UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
Brooks Fiber Properties, Inc.
(Name of Issuer)
Voting Common Stock, $.01 par value per share
(Title of Class of Securities)
114399 10 8
(CUSIP Number)
Harvey P. Perry
Senior Vice President, General Counsel, and Secretary
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71203
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
May 5, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box *.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of
the Act (however, see the Notes).
CUSIP No. 114399 10 8
1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Century Telephone Enterprises, Inc. 72-0651161
2) Check the Appropriate Box if a Member of a Group*
(a) _____
(b) _____
3) SEC Use Only
4) Source of Funds*
OO
5) Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) _____
6) Citizenship or Place of Organization
Louisiana
Number of 7) Sole Voting Power 4,336,226
Shares Bene-
ficially 8) Shared Voting Power 0
Owned by Each
Reporting 9) Sole Dispositive Power 4,336,226
Person
With 10) Shared Dispositive Power 0
11) Aggregate Amount Beneficially Owned by Each
Reporting Person 4,336,226
12) Check if the Aggregate Amount in Row (11)
Excludes Certain Shares* X
13) Percent of Class Represented by Amount
in Row (11) 11.5%
14) Type of Reporting Person* CO
*SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER
PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND
THE SIGNATURE ATTESTATION.
Item 1. Security and Issuer.
This statement relates to the voting common stock, $.01 par value
per share (the "Common Stock"), of Brooks Fiber Properties, Inc. (the
"Issuer"), a Delaware corporation. The address of the principal
executive offices of the Issuer is 425 Woods Mill Road South, Suite 300,
Town & Country, Missouri 63017.
Item 2. Identity and Background.
This statement is filed by Century Telephone Enterprises, Inc. (the
"Reporting Person"), a Louisiana corporation. The Reporting Person is a
regional diversified telecommunications company that is primarily engaged
in providing traditional local exchange telephone services and cellular
telephone communications services. The address of the Reporting Person's
principal office is 100 Century Park Drive, Monroe, Louisiana 71203.
(a), (b), and (c) Set forth below with respect to each of the
directors and executive officers of the Reporting Person is such person's
name, residence or business address, present principal occupation, and
the name, principal business, and address of any organization in which
such occupation is conducted.
<TABLE>
<CAPTION>
Name, Principal Business,
Present and Address
Residence of Principal Which Occupation
Name Business Address Occupation is Conducted
- - ------------------- ------------------------- -------------- -------------------------
<S> <C> <C> <C>
William R. Boles 1805 Tower Drive Lawyer Boles, Boles & Ryan
Monroe, Louisiana 71201 law firm
1805 Tower Drive
Monroe, Louisiana 71201
Virginia Boulet 400 Poydras Street Lawyer Phelps Dunbar, L.L.P.
New Orleans, Louisiana 70130 law firm
400 Poydras Street
New Orleans, Louisiana 70130
Ernest Butler, Jr. Stephens Building Senior Executive Stephens Inc.
111 Center Street Vice President investment banking firm
Little Rock, Arkansas 72201 Stephens Building
111 Center Street
Little Rock, Arkansas 72201
David D. Cole 100 Century Park Drive President-Mobile Century Telephone Enterpises, Inc.
Monroe, Louisiana 71203 Communications cellular and local telephone services
Group 100 Century Park Drive
Monroe, Louisiana 71203
Kenneth R. Cole 100 Century Park Drive President- Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 Telephone Group cellular and local telephone services
100 Century Park Drive
Monroe, Louisiana 71203
Calvin Czeschin Post Office Box 789 President and Yelcot Telephone Company
Mountain Home, Arkansas Chief Executive local telephone services
72653 Officer Post Office Box 789
Mountain Home, Arkansas 72653
R. Stewart Ewing, Jr. 100 Century Park Drive Senior Vice Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 President and cellular and local telephone services
Chief Financial 100 Century Park Drive
Officer Monroe, Louisiana 71203
James B. Gardner 8080 North Central Expressway Managing Director Service Asset Management Company
Suite 1010 financial services firm
Dallas, Texas 75206 8080 North Central Expressway
Suite 1010
Dallas, Texas 75206
W. Bruce Hanks 100 Century Park Drive Senior Vice Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 President- cellular and local telephone services
Corporate 100 Century Park Drive
Development and Monroe, Louisiana 71203
Strategy
R.L. Hargrove, Jr. 115 Shalimar Drive Financial and None
West Monroe, Louisiana 71291 Tax Consultant
Johnny Hebert Post Office Box 275 President Valley Electric
West Monroe, Louisiana 71294 electrical contractor
Post Office Box 275
West Monroe, Louisiana 71294
F. Earl Hogan Post Office Box 70 Managing Partner EDJ Farms Partnership
Oak Ridge, Louisiana 71264 farming enterprise
Post Office Box 70
Oak Ridge, Louisiana 71264
C.G. Melville, Jr. 3607 1/2 Napoleon Avenue Private Investor None
New Orleans, Louisiana 70125
Harvey P. Perry 100 Century Park Drive Senior Vice Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 President, cellular and local telephone servicess
General Counsel, 100 Century Park Drive
and Secretary Monroe, Louisiana 71203
Glen F. Post, III 100 Century Park Drive Vice Chairman Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 of the Board, cellular and local telephone services
President, and 100 Century Park Drive
Chief Executive Monroe, Louisiana 71203
Officer
Jim D. Reppond Post Office Box 9 Retired None
Salem, Arkansas 72576
Clarke M. Williams 100 Century Park Drive Chairman of the Century Telephone Enterprises, Inc.
Monroe, Louisiana 71203 Board cellular and local telephone services
100 Century Park Drive
Monroe, Louisiana 71203
</TABLE>
(d) Neither the Reporting Person nor, to the best of the Reporting
Person's knowledge, any director or executive officer of the Reporting
Person has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) during the past five years.
(e) Neither the Reporting Person nor, to the best of the Reporting
Person's knowledge, any director or executive officer of the Reporting
Person has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws during the past five years.
(f) Each of the directors and executive officers of the Reporting
Person is a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration.
All 4,336,226 shares of Common Stock beneficially owned by the
Reporting Person were acquired pursuant to the Agreement and Plan of
Merger (the "Merger Agreement") dated as of April 1, 1997, by and among
the Issuer, the Reporting Person, Brooks Fiber Communications of Texas,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Issuer
("Sub"), and Metro Access Networks, Inc. ("Metro"), a Delaware
corporation, a majority of the $.10 par value per share common stock
("Metro Common Stock") of which was owned by the Reporting Person. In
accordance with the terms of the Merger Agreement, on May 5, 1997, Sub
was merged with and into Metro and, in connection therewith, all 3,063
shares of Metro Common Stock owned by the Reporting Person were converted
into 4,336,226 shares of Common Stock. No part of the consideration for
such shares of Common Stock was represented by funds loaned by a bank or
amounts borrowed or otherwise obtained for the purpose of acquiring such
Common Stock.
To the best of the Reporting Person's knowledge, none of the
directors or executive officers of the Reporting Person own any Common
Stock except for Harvey P. Perry, who acquired 500 shares of Common Stock
with personal funds, none of which were loaned by a bank or borrowed or
otherwise obtained for the purpose of acquiring such Common Stock. The
Reporting Person disclaims beneficial ownership of the 500 shares of
Common Stock held by Mr. Perry.
Item 4. Purpose of Transaction.
The Reporting Person acquired 4,336,226 shares of Common Stock for
investment purposes pursuant to the provisions of the Merger Agreement.
Metro owns and operates and has under construction fiber optic
telecommunications networks in several Texas metropolitan areas and has
made arrangements for the provision of full local exchange switched
services in such areas. The boards of directors of Sub and Metro
determined that it was in the best interests of their respective
stockholders to consummate a business combination transaction in which
(i) Sub would merge with and into Metro (the "Merger"), (ii) each
outstanding share of common stock of Sub would be converted into one
share of common stock of the surviving corporation (the "Surviving
Corporation"), (iii) each outstanding share of Metro Common Stock would
be converted into a certain number of shares of Common Stock as
determined in accordance with the terms of the Merger Agreement (subject
to certain exceptions not applicable to the Reporting Person), and (iv)
the name of the Surviving Corporation would be amended to be Brooks Fiber
Communications of Texas, Inc. The result of such business combination
was that, in effect, the Issuer acquired Metro from Century and the other
owners of Metro in exchange for the above-described consideration.
The Reporting Person is obligated under the Merger Agreement to
indemnify the Issuer and the Surviving Corporation for certain losses
that may arise in connection with the Merger if the aggregate amount of
such losses exceeds $250,000. All such losses that in the aggregate
amount are equal to 4% or less of the "Merger Consideration" (as that
term is defined in the Merger Agreement) must be paid by the Reporting
Person in shares of Common Stock valued at $20.60 for each such share.
After the Reporting Person has indemnified the Issuer for such losses in
an amount equal to 4% of the "Merger Consideration," the Reporting Person
will have the option to pay for any additional indemnifiable losses in
either cash or shares of Common Stock valued at $20.60 for each such
share. All indemnifiable losses are computed net of any recovery of
insurance proceeds. Claims for such indemnification must be made within
certain time limitations. The Reporting Person will not be liable for
any such losses in an amount greater than the aggregate value of the
4,336,226 shares of Common Stock it acquired in the Merger, determined at
$20.60 for each such share.
Upon the consummation of the Merger, the Reporting Person and the
Issuer entered into an Affiliate Agreement (the "Affiliate Agreement")
dated as of May 5, 1997, pursuant to which the Issuer agreed to maintain
its Registration Statement No. 333-21223 on Form S-4 (the "Registration
Statement") filed with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "1933 Act") effective for resales
of the Common Stock acquired in the Merger by the Reporting Person for a
period of five years following the Merger. The Issuer also agreed to use
its best efforts to register or qualify resales of Common Stock by the
Reporting Person under the securities laws of such jurisdictions as the
Reporting Person may reasonably request. If, however, the Reporting
Person's ownership of Common Stock should fall below 5% of the
outstanding Common Stock during the five-year period, the Issuer's
obligation with respect to maintaining the effectiveness of the
Registration Statement would cease unless and to the extent that the
volume limitations of Rule 145 promulgated by the SEC under the 1933 Act
would continue to be applicable to resales of Common Stock by the
Reporting Person. In the event that a material change or development
should occur that would require an amendment or supplement to the
Registration Statement, the Reporting Person will suspend any resales of
Common Stock for the period specified in the Affiliate Agreement. The
Reporting Person also agreed that, in the event that it is afforded an
opportunity to participate in an underwritten public offering of Issuer
equity securities when it owns more than 1% of the outstanding Common
Stock, it will not, without the prior written consent of the Issuer and
the managing underwriters thereof, effect any public sale or distribution
of Common Stock, other than in connection with such offering, during the
period commencing seven days prior to the effective date of such offering
and ending on a date between ninety and one hundred and eighty days after
the effective date of such offering as selected by the managing
underwriters thereof.
In connection with the Merger Agreement, the Reporting Person and
the Issuer also entered into a Stockholder Agreement (the "Stockholder
Agreement") dated as of April 1, 1997, to establish certain terms and
conditions concerning the acquisition and disposition of Issuer
securities after the Merger by the Reporting Person and the corporate
governance of the Issuer after the Merger. Pursuant to the requirements
of the Stockholder Agreement, the board of directors (the "Board of
Directors") of the Issuer created two vacancies in the Board of Directors
and elected two designees of the Reporting Person to fill the two
vacancies and to serve until the end of their respective terms. The
Reporting Person's designees are Glen F. Post, III and W. Bruce Hanks,
who are also directors and executive officers of the Reporting Person.
In accordance with the provisions of the Stockholder Agreement, one of
the nominees, Mr. Post, was designated as Vice Chairman of the Board of
Directors. The Issuer agreed that, in connection with each meeting of
the Issuer's stockholders at which the term of any director designated by
the Reporting Person expires, its Board of Directors will nominate for
election as a director of the Issuer a designee of the Reporting Person
to stand for election for a succeeding term and will vote all management
proxies in favor of such nominee, except for such proxies as specifically
indicated to the contrary. The Issuer will also recommend its
stockholders to vote in favor of such nominees and will use reasonable
efforts to solicit from its stockholders proxies voted in favor of such
nominees. If any director designated by the Reporting Person should
decline or be unable to serve for any reason, or if such director resigns
or is removed, the Board of Directors will promptly upon the request of
the Reporting Person nominate or elect a new qualified person recommended
by the Reporting Person to replace such designee.
The Reporting Person will cease to have the right under the
Stockholder Agreement to designate or cause the nomination or election of
any member of the Board of Directors when the Reporting Person and its
affiliates beneficially own outstanding voting securities of the Issuer
and any Issuer securities convertible or exchangeable into its voting
securities that represent less than 5% of the voting power of all
outstanding voting securities of the Issuer. Until such time as the
Reporting Person and its affiliates beneficially own outstanding voting
securities of the Issuer representing less than 5% of the voting power of
all outstanding voting securities of the Issuer, the Reporting Person has
agreed that it and its affiliates will vote the voting securities of the
Issuer held by them for the nominees recommended by the Board of
Directors, provided such nominees include the Reporting Person's
nominees. The Reporting Person and its affiliates will cause the
directors designated by the Reporting Person to resign from the Board of
Directors at such time as the Reporting Person and its affiliates
beneficially own less than 5% of the voting power of all outstanding
voting securities of the Issuer. If, however, the Reporting Person's
percentage of the voting power of all outstanding voting securities of
the Issuer is reduced below 5% as the result of an issuance of
outstanding voting securities by the Issuer, the Reporting Person will be
afforded ninety days to purchase a sufficient amount of additional voting
securities of the Issuer necessary to maintain its level of
representation on the Board of Directors.
The Issuer has the obligation under the Stockholder Agreement to
take all necessary action to insure at all time that its certificate of
incorporation and by-laws are not at any time inconsistent with the
provisions of the Stockholder Agreement. The Issuer agreed that, except
as required by applicable law, rule, or regulation or the Merger
Agreement, it will not approve or recommend to its stockholders any
transaction or approve, recommend, or take any other action that would
impose limitations on the legal rights of the Reporting Person or its
affiliates as stockholders of the Issuer to designate directors pursuant
to the Stockholder Agreement, otherwise materially adversely discriminate
against the Reporting Person or its affiliates as stockholders of the
Issuer, or restrict the right of any director designated by the Reporting
Person to vote on any matter as such director believes appropriate in
accordance with such designee's fiduciary duties as a director of the
Issuer.
In accordance with the provisions of the Stockholder Agreement,
neither the Reporting Person nor any of its affiliates may acquire
beneficial ownership of any Issuer equity securities that would cause
their ownership of the voting power of all outstanding voting securities
of the Issuer to exceed 15% thereof without the prior consent of the
Board of Directors except (i) in the event that the Issuer receives a
bona fide offer from a third party to acquire in excess of 50% of the
Issuer's outstanding voting securities, in which event such restriction
would be temporarily waived to permit the Reporting Person, if it so
desired, to make one or more offers to increase its ownership of the
outstanding voting securities of the Issuer on the same basis as such
third party offer and (ii) in the event that the Reporting Person
exercises its right to sell its membership interests in Michigan Fiber
Communications L.L.C., a Delaware limited liability company, pursuant to
the provisions of the Limited Liability Company Agreement (the "Limited
Liability Company Agreement") entered into between the Reporting Person
and a subsidiary of the Issuer, such restriction would be waived by the
Issuer if necessary to permit the Reporting Person to receive payment of
the purchase price therefor from the Issuer in shares of Common Stock.
(The Reporting Person hereby agrees to furnish supplementally to the
Securities and Exchange Commission upon request a copy of the Limited
Liability Company Agreement, pursuant to which the parties thereto may
contribute cash or assets to construct and to operate jointly local
telecommunications networks within the State of Michigan.) The Reporting
Person also agreed that, for as long as one or more of its nominees is a
director of the Issuer, neither it nor any of its affiliates will, and
they will not assist or encourage other persons to directly or indirectly
(i) acquire ownership of any substantial portion of the assets or equity
securities of the Issuer, (ii) engage in any solicitation of proxies or
form, join, or in any way participate in a "group" (as defined under the
Securities Exchange Act of 1934) with respect to equity securities of the
Issuer, or (iii) subject to the obligation of its designees on the Board
of Directors to exercise their fiduciary duties as directors, otherwise
seek or propose to acquire control of the Board of Directors.
Except as described above in this Item 4, there are no plans or
proposals that the Reporting Person has or, to the best of its knowledge,
that the directors and executive officers of the Reporting Person have
that relate to or would result in (a) the acquisition of additional
securities of the Issuer or the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries; (c) a sale or transfer of a material amount of assets of
the Issuer or any of its subsidiaries; (d) any change in the present
Board of Directors or management of the Issuer; (e) any material change
in the present capitalization or dividend policy of the Issuer; (f) any
other material change in the Issuer's business or corporate structure;
(g) changes in the Issuer's certificate of incorporation, by-laws, or
other instruments corresponding thereto or other actions that may impede
the acquisition of control of the Issuer by any person; (h) causing a
class of securities of the Issuer to cease to be authorized to be quoted
on the Nasdaq inter-dealer quotation system; (i) a class of equity
securities of the Issuer becoming eligible for termination of
registration under the Securities Exchange Act of 1934; or (j) any action
similar to any of the matters enumerated above. The Reporting Person
intends, however, to review continuously all aspects of its investment in
the Issuer, including the Issuer's business, operations, financial
results and condition and prospects, the market price of the Common
Stock, conditions in the securities markets generally, and general
economic and industry conditions. The Reporting Person reserves the
right, in light of its continuing review of these factors and in
accordance with and subject to its rights and its obligations under the
Merger Agreement, the Affiliate Agreement, and the Stockholder Agreement,
to acquire additional shares of Common Stock, to dispose of any or all of
the shares of Common Stock it currently holds, or otherwise to change its
intention with respect to any or all of the matters referred to in this
Item 4. Thus, based on its continuing review of its investment in the
Issuer, the Reporting Person may formulate a plan or proposal relating to
one or more of the matters enumerated above. In addition, in the course
of performing their duties as directors of the Issuer, Messrs. Post and
Hanks may discuss one or more of the matters enumerated above with other
directors of the Issuer or the Issuer's management or may formulate a
plan or proposal relating to one or more of the matters enumerated above.
The foregoing descriptions of the Merger Agreement, the Affiliate
Agreement and the Stockholder Agreement are qualified in their entirety
by reference to such agreements, each of which is filed as an exhibit
hereto and is hereby incorporated into this Item 4.
Item 5. Interest in Securities of the Issuer.
(a) As of the date hereof, the Reporting Person beneficially owned
4,336,226 shares of Common Stock, which is 11.5% of the outstanding
shares of Common Stock. To the best of the Reporting Person's knowledge,
as of the date hereof no director or executive officer of the Reporting
Person beneficially owned any Common Stock, except Harvey P. Perry, who
beneficially owned 500 shares of Common Stock, which is substantially
less than 1% of the outstanding shares of Common Stock. The Reporting
Person disclaims beneficial ownership of the shares of Common Stock
beneficially owned by Mr. Perry.
(b) The Reporting Person has the sole power to vote or to direct
the vote and the sole power to dispose or to direct the disposition of
all 4,336,226 shares of Common Stock referred to in Item 5(a) as being
beneficially owned by it, subject to its obligations under the
Stockholder Agreement with respect to voting shares of Common Stock,
which are summarized in Item 4 hereof. To the best of the Reporting
Person's knowledge, Mr. Perry has the sole power to vote or to direct the
vote and the sole power to dispose or direct the disposition of all 500
shares of Common Stock referred to in Item 5(a) as being beneficially
owned by him.
(c) The Reporting Person has not engaged in any transactions
involving Common Stock during the past sixty days other than the
acquisition by the Reporting Person of 4,336,226 shares of Common Stock
upon the conversion of its 3,063 shares of Metro Common Stock as a result
of the Merger, which was consummated effective May 5, 1997. To the best
of the Reporting Person's knowledge, no director or executive officer of
the Reporting Person has engaged in any transactions in Common Stock
during the past sixty days.
(d) No other person is known to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the
sale of, the 4,336,226 shares of Common Stock referred to in Item 5(a) as
being beneficially owned by the Reporting Person. No other person is
known to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the 500 shares of
Common Stock referred to in Item 5(a) as being beneficially owned by
Harvey P. Perry.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
The answer to Item 4 of this Schedule 13D is incorporated by
reference in response to this Item 6.
Item 7. Material to be Filed as Exhibits.
2.1 Agreement and Plan of Merger dated as of April 1, 1997, by and
among the Issuer, Sub, the Reporting Person, and Metro. The Reporting
Person hereby agrees to furnish supplementally to the Securities and
Exchange Commission upon request copies of the schedules and exhibits to
such Agreement and Plan of Merger, which have been omitted from this
filing.
2.2 Affiliate Agreement dated as of May 5, 1997, between the Issuer
and the Reporting Person.
2.3 Stockholder Agreement dated as of April 1, 1997, between the
Issuer and the Reporting Person.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true,
complete and correct.
CENTURY TELEPHONE ENTERPRISES, INC.
May 15, 1997 By: /s/ Glen F. Post, III
------------------ ------------------------------------
Date Glen F. Post, III
Vice Chairman of the Board,
President, and Chief
Executive Officer
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
- - ------ ---------------------- -------------
2.1 Agreement and Plan of Merger made as of April 1, 1997,
by and among Brooks Fiber Properties, Inc. (the
"Issuer"), Brooks Fiber Communications of Texas Inc.,
Century Telephone Enterprises, Inc. (the "Reporting
Person"), and Metro Access Networks, Inc.
2.2 Affiliate Agreement dated as of May 5, 1997, between
the Issuer and the Reporting Person
2.3 Stockholder Agreement dated as of April 1, 1997, between
the Issuer and the Reporting Person
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 1, 1997
BETWEEN
BROOKS FIBER PROPERTIES, INC.,
BROOKS FIBER COMMUNICATIONS OF TEXAS, INC.,
CENTURY TELEPHONE ENTERPRISES, INC.
AND
METRO ACCESS NETWORKS, INC.
____________
ACQUISITION
OF
METRO ACCESS NETWORKS, INC.
