
shall have made it impossible to satisfy a condition precedent
to the terminating
55
<PAGE>
party's obligations to consummate the transactions
contemplated by this Agreement, unless the occurrence or
existence of such event shall be due to the failure of such
party to perform or comply with any of the agreements,
covenants or conditions hereof to be performed or complied
with by such party prior to the Closing.
(ii) by either THL or Kelso if the Company is in material
breach of any representation, warranty, covenant or agreement contained in this
Agreement and such breach is not cured within 10 Business Days of written notice
of such breach.
(iii) by the Company or Carousel if the Buyers are in material
breach of any representation, warranty, covenant or agreement contained in this
Agreement and such breach is not cured within 10 Business Days of written notice
of such breach.
(b) This Agreement may be terminated by the written agreement
of the parties hereto.
12.2 LIABILITY. The termination of this Agreement under
Section 12.1(a) hereof shall not relieve any party of any liability under or for
breach of this Agreement prior to the date of termination. No Selling
Stockholder shall have any liability under this Agreement if the transactions
contemplated hereby do not close unless the failure to close results from such
Selling Stockholder's breach of this Agreement.
ARTICLE XIII
OTHER PROVISIONS
13.1 PUBLICITY. Except as required by Applicable Law or with
the other parties' express prior written consent, no party to this Agreement nor
any Affiliate of any party shall issue any press release or make any public
statement (oral or written) regarding this Agreement or the transactions
contemplated by this Agreement.
13.2 COMPLIANCE WITH HSRA. The Company and the Buyers shall
make or cause to be made in a timely fashion all filings which are required in
connection with the transactions contemplated hereby under the HSRA, and shall
furnish to the other party all information that the other reasonably requests in
connection with such filings.
13.3 BENEFIT AND ASSIGNMENT. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, successors and assigns. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
the other parties hereto, and any purported assignment or other transfer without
such consent shall be void and unenforceable; PROVIDED, that each of the Buyers
may assign this Agreement to any
56
<PAGE>
Affiliate of such Buyer, or to any lender to such Buyer or Affiliate thereof as
security for obligations to such lender, and PROVIDED, FURTHER, that no
assignment to any such Affiliate or lender shall in any way affect any party's
obligations or liabilities under this Agreement.
13.4 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Sections 11.1 and 13.3 hereof, nothing in this Agreement shall confer any rights
upon any Person other than the parties hereto and their respective heirs,
successors and permitted assigns.
13.5 ENTIRE AGREEMENT. This Agreement, the Stockholders'
Agreement, the Registration Rights Agreement, the Investor Management Services
Agreements and the Exhibits and Schedules hereto embody the entire agreement and
understanding of the parties hereto and supersede any and all prior agreements,
arrangements and understandings relating to the matters provided for herein,
including that certain Term Sheet delivered to the Company by THL Fund IV. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement of any
amendment, waiver or consent is sought.
13.6 WAIVER. At any time prior to the Closing Date, the
parties hereto may (I) extend the time for performance of any obligations or
other acts of the other parties hereto, (II) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (III) waive any compliance with any of the agreements or
conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
13.7 HEADINGS. The headings set forth in this Agreement are
for convenience only and will not control or affect the meaning or construction
of the provisions of this Agreement.
13.8 SEVERABILITY. If any provision, including any phrase,
sentence, clause, section or subsection, of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative, or unenforceable to any extent
whatsoever.
13.9 ARBITRATION. Any dispute or difference between the
parties hereto relating to the interpretation of this Agreement shall be finally
settled by arbitration conducted exclusively in New York, New York before an
arbitral tribunal of three arbitrators, one selected by the Buyers, one selected
by the Company, and the third by the Persons so selected, all in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. If either the Buyers or the Company fail
57
<PAGE>
to choose an arbitrator within 30 days after notice of commencement of
arbitration, or if the two arbitrators fail to choose a third arbitrator within
30 days after their appointment, the American Arbitration Association shall,
upon request of either the Buyers or the Company, appoint the arbitrator or
arbitrators to constitute or complete the arbitral tribunal, as the case may be.
Arbitration proceedings hereunder may be initiated by the Buyers or the Company
by making a written request to the American Arbitration Association, together
with any appropriate filing fee, at the office of the American Arbitration
Association in New York, New York. Any order or determination of the arbitral
tribune shall be final and binding upon the parties to the arbitration. The
parties hereto hereby consent to the in personam jurisdiction of the courts of
the State of New York for purposes of confirming any award and entering judgment
thereon.
13.10 CHOICE OF LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws, and the state and federal courts of New
York shall have exclusive jurisdiction over any controversy or claim arising out
of or relating to this Agreement.
13.11 NOTICES. All notices, requests, demands, letters,
waivers and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if (A)
delivered personally, (B) mailed, certified or registered mail with postage
prepaid, (C) sent by next-day or overnight mail or delivery or (D) sent by fax,
as follows:
To the Company:
521 East Morehead Street, Suite 250
Charlotte, North Carolina 28202
Attention: Mr. Walter E. Leach, Jr.
Phone: (704) 344-8150
Fax: (704) 344-8121
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Phone: (212) 318-6034
Fax: (212) 319-4090
To THL:
Thomas H. Lee Partners, L.P.
58
<PAGE>
75 State Street
Boston, Massachusetts 02109
Attention: Anthony J. DiNovi
Kent R. Weldon
Phone: (617) 227-1050
Fax: (617) 227-3514
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, P.C.
Phone: (312) 861-2000
Fax: (312) 861-2200
To Kelso:
Kelso & Company
320 Park Avenue, 24th Floor
New York, New York 10022
Attention: James J. Connors, II, Esq.
Phone: (212) 751-3939
Fax: (212) 223-2379
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Margaret A. Davenport, Esq.
Phone: (212) 909-6667
Fax: (212) 909-6836
To Carousel:
Carousel Capital Partners, L.P.
201 North Tryon Street
Suite 2450
Charlotte, North Carolina 28202
Attention: Nelson Schwab III
Phone: (704) 372-2040
Fax: (704) 372-1040
With a copy to:
59
<PAGE>
Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202
Attention: Stephen K. Rhyne, Esq.
Phone: (704) 331-7441
Fax: (704) 331-7598
To the other Selling Stockholders:
c/o MJD Communications, Inc.
521 East Morehead Street, Suite 250
Charlotte, North Carolina 28202
Attention: Mr. Walter E. Leach, Jr.
Phone: (704) 344-8150
Fax: (704) 344-8121
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Phone: (212) 318-6034
Fax: (212) 319-4090
or to such other person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(W) if by personal delivery on the day after such delivery, (X) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (Y) if
by next-day or overnight mail or delivery, on the day delivered or (Z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified or registered mail.
13.12 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
13.13 FURTHER ASSURANCES. The Company shall at any time and
from time to time after the Closing execute and deliver to the Buyers such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably be requested by the
Buyers, to confirm and assure the rights and obligations provided for in this
Agreement and render effective the consummation of the
60
<PAGE>
transactions contemplated hereby, or otherwise to carry out the intent and
purposes of this Agreement.
13.14 PAYMENTS. Each Founder and Management Stockholder hereby
acknowledges that such Founder and Management Stockholder is solely and
personally liable for any and all applicable Taxes of whatever nature that may
be imposed with respect to the payments made to such Founder or Management
Stockholder hereunder or under the Existing Stockholders' Agreement or in
connection with the transactions contemplated hereby or thereby and covenants
that such Founder or Management Stockholder shall timely pay any and all such
Taxes due with respect thereto. Each Founder and Management Stockholder agrees
to indemnify and hold harmless the Company, Kelso, THL and Carousel from and
against any Loss, claim, charge, liability, penalty, interest or other damages
arising from, or attributable or related to, any such Taxes arising from, or
attributable or related to, the payments made to the Founder or the Management
Stockholder hereunder or under the Existing Stockholders' Agreement or in
connection with the transactions contemplated hereby or thereby.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
MJD COMMUNICATIONS, INC.
By: /s/ Walter E. Leach, Jr.
-----------------------------------
Name: Walter E. Leach, Jr.
Title: Sr. V.P. & CFO
THOMAS H. LEE EQUITY
FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ Anthony J. DiNovi
-----------------------------------
Name:
Title:
KELSO INVESTMENT ASSOCIATES V,
L.P.
By: Kelso Partners V, L.P., its general
partner
By: /s/ George E. Matelich
-----------------------------------
Name: George E. Matelich
Title: General Partner
KELSO EQUITY PARTNERS V, L.P.
By: /s/ George E. Matelich
-----------------------------------
Name: George E. Matelich
Title: General Partner
[Signature Page to Stock Purchase Agreement]
<PAGE>
THOMAS H. LEE FOREIGN FUND IV,
L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ Anthony J. DiNovi
-----------------------------------
Name:
Title:
THOMAS H. LEE FOREIGN FUND IV-B,
L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: /s/ Anthony J. DiNovi
-----------------------------------
Name:
Title:
1987 THOMAS H. LEE NOMINEE
TRUST
By: /s/ Thomas H. Lee
-----------------------------------
Trustee
/s/ David V. Harkins
--------------------------------------
David V. Harkins
THE HARKINS 1995 GIFT TRUST
By: /s/ Sheryll J. Harkins
-----------------------------------
Trustee
[Signature Page to Stock Purchase Agreement]
<PAGE>
/s/ Scott A. Schoen
--------------------------------------
Scott A. Schoen
/s/ C. Hunter Boll
--------------------------------------
C. Hunter Boll
/s/ Scott M. Sperling
--------------------------------------
Scott M. Sperling
/s/ Anthony J. DiNovi
--------------------------------------
Anthony J. DiNovi
/s/ Thomas M. Hagerty
--------------------------------------
Thomas M. Hagerty
/s/ Warren C. Smith, Jr.