BY
BROOKS FIBER PROPERTIES, INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
ARTICLE I - THE MERGER AND RELATED TRANSACTIONS..........................1
1.01 The Merger......................................................1
1.02 The Closing; Effective Time.....................................1
1.03 Effect of the Merger............................................2
1.04 Certificate of Incorporation and Bylaws of the
Surviving Corporation.........................................2
1.05 Officers and Directors of the Surviving Corporation.............2
1.06 Name of the Surviving Corporation...............................3
1.07 Management Agreement............................................3
1.08 Agreements with Shareholders, Option Holders and
SAR Holders...................................................3
1.09 Employment of Metro Personnel...................................4
1.10 Most Favored Pricing............................................4
1.11 Additional Borrowings...........................................5
1.12 Assumed Name....................................................5
1.13 Supplemental Payment............................................5
ARTICLE II - CONVERSION OF SECURITIES.....................................5
2.01 Conversion of Securities........................................5
2.02 Exchange of Certificates........................................7
2.03 Merger Consideration............................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER....................8
3.01 Existence and Qualification.....................................8
3.02 Ownership of Shares.............................................9
3.03 Capitalization of Metro.........................................9
3.04 Approval of Agreement...........................................9
3.05 Books and Records..............................................10
3.06 Financial Statements...........................................10
3.07 Events Subsequent to December 31, 1996.........................10
3.08 Work in Progress...............................................10
3.09 Accounts and Notes Receivable..................................10
3.10 No Undisclosed Liabilities.....................................11
3.11 Tax Returns and Audit..........................................11
3.12 Contracts and Other Obligations................................12
3.13 Real Property - Owned..........................................12
3.14 Personal Property - Owned......................................12
3.15 Real and Personal Property - Leased by Metro...................12
3.16 Real and Personal Property - Leased to Metro...................13
3.17 Patents, Trademarks and Copyrights.............................13
3.18 Other Intangible or Intellectual Property......................14
3.19 Necessary Property.............................................14
3.20 Description of Networks; Use and Condition of
Property, Plant and Equipment................................14
3.21 Licenses, Rights of Way and Permits............................15
3.22 Contracts and Commitments......................................16
3.23 Business Relationships.........................................17
<PAGE>
3.24 No Breach of Law or Governing Documents........................17
3.25 Litigation and Arbitration.....................................17
3.26 Employees and Consultants......................................18
3.27 Indebtedness to and from Shareholders and Others...............18
3.28 Outside Financial Interests....................................18
3.29 Payments, Compensation and Perquisites of Agents,
Consultants and Others.......................................18
3.30 Labor Agreements, Employee Benefit Plans, and
Employment Agreements........................................18
3.31 ERISA..........................................................19
3.32 Terminated Plans...............................................19
3.33 Overtime, Back Wages, Vacation and Minimum Wages...............20
3.34 Discrimination and Occupational Safety and Health..............20
3.35 Alien Employment Eligibility...................................20
3.36 Labor Disputes; Unfair Labor Practices.........................20
3.37 Insurance Policies.............................................20
3.38 Environmental Matters..........................................21
3.39 Broker's Fees..................................................21
3.40 Foreign Assets.................................................21
3.42 Truthfulness...................................................21
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB.............21
4.01 Corporate Existence............................................22
4.02 Approval of Agreement..........................................22
4.03 Outstanding Shares of Capital Stock............................22
4.04 Authorization and Issuance of Shares...........................22
4.05 Books and Records..............................................23
4.06 Financial Statements...........................................23
4.07 Events Subsequent to December 31, 1996.........................23
4.08 No Undisclosed Liabilities.....................................24
4.09 No Breach of Law or Governing Documents........................24
4.10 Litigation and Arbitration.....................................24
4.11 Tax Returns and Audit..........................................24
4.12 Licenses, Rights of Way and Permits............................24
4.13 Business Relationships.........................................25
4.14 Environmental Matters..........................................25
4.15 Broker's Fees..................................................25
4.16 Buyer's SEC Reports............................................25
4.17 Truthfulness...................................................26
ARTICLE V - COVENANTS OF SELLER..........................................26
5.01 Operation of the Business......................................26
5.02 Preservation of Business.......................................27
5.03 Insurance and Maintenance of Property..........................28
5.04 Full Access....................................................28
5.05 Books, Records and Financial Statements........................28
5.06 Other Governmental Filings.....................................28
5.07 Third Party Offers and Negotiations............................28
5.08 Employees of the Companies.....................................28
5.09 Tax Matters....................................................29
5.10 Notification of Certain Matters................................30
<PAGE>
ARTICLE VI - COVENANTS OF BUYER..........................................30
6.01 Operation of the Business......................................31
6.02 Preservation of Business.......................................32
6.03 Insurance and Maintenance of Property..........................32
6.04 Full Access....................................................32
6.05 Books, Records and Financial Statements........................32
6.06 Other Governmental Filings.....................................32
6.07 Notification of Certain Matters................................33
ARTICLE VII - COVENANTS NOT TO COMPETE...................................33
ARTICLE VIII - CONDITIONS TO OBLIGATIONS OF BUYER AND SUB TO
EFFECT THE MERGER......................................................35
8.01 Representations and Warranties of Seller.......................35
8.02 Performance of this Agreement..................................35
8.03 Certificate of Seller..........................................35
8.04 Opinion of Counsel.............................................35
8.05 No Prohibitions................................................35
8.06 Consents.......................................................35
8.07 Compliance With Applicable Law.................................35
8.08 Resignations...................................................36
8.09 Books and Records..............................................36
8.10 Tax Status.....................................................36
8.11 Joint Venture Agreement........................................36
8.12 Master Service Agreement.......................................36
8.13 Miscellaneous Services Agreement...............................36
8.14 Agreements with Shareholders, Option Holders and
SAR Holders..................................................37
8.12 Shareholder Approval...........................................37
8.13 March Balance Sheet............................................37
ARTICLE IX - CONDITIONS TO OBLIGATIONS OF SELLER, AND METRO TO
EFFECT THE MERGER......................................................37
9.01 Representations and Warranties of Buyer........................37
9.02 Performance of this Agreement..................................37
9.03 Certificate of Buyer...........................................37
9.04 Opinion of Counsel.............................................37
9.05 No Prohibitions................................................38
9.06 Compliance with Applicable Law.................................38
9.07 Payment of Merger Consideration................................38
9.11 March Balance Sheet............................................38
9.08 Release of Guaranties..........................................38
9.10 Joint Venture Agreement........................................38
9.11 Master Service Agreement.......................................38
9.12 Miscellaneous Service Agreement................................38
9.13 Agreements with Shareholders, Option Holders and
SAR Holders..................................................38
ARTICLE X - INDEMNIFICATION..............................................39
10.01 Indemnification...............................................39
10.02 Participation in Litigation...................................40
10.03 Claims Procedure..............................................40
<PAGE>
10.04 Right of Offset...............................................41
10.05 Limitations on Indemnification................................41
ARTICLE XI - MISCELLANEOUS...............................................41
11.01 Binding Agreement.............................................41
11.02 Termination of Agreement......................................41
11.03 Manner and Effect of Termination..............................43
11.04 Survival of Representations, Warranties and
Covenants...................................................44
11.05 Further Assurances............................................44
11.06 Dispute Resolution Procedures.................................44
11.07 Entire Agreement and Modification.............................45
11.08 Severability..................................................45
11.09 Counterparts..................................................45
11.10 Interpretation................................................45
11.11 Governing Law.................................................46
11.12 Payment of Fees and Expenses..................................46
11.13 No Waiver.....................................................46
11.14 Public Announcements..........................................46
11.15 Notices.......................................................46
List of Exhibits
Exhibit A - Maps of Dallas/Irving/Ft. Worth, Austin, San Antonio,
Houston, Corpus Christi and Waco Networks
Exhibit B - Form of Management Agreement
Exhibit C - Procedures and Form of Cash Election
Exhibit D - Form of Buyer Stock Option Agreement
Exhibit E - Form of Letter of Transmittal
Exhibit F - Form of Opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P., Counsel to Seller
Exhibit G - Form of Affiliate Agreement
Exhibit H - Form of Stockholder Agreement
Exhibit I - Form of Opinion of Bryan Cave LLP, Counsel to Buyer
Exhibit J - Form of Guarantee Agreement
Exhibit K - Forms of Joint Venture Agreements
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as
of April 1, 1997, by and among Brooks Fiber Properties, Inc., a Delaware
corporation ("Buyer"), Brooks Fiber Communications of Texas, Inc., a
Delaware corporation wholly-owned by Buyer ("Sub"), Century Telephone
Enterprises, Inc., a Louisiana corporation ("Seller"), and Metro Access
Networks, Inc., a Delaware corporation eighty percent owned by Seller
("Metro").
RECITALS
A. Seller owns directly 80% of the issued and outstanding
capital stock of Metro.
B. Metro owns and operates fiber optic telecommunications
networks in Dallas/Irving/Ft. Worth, Austin and San Antonio, Texas, has
networks under construction in Houston, Corpus Christi and Waco, Texas,
and has ordered or committed to the purchase of four DMS-500 switches to
allow the provision of full local exchange switched services in its
networks.
C. The respective Boards of Directors of Sub and Metro have
approved and determined it is advisable and in the best interests of
their respective stockholders to consummate, and their respective
stockholders have approved, the business combination transaction provided
for herein in which Sub would merge with and into Metro upon the terms
and conditions set forth herein, in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law").
D. The respective Boards of Directors of Metro and Sub have
approved and adopted this Agreement and Plan of Merger as a plan of
reorganization within the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "IRC").
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants of the parties hereinafter expressed, it is hereby
agreed as follows:
ARTICLE I
THE MERGER AND RELATED TRANSACTIONS
1.01 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law, at the
Effective Time (as defined in Section 1.02), Sub shall be merged with and
into Metro (the "Merger"). As a result of the Merger, the separate
corporate existence of Sub shall cease and Metro shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
1.02 The Closing; Effective Time.
(a) Subject to satisfaction or, if permissible, waiver, of the
conditions set forth in Articles VIII and IX hereto, consummation of the
Merger (the "Closing") shall take place at the offices of Seller, 100
Century Park Drive, Monroe, Louisiana, at 10:00 A.M. local time on a date
to be mutually agreed upon by Buyer and Metro (the "Closing Date"), which
<PAGE>
shall be no later than the fifth business day following satisfaction of
the conditions to the closing specified in Sections 8.07 and 9.06 hereof,
or at such other place, time or date (not later than June 30, 1997,
unless extended by written mutual agreement of the parties hereto) as
Metro and Buyer shall mutually agree, and will be effective at the
Effective Time.
(b) On the day of the Closing, or as soon as reasonably
practicable following the Closing, the Surviving Corporation shall
execute and deliver to the Secretary of State of Delaware a certificate
of merger in proper form for filing under Delaware Law (the "Certificate
of Merger"). The Merger shall become effective on the date the
Certificate of Merger is filed with the Secretary of State of Delaware or
at such later time as may be specified in the Certificate of Merger, such
time being herein called the "Effective Time." As soon as reasonably
practicable following the Effective Time, the Certificate of Merger
endorsed by the Secretary of State of Delaware shall be recorded in the
Office of the Recorder of the county in which the registered office of
the Surviving Corporation is located in accordance with Delaware Law.
(c) Subject to the terms and conditions hereof, Sub and Metro
shall each use reasonable efforts to take all such action as may be
necessary or appropriate to effectuate the Merger under Delaware Law at
the time specified in this Section 1.02. Effective as of the date
hereof, Seller and Buyer have entered into the Stockholder Agreement
attached hereto as Exhibit H.
(d) If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title
and possession to all properties, interests, assets, rights, privileges,
immunities, powers and franchises of either Sub or Metro, the officers of
the Surviving Corporation are fully authorized in the name of Sub or
Metro, as the case may be, or otherwise to take, and shall take, all such
necessary or desirable action.
1.03 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of, and subject to the
provisions of, Delaware Law, at the Effective Time, except as otherwise
provided in this Agreement, all the properties, interests, assets,
rights, privileges, immunities, powers and franchises of Sub and Metro
shall vest in the Surviving Corporation, and all debts, liabilities,
duties and obligations of Sub and Metro shall become the debts,
liabilities, duties and obligations of the Surviving Corporation.
1.04 Certificate of Incorporation and By-laws of the Surviving
Corporation. At the Effective Time, the Certificate of Incorporation of
Sub shall be the Certificate of Incorporation of the Surviving
Corporation, and the By-laws of Sub in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation.
1.05 Officers and Directors of the Surviving Corporation. The
officers and directors of Sub immediately prior to the Effective Time
shall be the officers and directors of the Surviving Corporation, each to
<PAGE>
hold office in accordance with the Certificate of Incorporation and By-
laws of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified or until their respective earlier
death, resignation or removal.
1.06 Name of the Surviving Corporation. The name of the
Surviving Corporation shall be "Brooks Fiber Communications of Texas,
Inc."
1.07 Management Agreement. Effective April 1, 1997, the Buyer
and Metro shall enter into a Management Agreement substantially in the
form attached hereto as Exhibit B (the "Management Agreement").
1.08 Agreements with Shareholders, Option Holders and SAR
Holders.
(a) Pursuant to the terms of the letter agreement dated March 27,
1997 between Metro, Seller, Richard B. Kolsby and each of the holders of
options (the "Option Holders") to purchase common stock, $.10 par value
per share, of Metro ("Metro Common Stock"), Metro and Seller shall use
their best efforts to enter into one or more agreements with Mr. Kolsby
and the Option Holders, pursuant to which the following actions would be
taken:
(i) all indebtedness of Metro to Seller reflected on the
balance sheet of Metro as of March 31, 1997 (the "March Balance Sheet")
shall be converted prior to the Effective Time into shares of Metro
Common Stock;
(ii) each Option Holder (other than those Option Holders, if
any, identified on Schedule 2.01(c) hereto) shall agree to exercise, no
later than the day before the Closing Date, each of their options to
purchase Metro Common Stock ("Metro Stock Options"), in each case on the
terms and conditions of the Stock Option Agreements listed on
Schedule 3.03 hereto (as to options held by the Option Holders) and the
terms and conditions of Section 3.05 of the Shareholders Agreement dated
October 14, 1993 (the "Shareholders Agreement") between Metro, Seller and
Richard B. Kolsby (as to options held by Seller); and
(iii) all rights and obligations of the parties to the Put
Agreements listed on Schedule 3.03 hereto ("Put Agreements"), and the
Shareholders Agreement shall be terminated prior to the Effective Time.
(b) Metro and Seller shall use their best efforts to enter into one
or more agreements with each of the holders of the Stock Appreciation
Rights Agreements listed on Schedule 1.08 hereto (the "Metro SARs"),
pursuant to which each of such holders shall agree to receive, at the
time and in the manner provided in Section 2.01(d), cash payments in full
settlement of the rights under the Metro SARs based upon the number of
Fully-Diluted Metro Shares (as defined below) at the Effective Time.
(c) Metro and Seller shall use their best efforts to enter into an
agreement with M.D. English to terminate the Consulting Agreement with
him referenced on Schedule 3.26 hereto.
(d) Metro shall furnish to Buyer at least five business days prior
to the Closing a certificate setting forth (i) the number of shares of
Metro Common Stock that will be issued and outstanding as of the
<PAGE>
Effective Time, after consummation of each of the transactions
contemplated by paragraph (a) above, (ii) the number of such shares that
will be held as of such time by Seller and each other holder of issued
and outstanding shares of Metro Common Stock (collectively, with Seller,
the "Shareholders"), (iii) the number of Fully-Diluted Metro Shares (as
defined below) that will be outstanding at the Effective Time, and
(iv) the total cash payments made or to be made by Metro under Section
1.08(b). For purposes hereof, Fully-Diluted Metro Shares shall mean, as
of any respective date, the sum of (i) the number of shares of Metro
Common Stock issued and outstanding as of such date and (ii) the number
of shares of Metro Common Stock issuable upon the exercise of all Metro
Stock Options outstanding as of such date.
1.09 Employment of Metro Personnel.
(a) The Surviving Corporation will offer employment on an at-
will basis to the employees of Metro as of the Effective Time, including,
without limitation, the individuals listed on Schedule 3.26 hereto, for a
period of at least six months following the Effective Time (unless
earlier terminated for Cause as defined in paragraph (b) below or
terminated pursuant to paragraph (c)(i) below) at such individuals'
respective current salary levels and locations and will adopt and
maintain such benefit programs and plans for their benefit, including
appropriate Buyer stock options in accordance with their job
descriptions, as are specified on Schedule 1.09 hereto.
(b) If, during the six-month period referred to in paragraph
(a) above, the Surviving Corporation (or any controlling entity of the
Surviving Corporation) shall terminate the employment of any such
employee with the Surviving Corporation, other than for Cause, the
Surviving Corporation shall pay such employee a lump sum severance
payment equal to such employee's salary for the balance of the six-month
period. For purposes hereof, "Cause" shall mean conviction of a felony,
habitual intoxication, abuse of or addiction to a controlled or dangerous
substance, excessive absenteeism, the willful and continued failure by
the employee to substantially perform his or her duties as an employee of
the Surviving Corporation or otherwise to abide by its corporate
policies, or the willful engaging by the employee in misconduct which is
materially injurious to the Surviving Corporation, monetarily or
otherwise.
(c) If, during the six month period referred to in paragraph
(a) above, the Surviving Corporation assigns any of such employees to a
job assignment which requires such employee to be based more than fifty
miles from such employee's current location, such employee may decline
such assignment in which event the Surviving Corporation may either (i)
terminate such employee and pay such employee a lump sum severance
payment equal to such employee's salary for the balance of the six month
period or (ii) elect to continue the at-will employment of such employee
at such employee's then current location.
1.10 Most Favored Pricing. The Buyer will offer Seller a ten-
year contract with two ten-year renewal options to purchase (the "Master
Service Agreement"), at the Surviving Corporation's most favored pricing
regardless of volume, dedicated and switched services for resale from the
Dallas/Irving/Ft. Worth, Austin, San Antonio, Corpus Christi and Waco
networks of the Surviving Corporation.
<PAGE>
1.11 Additional Borrowings. Subject to Section 5.01(h), Buyer
acknowledges that Metro may borrow additional funds from Seller after
March 31, 1997. Buyer (i) agrees that any such additional borrowings
from Seller after March 31, 1997 shall be repaid by Buyer no later than
30 days after the Closing Date and (ii) acknowledges that no such
additional borrowing from Seller after March 31, 1997 with Buyer's prior
approval shall be deemed to breach any representation, warranty, covenant
or agreement of Metro or Seller hereunder. Buyer has given its prior
approval with respect to additional borrowings necessary to enable Metro
to satisfy its payroll and accounts payable obligations until such time
as Buyer notifies Seller that such additional borrowings are no longer
required.
1.12 Assumed Name. Immediately prior to the Effective Time,
Metro shall assign to Seller all right, title and interest in Metro's
registered assumed name "New Century Communications," as more fully
described on Schedule 3.17 hereto.
1.13 Supplemental Payment. In connection with the negotiation,
execution and delivery of the letter agreement referred to in Section
1.08(a), Buyer acknowledges that the Option Holders have requested to
receive, and Metro has agreed to pay, supplemental cash payments in
connection with the exercise of their Metro Stock Options to partially
offset the income taxes that will become due and payable as a result of
such exercises. Upon the request of Metro, Buyer agrees to loan to Metro
up to $565,000 to fund these payments by Metro to the Option Holders. In
the event Buyer loans such cash and the Merger is not consummated
hereunder, Seller shall, or shall cause Metro to, repay such loan.
Metro's obligation to make these payments to the Option Holders shall not
be accrued as a liability of Metro on the March Balance Sheet.
ARTICLE II
CONVERSION OF SECURITIES
2.01 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any further action on the part of Sub or
Metro or any stockholder thereof:
(a) Effective as of the Effective Time, each share of the
$0.01 par value Common Stock of Sub ("Sub Common Stock") shall be
converted into and become one fully paid and non-assessable share of
common stock, $0.01 par value per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). Each certificate representing
outstanding shares of Sub Common Stock shall at the Effective Time
represent an equal number of shares of Surviving Corporation Common
Stock.
(b) Each share of Metro Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into (A) that
number of full shares of the common stock of Buyer, par value $0.01 per
share (such shares, together with the associated Preferred Stock Purchase
Rights issued pursuant to the Rights Agreement dated February 29, 1996
between the Company and The Boatmen's Trust Company, as Rights Agent,
being hereinafter referred to collectively as "Buyer Common Stock"), as
shall be determined by dividing the Merger Consideration (as defined in
Section 2.03 hereof) by the total number of the Fully-Diluted Metro
<PAGE>
Shares (the "Metro Per Share Consideration") and dividing the result by
$20.60, or (B) at the option of any holder of Metro Common Stock other
than Seller, exercised in the manner specified herein in Exhibit C hereto
on or prior to the third business day prior to the date of the Closing (a
"Cash Election"), a right to receive, in lieu of some or all of the
shares of Buyer Common Stock otherwise issuable to such holder pursuant
to clause (A), a cash payment equal to the product of such number of
shares of Buyer Common Stock, times $20.60, provided, however, that the
aggregate amount of cash (including cash paid for fractional shares) for
which shares of Metro Common Stock may be exchanged may in no event
exceed an amount of cash which would result in the Shareholders
surrendering less than 80% of their Metro Common Stock in exchange solely
for Buyer Common Stock as required for the Merger to be a tax-free
reverse triangular reorganization under Section 368(a)(2)(E) of the IRC
(the "Cash Limitation"). The shares of Buyer Common Stock issued
pursuant to clause (A) are herein referred to as the "Stock
Consideration" and the amount of cash, if any, paid pursuant to clause
(B) is herein referred to as the "Cash Consideration." The Stock
Consideration shall be issued pursuant to Buyer's shelf registration
statement (the "Registration Statement") on Form S-4 (No. 333-21223)
under the Securities Act of 1933, as amended ("Securities Act").
(c) Any of the Metro Stock Options listed on
Schedule 2.01(c) hereto, which is outstanding immediately prior to the
Effective Time (the "Assumed Metro Stock Options"), shall be converted
into an option, substantially in the form of Exhibit D hereto, to
purchase from Buyer ("Buyer Stock Option") the number of shares of Buyer
Common Stock (rounded down to the nearest full share) as shall be
determined by (A) multiplying (i) the number of shares of Metro Common
Stock issuable upon exercise of such Assumed Metro Stock Option
immediately prior to the Effective Time by (ii) the Metro Per Share
Consideration and (B) dividing the resulting product by $20.60, and
having an option exercise price per share of Buyer Common Stock (rounded
to the nearest cent) as shall be determined by dividing (i) the aggregate
exercise price of such Assumed Metro Stock Option by (ii) such number of
shares of Buyer Common Stock. Buyer shall reserve for issuance the
number of shares of Buyer Common Stock that will become issuable upon the
exercise of the Buyer Stock Options. Seller and Metro shall cause all
other Metro Stock Options to be exercised prior to the Closing Date.
(d) The amounts payable pursuant to the Metro SARs outstanding
immediately prior to the Effective Time shall be accrued as a liability
on the March Balance Sheet and shall be paid by Metro immediately prior
to the Closing Date
(e) Each share of Metro Common Stock, if any, held in the
treasury of Metro immediately prior to the Effective Time shall be
canceled and extinguished and no payment shall be made with respect
thereto.
(f) From and after the Effective Time, each certificate
theretofore evidencing one or more shares of Metro Common Stock shall no
longer evidence such shares, but shall evidence only the right to
receive, in exchange therefor, the Merger Consideration set forth in this
Article II in the manner provided in Section 2.02 of this Agreement.
<PAGE>
2.02 Exchange of Certificates.
(a) At the Closing, each of the Shareholders shall surrender
or shall cause to be surrendered to Buyer certificates for all of the
issued and outstanding shares of Metro Common Stock duly endorsed for
transfer and accompanied by a letter of transmittal substantially in the
form attached hereto as Exhibit E, and Buyer shall cause the Merger
Consideration to be delivered in exchange therefor to the Shareholders in
accordance with their respective holdings of the issued and outstanding
shares of Metro Common Stock.
(b) No certificate or scrip representing fractional shares of
Buyer Common Stock to which holders of Metro Common Stock would otherwise
be entitled pursuant to Section 2.01(b) will be issued in the Merger, and
such fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of Buyer. In lieu thereof, Buyer
shall pay each holder of Metro Common Stock who is otherwise entitled to
a fractional share of Buyer Common Stock cash in an amount equal to the
product of such fractional share of Buyer Common Stock and $20.60.
(c) At the Closing, each holder of an Assumed Metro Stock
Option to be converted pursuant to Section 2.01(c) shall surrender the
agreement evidencing such Assumed Metro Stock Option to Buyer, and Buyer
shall deliver to such holder the Buyer Stock Option into which such
Assumed Metro Stock Option shall be converted at the Effective Time in
accordance with the provisions of Section 2.01(c).
2.03 Merger Consideration.
(a) The Merger Consideration will be an amount equal to the
sum of $63,449,203 plus the Net Book Value of Metro as of March 31, 1997
(the "Merger Consideration"). For this purpose, "Net Book Value" means
the total amount of Metro's assets shown on the March Balance Sheet less
the total amount of Metro's liabilities shown on the March Balance Sheet
(except any indebtedness of Metro to Seller).
(b) On or prior to April 15, 1997, Metro shall deliver the
March Balance Sheet to Buyer and to Seller. Except as set forth on
Schedule 2.03 hereto, the March Balance Sheet shall be prepared in
accordance with generally accepted accounting principles consistently
applied ("GAAP"), with all appropriate accruals and reserves, whether or
not such accruals and reserves have previously been included in financial
statements of Metro. The proposed accounting treatment of each of the
various matters listed on Schedule 2.03 hereto shall be final, conclusive
and binding on the parties hereto and the Shareholders.
(c) Buyer shall have ten (10) business days after its receipt
of the March Balance Sheet either to agree with it or, if Buyer disputes
any amount thereon, to give written notice ("Notice of Dispute") to Metro
and to Seller of such dispute, specifying in reasonable detail all points
of disagreement with the March Balance Sheet. If Buyer fails to deliver
a Notice of Dispute during such ten (10) business day period, the March
Balance Sheet shall conclusively be deemed to have been agreed upon by
the parties and shall be final, conclusive and binding on all parties
hereto and the Shareholders.
<PAGE>
(d) Upon receipt of a Notice of Dispute, Metro and Seller
shall promptly consult with the Buyer with respect to its specified
points of disagreement in an effort to resolve the dispute. If any such
dispute cannot be resolved by the parties within ten (10) business days
after Metro and Seller receive the Notice of Dispute, the parties shall
refer the dispute to a partner in national firm of certified public
accountants mutually agreed upon by Buyer and Metro (the "Arbiter"), as
an arbitrator to finally determine, as soon as practicable, and in any
event within fifteen (15) days after such reference, all points of
disagreement with respect to the March Balance Sheet. For purposes of
such arbitration each of Buyer and Metro shall submit a proposed March
Balance Sheet. Metro's proposed March Balance Sheet need not be identical
to the March Balance Sheet delivered pursuant to Section 2.03(b). The
Arbiter shall conduct the arbitration under such procedures as the
parties may agree or, failing such agreement, under the Commercial
Arbitration Rules of the American Arbitration Association. The fees and
expenses of the arbitration and the Arbiter incurred in connection with
the arbitration of the March Balance Sheet shall be allocated between
Buyer and Seller by the Arbiter in proportion to the extent either Buyer
or Metro did not prevail on items in dispute in the March Balance Sheet;
provided, that such fees and expenses shall not include, so long as such
party complies in all material respects with the procedures of this
Section 2.03, the other party's outside counsel or accounting fees. All
determinations by the Arbiter with respect to the March Balance Sheet and
the allocation of arbitration fees and expenses shall be final,
conclusive and binding on Buyer, Metro and the Shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and
warranties to Buyer and Sub.
3.01 Existence and Qualification.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Louisiana and has the
corporate power and authority to own all of the outstanding shares of
Metro Common Stock owned by it, to perform its obligations hereunder and
to consummate the transactions contemplated hereby.
(b) Metro is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and (i) has
the corporate power and authority to own and use its properties and to
transact the businesses in which it is engaged, (ii) holds all of the
franchises, licenses, rights of way, operating permits, grants of
location and carrier agreements and certifications necessary and required
therefor, except where the failure to hold any such rights would not have
a material adverse effect upon Metro, (iii) is duly licensed or qualified
to do business and is in good standing in the State of Texas, and (iv) is
not required to be registered, licensed or qualified to do business in
any other jurisdiction, except any jurisdiction where the failure to be
so registered, licensed or qualified would not have a material adverse
effect upon Metro. Metro does not have any direct or indirect
subsidiaries or other entity in which it has any direct or indirect
ownership or beneficial interest.
<PAGE>
(c) Metro is a telecommunications corporation certificated to
provide local exchange services and other public telecommunications
services anywhere within the State of Texas ("Network Services"), as
described in exhibits from time to time filed by Metro with the Public
Utility Commission of the State of Texas ("PUC"), pursuant to a valid
service provider certificate of authority granted by the PUC by its
Consolidated Order (Docket No. 16452).
3.02 Ownership of Shares. Except as set forth on Schedule 3.02
hereto, each of Seller and the other persons listed on Schedule 3.02
hereto is the lawful holder of record and beneficial owner of the number
of shares of Metro Common Stock, Metro Stock Options and Metro SARs set
forth in Schedule 3.02 hereto opposite Seller's or such person's name, in
each case free and clear of any claim, lien, pledge, charge, option,
security interest or other encumbrance, or any legal, contractual or
other limitation or restriction including, without limitation, any
restriction on transfer or the right to vote.
3.03 Capitalization of Metro. The entire authorized issued and
outstanding capital stock of Metro is as set forth on Schedule 3.03
hereto. Each of the issued and outstanding shares of capital stock of
Metro is validly issued and outstanding, fully paid and non-assessable.
Except as set forth on Schedule 3.03 hereto, there are no outstanding
subscription, rights, options, warrants, convertible or exchangeable
securities or other agreements of any kind entitling any person or entity
to acquire from Metro any shares of capital stock of Metro (or any
securities convertible into or exchangeable for shares of such capital
stock), and there are no agreements, arrangements, rights or commitments
of any character relating to the issuance, sale, purchase or redemption,
or restricting the transfer of, or the declaration as payment of
dividends on, any shares of capital stock of Metro.
3.04 Approval of Agreement. Except as set forth on Schedule
3.04 hereto, the execution, delivery and performance of this Agreement by
Seller and Metro has been duly authorized and approved by all necessary
corporate action on the part of Seller and Metro. Pursuant to such
authorizations and approvals, Seller and Metro each have full power and
authority to enter into this Agreement and to perform its obligations
hereunder. Subject to compliance with the filing and waiting period
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 ("H-S-R Act") and the filing and recordation of the Certificate of
Merger and except as set forth on Schedule 3.04 hereto, neither the
execution and delivery by Seller or Metro of this Agreement nor the
performance by Seller or Metro of its respective obligations hereunder
does or will (i) conflict with or result in any violation of or
constitute a breach of any provision of its respective Articles or
Certificate of Incorporation, Bylaws and, except as set forth in
Schedule 3.21 hereto, the franchises, licenses, rights of way, permits,
grants of location and carrier agreements and certifications, of Metro,
or any indenture, evidence of indebtedness or other agreement to which
Seller or Metro is a party or by which Seller or Metro is bound, (iii)
result in the creation of any lien or other encumbrance upon any of the
assets of Metro, (iv) violate any judgment, order, injunction, decree or
award of any court, administrative agency or governmental body against or
binding upon Seller or Metro or (v) constitute a violation by Seller or
Metro of any applicable law or regulation.
<PAGE>
3.05 Books and Records. The books of account, stock record
books, minute books, bank accounts and other corporate records of Metro
have been made available to Buyer and its representatives and are true,
correct and complete in all material respects, have been maintained in
accordance with sound business practices and the matters contained
therein are accurately reflected in the December Financial Statements (as
hereinafter defined) of Metro to the extent appropriate.
3.06 Financial Statements. Attached hereto as Schedule 3.06
are the balance sheet of Metro as of December 31, 1996 ("Metro's December
Balance Sheet"), and the related statement of operations, statement of
stockholders' equity and statement of cash flows for the year then ended
(collectively, "Metro's December Financial Statements"). Metro's
December Financial Statements are true, complete and correct in all
material respects, have been prepared in conformity with GAAP
consistently applied, and present fairly in all material respects the
financial position of Metro at December 31, 1996 and the results of
operations of Metro for the year then ended. Without limiting the
foregoing, all of the assets and liabilities of Metro at December 31,
1996 have been properly reflected on Metro's December Balance Sheet in
accordance with GAAP, and, as of the date hereof, Metro does not have any
indebtedness for money borrowed (other than money borrowed from Seller)
which is not reflected on Metro's December Balance Sheet.
3.07 Events Subsequent to December 31, 1996. Except as set
forth on Schedule 3.07 hereto, since December 31, 1996, there has been no
(a) change in the business, condition (financial or otherwise),
operations, prospects, assets or liabilities of Metro, other than changes
in the ordinary course of business, none of which have been materially
adverse, (b) material damage, destruction or loss, whether covered by
insurance or not, affecting any of the assets of Metro, (c) declaration,
setting aside or payment of any dividend or other distribution in respect
of or to the holder of any of the shares of the capital stock of Metro,
(d) issuance of any stock or other securities by Metro (except upon
exercise of existing Metro Stock Options), (e) waiver of any rights or
suffering of any losses by Metro, except in the ordinary course of
business, none of which have been materially adverse, or (f) entering
into any transaction by Metro other than in the ordinary course of
business.
3.08 Work in Progress. The construction work in progress
reflected in Metro's December Balance Sheet is properly valued in
accordance with GAAP. The assets of Metro do not include any materials
held on consignment or in the possession of others.
3.09 Accounts and Notes Receivable. Subject to applicable
reserves for bad debts shown on or reflected in Metro's December Balance
Sheet, (a) all accounts and notes receivable reflected on Metro's
December Balance Sheet are, and all accounts and notes receivable of
Metro subsequently accruing to the Effective Time will be (except those
which have been collected since December 31, 1996), to the best knowledge
of Seller and Metro (i) valid, genuine and subsisting, (ii) subject to no
known defenses, set-offs or counterclaims and (iii) current and
collectible and (b) all accounts and notes receivable of Metro reflected
on the March Balance Sheet and its balance sheet immediately prior to the
first day of the month in which the Effective Time occurs will be paid in
full, net of such reserves, on or before 120 days after the Effective
Time, less any applicable trade discounts.
<PAGE>
3.10 No Undisclosed Liabilities. Metro does not have any
liabilities or obligations whatsoever, either accrued, absolute,
contingent or otherwise, and Seller knows of no basis for any claim
against Metro for any liability or obligation, except (a) to the extent
set forth or reflected on Metro's December Balance Sheet, (b) to the
extent specifically set forth on any Schedule delivered by Seller
pursuant hereto or otherwise described in this Article III, or
(c) liabilities or obligations incurred in the normal and ordinary course
of business since December 31, 1996, none of which liabilities or
obligations since December 31, 1996 have been materially adverse.
3.11 Tax Returns and Audit. Metro (or Seller on behalf of
Metro) has filed, or caused to be filed, on a timely basis with the
appropriate agencies all U.S. federal, state, local, foreign and other
tax returns and tax reports required by law to be filed by or with
respect to Metro and each of its employees and employee benefit plans,
and, except as set forth on Schedule 3.11 hereto, (a) such returns and
reports are true, complete and correct, (b) no audit or investigation of
Metro or of any such returns or reports is in progress, pending or
threatened, (c) except for the tax returns filed by Seller and described
on Schedule 3.11 hereto, Metro has not joined in and will not join in the
filing of any consolidated or combined tax return with respect to which
it is or could be jointly or severally liable and Metro is not a party to
any affiliated group consolidated return tax allocation, tax sharing or
tax indemnity agreement, (d) Metro is not a foreign person within the
meaning of Section 1445(b)(2) of the IRC and the regulations thereunder,
(e) all income, profits, employment (including Social Security,
unemployment insurance and employee income tax withholding), franchise,
gross receipts, sales, use, transfer, stamp, occupation, property,
excise, ad valorem and other taxes, all Pension Benefit Guaranty
Corporation ("PBGC") premiums and other governmental charges of a similar
nature, and all penalties, additions to tax and interest relating to such
taxes, premiums and charges (all of which are referred to herein
individually as a "Tax" and collectively as "Taxes"), due from Metro have
been fully paid or accrued, (f) there exists no unpaid Tax or Tax
deficiency assessed by any governmental authority against Metro or with
respect to either of their respective businesses, (g) to the best
knowledge of Seller and Metro, there exist no grounds for the assertion
or assessment of any additional Taxes against Metro or with respect to
its businesses, (h) copies of all U.S. federal, Texas and Delaware income
Tax returns (or schedules included in Seller's consolidated U.S. federal
returns that relate to Metro), Tax examination reports and statements of
deficiencies assessed against, or agreed to by Seller (to the extent they
relate to Metro) and/or Metro have been made available to Buyer, (i) no
waiver of any statute of limitations has been given and is in effect in
respect to the assessment of any Taxes against Metro, (j) Metro has not
made an election under Section 338 of the IRC or taken any action that
would result in any income Tax liability to Metro as a result of a deemed
election within the meaning of Section 338 of the IRC, and (k) the
adjusted tax basis of the assets of Metro is equal to or greater than the
amount shown on Schedule 3.11 hereto, and the useful life of such assets
for purposes of determining depreciation or amortization for federal
income tax purposes is as set forth on Schedule 3.11 hereto.
<PAGE>
3.12 Contracts and Other Obligations. Except as specifically
set forth on Schedule 3.12 hereto, each of the agreements, contracts,
commitments and other obligations of Metro listed on the Schedules to
this Agreement ("Contracts") is a valid and binding obligation of Metro
in accordance with its terms and is in full force and effect and neither
Metro nor, to the best knowledge of Seller or Metro, any other party
thereto is in default with respect to any term or condition thereof, nor,
to the best knowledge of Seller and Metro, has any event occurred which,
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto or would give any party thereto an
affirmative defense against Metro. Except as specifically set forth on
Schedule 3.12 hereto, no termination or other penalty will result under,
and no consent is required under, any Contract for the consummation of
the transactions contemplated by this Agreement. Metro has delivered or
otherwise made available to Buyer true, correct and complete copies of
the contracts, agreements or other documents creating or evidencing each
of the Contracts.
3.13 Real Property - Owned. Metro does not own any parcel of
real property or have any interest in or any right or obligation to
acquire any interest in any parcel of real property.
3.14 Personal Property - Owned. Except as set forth on
Schedule 3.14 hereto, Metro has good and marketable title to all personal
property owned and used in its businesses (including without limitation
all personal property reflected on the December Balance Sheet or acquired
after the date thereof, except any subsequently sold in the ordinary
course of business), free and clear of all mortgages, options, liens,
charges, security interests, leases, covenants, conditions, agreements,
claims, restrictions and other encumbrances of every kind and there
exists no restriction on the use or transfer of such property.
3.15 Real and Personal Property - Leased by Metro.
(a) Set forth on Schedule 3.15 hereto is a description of each
lease under which Metro is the lessor of any real or personal property.
Metro has delivered or made available to Buyer a true, correct and
complete copy of each lease identified on Schedule 3.15. The premises or
property described in such leases are presently occupied or used by the
lessee under the terms of such leases.
(b) All rentals or other payments due under such leases have
been paid and there exists no default under the terms of such leases and
no event has occurred which, upon passage of time or the giving of
notice, or both, would result in any event of default or prevent Metro
from exercising and obtaining the benefits of any rights contained
therein. No consent is required under any such lease for the
consummation of the transactions contemplated hereby. Upon the Closing
Buyer will have all right, title and interest of the lessor under the
terms of such leases, free of all liens, claims or encumbrances and all
such leases are valid and in full force and effect.
<PAGE>
3.16 Real and Personal Property - Leased to Metro.
(a) Set forth on Schedule 3.16 hereto is a description of each
lease under which Metro is the lessee of any real or personal property.
Metro has delivered or made available to Buyer a true, correct and
complete copy of each lease identified on Schedules 3.16. The premises
or property described in said leases are presently occupied or used by
Metro in its businesses as lessee under the terms of such leases. To the
best knowledge of Seller and Metro, all improvements located on and the
use presently being made of all real property leased by Metro comply with
all applicable zoning and building codes and ordinances and all
applicable fire, environmental, occupational safety and health and
similar standards established by law or regulation. There is no
proposed, pending or, to the best knowledge of Seller and Metro,
threatened change in any such code, ordinance or standard which would
adversely affect the respective businesses of Metro or the use of any of
such property or leasehold improvements. There is no proposed, pending
or, to the best knowledge of Seller and Metro, threatened condemnation
proceeding or similar action affecting any of such property, plant,
equipment or leasehold improvements or with respect to any streets or
public amenities appurtenant thereto or in the vicinity thereof which
would adversely affect the respective businesses of Metro or the use of
any of such property or leasehold improvements.
(b) Except as set forth on Schedules 3.16, all rentals due
under such leases have been paid and there exists no default under the
terms of such leases and no event has occurred which, upon passage of
time or the giving of notice, or both, would result in any event of
default or prevent Metro from exercising and obtaining the benefits of
any rights or options contained therein. Except as set forth on
Schedule 3.16 hereto, no consent under any such lease is necessary for
the consummation of the transactions contemplated hereby. Metro has all
right, title and interest of the lessee under the terms of said leases,
free of all liens, claims or encumbrances and all such leases are valid
and in full force and effect.
(c) There is no default or basis for acceleration or
termination under, nor has any event occurred nor does any condition
exist which, with the passage of time or the giving of notice, or both,
would constitute a default or basis for acceleration or termination under
any underlying lease, agreement, mortgage or deed of trust, which default
or basis for acceleration or termination would adversely affect any lease
described on Schedule 3.16 or the property or use of the property covered
by such lease in the respective businesses of Metro. There will be no
default or basis for acceleration or termination under any such
underlying lease, agreement, mortgage or deed of trust as a result of the
transactions provided for in this Agreement.
3.17 Patents, Trademarks and Copyrights. Set forth on
Schedule 3.17 hereto is a listing of all the patents, applications for
patents, trademark registrations, applications for trademark
registrations, unregistered trademarks, tradenames, copyright
registrations, applications for copyright registration and license
agreements with respect to the foregoing used, owned or granted by or to
Metro. Except as set forth on Schedule 3.17, (a) all such items are
valid and subsisting; (b) good and marketable title to all such items
together with all common law rights (if any) to the subject matter
thereof is held by Metro, free and clear of all options, adverse claims,
defenses, liens, charges, security interests, covenants, conditions,
<PAGE>
agreements, restrictions and other encumbrances; (c) except for
requirements of applicable law, there exists no restriction on the use or
transfer of any such item; (d) there are no interferences, challenges,
proceedings or infringement suits pending or, to the knowledge of Seller
or Metro, threatened, with respect to any such item; and (e) Metro has
not granted a license to any other party with respect to any such item.
Metro is not infringing upon the right of any other person under any
patent, trademark on other intellectual property right (including rights
described in Section 3.18) and, to the best knowledge of Seller and
Metro, no other person is infringing upon any patent, trademark or
intellectual property right (including rights described in Section 3.18)
of Metro.
3.18 Other Intangible or Intellectual Property. Metro has
valid title to or the valid right to use all intangible or intellectual
property used by it (including all inventions, discoveries, processes,
formulae, trade secrets, unregistered copyrights, proprietary technical
information and know-how, to the extent such property is not covered by
Section 3.17 hereof), free and clear of any claim, defense or right of
any other person or entity.
3.19 Necessary Property. The tangible and intangible property
owned and leased by Metro and listed or described on Schedule 3.19 hereto
and in the other Schedules hereto constitute all of the property and
property rights owned and leased by Metro and all of the property and
property rights which in any way relate to, are used in or, except as set
forth on Schedule 3.19 hereto, are necessary for, the continued conduct
of the respective businesses of Metro in the manner and to the extent
presently conducted or planned.
3.20 Description of Networks; Use and Condition of Property,
Plant and Equipment.
(a) Metro has the following networks in operation or under
construction:
(i) Metro's Dallas/Irving/Ft. Worth network consists of
approximately 281 route miles (as of February 12, 1997) of fiber optic
cable plant (with minimum and maximum fiber counts of 12 and 144,
respectively) installed and operating as intended and as shown on map
Exhibit A-1 delivered pursuant to Section 3.20(b), with rings in Ft.
Worth, Irving and Dallas, and a transport route connecting the three
markets. The Dallas/Irving/Ft. Worth network is approximately 87 miles
of underground construction and the balance is aerial construction. The
Dallas/Irving/Ft. Worth network passes three Southwestern Bell central
offices and one GTE central office and is interconnected with all major
inter-exchange carriers ("IXCs"). Metro is currently in the process of
deploying a DMS-500 switch in the Dallas/Irving/Ft. Worth network and has
deployed a Cascade 9000 frame relay switch in the Dallas/Irving/Ft. Worth
network.
(ii) Metro's Austin network consists of approximately 38
route miles (as of February 12, 1997) of fiber optic cable plant (with
minimum and maximum fiber counts of 12 and 144, respectively) installed
and operating as intended and as shown on map Exhibit A-2 delivered
pursuant to Section 3.20(b), of which approximately 5.75 miles consists
of underground construction and the balance is aerial construction. The
Austin network passes three Southwestern Bell central offices and is
interconnected with all major IXCs. Metro has ordered a DMS-500 switch
<PAGE>
for deployment in the Austin network, and has deployed a Cascade 9000
frame relay switch in the Austin network.
(iii) Metro's San Antonio network consists of
approximately 7 route miles (as of February 12, 1997) of fiber optic
cable plant (with minimum and maximum fiber counts of 12 and 144,
respectively) installed and operating as intended and as shown on map
Exhibit A-3 delivered pursuant to Section 3.20(b), of which approximately
2.5 miles consists of underground construction and the balance is aerial
construction. The San Antonio network passes three Southwestern Bell
central offices and is interconnected with all major IXCs. Metro has
ordered a DMS-500 switch for deployment in the San Antonio network and
has deployed a Cascade 9000 frame relay switch in the San Antonio
network.
(iv) Metro's networks in Houston, Corpus Christi and Waco
are planned for construction along routes indicated on maps Exhibits A-4,
A-5 and A-6 hereto, respectively, delivered pursuant to Section 3.20(b).
Metro has committed to order a DMS-500 switch for deployment in the
Houston network.
(b) By letter dated March 28, 1997, Metro's counsel furnished
to Buyer copies of maps that reflect (i) those portions of Metro's
networks for Dallas/Irving/Fort Worth, Austin and San Antonio, Texas that
were built and those portions that were planned for construction as of
March 27, 1997 and (ii) Metro's proposed networks for Houston, Corpus
Christi and Waco, Texas as of March 27, 1997. All of Metro's fiber optic
cable installed in the central business districts of Dallas/Irving/Fort
Worth, Austin and San Antonio has a fiber count of 144. Each such
district is labeled on the maps for these markets. In all other areas in
these markets, the fiber count of Metro's fiber optic cable is less than
144.