--------------------------------------
Warren C. Smith, Jr.
/s/ Seth W. Lawry
--------------------------------------
Seth W. Lawry
/s/ Kent R. Weldon
--------------------------------------
Kent R. Weldon
/s/ Terrence M. Mullen
--------------------------------------
Terrence M. Mullen
/s/ Todd M. Abbrecht
--------------------------------------
Todd M. Abbrecht
/s/ Charles A. Brizius
--------------------------------------
Charles A. Brizius
/s/ Scott Jaeckel
--------------------------------------
Scott Jaeckel
/s/ Soren Oberg
--------------------------------------
Soren Oberg
/s/ Thomas R. Shepherd
--------------------------------------
Thomas R. Shepherd
[Signature Page to Stock Purchase Agreement]
<PAGE>
/s/ Joseph J. Incandela
--------------------------------------
Joseph J. Incandela
/s/ Wendy L. Masler
--------------------------------------
Wendy L. Masler
/s/ Andrew D. Flaster
--------------------------------------
Andrew D. Flaster
ROBERT SCHIFF LEE 1988
IRREVOCABLE TRUST
By: /s/ Charles W. Robins
-----------------------------------
Trustee:
/s/ Stephen Zachary Lee
--------------------------------------
Stephen Zachary Lee
/s/ Charles W. Robins
--------------------------------------
Charles W. Robins as Custodian for Jesse
Lee
/s/ Charles W. Robins
--------------------------------------
Charles W. Robins as Custodian for
Nathan Lee
/s/ Charles W. Robins
--------------------------------------
Charles W. Robins
/s/ James Westra
--------------------------------------
James Westra
THOMAS H. LEE CHARITABLE
INVESTMENT L.P.
By: Thomas H. Lee,
its general partner
[Signature Page to Stock Purchase Agreement]
<PAGE>
By: /s/ Thomas H. Lee
-----------------------------------
Name:
Title:
THL-CCI INVESTORS LIMITED
PARTNERSHIP
By: THL Investment Management Corp.,
its general partner
By: /s/ Wendy L. Masler
-----------------------------------
Name:
Title:
PUTNAM INVESTMENTS, INC.
By: /s/ William H. Woolverton
-----------------------------------
Name:
Title:
THL EQUITY ADVISORS IV, LLC,
as Stockholder Representative
By: /s/ C. Hunter Boll
-----------------------------------
Name:
Title:
JED COMMUNICATIONS ASSOCIATES,
INC.
By: /s/ Daniel G. Bergstein
-----------------------------------
[Signature Page to Stock Purchase Agreement]
<PAGE>
Name: Daniel G. Bergstein
Title: President
/s/ Meyer Haberman
--------------------------------------
Meyer Haberman
/s/ Jack H. Thomas
--------------------------------------
Jack H. Thomas
/s/ Eugene B. Johnson
--------------------------------------
Eugene B. Johnson
/s/ John P. Duda
--------------------------------------
John P. Duda
/s/ Walter E. Leach, Jr.
--------------------------------------
Walter E. Leach, Jr.
UNIVERSITY OF NORTH CAROLINA
AT CHARLOTTE FOUNDATION, INC.
By: /s/ Olen B. Smith, Jr.
-----------------------------------
Name: Olen B. Smith, Jr.
Title: Treasurer
CAROUSEL CAPITAL PARTNERS, L.P.
By: Carousel Capital Company, L.L.C.,
its general partner
By: /s/ Nelson Schwab III
-----------------------------------
Name: Nelson Schwab III
Title: Managing Director
[Signature Page to Stock Purchase Agreement]
<PAGE>
SCHEDULE A
OTHER STOCKHOLDERS
Peter Nixon
Michael Stein
Lisa Hood
Pamela D. Clark
Patrick R. Eudy
Patrick L. Morse
Timothy W. Henry
Steve Davis
Larry Hunt
Ross Fritz
Jack Morfield
Bob Gniadek
Whit Edwards
Mike Harrington
Dana Twombly
Steve Yusko
Leon Frazier
Michael and Lindy Bergstein
Joel Bergstein
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE:
CONTACTS:
MJD COMMUNICATIONS, INC.