(c) All of the property, plant and equipment of Metro is in
good operating condition and repair as required for its use in the
businesses of Metro as presently conducted or planned (reasonable wear
and tear excepted), and conforms in all material respects to all
applicable laws, and no notice of any violation of any law, statute,
ordinance or regulation relating thereto has been received by Seller or
Metro except such as have been fully complied with.
3.21 Licenses, Rights of Way and Permits. Set forth on
Schedule 3.21 hereto is a listing of each franchise, license, right of
way, construction or operating permit, grant of location and carrier
agreement and certification owned or held by Metro, which are all that is
required for the conduct of the businesses of Metro in the manner and to
the extent presently conducted or planned, showing, in each case, the
name of the person, government agency or other entity issuing or granting
such license, right of way, permit, grant of location and carrier
agreement and certification. Such licenses, rights of way, permits,
grants of location and carrier agreements and certifications are valid
and in full force and effect and, except as specifically set forth on
Schedule 3.21 hereto, no termination or other penalty will result
thereunder, and no consent is required thereunder, for the consummation
of the transactions contemplated by this Agreement.
<PAGE>
3.22 Contracts and Commitments. Except as set forth in
Schedule 3.22 hereto, there is not outstanding:
(a) Any single contract or purchase order providing for
an expenditure by Metro in excess of $50,000, contracts or purchase
orders with the same or affiliated vendor(s) providing for an expenditure
by Metro in excess of $50,000, or contracts or purchase offers in the
aggregate providing for expenditures by Metro in excess of $50,000, for
the purchase of any real property, machinery, equipment or other items
which are in the nature of capital investment;
(b) Any other single contract or purchase order providing
for an expenditure by Metro in excess of $50,000, other contracts or
purchase orders with the same or affiliated vendor(s) providing for an
expenditure by Metro in excess of $50,000, or contracts or purchase
offers in the aggregate providing for expenditures by Metro in excess of
$50,000, for the purchase of materials, supplies, component parts or any
other items or services;
(c) Any contract, bid or offer to which Metro is a party
or by which Metro is bound to provide services to third parties (i)
which Seller or Metro knows or has reason to believe is at a price which
would result, for more than two consecutive months, in a loss before
interest, income taxes, depreciation and amortization (an "EBITDA Loss")
on the providing of such services in the manner contemplated under the
contract, bid or offer (e.g., Metro is not buying type-2 circuits and
selling them at less than cost), (ii) which is pursuant to terms or
conditions that Metro cannot reasonably expect to satisfy or fulfill in
their entirety, or (iii) which involves more than $15,000 in monthly
revenues or which, together with all other contracts, bids or offers to
or with the same party or any affiliated parties, involves more than
$30,000 in monthly revenues;
(d) Any purchase commitment by Metro for materials,
supplies, component parts or other items or services in excess of the
normal, ordinary, usual and current requirements of its businesses or at
a price in excess of the current reasonable market price charged to
similarly situated companies;
(e) Any revocable or irrevocable power of attorney
granted by Metro to any person, firm or corporation for any purpose
whatsoever;
(f) Any loan agreement, indenture, promissory note,
conditional sales agreement or other similar type of agreement or
instrument to which Metro is a party or by which Metro is bound;
(g) Any arrangement or other agreement to which Metro is
a party, or by which Metro is bound, which involves (i) a sharing of
profits, (ii) future payments by Metro of $15,000 or more per annum to
any other person, or (iii) any joint venture or similar contract or
arrangement to which it is a party;
<PAGE>
(h) Any sales agency, sales representation,
distributorship or franchise agreement, oral or written, to which Metro
is a party or by which Metro or its businesses is bound;
(i) Any contract containing covenants limiting the
freedom of Metro to compete in any line of business or with any person or
in any area;
(j) Any material contract or commitment to which Metro is
a party which is or was not made in the ordinary course of its
businesses; or
(k) Any other material contract or commitment to which
Metro is a party which is not cancelable without penalty on thirty (30)
days notice or less and which is not specifically described on any other
Schedule hereto.
3.23 Business Relationships. No current customer of Metro, no
carrier with which Metro has an interconnect agreement and no entity
which since January 1, 1996 has supplied equipment or optical fiber cable
to Metro has threatened in writing to cancel or otherwise terminate its
relationship with Metro, except where such cancellation or termination
would not have a material adverse effect upon Metro.
3.24 No Breach of Law or Governing Documents. There is no
material default under or material violation of any applicable statute,
law, ordinance, decree, order, rule or regulation of any governmental
body, or the provisions of any franchise, license, right of way,
construction or operating permit, grant of location or carrier agreement
or certification, by Metro and there is no default under or violation of
any provision of the Certificate of Incorporation or By-laws of Metro or
the Shareholders Agreement, Put Agreements, Employment Agreements, Metro
Stock Options or Metro SARs. Except as set forth in Section 3.04 or
Schedule 3.24 hereto, no governmental permits or consents are necessary
for Metro and Seller to effect the transactions contemplated hereby.
3.25 Litigation and Arbitration. Except as set forth on
Schedule 3.25 hereto, there is no suit, claim, action or proceeding now
pending or, to the best knowledge of Seller or Metro, threatened before
any court, grand jury, administrative or regulatory body, governmental
agency, arbitration or mediation panel or similar body, to which Metro is
a party or which may result in any judgment, order, decree, liability,
award or other determination against Metro which, if determined adversely
to Metro, would individually or in the aggregate have a material adverse
effect on Metro or which will prevent or hamper the consummation of the
transactions contemplated by this Agreement. No such judgment, order,
decree or award has been entered against Metro which has, or could have,
any continuing effect.
<PAGE>
3.26 Employees and Consultants. Set forth on Schedule 3.26
hereto is a complete list of:
() all employees of Metro (including all employees of
Century Service Group, Inc. that devote all of their working time to
Metro)who earn $25,000 or more per year; and
() all agents and consultants to Metro;
together, in each case, with the current rate of compensation payable to
each.
3.27 Indebtedness to and from Shareholders and Others. Except
as set forth on Schedule 3.27 hereto, Metro is not indebted to any of its
Shareholders or, except for amounts due as normal salaries, wages and
bonuses and in reimbursement of ordinary expenses on a current basis, any
of its officers, employees or agents, and no Shareholder, officer,
employee or agent of Metro is indebted to it except for advancements for
ordinary business expenses in a nominal amount.
3.28 Outside Financial Interests. Except as set forth on
Schedule 3.28 hereto, neither Seller nor any director or officer of
Seller or Metro has any direct or indirect financial interest in any
competitor, supplier or customer of Metro other than ownership of passive
investments constituting not more than 1% of the outstanding securities
of publicly-traded companies.
3.29 Payments, Compensation and Perquisites of Agents,
Consultants and Others. All payments to agents, consultants and others
made by Metro have been in payment of bona fide fees and commissions and
not as illegal or improper payments. Metro has properly and accurately
reflected on its books and records all compensation paid to and
perquisites provided to its agents, consultants and others. Such
compensation and perquisites have been properly and accurately disclosed
in the public or private reports, records and filings of Metro, to the
extent required by law.
3.30 Labor Agreements, Employee Benefit Plans, and Employment
Agreements. Except as set forth on Schedule 3.30 hereto, Metro is not a
party to (a) any union collective bargaining, works council or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, profit-sharing, deferred compensation, bonus, stock option,
stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement whether legally binding or not, (c) any plan or policy
providing for employee benefits, including but not limited to vacation,
disability, sick leave, medical, hospitalization, life and other
insurance plans, and related benefits, or (d) any employment agreement.
True, correct and complete copies of all documents creating or evidencing
any agreement, arrangement, plan or policy listed on Schedule 3.30 have
been delivered or made available to Buyer. Except as set forth on
Schedule 3.30 hereto, there are no negotiations, demands or proposals
which are pending or which have occurred since January 1, 1997 which
concern matters now covered, or that would be covered, by the type of
agreements, arrangements, plans or policies listed in this Section.
<PAGE>
3.31 ERISA.
(a) All employee benefit plans disclosed on Schedule 3.30
(collectively, "Plans") comply in all material respects with, and have
been operated and maintained in compliance with, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other
applicable laws and regulations, to the extent applicable. No
"reportable event" (as defined in Section 4043(b) of ERISA) or
"prohibited transaction" (as defined in Section 4975(c)(1) of the IRC, or
Section 406 of ERISA) has occurred with respect to any Plan, and, except
as may result from the Merger, there is no fact or circumstance which may
lead to the occurrence of any reportable event or prohibited transaction.
With respect to each Plan:
(i) All minimum funding standards of ERISA and the IRC
have been complied with, without waiver thereof;
(ii) Full payment has been made of all amounts which are
required and due under the terms of each Plan, and full payment will be
made of all amounts which are required and due through the date of the
Closing;
(iii) No "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the IRC) exists, and there has
been no waiver thereof applied for or granted;
(iv) The "current value" of the assets of each Plan does,
and at the Effective Time will, exceed the "present value" of all
"accrued benefits" thereunder (as such terms are defined in Section 3 of
ERISA);
(v) Metro has not incurred any liability to the PBGC, and
there exists no fact or circumstance which may result in any such
liability; and
(vi) The statements of assets and liabilities of each
audited Plan as of December 31, 1995 and the statements of changes in
fund balances and in financial position and the statements of changes in
net assets available for benefits under such Plan for such fiscal year,
copies of which have been furnished or made available to Buyer, fairly
present in all material respects the financial condition of such Plan as
at such date and the results of operations thereof for the year ended on
such date, all in accordance with GAAP applied on a consistent basis.
The Plans for which separate audited statements are not available from
Metro are identified on Schedule 3.30. All expenses and liabilities
relating to all of the Plans have been and will be on the Effective Date
fully and properly accrued on Metro's books and records.
(b) Neither Metro nor any of its affiliates is presently a
party to or participant in any multi-employer plan (as defined in
Section 3(37) of ERISA).
3.32 Terminated Plans. Neither Metro nor any of its affiliates
has terminated or taken action to terminate any Plan and neither Metro
nor any of its affiliates has any liability to any person or entity,
including without limitation the PBGC, any other governmental agency or
<PAGE>
any participant in or beneficiary of any such Plan. Neither Metro nor
any of its affiliates is liable for any excise, income or other tax or
penalty as a result of any such termination.
3.33 Overtime, Back Wages, Vacation and Minimum Wages. Except
as set forth on Schedule 3.33 hereto, no present or former employee of
Metro has any claim against Metro (whether under U.S., federal, state or
local law, foreign law, any employment agreement, or otherwise) on
account of or for (a) overtime pay, other than overtime pay for the
current payroll period, (b) wages or salary (excluding current bonus
accruals and amounts accruing under pension and profit-sharing plans) for
any period other than the current payroll period, (c) vacation, time off
or pay in lieu of vacation or time off, other than that earned in respect
of the current fiscal year, or (d) any violation of any statute,
ordinance or regulation relating to minimum wages or maximum hours of
work.
3.34 Discrimination and Occupational Safety and Health. Except
as set forth on Schedule 3.25 hereto, no person or party (including, but
not limited to, governmental agencies of any kind) has any claim, or
basis for any action or proceeding, against Metro arising out of any
statute, ordinance or regulation relating to discrimination in employment
or employment practices or occupational safety and health standards.
Metro has not received any notice from any U.S. federal, state, local or
foreign governmental entity alleging a claim of discrimination in
employment or employment practices or a violation of occupational safety
or health standards.
3.35 Alien Employment Eligibility. With respect to each person
employed by Metro since its inception, (a) Metro has hired such person in
compliance with the Immigration Reform and Control Act of 1986 and the
rules and regulations thereunder ("IRCA") and (b) Metro has complied in
all material respects with all recordkeeping and other regulatory
requirements under IRCA.
3.36 Labor Disputes; Unfair Labor Practices. There is neither
pending nor, to the best knowledge of Seller and Metro, threatened any
labor dispute, strike or work stoppage which affects or which may affect
the businesses of Metro. Neither Metro nor any of its agents,
representatives or employees has committed any unfair labor practice as
defined in the National Labor Relations Act of 1947, as amended. There
is not now pending or, to the best knowledge of Seller and Metro,
threatened any charge or complaint against Metro by the National Labor
Relations Board, any state or local labor or employment agency or any
representative thereof, and the execution of this Agreement and the
Merger hereunder will not result in any such charge or complaint.
3.37 Insurance Policies. Set forth on Schedule 3.37 hereto is
a list of all insurance policies and bonds in force covering or relating
to any of the properties, assets or businesses of Metro. Policies
therein described evidence insurance in such amounts and against such
risks and losses as are generally maintained with respect to comparable
businesses and properties.
<PAGE>
3.38 Environmental Matters.
() There is no investigation, inquiry and other proceeding
now pending or, to the knowledge of Seller or Metro, threatened by any
U.S. federal, state or local governmental entity or any foreign
governmental entity with respect to the properties, assets or businesses
of Metro in connection with the actual or alleged failure to comply with
any requirement of any law, regulation or ordinance relating to air or
water quality, waste management, hazardous or toxic substances, or the
protection of health or the environment.
() Metro does not generate, handle, transport or dispose of
any hazardous substances, hazardous wastes, hazardous materials or toxic
substances, as defined under applicable environmental laws (collectively,
"waste materials") and there is no waste disposal, treatment or storage
site used by Metro.
() Metro has not engaged any person, firm, corporation or
other entity to handle, transport or dispose of waste materials for
Metro.
() Metro has maintained all documents and records and made
all filings required by, and has otherwise fully complied with, all
applicable laws, regulations and ordinances relating to air or water
quality, waste management, hazardous or toxic substances, and the
protection of health or the environment. To the best knowledge of Seller
and Metro and except as provided in Schedule 3.38 hereto, none of the
properties leased by Metro or otherwise used in connection with its
business is contaminated with any hazardous waste or substance.
3.39 Broker's Fees. Neither Seller, Metro nor any of their
respective affiliates has retained any broker, finder or agent or agreed
to pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
3.40 Foreign Assets. Metro does not have any interest in any
real property or tangible or intangible personal property located outside
of the United States, including any stock, securities or investments in,
claims against, or receivables from any entity or person with
substantially all of its property or business so located.
3.41 Truthfulness. No representation or warranty of Seller
herein and no statement or information contained or referenced in any
Schedule delivered by Metro or Seller pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Buyer and Sub hereby make the following representations and
warranties to Seller.
<PAGE>
4.01 Corporate Existence. Each of Buyer and Sub is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, (i) has the corporate power and
authority to own and use its properties and to transact the business in
which it is engaged and to consummate the transactions contemplated
hereby and (ii) holds all of the franchises, licenses, rights of way,
operating permits, grants of location and carrier agreements and
certifications necessary and required therefor, except where the failure
to hold any such rights would not have a material adverse effect upon
Buyer. Sub is duly licensed or qualified to do business and is in good
standing in the State of Texas.
4.02 Approval of Agreement. The execution, delivery and
performance of this Agreement by Buyer and Sub has been duly authorized
and approved by all necessary corporate action on the part of Buyer and
Sub. Pursuant to such authorizations and approvals, each of Buyer and
Sub has full power and authority to enter into this Agreement and to
perform its obligations hereunder. Subject to compliance with the filing
and waiting period requirements under the H-S-R Act and the filing and
recordation of the Certificate of Merger, neither the execution and
delivery by Buyer or Sub of this Agreement nor the performance by Buyer
or Sub of its obligations hereunder does or will (i) conflict with or
result in any violation of or constitute a breach of any provision of the
Certificate of Incorporation or By-Laws of Buyer or Sub and, except as
set forth in any of the Schedules delivered under this Article, the
franchises, licenses, rights of way, permits, grants of location and
carrier agreements and certifications of Buyer or Sub, or any indenture,
evidence of indebtedness or other agreement to which Buyer or Sub is a
party or by which Buyer or Sub is bound, (ii) violate any judgment,
order, injunction, decree or award of any court, administrative agency or
governmental body against or binding upon Buyer or Sub or (iii)
constitute a violation by Buyer or Sub of any applicable law or
regulation.
4.03 Outstanding Shares of Capital Stock. The authorized
capital stock of Buyer consists of 50,000,000 shares of Buyer Common
Stock, of which 32,672,579 shares were issued and outstanding as of
February 28, 1997, and 1,040,012 shares of preferred stock, par value
$0.01 per share, none of which are issued and outstanding, and no shares
of any capital stock are held by Buyer in its treasury. All of the
outstanding shares of Buyer Common Stock are duly authorized and validly
issued, fully paid and non-assessable and free of preemptive rights.
Except as described in Buyer's Prospectus dated March 20, 1997 filed as
part of Buyer's Registration Statement No. 333-21223 on Form S-4 under
the Securities Act and attached as Schedule 4.03 hereto (the
"Prospectus"), and options granted pursuant to Buyer's employee stock
plans since February 28, 1997, no subscription, warrant, option or other
right to purchase or acquire any shares of any class of capital stock of
Buyer or securities convertible into or exchangeable for shares of such
capital stock is authorized or outstanding, and there is no commitment of
Buyer to issue any such shares, warrants, options or other such rights or
securities. Except as described in the Prospectus, there are no
agreements, arrangements, rights or commitments of any character relating
to the issuance, sale, purchase or redemption, or restricting the
transfer, of, or the declaration or payment of dividends on, any shares
of capital stock of Buyer.
<PAGE>
4.04 Authorization and Issuance of Stock Consideration and
Buyer Stock Options. The issuance of the Stock Consideration and Buyer
Stock Options as contemplated by this Agreement have been duly authorized
and, upon delivery to the Seller and to the other holders of Metro Common
Stock of certificates for the Stock Consideration in exchange for the
shares of Metro Common Stock and, upon delivery to the holders of Metro
Stock Options of the Buyer Stock Options in exchange for their respective
Metro Stock Options in accordance with the terms hereof, the Stock
Consideration will have been validly issued, fully paid and non-
assessable, and free of preemptive rights, and, if and when the shares of
Buyer Common Stock issuable upon exercise of the Buyer Stock Options are
issued and delivered against payment therefor as provided in such Buyer
Stock Options, such shares of Buyer Common Stock will be validly issued,
fully paid and non-assessable and free of preemptive rights.
4.05 Books and Records. The books of account, stock record
books, minute books, bank accounts and other corporate records of Buyer
have been made available to Metro and Seller and are true, correct and
complete in all material respects, have been maintained in accordance
with sound business practices and the matters contained therein are
accurately reflected in the Buyer's December Financial Statements (as
hereinafter defined) to the extent appropriate.
4.06 Financial Statements. The consolidated balance sheet of
Buyer as of December 31, 1996 ("Buyer's December Balance Sheet"), and the
related consolidated statements of operations, changes in shareholders'
equity and cash flow for the year then ended (collectively, "Buyer's
December Financial Statements") set forth in the Prospectus are true,
complete and correct in all material respects, have been prepared in
conformity with GAAP consistently applied, and present fairly in all
material respects the consolidated financial position of Buyer at
December 31, 1996 and the consolidated results of operations of Buyer for
the year then ended. Without limiting the foregoing, all of the
consolidated assets and liabilities of Buyer at December 31, 1996 have
been properly reflected on Buyer's December Balance Sheet in accordance
with GAAP.
4.07 Events Subsequent to December 31, 1996. Except as set
forth on Schedule 4.07 hereto or described in the Prospectus, since
December 31, 1996, there has been no (a) change in the business,
condition (financial or otherwise), operations, prospects, assets or
liabilities of Buyer, other than changes in the ordinary course of
business, none of which have been materially adverse, (b) material
damage, destruction or loss, whether covered by insurance or not,
affecting any of the assets of Buyer or any of its subsidiaries, (c)
declaration, setting aside or payment of any dividend or other
distribution in respect of or to the holder of any of the shares of the
capital stock of Buyer, (d) issuance of any stock or other securities by
Buyer (except upon exercise of options granted pursuant to Buyer's 1993
Stock Option Plan), (e) waiver of any rights or suffering of any losses
by Buyer or any of its subsidiaries, except in the ordinary course of
business, none of which have been materially adverse, or (f) entering
into any transaction by Buyer or any of its subsidiaries other than in
the ordinary course of business.
<PAGE>
4.08 No Undisclosed Liabilities. Buyer does not have any
liabilities or obligations whatsoever, either accrued, absolute,
contingent or otherwise, and Buyer knows of no basis for any claim
against Buyer or any of its subsidiaries for any liability or obligation,
except (a) to the extent set forth or reflected on the Buyer's December
Balance Sheet, or (b) to the extent specifically set forth on any
Schedule delivered by Buyer pursuant hereto or otherwise described in
this Article IV, or (c) liabilities or obligations incurred in the normal
and ordinary course of business since December 31, 1996, none of which
liabilities or obligations since December 31, 1996 have been materially
adverse.
4.09 No Breach of Law or Governing Documents. There is no
material default under or violation of any applicable statute, law,
ordinance, decree, order, rule or regulation of any governmental body, or
the provisions of any franchise, license, right of way, construction or
operating permit, grant of location or carrier agreement or
certification, by Buyer or any of its subsidiaries and there is no
default under or violation of the Certificate of Incorporation or By-laws
of Buyer or Sub. Except as set forth in Sections 3.24 and 4.02, no
governmental permits or consents are necessary for Buyer and Sub to
effect the transactions contemplated hereby.
4.10 Litigation and Arbitration. Except as described in the
Prospectus, there is no suit, claim, action or proceeding now pending or,
to the best knowledge of Buyer, threatened before any court, grand jury,
administrative or regulatory body, governmental agency, arbitration or
mediation panel or similar body, to which Buyer or any of its
subsidiaries is a party or which may result in any judgment, order,
decree, liability, award or other determination against Buyer or any of
its subsidiaries which, if determined adversely to Buyer or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on Buyer or which will prevent or hinder the consummation
of the transactions contemplated by this Agreement. No such judgment,
order, decree or award has been entered against Buyer which has, or could
have, any continuing effect.
4.11 Tax Returns and Audit. Buyer has filed, or caused to be
filed, on a timely basis with the appropriate agencies all U.S. federal,
state, local, foreign and other tax returns and tax reports required by
law to be filed by or with respect to Buyer and each of its employees and
employee benefit plans, and, except as set forth on Schedule 4.11 hereto,
(a) such returns and reports are true, complete and correct, (b) no audit
or investigation of Buyer or any such returns or reports is in progress,
pending or threatened, (c) all Taxes due from Buyer have been fully paid
or accrued, (d) there exists no unpaid Tax or Tax deficiency assessed by
any governmental authority against Buyer or with respect to its
businesses, (e) to the best knowledge of Buyer, there exist no grounds
for the assertion or assessment of any additional Taxes against Buyer or
with respect to its businesses, and (f) no waiver of any statute of
limitations has been given and is in effect in respect to the assessment
of any Taxes against Buyer.
4.12 Licenses, Rights of Way and Permits. Buyer and its
subsidiaries hold all licenses, rights of way, operating permits, grants
of location and carrier agreements and certifications which are required
for the conduct of the businesses of Buyer and its subsidiaries in all
material respects in the manner and to the extent presently conducted.
<PAGE>
Such licenses, rights of way, permits, grants of location and carrier
agreements and certifications are valid and in full force and effect and,
except as specifically set forth on Schedule 4.12 hereto, no termination
or other penalty will result thereunder, and no consent is required
thereunder, for the consummation of the transactions contemplated by this
Agreement.
4.13 Business Relationships. No current customer of Buyer or
any of its Subsidiaries, no carrier with which Buyer or any of its
subsidiaries has an interconnect agreement and no entity which since
January 1, 1996 has supplied network equipment or optical fiber cable to
Buyer or any of its subsidiaries has threatened in writing to cancel or
otherwise terminate its relationship with Buyer or any of its
subsidiaries, except where such cancellation or termination would not
have a material adverse effect on Buyer.
4.14 Environmental Matters.
(a) There is no investigation, inquiry and other
proceeding now pending or, to the knowledge of such Buyer, threatened by
any U.S. federal, state or local governmental entity or any foreign
governmental entity with respect to the properties, assets or businesses
of Buyer or any of its subsidiaries in connection with the actual or
alleged failure to comply with any requirement of any law, regulation or
ordinance relating to air or water quality, waste management, hazardous
or toxic substances, or the protection of health or the environment.
(b) Neither Buyer nor any of its subsidiaries generates,
handles, transports or deposes of any hazardous substances, hazardous
wastes, hazardous materials or toxic substances, as defined under
applicable environmental laws (collectively, "waste materials").
(c) Neither Buyer nor any of its subsidiaries has engaged
any person, firm, corporation or other entity to handle, transport or
dispose of waste materials.
(d) Buyer and its subsidiaries have maintained all
documents and records and made all filings required by, and has otherwise
fully complied with, all applicable laws, regulations and ordinances
relating to air or water quality, waste management, hazardous or toxic
substances, and the protection of health or the environment. To the best
knowledge of Buyer, none of the properties owned or leased by Buyer or
any of its subsidiaries or otherwise used in connection with any of their
respective businesses is contaminated with any hazardous waste or
substance.
4.15 Broker's Fees. Neither Buyer nor Sub nor any of their
respective affiliates has retained any broker, finder or agent or agreed
to pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
4.16 Buyer's SEC Reports. The Prospectus and each report filed
by Buyer with the Securities and Exchange Commission ("SEC Reports")
pursuant to Section 13 or 14(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), since May 2, 1996 complied as to form in all
material respects with each applicable provision of the Securities Act,
the Exchange Act, and the rules and regulations promulgated thereunder
and did not as of such date contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
<PAGE>
contained therein, in light of the circumstances in which they were made,
not misleading. Each SEC Report to be filed by Buyer between the date of
this Agreement and the Effective Time will comply as to form in all
material respects with each applicable provision of the Exchange Act and
the rules and regulations promulgated thereunder and will not as of such
date contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
4.17 Truthfulness. No representation or warranty of Buyer or
Sub herein and no statement or information contained or referenced in any
Schedule delivered by Buyer or Sub pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees with Buyer that, from and after the
date of this Agreement and until the Effective Time, Seller will cause
Metro to conduct the businesses of Metro subject to the following
provisions and limitations:
5.01 Operation of the Business. Without the prior written
consent of Buyer, Metro will not:
(a) Grant any increase in the rate of pay of any of its
officers, employees or agents, enter into or increase the benefits
provided under any bonus, profit-sharing, incentive compensation,
pension, retirement, medical, hospitalization, life insurance or other
insurance plan or plans, or other contracts or commitments, or in any
other way increase in any amount the benefits or compensation of any such
officer, employee or agent;
(b) Enter into any employment contract or collective
bargaining agreement;
(c) Enter into any material contract or commitment or
engage in any transaction which is not in the usual and ordinary course
of its business or which is inconsistent with past practices;
(d) Sell, transfer, assign or permit to expire or be
canceled any license, right of way, permit, grant of location or carrier
agreement or certification;
(e) Sell or dispose of or encumber any material amount of
assets;
(f) Make, or enter into any contract for, any capital
expenditure or enter into any lease of capital equipment or real estate
<PAGE>
not contemplated by Metro's 1997 capital or operating budget which
involves more than $50,000 or enter into any series of such contracts
with any one party or affiliated group of parties involving more than
$50,000 in the aggregate;
(g) Enter into any contract, whether for the purchase or
sale of materials, supplies, component parts or other items or services
or otherwise, and whether in the ordinary course of its business or
otherwise, not contemplated by Metro's 1997 capital or operating budget
which involves more than $50,000 or enter into any series of such
contracts with any one party or affiliated group of parties involving
more than $50,000 in the aggregate;
(h) Create, assume, incur or guarantee any indebtedness
for borrowed money, other than indebtedness for money borrowed from
Seller which, if borrowed after March 31, 1997 with Buyer's prior
approval, Buyer agrees at the time of borrowing to repay said borrowing
pursuant to Section 1.11;
(i) Except as required by Section 1.08 hereof or upon
exercise of Metro Stock Options, declare or pay any distribution in
respect of, or make any sale of, its equity interests or directly or
indirectly redeem, purchase or otherwise acquire any of its equity
interests;
(j) Change any accounting procedures or practices or its
financial structure or make any new elections with respect to Taxes or
any changes in current elections with respect to Taxes;
(k) Perform any act, or attempt to do any act, or permit
any act or omission to act, which will cause a breach of any material
contract, commitment or obligation to which it is a party;
(l) Except in the ordinary course of its business and
consistent with its past practices, take any other action or incur any
other liability or obligation in excess of $250,000 (other than a
liability for which Seller agrees in writing at Closing to fully
indemnify the Buyer, without regard to any of the limitations in
Section 10.05 hereof) which, if taken or incurred prior to the date of
this Agreement, would be required to be disclosed on any of Seller's
Schedules hereto; or
(m) Authorize, agree or become committed to do or take
any of the foregoing actions.
5.02 Preservation of Business. Metro will carry on its
businesses diligently and substantially in the same manner as heretofore
conducted and keep its business organization intact, including its
present employees (except as may occur in the ordinary course of
business) and present relationships with suppliers and customers and
others having business relations with it (except as may occur in the
ordinary course of business). Metro will at all times maintain in
inventory quantities of component parts and other supplies and materials
sufficient to allow the Surviving Corporation to continue to operate its
businesses and complete its construction plans, after the Effective Time,
free from any shortage of such items.
<PAGE>
5.03 Insurance and Maintenance of Property. All of the
property owned or leased by Metro will be insured against all ordinary
and insurable risks pursuant to the policies listed on Schedule 3.37
hereto or replacement policies and Metro will operate, maintain and
repair all of its property in a careful, prudent and efficient manner.
5.04 Full Access. Representatives of Buyer shall have full
access at all reasonable times to all premises, properties, books,
records, contracts, tax records and documents of Metro and Metro will
furnish to Buyer any information with respect thereto as Buyer may from
time to time request. Such examination and investigation by Buyer shall
not affect the warranties and representations of the Seller contained in
this Agreement; provided, however, that if any executive officer of Buyer
is finally held by a trier of fact or an arbitrator to have knowingly
breached its covenant under Section 6.07(a)(v), then Seller shall be
relieved of any liability for any unintentional breach discovered, but
not disclosed, by Buyer.
5.05 Books, Records and Financial Statements. Metro will
maintain its books and financial records in accordance with GAAP
consistently applied, and on a basis consistent with its past practices.
Said books and financial records shall fairly and accurately reflect the
operations of the respective businesses of Metro in all material
respects. Metro shall furnish to Buyer promptly, as available, financial
statements and operating reports applicable to Metro since December 31,
1996, all of which shall be prepared in accordance with GAAP consistently
applied and shall present fairly in all material respects, the financial
position and results of operations of Metro at the dates and for the
periods indicated.
5.06 Other Governmental Filings. Seller and Metro will
cooperate with Buyer in making, as soon as practicable following the
execution hereof, all filings required by any governmental agency and to
obtain as promptly as practicable all required waivers, consents and
approvals from governmental agencies and others in connection with the
transactions contemplated by this Agreement. All information provided by
Seller and Metro in connection with such filings and requests for
waivers, consents and approvals will be true, accurate and complete and
will comply with all applicable laws and regulations and contractual
requirements.
5.07 Third Party Offers and Negotiations. Seller shall not and
shall not permit Metro to entertain any offer from or negotiate with any
other party with respect to the sale or acquisition of any shares of the
capital stock or any material asset of Metro.
5.08 Employees of the Companies. Neither Seller nor any of its
affiliates, successors or assigns will, at any time prior to the first
anniversary of the Effective Time, directly or indirectly, without the
express written consent of Buyer, solicit or encourage any employee of
Metro to leave the employment of Metro or hire any employee of Metro or
any person who was an employee of Metro at any time after January 1, 1996
(other than the persons identified in the letter dated March 24, 1997
from W. Bruce Hanks to James C. Allen or any person whose employment is
involuntarily terminated by the Surviving Corporation following the
Effective Time). As used in this Section 5.08 and elsewhere in this
Agreement, the term "affiliates" of Seller means each "affiliate" of
Seller as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended.
<PAGE>
5.09 Tax Matters.
(a) All income, deductions, losses, gains and credits of
Metro incurred on or prior to the date which includes the Effective Time
shall be reportable on the consolidated return of Seller. Upon Seller's
reasonable request, Buyer will afford Seller and its representatives
access to the books and records of Metro for purposes of preparing
federal and state income Tax returns and reports (including any
amendments to previously filed returns and reports) for all Tax periods
of Metro ending on or prior to the Effective Time. Seller shall prepare
(or cause to be prepared) and file (or cause to be filed) all federal and
state income Tax returns and reports (including any amended returns and
reports) for all such periods. Seller shall provide Buyer and its
representatives with copies of each such completed return and report (and
amended return and report) (except that in the case of such consolidated
federal return and report of Seller, only the schedules relating to Metro
included in the Seller consolidated federal return need be provided) and,
a statement certifying the amounts of Tax shown thereon which are payable
by Metro, if any, at least twenty (20) business days prior to the due
date for the filing thereof. Each such return and report shall be true,
correct and complete. Any Taxes shown to be due or payable by Metro on
any such returns and reports shall be paid by Metro, provided that the
Seller shall pay to Metro any amount that is not accrued as a liability
on the March Balance Sheet no later than five (5) business days before
the due date for payment of such Taxes.
(b) In the event of an audit or investigation of any Tax
return or report (a "Pre-Closing Action") of Metro (or of Seller which
relates in any way to Metro) with respect to any of the operations or
activities of Metro on or prior to the Effective Time or any claim or
demand for any additional Tax with respect thereto, Seller shall provide
Buyer with such factual information which Seller possesses as Buyer may
request with respect thereto and shall otherwise provide such assistance
as Buyer may request in connection with such audit or investigation.
Seller may control the defense and settlement of any issues arising as a
result of any such audit or investigation unless such issue may impact
upon any Tax of Buyer or Metro which is attributable to periods ending
after the Effective Time (in which event the defense and settlement
thereof shall be shared by Buyer and Seller). Each party shall provide
the other with such factual information which it possesses and shall
otherwise provide such assistance as the other may reasonably request in
connection with the defense and settlement of any such matter.
(c) If any adjustment is made in a Pre-Closing Action of
Metro (or of Seller which relates in any way to Metro) resulting in a
deficiency which would have required a larger Tax payment by Metro if
such adjustment had been included in the original return, and such
deficiency represents a permanent difference in Tax liability, the Seller
shall be solely responsible for such deficiency. If the deficiency
represents a timing difference in Tax liability, the Seller will pay to
Buyer an amount equal to the Tax liability net of any future Tax benefit
to the Surviving Corporation, in each case discounted to present value on
the date of payment from the due date of such future Tax liability and
Tax benefit at the rate of 9% per annum.
(d) If any adjustment is made in a Pre-Closing Action of
Metro (or of Seller which relates in any way to Metro) resulting in a
refund or credit, and such adjustment does not affect the future Tax
<PAGE>
liability of the Surviving Corporation, the refund or credit shall be
retained by or paid to the Seller. If any adjustment is made which
increases the future Tax liability of the Surviving Corporation, Seller
will pay to Buyer an amount equal to the amount of such future Tax
liability discounted to present value on the date of payment from the due
date of such future Tax liability at the rate of 9% per annum.
(e) Seller shall maintain and preserve their records with
respect to Metro for at least ten (10) years after the Effective Time and
until any outstanding claims in respect of Taxes for any period or
periods ending on or prior to the Effective Time are resolved.
5.10 Notification of Certain Matters.
(a) Each of Seller and/or Metro shall give prompt written
notice to Buyer of (i) the occurrence, or failure to occur, of any event
which will be likely to cause any representation or warranty of Seller
contained in this Agreement to be untrue or inaccurate at any time from
the date hereof to the Effective Time, (ii) any failure of Seller to
comply with or satisfy any covenant or agreement to be complied with or
satisfied by it under this Agreement or the inability of the Seller to
satisfy any condition specified in Article VIII, (iii) any claim, action,
proceeding or investigation commenced or threatened, involving or
affecting Metro or any of its properties, assets, or businesses, (iv) any
material adverse change in the business, condition (financial or
otherwise), operations, prospects, assets or liabilities of Metro or the
occurrence of an event known to any Seller and/or Metro which, so far as
reasonably can be foreseen at the time of its occurrence, would result in
any such change, and (v) the discovery by Seller, through Seller's
performance of its due diligence in connection with this Agreement, of
any fact or circumstance relating to the business or operations of Buyer
or any of its subsidiaries which leads the Seller to determine in good
faith that any representation of Buyer or Sub contained in this Agreement
is, or is reasonably likely to be, untrue or inaccurate at any time from
the date hereof to the Effective Time.
(b) In addition to, and not in lieu of, the foregoing, Seller
shall deliver to Buyer a true and complete schedule of changes (the
"Seller Update Schedule") to any of the information contained in the
Seller's Schedules to this Agreement (including changes to any of the
representations or warranties of Seller in Article III hereof as to which
no Schedules have been created as of the date hereof but as to which a
Schedule would have been required hereunder to have been created on or
before the date hereof if such changes had existed on the date hereof) in
writing to Buyer, dated within five business days of the Effective Time,
together with a certificate executed by an authorized officer of Seller
stating that he has supervised or conducted a reasonable investigation
necessary for purposes of such certificate and certifying as to the
accuracy and completeness of such Seller Update Schedule.
ARTICLE VI
COVENANTS OF BUYER
From and after the date of this Agreement and until the
Effective Time, Buyer and Sub covenant and agree with Metro as follows:
<PAGE>
6.01 Operation of the Business. Without the prior written
consent of Metro, neither Buyer nor any of its subsidiaries will:
(a) Enter into any material contract or commitment or
engage in any transaction which is not in the usual and ordinary course
of its business or which is inconsistent with past practices;
(b) Sell, transfer, assign or permit to expire or be
canceled any license, right of way, permit, grant of location or carrier
agreement or certification, other than pursuant to currently outstanding
credit facilities described in the Prospectus or in connection with an
additional senior secured bank credit facility in an aggregate principal
amount of up to $300 million;
(c) Sell or dispose of or encumber any material amount of
assets other than pursuant to currently outstanding credit facilities
described in the Prospectus or in connection with an additional senior
secured bank credit facility in an aggregate principal amount of up to
$300 million;
(d) Create, assume, incur or guarantee any indebtedness
for borrowed money other than pursuant to currently outstanding credit
facilities described in the Prospectus or in connection with an
additional senior secured bank credit facility in an aggregate principal
amount of up to $300 million;
(e) In the case of Buyer, (i) declare, set aside or pay
any dividends on or make any other distributions in respect of the Buyer
Common Stock, (ii) split, combine, reclassify or take similar action with
respect to the Buyer Common Stock or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for the
Buyer Common Stock or (iii) adopt a plan of complete or partial
liquidation or dissolution or any recapitalization affecting the Buyer
Common Stock;
(f) In the case of Buyer and except upon exercise of
outstanding warrants or commitments described in the Prospectus or upon
exercise of Buyer Stock Options, make any sale of its equity interests or
directly or indirectly redeem, purchase or otherwise acquire any of its
equity interests;
(g) Change any accounting procedures or practices or its
financial structure or make any new elections with respect to Taxes or
any changes in current elections with respect to Taxes;
(h) Perform any act, or attempt to do any act, or permit
any act or omission to act, which will cause a breach of any material
contract, commitment or obligation to which it is a party;
(i) Except in the ordinary course of its business and
consistent with its past practices, take any other action or incur any
other liability or obligation in excess of $2,500,000 which, if taken or
incurred prior to the date of this Agreement, would be required to be
disclosed on any of Buyer's Schedules hereto; or
<PAGE>
(j) Authorize, agree or become committed to take any of
the foregoing actions.
6.02 Preservation of Business. Buyer and its subsidiaries will
carry on their respective businesses diligently and substantially in the
same manner as heretofore conducted and keep their respective business
organizations intact, including their respective present employees
(except as may occur in the ordinary course of business) and present
relationships with suppliers and customers and others having business
relations with them (except as may occur in the ordinary course of
business).
6.03 Insurance and Maintenance of Property. All of the
property owned or leased by Buyer and its subsidiaries will be insured
against all ordinary and insurable risks and Buyer and its subsidiaries
will operate, maintain and repair all of their respective property in a
careful, prudent and efficient manner.
6.04 Full Access. Metro and Seller and their representatives
shall have full access at all reasonable times to all premises,
properties, books, records, contracts, tax records and documents of Buyer
and its subsidiaries and Buyer and its subsidiaries will furnish to
Seller any information with respect thereto as Seller may from time to
time request. Such examination and investigation by Metro and Seller
shall not affect the warranties and representations of the Buyer and Sub
contained in this Agreement; provided, however, that if any executive
officer of Metro or Seller is finally held by a trier of fact or an
arbitrator to have knowingly breached its covenant under Section
5.10(a)(v), then Buyer shall be relieved of liability for any
unintentional breach discovered, but not disclosed, by Metro or Seller,
as the case may be.
6.05 Books, Records and Financial Statements. Buyer will
maintain its consolidated books and financial records in accordance with
GAAP consistently applied, and on a basis consistent with its past
practices. Said books and financial records shall fairly and accurately
reflect the consolidated operations of the respective businesses of Buyer
in all material respects. Buyer shall furnish to Seller promptly, as
available, all SEC Reports filed by Buyer between the date hereof and the
Effective Time, including quarterly consolidated financial statements of
Buyer since the date of Buyer's December Financial Statements, all of
which shall be prepared in accordance with GAAP consistently applied and
shall present fairly in all material respects the consolidated financial
position and results of operations of Buyer at the dates and for the
periods indicated.
6.06 Other Governmental Filings. Buyer and Sub will cooperate
with Seller and Metro in making, as soon as practicable following the
execution hereof, all filings required by any governmental agency and to
obtain as promptly as practicable all required waivers, consents and
approvals from governmental agencies and others in connection with the
transactions contemplated by this Agreement. All information provided by
Buyer and Sub in connection with such filings and requests for waivers,
consents and approvals will be true, accurate and complete and will
<PAGE>
comply with all applicable laws and regulations and contractual
requirements. Buyer shall use its best efforts to have the Stock
Consideration approved for listing on the Nasdaq National Market System,
upon official notice of issuance.
6.07 Notification of Certain Matters.
(a) Buyer or Sub, as the case may be, shall give prompt
written notice to Metro and Seller of (i) the occurrence, or failure to
occur, of any event which will be likely to cause any representation or
warranty of Buyer or Sub contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Effective Time,
(ii) any failure of Buyer or Sub to comply with or satisfy any covenant
or agreement to be complied with or satisfied by it under this Agreement
or the inability of Buyer to satisfy any condition specified in Article
IX, (iii) any claim, action, proceeding or investigation commenced or
threatened, involving or affecting Buyer or any of its subsidiaries or
any of their respective properties, assets, or businesses, (iv) any
material adverse change in the consolidated business, condition
(financial or otherwise), operations, prospects, assets or liabilities of
Buyer or the occurrence of an event known to Buyer which, so far as
reasonably can be foreseen at the time of its occurrence, would result in
any such change, and (v) the discovery by Buyer, either through Buyer's
performance of its due diligence in connection with this Agreement or
through Buyer's performance of its obligations under the Management
Agreement, of any fact or circumstance relating to Metro's businesses or
operations which leads Buyer to determine in good faith that any
representation of Seller contained in this Agreement is or is reasonably
likely to be untrue or inaccurate at any time from the date hereof to the
Effective Time.
(b) In addition to, and not in lieu of, the foregoing, Buyer
shall deliver to Metro and Seller a true and complete schedule of changes
(the "Buyer Update Schedule") to any of the information contained in
Buyer's Schedules to this Agreement (including any changes to any of the
representations or warranties of Buyer or Sub in Article IV hereof as to
which no Schedules have been created as of the date hereof but as to
which a Schedule would have been required hereunder to have been created
on or before the date hereof if such changes had existed on the date
hereof) in writing to Metro and Seller, dated within five business days
of the Effective Time, together with a certificate executed by an
authorized officer of Buyer stating that he has supervised or conducted a
reasonable investigation necessary for purposes of such certificate and
certifying as to the accuracy and completeness of such Buyer Update
Schedule.
ARTICLE VII
COVENANTS NOT TO COMPETE
(a) Seller acknowledges and agrees that the value to Buyer of
the transactions provided for herein would be substantially diminished if
Seller (or any of its affiliates, successors or assigns) were to enter
into business activities competitive with those of Metro for a reasonable
period following the Effective Time. Consequently, as an inducement to
Buyer to enter into this Agreement, which Seller acknowledges benefits
it, and in consideration of the payments, promises and representations of
Buyer under this Agreement, Seller covenants and agrees, for the benefit
of Buyer and the Surviving Corporation, that neither Seller nor any of
its affiliates, successors or assigns will engage in, or have any
interest in, directly or indirectly, any other person, firm, corporation
<PAGE>
or other entity engaged in, for a period of three (3) years following the
Effective Time, any competitive local telecommunications exchange
business in any of the counties in the State of Texas listed on Schedule
7.00 hereto, except that (i) in relation to Seller's local telephone
operations in Lake Dallas, San Marcos and Mustang Island, Texas, Seller
and its affiliates, successors and assigns (referred to below
collectively as "Century" for purposes of this Article VII) shall be
entitled to continue to offer service within their franchise territories
to existing and additional customers and to build extensions to their
networks to offer service to additional customers unless the Surviving
Corporation is able to provide such services, utilizing facilities
suitable to Century for these purposes, in which event Seller shall
purchase such services from the Surviving Corporation pursuant to the
Master Service Agreement and (ii) Seller may invest in or acquire one or
more independent local exchange companies, other than Southwestern Bell
Telephone or GTE Corp., with operations in the counties in the State of
Texas listed on Schedule 7.00 hereto. Additionally, it is acknowledged by
Buyer that Century is engaged in certain other telecommunications
businesses in the listed counties, including but not limited to retail
long distance, wholesale long distance, interactive information services,
internet service provision and wireless local services, none of which
shall be deemed to constitute a "competitive local telecommunications
exchange business" for purposes of this Article VII. It is also agreed
that Seller shall be free to make passive investments in any publicly-
traded security of a telecommunications company which does not constitute
more than 1% of the total outstanding amount of such security (and to
continue to hold Buyer Common Stock on the terms contemplated hereby) and
may make investments in any entity which does not have any significant
operations in any of the counties listed on Schedule 7.00 hereto.