Timothy W. Henry
704-344-8150
[email protected]
KELSO & COMPANY
George E. Matelich
212-223-2379
THOMAS H. LEE PARTNERS, L.P.
Gregory Miller
212-626-6694
[email protected]
MJD COMMUNICATIONS, INC. ANNOUNCES INVESTMENT BY
THOMAS H. LEE PARTNERS AND KELSO & COMPANY
INTEGRATED COMMUNICATIONS PROVIDER ANNOUNCES
STRATEGIC RLEC ACQUISITIONS
CLEC SUBSIDIARY TOPS 39,000 ACCESS LINES
Charlotte, NC, January 3, 2000 - MJD Communications, Inc. ("MJD" or the
"Company"), a rapidly growing, nationwide integrated communications provider,
today announced that Thomas H. Lee Partners, L.P. ("THL") and Kelso & Company
("Kelso") have committed to collectively invest approximately $445 million in
the Company.
The investments will initially be a combination of nonvoting preferred and
common equity. Both securities will convert to voting common equity immediately
after all regulatory approvals are received. THL has committed to invest up to
approximately $375 million and Kelso, an existing equity investor in the
Company, will invest up to an additional $70 million. MJD will use the proceeds
to: (i) fund the acceleration of MJD's competitive local exchange carrier
("CLEC") strategy through its subsidiary, FairPoint Communications Corp.
("FairPoint"); (ii) fund pending rural local exchange carrier ("RLEC")
acquisitions; and (iii) purchase equity from certain existing shareholders.
<PAGE>
"We view this as a significant milestone in the Company's history. These
investments will allow MJD to accelerate its growth strategy and serve to
validate the Company's integrated communications business model," commented
Chairman and Chief Executive Officer Jack Thomas. "We are pleased that Kelso is
willing to commit additional equity to support our continued growth and that THL
has chosen to make such a substantial investment in MJD. We view both firms as
strong and supportive investors."
"We are very pleased to become a strategic investor in what we believe to be one
of the leading integrated communications providers to rural and ex-urban
markets," said Anthony J. DiNovi, a THL Managing Director. "We have entertained
numerous opportunities to invest in the telecommunications industry and believe
MJD has a superior business model and outstanding management team. We will be a
strong and supportive partner to the Company as MJD pursues an exciting growth
strategy."
"MJD has demonstrated its ability to successfully execute its rural local
exchange acquisition and its capital efficient competitive local exchange
carrier strategies," said George E. Matelich, a Managing Director at Kelso &
Company. "We believe MJD has considerable growth opportunities and the
additional investment will allow MJD to accelerate its ex-urban CLEC strategy."
Thomas H. Lee Partners, L.P. is a Boston-based private equity firm.
Kelso & Company is a New York-based private investment firm.
MJD recently acquired Orwell Telephone Company, which serves approximately 6,800
access lines in nine rural local exchanges located in northeastern and
northwestern Ohio. Orwell becomes the second RLEC acquired by MJD in Ohio in
1999. Also, MJD announced that it has recently entered into agreements to
purchase two strategically located RLEC properties. MJD signed a purchase
agreement to acquire TPG Communications, Inc. which owns GT Com, which serves
approximately 51,000 access lines primarily in the Florida Panhandle. In
addition, MJD has executed a purchase agreement to acquire Peoples Mutual
Telephone Company located in Gretna, Virginia, which serves approximately 7,800
access lines. With these two acquisitions, MJD establishes a significant
southeastern presence from which its CLEC subsidiary, FairPoint, is expected to
launch its business strategy into southeast ex-urban markets.
MJD is an integrated communications provider pursuing two parallel paths in the
rapidly growing voice and data communications marketplace. MJD expects to
continue its successful acquisition strategy by acquiring and operating RLECs.
With the announcement of the recent acquisitions, the Company will operate 26
RLECs located in 14 states providing service to over 214,000 access lines. In
addition, MJD's subsidiary, FairPoint Communications Corp., is executing a
competitive local exchange carrier strategy in targeted ex-urban markets. At the
end of December 1999, FairPoint was providing a full product offering of voice,
Internet and data communication services in 96 Tier IV markets to approximately
39,000 access lines.
<PAGE>
NOTE ON FORWARD LOOKING STATEMENTS: All statements, other than the statements of
historical facts disclosed, including statements regarding the company's future
financial position, business strategy, budget or projected costs, plans and
objectives for the management of future operations are forward-looking
statements. Although the company believes the expectations reflected in such
forward-looking statements are reasonable, they can give no assurance that such
expectations will prove to be correct. Important factors that could cause actual
results to differ materially from the company's expectations include without
limitation risks associated with acquisition, industry trends,
telecommunications regulations and changes in technology.