(b) Seller specifically acknowledges and agrees that the
foregoing covenants are commercially reasonable and reasonably necessary
to protect the interests Buyer will acquire in the businesses of Metro
hereunder.
(c) If any court or tribunal of competent jurisdiction shall
refuse to enforce one or more of the covenants contained in this Article
VII because the time limit applicable thereto is deemed unreasonable, it
is expressly understood and agreed between the parties hereto that such
covenant or covenants shall not be void but that for the purpose of such
proceeding such time limitation shall be deemed to be reduced to the
extent necessary to permit the enforcement of such covenant or covenants.
If any court or tribunal of competent jurisdiction shall refuse to
enforce any or all of the covenants contained in this Article VII
because, taken together, they are more extensive (whether as to
geographic area, scope of business or otherwise) than is deemed to be
reasonable, it is expressly understood and agreed between the parties
hereto that such covenant or covenants shall not be void but that for the
purpose of such proceeding the restrictions contained therein (whether as
to geographic area, scope of business or otherwise) shall be deemed to be
reduced to the extent necessary to permit the enforcement of such
covenant or covenants.
(d) Seller hereby acknowledges that the businesses of Metro
are unique and that Buyer, the Surviving Corporation and their respective
successors and assigns will suffer irreparable and continuing harm to the
extent that any of the foregoing covenants is breached and that legal
remedies would be inadequate in the event of any such breach.
Accordingly, Seller agrees that, in the event of a breach of any of the
covenants contained in this Article VII, Buyer and the Surviving
<PAGE>
Corporation shall, in addition to any other rights and remedies available
under law and in equity, have the right and remedy to have the provisions
of this Article VII specifically enforced by any court having
jurisdiction.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER AND SUB TO EFFECT THE MERGER
The obligations of Buyer and Sub to consummate the transactions
provided for in this Agreement shall be subject to the satisfaction of
each of the following conditions on or before the date of the Closing,
subject to the right of Buyer to waive any one or more of such
conditions:
8.01 Representations and Warranties of Seller. The
representations and warranties of Seller contained in this Agreement
shall be true and correct when made and the information contained
therein, as updated by the Seller Update Schedule, taken as a whole,
shall not have materially adversely changed as of the date of Closing
(except for changes specifically permitted hereunder or as may be caused
solely by the gross negligence of Buyer under the Management Agreement).
8.02 Performance of this Agreement. Seller shall have duly
performed or complied in all material respects with all of the
obligations to be performed or complied with by it under the terms of
this Agreement on or prior to the date of the Closing.
8.03 Certificate of Seller. Buyer shall have received a
certificate signed by chief executive officer of Seller dated as of the
date of the Closing and subject to no qualification certifying that the
conditions set forth in Sections 8.01, 8.02, 8.05 and 8.06 hereof have
been fully satisfied. Such certificate shall be deemed a representation
and warranty of Seller under this Agreement.
8.04 Opinion of Counsel. Buyer shall have received from Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., special counsel
to Metro and the Seller, a favorable opinion of counsel dated the date of
the Closing substantially in the form of Exhibit F hereto.
8.05 No Prohibitions. No preliminary or permanent injunction
or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission shall be in effect, or shall have been recommended by the
staff of a governmental, regulatory or administrative agency or
commission, which would prevent the consummation of the transactions
contemplated hereby.
8.06 Consents. All of the consents and approvals listed on
Schedules 3.12 and 3.21 hereto (other than those related to office
leases) shall have been obtained.
8.07 Compliance With Applicable Law. The filing and other
requirements under any applicable law, rule or regulation, including
without limitation the filing and waiting period requirements under the
H-S-R Act, relating to the consummation of the transactions provided for
<PAGE>
herein shall have been duly complied with. The Registration Statement
covering the issuance of the Stock Consideration shall be effective under
the Securities Act and no stop order suspending such effectiveness shall
have been entered and no proceeding seeking a stop order suspending such
effectiveness shall be pending or threatened. The Buyer Common Stock to
be issued in connection with the Merger shall have been approved for
listing, upon notice of issuance, on the Nasdaq National Market System.
Seller and each other holder of Metro Common Stock listed on
Schedule 8.07 hereto shall have executed and delivered to Buyer an
Affiliate Agreement substantially in the form of Exhibit G hereto.
8.08 Resignations. Metro and Seller shall have caused to be
delivered to Buyer the resignations of all of the directors and officers
of Metro, effective as of the Closing, in form reasonably satisfactory to
Buyer, provided that no such resignation will prevent the continued
employment of any individual listed on Schedule 1.09 hereto as provided
in Section 1.09 hereto.
8.09 Books and Records. Metro shall have caused to be
delivered to Buyer the minute books, stock record books, stock transfer
ledgers, corporate seals and other corporate books and records of Metro
and shall have surrendered custody of all of the other business records,
engineering records and other documents, discs, tapes and other records
owned by Metro, including but not limited to all sales data, customer
lists and records, accounts, bids, contracts, supplier records, drawings,
designs, specifications, process information, performance data, software,
programs and other information and data.
8.10 Tax Status. Buyer shall have received an affidavit signed
by the chief executive officer of Metro dated as of the Effective Time
stating, under penalty of perjury, the United States taxpayer
identification number of each of the Shareholders and that Metro is not a
foreign person, pursuant to Section 1445(b)(2) of the IRC.
8.11 Joint Venture Agreement. Seller and Brooks Fiber
Communications of Michigan, Inc., a Delaware corporation wholly-owned by
Buyer ("BFC of Michigan"), shall have executed and delivered agreements,
substantially in the forms attached hereto as Exhibit K, for a joint
venture to construct and operate local telecommunications networks within
the State of Michigan (the "Joint Venture").
8.12 Master Service Agreement. Seller and Buyer shall have
executed and delivered a mutually satisfactory Master Service Agreement.
8.13 Miscellaneous Services Agreement. Seller and Buyer shall
have executed and delivered a mutually satisfactory three-year "take or
pay" agreement whereby Seller will provide Buyer at competitive prices
services relating to customer care, billing, provisioning and/or other
services at an annual minimum level of $1,000,000 commencing January 1,
1998 ("Miscellaneous Services Agreement"), which Miscellaneous Services
Agreement shall provide that, in the event in any calendar year Buyer's
purchases thereunder total less than $1,000,000, Buyer shall pay Seller
25% of the difference between $1,000,000 and the actual amount of such
purchases.
<PAGE>
8.14 Agreements with Shareholders, Option Holders and SAR
Holders. Each of the Agreements contemplated by Section 1.08 shall have
been executed and delivered and the transactions contemplated thereby
shall have been consummated.
8.15 Termination of Certain Agreements. Each of the Put
Agreements and the Shareholders Agreement shall have been terminated in
the manner contemplated by Section 1.08(a)(iii), in each case without
liability to Metro other than any liability therefor accrued on the March
Balance Sheet or any liability expressly assumed in writing by Buyer.
8.16 Shareholder Approval. Seller and each of the other
holders of Metro Common Stock shall have duly approved this Agreement and
the Merger in accordance with Delaware Law and Metro's certificate of
incorporation, by-laws and the Shareholders Agreement.
8.17 March Balance Sheet. No unresolved dispute under Section
2.03(d) shall be pending.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER AND
METRO TO EFFECT THE MERGER
The obligations of each of Seller and Metro to consummate the
transactions provided for in this Agreement shall be subject to the
satisfaction of each of the following conditions on or before the date of
the Closing, subject to the right of Metro to waive any one or more of
such conditions in Sections 9.01 through 9.08, and the right of Seller to
waive any one or more of such conditions in Sections 9.09 through 9.13:
9.01 Representations and Warranties of Buyer. The
representations and warranties of Buyer contained in this Agreement shall
be true and correct when made and the information contained therein, as
updated by the Buyer Update Schedule, taken as a whole, shall not have
materially adversely changed as of the date of the Closing (except for
changes specifically permitted hereunder).
9.02 Performance of this Agreement. Buyer shall have duly
performed or complied in all material respects with all of the
obligations to be performed or complied with by it under the terms of
this Agreement on or prior to the date of the Closing.
9.03 Certificate of Buyer. Seller shall have received a
certificate signed by the chief executive officer of Buyer dated as of
the date of the Closing and subject to no qualification certifying that
the conditions set forth in Sections 9.01, 9.02 and 9.05 hereof have been
fully satisfied. Such certificate shall be deemed a representation and
warranty of Buyer hereunder.
9.04 Opinion of Counsel. Seller shall have received from Bryan
Cave LLP, special counsel to Buyer, a favorable opinion of counsel dated
the date of the Closing substantially in the form of Exhibit I hereto.
<PAGE>
9.05 No Prohibitions. No preliminary or permanent injunction
or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission shall be in effect, or shall have been recommended by the
staff of a governmental, regulatory or administrative agency or
commission, which would prevent the consummation of the transactions
contemplated hereby.
9.06 Compliance with Applicable Law. The filing and other
requirements under any applicable law, rule or regulation, including
without limitation the filing and waiting period requirements under the
H-S-R Act, relating to the consummation of the transactions provided for
herein shall have been duly complied with. The Registration Statement
covering the issuance of the Stock Consideration shall be effective under
the Securities Act and no stop order suspending such effectiveness shall
have been entered and no proceeding seeking a stop order suspending such
effectiveness shall be pending or threatened. The Buyer Common Stock to
be issued in connection with the Merger shall have been approved for
listing, upon notice of issuance, on the Nasdaq National Market System.
9.07 Payment of Merger Consideration. On the date of the
Closing the Buyer shall have delivered the Merger Consideration as
provided in Section 2.02(a) and (b) hereof and the Buyer Stock Options as
provided in Section 2.02(c) hereof.
9.08 March Balance Sheet. No unresolved dispute under Section
2.03(d) shall be pending.
9.09 Release of Guaranties. With respect to any agreement
described on Schedule 3.21 for which Seller has guaranteed the payment or
performance of the grantee, in the event the grantor thereof is unwilling
to release fully the guarantee of Seller, Buyer shall have agreed to
indemnify Seller against liability under its guarantee with respect to
the payment and performance of the grantee from and after the Effective
Time pursuant to a Guarantee Agreement substantially in the form of
Exhibit J hereto.
9.10 Joint Venture Agreement. Seller and BFC of Michigan shall
have executed and delivered agreements for the Joint Venture
substantially in the forms attached hereto as Exhibit K.
9.11 Master Service Agreement. Seller and Buyer shall have
executed and delivered a mutually satisfactory Master Service Agreement.
9.12 Miscellaneous Service Agreement. Seller and Buyer shall
have executed and delivered a mutually satisfactory Miscellaneous
Services Agreement.
9.13 Agreements with Shareholders, Option Holders and SAR
Holders. Each of the Agreements contemplated by Section 1.08 shall have
been executed and delivered and the transactions contemplated thereby
shall have been consummated.
<PAGE>
ARTICLE X
INDEMNIFICATION
10.01 Indemnification.
(a) Seller will indemnify, defend and hold harmless each of
Buyer, the Surviving Corporation and any stockholder, director, officer,
employee or agent of any of them from and against all claims,
liabilities, losses, costs, deficiencies or expenses, including
reasonable attorneys' fees, interest and penalties in connection
therewith ("Losses"), which may be sustained by any such indemnified
party and arise from:
(i) The breach of any agreement, covenant or other
obligation, and, subject to Sections 5.04 and 11.04 hereof, any
representation or warranty, of Seller made or incurred under or pursuant
to this Agreement or any document delivered pursuant hereto;
(ii) The assertion against any such indemnified party of
any liability or obligation of Seller or Metro for Taxes with respect to
periods ending on or prior to the Effective Time as provided in Section
5.09 or with respect to or arising directly or indirectly from any
transaction effected or deemed effected prior to the Effective Time or
with respect to any profits earned, accrued or received by Metro or any
affiliate of Metro prior to the Effective Time;
(iii) The assertion against any such indemnified party of
any liability or obligation of Seller or Metro arising from or in
connection with any severance, termination of employment, dismissal,
constructive dismissal, or other release from employment prior to the
Effective Time of any employee or former employee of Metro; and/or
(iv) The assertion against any such indemnified party of
any claim resulting from or arising out of the operations or activities
of Metro or the ownership or operation of any of its properties or assets
prior to the Effective Time, including, without limitation, any claim for
violation of any law, for service interruption or other breach of any
service obligation or for injury, death, property or economic damage,
except to the extent Seller is entitled to be indemnified by Buyer
pursuant to Section 10.01(b)(i), or except to the extent and only to the
extent that the Losses are finally determined by a trier of fact or
arbitrator to have been directly caused by a negligent act or omission of
any employee, representative or agent of Buyer that occurred in
connection with Buyer's provision of services under the Management
Agreement.
(b) Buyer will indemnify, defend and hold harmless each of
Seller and any stockholder, director, officer, employee or agent of
Seller from and against all Losses which may be sustained by any such
indemnified party and arise from:
(i) The breach of any agreement, covenant, or other
obligation, and, subject to Sections 6.04 and 11.04 hereof, any
representation or warranty of Buyer made or incurred under or pursuant to
this Agreement or any document delivered pursuant hereto; and/or
<PAGE>
(ii) The operations or activities of the Surviving
Corporation after the Effective Time, except to the extent Buyer is
entitled to be indemnified by Seller under Section 10.01(a) hereof.
(c) The rights to indemnification and the obligations to
indemnify provided in this Section 10.01 are subject to the provisions of
Sections 10.02, 10.03, 10.04 and 10.05 below and the last sentence of
Section 11.03(c) below.
10.02 Participation in Litigation. In the event any suit or
other proceeding is initiated against a party (an "Indemnified Party")
with respect to which such party alleges that the other party hereto (an
"Indemnifying Party") is or may be obligated to indemnify an Indemnified
Party hereunder, the Indemnified Party shall be entitled to participate
in such suit or proceeding, at its expense and by counsel of its
choosing, provided that (a) such counsel is reasonably satisfactory to
the Indemnifying Party, and (b) the Indemnifying Party shall retain
primary control over such suit or proceeding. Such counsel for the
Indemnified Party shall be afforded access to all information pertinent
to the suit or proceeding in question. Neither the Indemnified Party nor
the Indemnifying Party shall settle or otherwise compromise any such suit
or proceeding without the prior consent of the other party, which shall
not be unreasonably withheld, delayed or conditioned.
10.03 Claims Procedure.
(a) In the event from time to time an Indemnified Party
believes that it or any other Indemnified Party has or will suffer any
Losses for which the Indemnifying Party is obligated to indemnify it
hereunder, it shall promptly notify the Indemnifying Party in writing of
the matter, specifying therein the reason why the Indemnified Party
believes that the Indemnifying Party is or will be obligated to
indemnify, the amount, if liquidated, to be indemnified, and the basis on
which the Indemnified Party has calculated such amount; if not yet
liquidated, the notice shall so state. If the parties do not agree on
any claims submitted, they shall endeavor to settle and compromise such
claim for a period of thirty (30) days after the date of the Indemnified
Party's notice. If they are unable to resolve such dispute within such
thirty (30) day period, then either party may initiate the dispute
resolution procedures specified in Section 11.06.
(b) Subject to the provisions of Section 10.05, Seller shall
pay any Losses for which it becomes obligated to indemnify Buyer or the
Surviving Corporation hereunder as follows:
(i) all Losses which in the aggregate amount are equal to
or less than 4% of the Merger Consideration shall be paid by delivery of
a number of shares of Buyer Common Stock valued at $20.60 per share as
shall be equal in value to the amount of such Losses; and
(ii) after Seller has paid Buyer for Losses in an
aggregate amount which is equal to 4% of the Merger Consideration, Seller
shall have the option to pay for any additional Losses either in cash or
by delivery of shares of Buyer Common Stock valued at $20.60 per share.
<PAGE>
10.04 Right of Offset. All Losses shall be computed net of any
recovery of insurance proceeds.
10.05 Limitations on Indemnification.
(a) Notwithstanding the foregoing, no party will be
entitled to indemnification pursuant to this Article X following the
Closing until and only to the extent that the aggregate amount of Losses
for which (i) the Buyer would otherwise be entitled to receive
indemnification under Section 10.01(a), in the case of Buyer's Losses, or
(ii) Seller would otherwise be entitled to receive indemnification under
Section 10.01(b), in the case of Seller's Losses, exceeds $250,000;
provided, however, such $250,000 deductible amount shall not apply to any
Losses due to the matters described on Schedule 10.05 hereto.
(b) Notwithstanding the foregoing, neither party shall be
liable to the other under Section 10.01 hereof unless the claim is
asserted in writing prior to the second anniversary of the date of the
Closing except (i) claims under Section 10.01(a)(ii) and (iii) and any
claims related to a breach of the representations and warranties
contained in Sections 3.02 (Ownership of Shares), 3.03 (Capitalization of
Metro), 3.04 (Approval of Agreement) and 4.02 (Approval of Agreement) may
be asserted at any time (subject to the expiration of applicable statutes
of limitation) and (ii) claims under Section 10.01(a)(iv) may be asserted
at any time prior to the fifth anniversary of the date of the Closing.
(c) Notwithstanding the foregoing, neither party shall
have any liability under Section 10.01 in an amount greater than the
value of the Stock Consideration received by Seller, valued at $20.60 per
share.
ARTICLE XI
MISCELLANEOUS
11.01 Binding Agreement.
This Agreement shall be binding upon and shall inure to
the benefit of Buyer, Sub, Seller and their respective successors and
assigns.
11.02 Termination of Agreement. This Agreement and the
transactions contemplated hereby may be terminated prior to June 30, 1997
only as follows:
(a) By mutual consent of Buyer and Metro;
(b) By either (i) Buyer, on the one hand, if any of the
terms or conditions set forth in Article VIII are not satisfied on or
before the date of the Closing, or (ii), on the other hand, by Metro if
any of the terms or conditions set forth in Sections 9.01 through 9.08
are not satisfied on or before the date of the Closing or by Seller if
any of the terms or conditions set forth in Sections 9.09 through 9.13
<PAGE>
are not satisfied on or before the date of the Closing, and, in either
case, if the Closing shall not have occurred on the date provided for in
Section 1.02(a) hereof or such other date, if any, as Metro and Buyer
shall agree upon pursuant to Section 1.02(a) hereof;
(c) By Buyer:
(i) after the thirtieth business day following
receipt by Metro of Buyer's written notice of the occurrence of either of
the following events, describing such event in sufficient detail to
enable Metro and Seller to attempt to cure the problem identified in the
notice during such thirty business days, if Metro and Seller do not cure
the problem during such thirty-day period:
(A) if Seller fails to perform any of its
obligations under this Agreement which is required to be performed prior
to such time, except to the extent such breach is directly caused by
Buyer or Sub; or
(B) if at any time the representations and
warranties of Seller set forth in this Agreement are not true and correct
in all material respects, except as affected by transactions approved in
writing by Buyer or contemplated or required under this Agreement and
except to the extent such breach is directly caused by the gross
negligence of Buyer under the Management Agreement;
(ii) If any statute, rule, regulation, order or
decree not yet announced or proposed shall have been enacted, entered,
promulgated, proposed or enforced between the date hereof and the day of
the Closing by any governmental, regulatory or administrative entity,
agency or commission which would have a material adverse effect upon
Metro;
(iii) if any material claim, action, proceeding or
investigation is commenced between the date hereof and the day of the
Closing involving or affecting Metro or any of its properties or assets
which would have a material adverse effect upon Metro; or
(iv) if the information contained in the March
Balance Sheet or in any of the financial statements or operating reports
of Metro for any period subsequent to December 31, 1996 delivered
pursuant to Section 5.05 hereof reveals a material adverse change in
Metro (except to the extent such material adverse change in Metro is
directly caused by the gross negligence of Buyer under the Management
Agreement); or
(d) By Metro:
(i) after the thirtieth day following receipt by
Buyer of Metro's written notice of the occurrence of either of the
following events, describing such event in sufficient detail to enable
Buyer to attempt to cure the problem identified in the notice during such
thirty days, if Buyer does not cure the problem during such thirty-day
period:
<PAGE>
(A) if Buyer fails to perform any of its
obligations under this Agreement which is required to be performed prior
to such time, except to the extent such breach is directly caused by
Metro or Seller; or
(B) if at any time the representations and
warranties of Buyer set forth in this Agreement are not true and correct
in all material respects, except as affected by transactions approved in
writing by Metro or Seller or contemplated or required under this
Agreement;
(ii) If any statute, rule, regulation, order or
decree not yet announced or proposed shall have been enacted, entered,
promulgated, proposed or enforced between the date hereof and the day of
the Closing by any governmental, regulatory or administrative entity,
agency or commission which would have a material adverse effect upon
Buyer;
(iii) if any material claim, action, proceeding or
investigation is commenced between the date hereof and the day of the
Closing involving or affecting Buyer or any of its properties or assets
which would have a material adverse effect upon Buyer; or
(iv) if the information contained in any of the
financial statements of Buyer for any period subsequent to December 31,
1996 delivered pursuant to Section 6.05 hereto reveals a material adverse
change in Buyer.
11.03 Manner and Effect of Termination.
(a) Any action by Metro to terminate this Agreement and
the transactions contemplated hereby, as provided in Section 11.02
hereof, shall be taken by its Chairman. Any such action by Seller shall
be taken by its President and Chief Executive Officer. Any such action
by Buyer shall be taken by its Chairman of the Board or its Vice Chairman
of the Board.
(b) If this Agreement is terminated pursuant to Section
11.02 hereof without fault of either party or breach of this Agreement,
all obligations of the parties hereunder (except those under Section
11.12 hereof) shall terminate, without liability of Seller or Metro to
Buyer or Sub or of Buyer or Sub to Seller or Metro.
(c) Nothing in this Section 11.03 or elsewhere in this
Agreement shall impair or restrict the rights of any party to any and
all remedies at law or in equity in the event of a breach of or default
under this Agreement prior to termination pursuant to Section 11.02
hereof, including, without limitation, the right of specific performance
and injunctive relief giving effect to its rights hereunder; provided,
however, that neither party shall be liable to the other party for any
indirect, incidental, special or consequential damages, including lost
profits or revenue, lost savings, loss of managerial time, business
interruption or other lost opportunity, as a result of any such breach or
default by the other party even if such other party has been advised of
the possibility of such damages, whether any claim for such recovery is
based on theories of contract, negligence or tort, including strict
liability. After the Closing, the rights of indemnification granted
<PAGE>
under Article X hereof shall be the sole and exclusive remedy at law and
in equity of and with respect to all Losses of either party hereto
(including the respective successors and assigns of either party hereto).
11.04 Survival of Representations, Warranties and Covenants.
The right to indemnification for any breach of the representations and
warranties made by each party herein shall survive for twenty four months
after the date of the Closing, except as follows: (a) the
representations and warranties of Seller contained in Sections 3.02
(Ownership of Shares), 3.03 (Capitalization of Metro) and 3.04 (Approval
of Agreement) shall survive indefinitely (subject to the expiration of
any applicable statutes of limitations) and (b) the representations and
warranties of the Sellers in Section 3.11 (Tax Returns and Audits) shall
survive until the expiration of the applicable statute of limitations
with respect to the Taxes to which any claim relates, as such limitation
period may be extended from time to time. Each party hereto acknowledges
and confirms that neither party hereto makes any representations or
warranties whatsoever other than those specifically set forth herein.
All covenants in this Agreement not fully performed as the date of the
Closing shall survive the date of the Closing and continue thereafter
until fully performed.
11.05 Further Assurances. From time to time, as and when
requested by either party (whether before or after the Effective Time),
the other party shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to
be taken, all such further and other action as the requesting party may
reasonably deem necessary, proper or desirable to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement and the orderly transition of the respective businesses of
Metro to Buyer.
11.06 Dispute Resolution Procedures. If any question shall
arise in regard to the interpretation of any provision of this Agreement
or as to the rights and obligations of the parties hereunder, Glen F.
Post, III, acting in his capacity as Chairman of Metro and/or chief
executive officer of Seller, as appropriate, and James C. Allen, as chief
executive officer of Buyer, shall meet with each other to negotiate and
attempt to resolve such question in good faith. Such representatives
may, if they so desire, consult outside experts for assistance in
arriving at a resolution. In the event that a resolution is not achieved
within fifteen (15) days after their first meeting, then either party may
submit the question for final resolution by binding arbitration in
accordance with the rules and procedures of the American Arbitration
Association applicable to commercial transactions, and judgment upon any
award thereon may be entered in any court having jurisdiction thereof.
If Buyer initiates the arbitration, it shall be held in New Orleans,
Louisiana, and if Metro or Seller initiates the arbitration, it shall be
held in St. Louis, Missouri. In the event of any arbitration, Buyer
shall select one arbitrator, Seller or Metro shall select one arbitrator
and the two arbitrators so selected shall select a third arbitrator, any
two of which arbitrators together shall make the necessary
determinations. In making the foregoing selections, each party, as well
as the arbitrators selected by such parties, shall endeavor to designate
an arbitrator having substantive experience in the telecommunications
industry. All out of pocket costs and expenses of Buyer, Metro and
Seller in connection with such arbitration, including, without
limitation, the fees of the arbitrators and any administration fees and
reasonable attorney's fees and expenses, shall be borne by Buyer and
Seller in such proportions as the arbitrators shall decide that such
expenses should, in equity, be apportioned.
<PAGE>
11.07 Entire Agreement and Modification. This Agreement,
including the Schedules and Exhibits attached hereto, the letter
referenced in Section 5.08 hereof and the Confidentiality Agreement dated
October 2, 1996 between Seller and Buyer, constitutes the entire
agreement between the parties. No changes of, modifications of, or
additions to this Agreement shall be valid unless the same shall be in
writing and signed by each of the parties hereto.
11.08 Severability. If any provision of this Agreement shall
be determined to be contrary to law and unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in
accordance with their terms.
11.09 Counterparts. This Agreement may be executed in one or
more identical counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
11.10 Interpretation.
(a) The table of contents and article and section headings
contained in this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this Agreement.
Each of the parties has participated substantially in the negotiation and
drafting of this Agreement and each party hereby disclaims any defense or
assertion in any litigation or arbitration that any ambiguity herein
should be construed against the draftsman.
(b) References herein to effects which are "materially
adverse" or "material" to Metro are to the businesses, assets, prospects,
condition (financial or otherwise), liabilities or results of operations
of Metro, provided, however, that (i) an event (such as a regulatory
change) which affects the CLEC industry as a whole (an "Industry Wide
Event"), (ii) an EBITDA Loss of Metro during any month which is not more
than 120% of the amount of EBITDA Loss contemplated for such month by
Metro's 1997 operating budget, (iii) any public statement or the release
of any publicly-available information confirming that a competitor has
received a franchise or intends to seek a franchise in any territory
where Metro currently conducts operations or plans to conduct operations,
or confirming that a competitor has expanded its existing networks or
otherwise improved its competitive position in any such markets and
(iv) any liabilities which, if in existence on the date hereof, would be
required to be specifically set forth on any Schedule delivered by Seller
pursuant hereto (other than a liability for which Seller agrees in
writing at Closing to fully indemnify Buyer, without regard to the
limitations in Section 10.05 hereof, and except for liabilities not
requiring Buyer's consent under Section 5.01 hereof) incurred by Metro
after December 31, 1996 which are not in the aggregate in excess of
$250,000, would not be deemed "materially adverse" to Metro.
<PAGE>
(c) References herein to effects which are "materially
adverse" or "material" to Buyer are to the businesses, assets, prospects,
condition (financial or otherwise), liabilities or results of operations
of Buyer and its subsidiaries taken as a whole, provided, however, that
(i) an Industry Wide Event and (ii) a consolidated EBITDA Loss of Buyer
during any month which is not more than 120% of the amount of EDITDA Loss
contemplated for such month by Buyer's 1997 operating budget, would not
be deemed "materially adverse" to Buyer.
(d) Notwithstanding any cross-references in one Schedule to
another Schedule (all of which are included as a matter of convenience
only), each Schedule shall be deemed to include the information contained
in all other Schedules, such that reference to a matter or item under one
Schedule shall be deemed to constitute disclosure under all other
Schedules.
11.11 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the substantive laws of the
State of Delaware as applied to contracts made and performed within the
State of Delaware without regard to its conflicts of law principles.
11.12 Payment of Fees and Expenses. Buyer and Seller shall pay
all of the fees and expenses of their respective counsel, accountants and
other advisors and all other expenses incurred by such party incident to
the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby.
11.13 No Waiver. The failure of either party to exercise any
of its rights hereunder or to enforce any of the terms or conditions of
this Agreement on any occasion shall not constitute or be deemed a waiver
of that party's rights thereafter to exercise any rights hereunder or to
enforce each and every term and condition of this Agreement.
11.14 Public Announcements. Except as otherwise required by
applicable law or regulation or the rules of any applicable securities
exchange or national market system, so long as this Agreement is in
effect prior to the Effective Time, neither Buyer nor Seller will issue
or cause to be issued any press release or make any other public
announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not
be unreasonably withheld.
11.15 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when the same shall be delivered personally, one business
day after being sent prepaid by reputable overnight courier, or three
business days after being sent by registered or certified mail, postage
prepaid, and addressed as set forth below:
<PAGE>
(a) If to Buyer or Sub:
Brooks Fiber Properties, Inc.
425 Woods Mill Road South, Suite 300
Town & Country, Missouri 63017
Attention: Mr. James C. Allen
Vice Chairman and Chief Executive Officer
Fax (314) 579-4854
copy to:
Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: John P. Denneen, Esq.
Fax (314) 259-2020
(b) If to Metro or Seller:
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71203
Attention: Mr. Glen F. Post, III
President and Chief Executive Officer
Fax (318) 388-9562
copy to:
Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
Place St. Charles
201 St. Charles Avenue
New Orleans, LA 70171-5100
Attention: Kenneth J. Najder, Esq.
Fax (504) 582-8012
Either party may change the address to which notices are to be addressed
by giving the other party notice in the manner herein set forth.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
BUYER:
BROOKS FIBER PROPERTIES, INC.
/s/ James C. Allen
By _________________________________
ATTEST: Vice Chairman and
/s/ John P. Denneen Chief Executive Officer
_________________________
Secretary
SUB:
BROOKS FIBER COMMUNICATIONS
OF TEXAS, INC.
/s/ James C. Allen
By________________________________
ATTEST: Vice Chairman and
/s/ John P. Denneen Chief Executive Officer
_________________________
Secretary
SELLER:
CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Glen F. Post, III
ATTEST: By________________________________
President and Chief Executive Officer
/s/ Harvey P. Perry 72-0651161
________________________ Taxpayer ID No.: ___________________
Secretary
METRO:
METRO ACCESS NETWORKS, INC.
/s/ Glen F. Post, III
By________________________________
ATTEST: Chairman of the Board
/s/ Joy B. Eppinette
_________________________
Secretary
CERTIFICATE OF SECRETARY
OF
BROOKS FIBER COMMUNICATIONS OF TEXAS, INC.
I, John P. Denneen, the Secretary of Brooks Fiber Communications of
Texas, Inc., a Delaware corporation ("BFC"), hereby certify that the
Agreement and Plan of Merger to which this certificate is attached, after
having been first duly signed on behalf of BFC by its Vice Chairman and
attested by the Secretary under the corporate seal of BFC, was duly
submitted to the sole stockholder of BFC by written consent and that the
holder of all the issued and outstanding shares of stock of BFC entitled
to vote thereon voted for the adoption of said Agreement and Plan of
Merger.
WITNESS my hand and the seal of BFC this 28th day of April, 1997.
(Corporate Seal)
________________________________
Secretary
CERTIFICATE OF SECRETARY
OF
METRO ACCESS NETWORKS, INC.
I, _____________________, the Secretary of Metro Access Networks,
Inc., a Delaware corporation ("MAN"), hereby certify that the Agreement
and Plan of Merger to which this certificate is attached, after having
been first duly signed on behalf of MAN by its President and attested by
the Secretary under the corporate seal of MAN, was duly submitted to the
stockholders of MAN by written consent and that the holders of all
outstanding shares of stock of MAN entitled to vote thereon voted for the
adoption of said Agreement and Plan of Merger.
WITNESS my hand and the seal of MAN this 28th day of April, 1997.
(Corporate Seal)
________________________________
Secretary
The foregoing Agreement and Plan of Merger having been executed on
behalf of each of the parties thereto and having been adopted by the
stockholders of each of Brooks Fiber Communications of Texas, Inc., a
corporation organized and existing under the laws of the State of
Delaware, and Metro Access Networks, Inc., a corporation organized and
existing under the laws of the State of Delaware, in accordance with the
provisions of the General Corporation Law of the State of Delaware and
the fact having been certified on said Agreement and Plan of Merger by
the Secretary of each of said corporations, the Vice Chairman or
President of each of said corporations does hereby execute said Agreement
and Plan of Merger and the Secretary of each does hereby attest said
Agreement and Plan of Merger under the corporate seals of their
respective corporations, by authority of the directors and stockholders
thereof and as the respective act, deed and agreement of each of said
corporations on the 24th day of April, 1997.
BROOKS FIBER COMMUNICATIONS
OF TEXAS, INC.
(Corporate Seal)
By____________________________________
Vice Chairman and Chief
Executive Officer
Attest:
__________________________
Secretary
METRO ACCESS NETWORKS, INC.
(Corporate Seal)
By______________________________________
President and Chief
Executive Officer
Attest:
___________________________
Secretary
LIST OF SCHEDULES
A) Seller's Schedules:
1.08 - Metro SARs
2.01(c) - Assumed Metro Stock Options
2.03 - GAAP Accrual Exceptions
3.02 - Securityholders; Restrictions on Shares
3.03 - Authorized Capital Stock of Metro
3.04 - Required Authorizations
3.06 - Metro's December Financial Statements
3.07 - Events Subsequent to December 31, 1996
3.11 - Disclosures regarding Taxes
3.12 - Contracts: penalties on termination and required consents
3.14 - Personal property title exceptions
3.15 - Real and personal property leased by Metro
3.16 - Real property leased to Metro - list and exceptions
3.17 - Patents, Trademarks, Tradenames and Copyrights - list and
exceptions
3.19 - List of physical assets and shared tangible and intangible
property
3.21 - Licenses, Rights of Way and Permits
3.22 - Contracts
3.24 - Needed Governmental Permits
3.25 - Litigation and Arbitration
3.26 - Employees and Consultants
3.27 - Indebtedness to and from stockholders and others
3.28 - Outside financial interests
3.30 - Labor Agreements, Employee Benefit Plans and Employment
Agreements
3.33 - Employee claims
3.37 - Insurance Policies
3.38 - Environmental Matters
B) Buyer's Schedules:
4.03 - Prospectus
4.07 - Events subsequent to December 31, 1996
4.11 - Disclosures Regarding Taxes
4.12 - Consents Required Under Licenses, Rights of Way and Permits
C) Other Schedules:
1.09 - Employees and Benefit Programs and Plans
7.00 - Restricted Counties
8.07 - Affiliates of Metro
10.05 - Exclusions from Section 10.05
Affiliate Agreement
May 5, 1997
Brooks Fiber Properties, Inc.
425 Woods Mill Road South, Suite 300
Town & Country, Missouri 63017
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof it
may be deemed to be an "affiliate" of Metro Access Networks, Inc., a
Delaware corporation ("Metro"), as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933
Act").
Pursuant to the terms of the Agreement and Plan of Merger dated
as of April 1, 1997 (the "Merger Agreement"), among Brooks Fiber
Properties, Inc., a Delaware corporation ("BFP"), Brooks Fiber
Communications of Texas, Inc., a Delaware corporation wholly owned by BFP
("Sub"), Century Telephone Enterprises, Inc., a Louisiana corporation,
and Metro, providing for the merger of Sub with and into Metro (the
"Merger"), and as a result of the Merger, the undersigned will receive
shares of BFP's common stock, par value $0.01 per share ("BFP Common
Stock"), in exchange for the shares of common stock of Metro owned by the
undersigned at the Effective Time (as defined in the Merger Agreement) of
the Merger.
The undersigned represents and warrants to BFP, and BFP agrees,
as follows:
A. The undersigned shall not make any sale, transfer or other
disposition of the BFP Common Stock issued to the undersigned in
connection with the Merger in violation of the 1933 Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the
Merger Agreement and discussed its requirements and other applicable
limitations upon the ability of the undersigned to sell, transfer or
otherwise dispose of BFP Common Stock with its counsel.
C. The undersigned has been advised that the issuance of BFP
Common Stock to it pursuant to the Merger has been registered with the
Commission under the 1933 Act on BFP's Registration Statement No. 333-
21223 on Form S-4 under the 1933 Act (the "Registration Statement").
However, the undersigned has also been advised that, since at the time
the Merger was submitted for a vote of the stockholders of Metro the
undersigned may have been deemed to have been an affiliate of Metro, the
BFP Common Stock issued to the undersigned in connection with the Merger
must be held by it indefinitely unless (i) a distribution of BFP Common
Stock by it has been registered under the 1933 Act (including a
distribution pursuant to the Registration Statement), (ii) a sale of BFP
Common Stock by it is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the 1933 Act
or (iii) in the opinion of counsel reasonably acceptable to BFP (Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. is so acceptable
to BFP), some other exemption from registration is available with respect
to a proposed sale, transfer or other disposition of the BFP Common Stock
by it.
D. BFP shall timely file reports in compliance with the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in order
that there will be publicly available current public information
concerning the Company within the meaning of Rule 144(c) of the
Commission under the 1933 Act, and, in connection with any proposed sale
by the undersigned pursuant to Rule 145 under the 1933 Act, shall furnish
to the undersigned upon request a written statement as to whether BFP has
complied with such reporting requirements during the preceding 12 months
(or such shorter period that BFP may have been required to file such
reports). BFP hereby represents that, as of the date hereof, it is in
compliance with such reporting requirements.
E. The undersigned agrees to furnish BFP in writing such
information as BFP may reasonably request and which is customary in
connection with any resales of BFP Common Stock pursuant to the
Registration Statement. In the event a material(1) change or development
should occur that, in the reasonable opinion of counsel for BFP, would
require an amendment or supplement to the Registration Statement, the
undersigned shall, upon receipt of written notice from BFP, suspend all
such resales pursuant to the Registration Statement until the earlier of
(i) two business days after BFP files with the Commission its next report
on Form 8-K or its next quarterly or annual report under the 1934 Act on
Form 10-Q or 10-K, or (ii) BFP has advised the undersigned that the
Registration Statement may again be used for such resales. In such
event, at the request of the undersigned, BFP shall promptly prepare and
furnish to the undersigned a reasonable number of copies of a supplement
to or an amendment to the prospectus then included as part of the
Registration Statement which appropriately reflects such change or
development for delivery to purchasers of the BFP Common Stock from the
undersigned. BFP shall keep the Registration Statement effective for use
in connection with resales for a period of up to five years following the
Effective Time; provided, however, that if during such five-year period
the undersigned's ownership of BFP Common Stock falls below 5% of the
outstanding shares of BFP Common Stock (and, as a result thereof, the
undersigned is no longer permitted to designate two BFP directors under
the Stockholder Agreement dated as of April 1, 1997 by and between BFP
and the undersigned), the undersigned understands that the Registration
Statement will not be kept effective for resales by the undersigned
unless and to the extent the volume limitations of Rule 145 continue to
be applicable to sales by the undersigned of shares of BFP Common Stock
acquired in the Merger. As soon as reasonably practicable following the
earliest date permitted under Regulation C promulgated under the 1933
Act, BFP shall amend the Registration Statement to enable BFP to disclose
information with respect to its business in accordance with Item 10 of
Form S-4 under the 1933 Act. In the event of the issuance of any stop
order suspending the effectiveness of the Registration Statement, or of
any order suspending or preventing the use of any related prospectus or
suspending the qualification of any BFP Common Stock registered under
such Registration Statement for sale in any jurisdiction, BFP agrees to
use its reasonable best efforts promptly to obtain the withdrawal of such
order.
________________________________
(1) Information is material when "there is a substantial likelihood that
a reasonable shareholder would consider it important" (TSC Industries,
Inc. v. Northway, 426 U.S. 438, 449, 1976) or if there is "a
substantial likelihood that the disclosure of the omitted fact would
have been viewed by the reasonable investor as having significantly
altered the `total mix' of information made available" (Basic, Inc.
v. Levison, 485 U.S. 224, 231-232, 1988).
F. In connection with any underwritten offering by the
undersigned pursuant to the Registration Statement, BFP agrees to amend
or supplement the Registration Statement at the reasonable request of the
undersigned or its underwriters and to otherwise cooperate with the
undersigned and its underwriters in connection with any such offering;
provided, however, that the underwriters of any such offering shall be
reasonably acceptable to BFP. BFP further agrees to use its reasonable
best efforts to register or qualify resales of BFP Common Stock by the
undersigned under the securities or "blue sky" laws of such jurisdictions
as the undersigned reasonably requests and is legally required to do so
and to take any and all other acts that may be necessary to enable the
undersigned to consummate such resales in such jurisdictions; provided,
however, that BFP will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this sentence, file a general consent to service of
process or subject itself to taxation in any jurisdiction where BFP would
not otherwise be subject to taxation.
G. In the event of an underwritten public offering of any BFP
equity securities by BFP or any of its other stockholders, in which the
undersigned is offered the opportunity to participate and at a time when
the undersigned owns more than 1% of the outstanding shares of BFP Common
Stock, the undersigned will not, without the prior written consent of BFP
and the managing underwriters of such offering, effect any public sale or
distribution of its BFP Common Stock during the period commencing on the
seventh day prior to, and ending on the ninetieth day (or such longer
period up to 180 days as shall be required by the managing underwriters)
following, the effective date of such underwritten public offering,
except in connection therewith.
H. The undersigned also understands that stop transfer
instructions will be given to BFP's transfer agents with respect to the
BFP Common Stock acquired by the undersigned in connection with the
Merger and that there will be placed on the certificates for such BFP
Common Stock, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued in
a transaction to which Rule 145 promulgated under the 1933 Act
applies. The shares represented by this certificate may only
be transferred in accordance with the terms of an agreement
dated May 5, 1997 (the "Agreement"), between the registered
holder hereof and Brooks Fiber Properties, Inc. (the
"Corporation"), a copy of which Agreement is on file at the
principal offices of the Corporation. The Agreement permits a
sale of the shares represented by this certificate (i) pursuant
to the Corporation's Registration Statement on Form S-4 (No.
333-21223) and (ii) in conformity with the volume and other
limitations of Rule 145(d).
I. The undersigned also understands that unless the transfer
by it of its BFP Common Stock is pursuant to an effective registration
statement under the 1933 Act (including the Registration Statement) or is
a sale made in conformity with the provisions of Rule 145, BFP reserves
the right to put the following legend on the certificates issued to any
transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 promulgated under such Act
applies. The shares have been acquired by the holder not with
a view to, or for resale in connection with, any distribution
thereof within the meaning of such Act and may not be sold,
pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of such Act."
It is understood and agreed that the legends set forth in
paragraphs H and I above shall be removed by delivery of substitute
certificates without such legend in the event of a distribution by the
undersigned pursuant to an effective registration statement under the
1933 Act (including the Registration Statement) or as otherwise permitted
by Rule 145 or if (i) the undersigned shall have delivered to BFP a copy
of a letter from the staff of the Commission, or an opinion of counsel
reasonably acceptable to BFP, to the effect that such legend is not
required for purposes of the 1933 Act, (ii) a period of at least one year
shall have elapsed from the date the undersigned acquired the BFP Common
Stock received in the Merger and the provisions of Rule 145(d)(2) are
then applicable to the undersigned, (iii) a period of at least two years
shall have elapsed from the date the undersigned acquired the BFP Common
Stock received in the Merger and the provisions of Rule 145(d)(3) are
then applicable to the undersigned, or (iv) Rule 145 shall have been
amended such that the volume limitations thereof no longer apply to sales
by the undersigned of shares of BFP Common Stock acquired in the Merger.
Execution of this letter agreement should not be considered an
admission on the part of the undersigned that it is an "affiliate" of the
Company as described in the first paragraph of this letter, or as defined
under Rule 144 of the 1933 Act, nor as a waiver of any rights the
undersigned may have to object to any claim that it is such an affiliate
on or after the date of this letter.
This letter agreement shall be binding upon, and shall inure
the benefit of, the undersigned and BFP and their respective successors.
Very truly yours,
Century Telephone Enterprises, Inc.
/s/ Glen F. Post, III
By:__________________________________
Glen F. Post, III
Vice Chairman, President and Chief
Executive
Officer
Accepted and Agreed as of
this 5th day of May, 1997, by:
Brooks Fiber Properties, Inc.
/s/ James C. Allen
By:_______________________________
James C. Allen
Vice Chairman and Chief
Executive Officer
STOCKHOLDER AGREEMENT
by and between
BROOKS FIBER PROPERTIES, INC.
and
CENTURY TELEPHONE ENTERPRISES, INC.
Dated as of April 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
No.
ARTICLE I DEFINTIONS...................................................1
1.01 Definitions......................................................1
ARTICLE II BOARD OF DIRECTORS.........................................3
2.01 Composition of Board of Directors................................3
2.02 Resignations and Designations....................................4
2.04 Certificate of Incorporation and By-laws.........................5
2.05 Certain Restrictions.............................................5
ARTICLE III CENTURY'S RIGHTS TO PURCHASE ADDITIONAL
EQUITY SECURITIES; STANDSTILL........................................5
3.01 Limitation on Acquisition of Equity Securities...................5
3.02 Standstill.......................................................6
ARTICLE IV COVENANTS OF CENTURY IN CONNECTION WITH THE MERGER.........6
4.01 Ownership of Metro Shares; Approval of Merger Agreement..........6
4.02 No Solicitation..................................................7
ARTICLE V GENERAL PROVISIONS..........................................7
5.01 Termination......................................................7
5.02 Amendment and Waiver.............................................8
5.03 Notices..........................................................8
5.04 Entire Agreement.................................................9
5.05 No Third Party Beneficiary.......................................9
5.06 No Assignment; Binding Effect....................................9
5.07 Specific Performance; Legal Fees.................................9
5.08 Headings........................................................10
5.09 Invalid Provisions..............................................10
5.10 Governing Law...................................................10
5.11 Dispute Resolution Procedures...................................10
5.12 Counterparts....................................................11
<PAGE>
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of April 1, 1997, is made
and entered into by and between BROOKS FIBER PROPERTIES, INC., a Delaware
corporation ("BFP") and CENTURY TELEPHONE ENTERPRISES, INC., a Louisiana
corporation ("Century").
WHEREAS, BFP, Brooks Fiber Communications of Texas, Inc., a
Delaware corporation wholly owned by BFP ("Sub"), Century and Metro
Access Networks, Inc., a Delaware corporation majority owned by Century
("Metro"), have entered into an Agreement and Plan of Merger dated as of
April 1, 1997 (the "Merger Agreement"), which provides for the merger of
Sub with and into Metro and for Metro to become a wholly owned subsidiary
of BFP (the "Merger");
WHEREAS, at the Effective Time (as defined below) and in
accordance with the terms of the Merger Agreement, each share of common
stock of Metro (the "Metro Common Stock") held by Century immediately
prior to the Effective Time shall be converted into shares of the common
stock, par value $0.01 per share, of BFP ("BFP Common Stock"), as more
fully described in the Merger Agreement;
WHEREAS, as a condition to the willingness of BFP and Century
to consummate the Merger, BFP and Century desire to establish in this
Stockholder Agreement certain terms and conditions concerning the
acquisition and disposition of securities of BFP by Century and the
corporate governance of BFP after the Effective Time;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Stockholder Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. (a) Except as otherwise specifically
indicated, the following terms have the following meanings for all
purposes of this Stockholder Agreement:
"Affiliate" shall have the meaning assigned thereto in Rule
405, as presently promulgated under the Securities Act.
"beneficially owns" (or comparable variations thereof) has the
meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
"Board of Directors" means the Board of Directors of BFP.
"Delaware Law" means the General Corporation Law of the State
of Delaware.
"Effective Time" means the time at which the Merger becomes
effective under Delaware Law.
<PAGE>
"Equity Securities" means Voting Securities, Convertible
Securities and Rights to Purchase Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision.
"Liens" means any lien, claim, mortgage, encumbrance, pledge,
security interest, or charge of any kind.
"Person" means any individual, corporation, partnership, trust,
other entity or group (with the meaning of Section 13(d)(3) of the
Exchange Act).
"Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives of such entity.
"Restricted Group" means (i) Century, (ii) any and all Persons
directly or indirectly controlled by or under common control with Century
and (iii) any and all groups (within the meaning of Section 13(d)(3) of
the Exchange Act) of which Century or any Person directly or indirectly
controlling, controlled by or under common control with Century is a
member, other than any such group not acting for the purpose of
acquiring, holding or beneficially owning Equity Securities.
"Rule 144" means Rule 144 as presently promulgated under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" means any Person in which Century directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interest in, or the Voting Power
of, such Person.
"Voting Power" means, with respect to any Outstanding Voting
Securities, the highest number of votes that the holders of all such
Outstanding Voting Securities would be entitled to cast for the election
of directors or on any other matter (except to the extent such voting
rights are dependent upon events of default or bankruptcy), assuming, for
purposes of this computation, the conversion or exchange into Voting
Securities of Convertible Securities (whether presently convertible or
exchangeable or not) and the exercise of Rights to Purchase Voting
Securities (whether presently exercisable or not), in either case to the
extent that any such action would increase the number of such votes.
"Voting Securities" means the BFP Common Stock and any other
securities of BFP of any kind or class having power generally to vote for
the election of directors; "Convertible Securities" means securities of
<PAGE>
BFP which are convertible or exchangeable (whether presently convertible
or exchangeable or not) into Voting Securities; "Rights to Purchase
Voting Securities" means options and rights issued by BFP (whether
presently exercisable or not) to purchase Voting Securities or
Convertible Voting Securities; and "Outstanding Voting Securities" means
at any time the then issued and outstanding Voting Securities,
Convertible Securities (which shall be counted at the maximum number of
Voting Securities for which they can be converted or exchanged) and
Rights to Purchase Voting Securities (which shall be counted at the
maximum number of Voting Securities for which they can be exercised).
(b) In addition, the following terms are defined in the
Sections set forth below:
"Alternative Proposal" Section 4.02
"BFP" Preamble
"BFP Common Stock" Preamble
"Business Combination" Section 3.02
"Century" Preamble
"Merger" Preamble
"Merger Agreement" Preamble
"Metro" Preamble
"Metro Common Stock" Preamble
"Sub" Preamble
(c) Unless the context of this Stockholder Agreement otherwise
requires, (i) words of any gender include each other gender; (ii) words
using the singular or plural number also include the plural or singular
number, respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Stockholder Agreement;
and (iv) the terms "Article" or "Section" refer to the specified Article
or Section of this Stockholder Agreement. Whenever this Stockholder
Agreement refers to a number of days, such number shall refer to calendar
days unless business days are specified.
ARTICLE II
BOARD OF DIRECTORS
2.01 Composition of Board of Directors. (a) Effective at the
Effective Time, there shall be two vacancies on the Board of Directors
either by (i) an increase in the Board of Directors in accordance with
the terms of BFP's Certificate of Incorporation and By-laws, (ii)
director resignations or (iii) a combination thereof. Effective at the
Effective Time the Board of Directors shall elect two designees of
Century to fill the two vacancies on the Board of Directors created in
accordance with the preceding sentence, to serve from the Effective Time
until the end of their respective terms. The two designees of Century
shall be elected to different classes of the Board of Directors. For so
long as one or more nominees of Century is a director of BFP, one of such
nominees shall be designated as a Vice Chairman of the Board of
Directors.
<PAGE>
(b) Thereafter, and subject to the next succeeding sentence,
the Board of Directors (or any Committee of the Board of Directors which
nominates directors) shall, in connection with each meeting of
stockholders of BFP at which the term of any Century director expires,
nominate for election as a director of BFP, in accordance with BFP's
procedures for nomination of directors as provided for in its By-laws, a
designee of Century to stand for election for a succeeding term, and
shall vote all management proxies in favor of such nominee, except for
such proxies that specifically indicate to the contrary. BFP shall
recommend its stockholders to vote in favor of such nominees, and shall
use reasonable efforts to solicit from its stockholders proxies voted in
favor of such nominees. Notwithstanding the foregoing, Century shall
cease to have the right to designate, or cause the nomination or election
of any member of the Board of Directors from and after such date as the
Restricted Group beneficially owns Outstanding Voting Securities
representing less than 5% of the Voting Power of all Outstanding Voting
Securities. The obligation of the Board of Directors hereunder to
nominate for election as directors individuals designated by Century
shall be subject to the foregoing limitation.
(c) Until such time as the Restricted Group beneficially owns
Outstanding Voting Securities representing less than 5% of the Voting
Power of all Outstanding Voting Securities, if any director designated by
Century in accordance with this Section 2.01 shall decline or be unable
to serve for any reason, or if such director resigns or is removed, the
Board of Directors shall promptly upon the request of Century nominate or
elect, as the case may be, a new qualified person recommended by Century
to replace such designee.
(d) Until such time as the Restricted Group beneficially owns
Outstanding Voting Securities representing less than 5% of the Voting
Power of all Outstanding Voting Securities, at each meeting of
stockholders of BFP, the Restricted Group shall vote the Voting
Securities held by the Restricted Group (i) for the nominees recommended
by the Board of Directors (provided such nominees include the nominees
referred to in paragraphs (a) and (b) above), and (ii) on all other
proposals of the Board of Directors, as the Restricted Group determines
in its sole discretion.
(e) Century shall promptly provide to BFP, as BFP may from
time to time reasonably request, information regarding Century's
designees for the Board of Directors, for inclusion in any form, report,
schedule, registration statement, definitive proxy statement or other
documents required to be filed by BFP with the Securities and Exchange
Commission.
(f) The members of the Board of Directors designated by
Century in accordance with this Section 2.01 shall be covered by
directors and officers insurance in the same manner as provided by BFP
for its directors and officers generally.
2.02 Resignations and Designations. As necessary to establish
or maintain the composition of the Board of Directors contemplated by
Section 2.01, the Restricted Group will cause the directors designated by
Century to resign from the Board of Directors at such time as the
Restricted Group beneficially owns less than 5% of the Voting Power of
all Outstanding Voting Securities; provided, however, if at any time the
Restricted Group's percentage of the Voting Power of all Outstanding
Voting Securities is reduced below 5% as a result of an issuance of
Outstanding Voting Securities, Century shall be afforded 90 days to
purchase a sufficient amount of additional Voting Securities necessary to
<PAGE>
maintain its level of Board representation hereunder; and further
provided that such 90-day period shall be extended if Century is
prohibited from purchasing Voting Securities to comply with applicable
law.
2.03 Certificate of Incorporation and By-laws. BFP and Century
shall take or cause to be taken all lawful action necessary to ensure at
all times that BFP's Certificate of Incorporation and By-laws are not, at
any time, inconsistent with the provisions of this Stockholder Agreement.
2.04 Certain Restrictions. Except as required by applicable
law, rule or regulation or the Merger Agreement, BFP shall not approve or
recommend to its stockholders any transaction or approve, recommend or
take any other action (other than those expressly contemplated by this
Agreement and other than those that affect the members of the Restricted
Group or each director at the same time in the same manner) that would
(1) impose limitations on the legal rights of Century or its affiliates
as a stockholder of BFP to designate directors hereunder, including any
action that would impose restrictions based upon the size of security
holding (other than as provided for herein), the business in which a
security holder is engaged or other considerations applicable to Century
or its affiliates and not to stockholders generally, (2) otherwise
materially adversely discriminate against Century or its affiliates as
stockholders of BFP or (3) restrict the right of any Century director to
vote on any matter as such director believes appropriate in light of his
or her fiduciary duties as a director except with respect to (i) entering
into contractual or other business relationships with Century or any of
its affiliates (other than in their capacity as stockholders of BFP),
(ii) disputes with Century or any of its affiliates (including disputes
under this Agreement), (iii) interpretation or enforcement of this
Agreement or any other agreement with Century or any of its affiliates or
(iv) any other matter involving an actual or potential conflict of
interest due to such director's relationship with Century or any of its
affiliates, or otherwise.
ARTICLE III
CENTURY'S RIGHTS TO PURCHASE ADDITIONAL EQUITY SECURITIES; STANDSTILL
3.01 Limitation on Acquisition of Equity Securities. Following
the Effective Time, no member of the Restricted Group shall acquire
beneficial ownership of any Equity Securities which would cause the
Restricted Group's ownership of the Voting Power of all Outstanding
Voting Securities to exceed 15% without the prior consent of the Board of
Directors except (i) in the event BFP receives a bona fide offer from a
third party or parties (including a tender or exchange offer directed to
all holders of BFP Common Stock or Voting Securities) to acquire in
excess of 50% of the Outstanding Voting Securities, in which event the
restrictions in this Section 3.01 will be temporarily waived by BFP to
permit Century, if it should desire to do so, to make one or more offers
to increase its ownership of the Outstanding Voting Securities on the
same basis as such third party offer and (ii) in the event Century
exercises its right to sell its membership interest in Michigan Fiber
Communications L.L.C., a Delaware limited liability company, pursuant to
the provisions of Section 3.3(b) of the Limited Liability Company
Agreement to be entered into between Century and Brooks Fiber
Communications of Michigan, Inc. substantially in the form attached to
the Merger Agreement as Exhibit K, the restrictions in this Section 3.01
will, if necessary, be waived by BFP to permit Century to receive payment
of the purchase price therefor in full shares of BFP Common Stock.
<PAGE>
3.02 Standstill. (a) Following the Effective Time and for so
long as one or more nominees of Century is a director of BFP, no member
of the Restricted Group will, and they will not assist or encourage
others (including by providing financing) to, directly or indirectly (i)
acquire or agree, offer, seek or propose (whether publicly or otherwise)
to acquire ownership (including but not limited to beneficial ownership)
of any substantial portion of the assets or Equity Securities of BFP
(other than in a transaction permitted under Section 3.01), whether by
means of a negotiated purchase of assets, tender or exchange offer,
merger or other business combination, recapitalization, restructuring or
other extraordinary transaction ("Business Combination"), (ii) engage in
any "solicitation" of "proxies" (as such terms are used in the proxy
rules promulgated under the Exchange Act, but disregarding clause (iv) of
Rule 14a-1(1)(2) and including any exempt solicitation pursuant to Rule
14a-2(b)(1) or (2)), or form, join or in any way participate in a "group"
(as defined under the Exchange Act) with respect to any Equity
Securities, (iii) subject to the obligation of Century's designees on the
Board of Directors to exercise their fiduciary duties as directors,
otherwise seek or propose to acquire control of the Board of Directors,
(iv) take any action that could reasonably be expected to force BFP to
make a public announcement regarding any of the types of matters referred
to in clause (i), (ii) or (iii) above, or (v) enter into any discussions,
negotiations, agreements, arrangements or understandings with any third
party with respect to any of the foregoing. No member of the Restricted
Group will request BFP or any of its Representatives to amend or waive
any provision of this paragraph (including this sentence) during such
period. If at any time during such period a member of the Restricted
Group is approached by any third party concerning its participation in
any of the types of matters referred to in clause (i), (ii) or (iii)
above, such member will promptly inform BFP of the nature of such contact
and the parties thereto.
(b) Nothing in this Section 3.02 shall (i) prohibit or
restrict Century from responding to any inquiries from any shareholders
of BFP as to Century's intention with respect to the voting of any Voting
Securities beneficially owned by Century as long as such response is
consistent with the terms of this Agreement; or (ii) restrict the right
of each Century director on the Board or any committee thereof to vote on
any matter as such individual believes appropriate in light of his or her
fiduciary duties as a director or committee member.
ARTICLE IV
COVENANTS OF CENTURY IN CONNECTION WITH THE MERGER
4.01 Ownership of Metro Shares; Approval of Merger Agreement.
(a) Century represents and warrants to BFP that it owns, beneficially and
of record, as of the date hereof, the number of shares of each class of
capital stock of Metro listed on Schedule I hereto (the "Metro Shares"),
subject to no rights of others and free and clear of all Liens.
Century's right to vote or dispose of the Metro Shares is not subject to
any voting trust, voting agreement, voting arrangement or proxy and
Century has not entered into any contract, option or other arrangement or
undertaking with respect thereto.
<PAGE>
(b) Until the Effective Time, Century will not directly or
indirectly assign, sell, pledge, hypothecate or otherwise transfer or
dispose of any of the Metro Shares or any interest therein, exercise any
right of conversion with respect to any Metro Shares, deposit any of the
Metro Shares into a voting trust or enter into a voting agreement or
arrangement or grant any proxy with respect thereto or enter into any
contract, option or other arrangement or undertaking with respect to the
direct or indirect disposition, of any of the Metro Shares.
(c) Century will, with respect to those Metro Shares that it
owns of record on the record date for voting at any annual or special
meeting of Metro stockholders to be held for the purpose of voting on the
adoption of the Merger Agreement or for granting any written consent in
connection with the solicitation of written consents in lieu of such a
meeting (collectively, the "Metro Stockholders' Meeting"), vote such
shares (or execute written consents with respect to such shares) (i) in
favor of the adoption of the Merger Agreement and the approval of the
Merger and the other transactions contemplated by the Merger Agreement,
(ii) against any Alternative Proposal (as defined in Section 4.02) and
(iii) in favor of any other matter necessary for the consummation of the
transactions contemplated by the Merger Agreement, as any of the
foregoing is considered and voted upon at the Metro Stockholders'
Meeting.
4.02 No Solicitation. Prior to the Effective Time, Century
shall not, and it shall use its best efforts to cause its Affiliates and
Representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal
or offer (including, without limitation, any proposal or offer to the
stockholders of Metro) with respect to a merger, consolidation or other
business combination including Metro or any of its Subsidiaries or any
acquisition or similar transaction (including, without limitation, a
tender or exchange offer) involving the purchase of all or any
significant portion of the assets of Metro and its Subsidiaries taken as
a whole or any outstanding shares of the capital stock of Metro or any
Subsidiary of Metro (any such proposal or offer being hereinafter
referred to as an "Alternative Proposal"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have
any discussions or enter into any agreements, arrangements or
understandings, whether written or oral, with, any person or group
relating to an Alternative Proposal (excluding the transactions
contemplated by the Merger Agreement), or otherwise facilitate any effort
or attempt to make or implement an Alternative Proposal. Century will
promptly notify BFP if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
it or any of such persons.
ARTICLE V
GENERAL PROVISIONS
5.01 Termination. This Stockholder Agreement and all rights and
obligations of the parties hereunder, including, without limitation, the
provisions of Section 4.02, shall automatically terminate, and shall
cease to be of any further force and effect, upon the earlier of (i) the
termination of the Merger Agreement under Section 11.02 thereof, (ii) the
mutual written agreement of BFP and Century or (iii) at such time as a
nominee of Century is no longer a director of BFP and Century no longer
has the right hereunder to designate or cause the nomination or election
of any member of the Board of Directors. Notwithstanding the termination
of this Stockholder Agreement, nothing contained herein shall relieve any
party hereto from liability for breach of any of its representations,
warranties, covenants or agreements contained in this Stockholder
Agreement.
<PAGE>
5.02 Amendment and Waiver. (a) This Stockholder Agreement may
be amended, supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto.
(b) Any term or condition of this Stockholder Agreement may be
waived at any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term
or condition. No waiver by any party of any term or condition of this
Stockholder Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of
this Stockholder Agreement on any future occasion. All remedies, either
under this Stockholder Agreement or by law or otherwise afforded, will be
cumulative and not alternative.
5.03 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or mailed
(first class postage prepaid) to the parties at the following addresses
or facsimile numbers:
If to BFP, to:
Brooks Fiber Properties, Inc.
425 Woods Mill Road South, Suite 300
Town & Country, Missouri 63017
Attn: James C. Allen
Vice Chairman and Chief Executive Officer
(Fax) (314) 579-4854
with a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway
Suite 3600
St. Louis, Missouri 63102
Attn: John P. Denneen, Esq.
(Fax) (314) 259-2020
If to Century, to:
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71203
Attn: Glen F. Post, III
(Fax) (318) 388-9562
with a copy to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
Place St. Charles
201 St. Charles Avenue
New Orleans, Louisiana 70171-5100
Attn: Kenneth J. Najder, Esq.
(Fax) (504) 582-8012
<PAGE>
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be
deemed given upon delivery, (ii) if delivered by facsimile transmission
to the facsimile number as provided in this Section, be deemed given upon
receipt, and (iii) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to
this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that
party by giving notice specifying such change to the other parties
hereto.
5.04 Entire Agreement. This Stockholder Agreement supersedes
all prior discussions and agreements among the parties hereto with
respect to the subject matter hereof and contains, together with the
Merger Agreement, the sole and entire agreement among the parties hereto
with respect to the subject matter hereof.
5.05 No Third Party Beneficiary. The terms and provisions of
this Stockholder Agreement are intended solely for the benefit of each
party hereto, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person.
5.06 No Assignment; Binding Effect. Neither this Stockholder
Agreement nor any right, interest or obligation hereunder may be assigned
by any party hereto without the prior written consent of the other party
hereto and any attempt to do so will be void. Subject to the preceding
sentence, this Stockholder Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
5.07 Specific Performance; Legal Fees. The parties acknowledge
that money damages are not an adequate remedy for violations of any
provision of this Stockholder Agreement and that any party may, in its
sole discretion, apply to a court of competent jurisdiction for specific
performance for injunctive or such other relief as such court may deem
<PAGE>
just and proper in order to enforce any such provision or prevent any
violation hereof and, to the extent permitted by applicable law, each
party waives any objection to the imposition of such relief. The parties
hereto agree that, in the event that any party to this Stockholder
Agreement shall bring any legal action or proceeding to enforce or to
seek damages or other relief arising from an alleged breach of any term
or provision of this Stockholder Agreement by the other party, the
prevailing party in any such action or proceeding shall be entitled to an
award of, and the other party to such action or proceeding shall pay, the
reasonable fees and expenses of legal counsel to the prevailing party.
5.08 Headings. The headings used in this Stockholder Agreement
have been inserted for convenience of reference only and do not define or
limit the provisions hereof.
5.09 Invalid Provisions. If any provision of this Stockholder
Agreement is held to be illegal, invalid or unenforceable under any
present or future law, and if the rights or obligations of any party
hereto under this Stockholder Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable,
(ii) this Stockholder Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part
hereof and (iii) the remaining provisions of this Stockholder Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance
therefrom.
5.10 Governing Law. This Stockholder Agreement shall be
governed by and construed in accordance with the substantive laws of the
State of Delaware as applied to contracts made and performed within the
State of Delaware without regard to its conflicts of law principles.
5.11 Dispute Resolution Procedures. If any question shall
arise in regard to the interpretation of any provision of this
Stockholder Agreement or as to the rights and obligations of either of
the parties hereunder, Glen F. Post, III, as chief executive officer of
Century, and James C. Allen, as chief executive officer of BFP, shall
meet with each other to negotiate and attempt to resolve such question in
good faith. Such representatives may, if they so desire, consult outside
experts for assistance in arriving at a resolution. In the event that a
resolution is not achieved within thirty (30) days after their first
meeting, either party may submit the question for final resolution by
binding arbitration in accordance with the rules and procedures of the
American Arbitration Association applicable to commercial transactions,
and judgment upon any award thereon may be entered in any court having
jurisdiction thereof. If BFP initiates the arbitration, it shall be held
in New Orleans, Louisiana, and if Century initiates the arbitration, it
shall be held in St. Louis, Missouri. In the event of any arbitration,
BFP shall select one arbitrator, Century shall select one arbitrator and
the two arbitrators so selected shall select a third arbitrator, any two
of which arbitrators together shall make the necessary determinations.
In making the foregoing selections, each party, as well as the
arbitrators selected by such parties, shall endeavor to designate an
arbitrator having substantive experience in the telecommunications
industry. All out of pocket costs and expenses of BFP and Century in
connection with such arbitration, including, without limitation, the fees
of the arbitrators and any administration fees and reasonable attorney's
fees and expenses, shall be borne by BFP and Century in such proportions
as the arbitrators shall decide that such expenses should, in equity, be
apportioned.
<PAGE>
5.12 Counterparts. This Stockholder Agreement may be executed
in any number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this
Stockholder Agreement to be signed by its officer thereunto duly
authorized as of the date first above written.
BROOKS FIBER PROPERTIES, INC.
/s/ James C. Allen
By:_________________________________________
Vice Chairman and Chief Executive Officer
CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Glen F. Post, III
By:_________________________________________
President and Chief Executive Officer
SCHEDULE I
Metro Shares Owned by Century
Class Number
Common Stock...................................800
