CITIZENS UTILITIES COMPANY
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE YEAR ENDED DECEMBER 31, 1994
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 0-1291
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CITIZENS UTILITIES COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 06-0619596
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
High Ridge Park
P.O. Box 3801
Stamford, Connecticut 06905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 329-8800
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock Series A, par value $.25 per share New York Stock Exchange
Common Stock Series B, par value $.25 per share New York Stock Exchange
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(Title of each class) (Name of exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding twelve months, (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past ninety days.
Yes X No
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State the aggregate market value of the voting stock held by nonaffiliates
of the registrant as of January 31, 1995: $2,808,214,408.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of January 31, 1995.
Common Stock Series A 152,700,792
Common Stock Series B 60,137,151
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the registrant's 1995 Annual Meeting of Stockholders
is incorporated by reference into Part III of this Report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]<PAGE>
Item 1. Description of Business
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(a) General Development of Business
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The "Company" includes Citizens Utilities Company and its subsidiaries
except where the context or statement indicates otherwise. The Company was
incorporated in Delaware in 1935 to acquire the assets and business of a
predecessor public utility corporation. Since then, the Company has grown as
a result of investment in owned utility operations and numerous acquisitions
of additional utility operations. It continues to consider and carry out
business expansion through significant acquisitions and joint ventures in
traditional public utility and related fields and the rapidly evolving
telecommunications and cable television industries.
The Company directly, or through subsidiaries, provides
telecommunications, electric distribution, natural gas transmission and
distribution and water and wastewater treatment services to more than
1,400,000 customer connections in areas of eighteen states. Other than the
transfer to the Company of the GTE Telephone Properties discussed below,
there have not been any material changes in the business of the Company
during the past fiscal year. The Company's strong financial resources and
consistent operating performance enable it to make the investments and
conduct the operations necessary to serve growing areas and to expand through
acquisitions.
On May 19, 1993, the Company and GTE Corporation announced the signing
of ten definitive agreements pursuant to which the Company agreed to acquire
from GTE Corporation, for $1.1 billion, certain telephone properties serving
approximately 500,000 local telephone access lines in nine states ("the GTE
Telephone Properties"). On December 31, 1993, 189,123 access lines in Idaho,
Tennessee, Utah and West Virginia were transferred to the Company. On June
30, 1994, 270,883 local telephone access lines in New York were transferred
to the Company. On November 30, 1994, 37,802 local telephone access lines in
Arizona and Montana were transferred to the Company and on December 30, 1994,
5,440 local telephone access lines in California were transferred to the
Company. The remaining GTE Telephone Property is located in Oregon and is
expected to be transferred to Citizens in 1995.
On November 29, 1994, the Company and ALLTEL Corporation ("ALLTEL")
announced the signing of eight definitive agreements pursuant to which
Citizens agreed to acquire from ALLTEL for $292,000,000, certain telephone
properties servicing approximately 110,000 local telephone access lines and
certain cable television systems servicing approximately 7,000 subscribers.
The properties are located in eight states: Arizona, California, Nevada, New
Mexico, Oregon, Tennessee, Utah and West Virginia ("ALLTEL Telephone
Properties"). The closings are expected to occur state by state throughout
1995 and the first half of 1996.
(b) Financial Information about Industry Segments
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The Consolidated Statements of Income and Note 10 of the Notes to
Consolidated Financial Statements included herein sets forth financial
information about industry segments of the Company for the last three fiscal
years.
(c) Narrative Description of Business
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TELECOMMUNICATIONS
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The Company provides telecommunications services in Arizona,
California, Idaho, Montana, New York, Oregon, Pennsylvania, Tennessee, Utah,
Washington and West Virginia to primarily residential customers served by
more than 706,000 access lines as of December 31, 1994. The Company will
provide telecommunications services to customers served by approximately
126,000 additional access lines in Arizona, California, Nevada, New Mexico,
Oregon, Tennessee, Utah and West Virginia and cable television service to
approximately 7,000 subscribers in California upon the transfer to the
Company of the remaining GTE and ALLTEL Telephone Properties.
Telecommunications services consist of local exchange service, centrex
service, network access service, long distance service, interexchange
service, competitive access service, competitive local exchange service,
cellular service, cable television service and other related services. The
Company's telecommunications services and/or rates are subject to the
jurisdiction of the Federal Communications Commission and state regulatory
agencies.
Various state regulatory agencies, state legislatures and the federal
government have initiated proceedings to promote the development of
competition in telecommunications markets. These proceedings are focussed on
removing the regulatory and legal barriers to competitive entry into the
interLATA toll, intrastate intraLATA toll and local exchange markets;
developing rules to govern the relationship between competitors; and
designing rebalanced rate structures for the incumbent local exchange company
("LEC") which would allow LECs the opportunity to effectively compete in
these markets while protecting the public's interest and access to
telecommunication services. Simultaneously, many states are investigating or
have implemented procedures for LECs to enter into incentive regulatory
frameworks ("IRF") as an alternative to traditional rate base, rate of return
regulation, and/or classifying services on the basis of the presence of
competition and allowing deregulation or flexible pricing regulation for the
services deemed competitive.
The Public Utility Commission of the State of California ("CPUC")
issued an order, effective January 1, 1995, authorizing competition for
intrastate intraLATA switched toll services, rebalancing local exchange and
toll rates, establishing more specific procedures for local exchange carriers
to enter into incentive regulatory frameworks ("IRF") and providing a
timetable for the elimination of the intrastate toll settlement pools for
mid-sized local exchange carriers. In support of CPUC efforts which preceded
its order, the Company's California telephone subsidiary (the "Subsidiary")
exited the toll settlement pools in 1991 and entered into a transition
contract with Pacific Bell. Pursuant to this contract, Pacific Bell agreed
to pay the Subsidiary $38,000,000 annually through the end of 1994 to
partially offset the decline in revenues which resulted from exiting the toll
settlement pools. The Subsidiary expected to conclude a general rate case
permitting the implementation of rebalanced, competitive rates effective
January 1, 1995 intended to protect the Subsidiary's overall revenues, other
than the $38,000,000 Pacific Bell contract payment, by enabling it to
effectively compete in the intrastate intraLATA switched toll services
market. Although this general rate case has not been finalized, the CPUC has
issued an interim rate order which became effective January 1, 1995 and
authorizes rebalanced competitive rates for the Subsidiary. In its general
rate case, the Subsidiary requested approval of an IRF which would allow it
to earn up to 5% in excess of its authorized rate of return. It is expected
that the approved IRF will be effective when the final rate order is issued
later in 1995.
The Company continues to invest in its subsidiary, Electric Lightwave,
Inc. ("ELI"), a competitive access provider in Arizona, California, Oregon,
Utah and Washington. Through ELI, the Company has been granted authority in
Washington to provide competitive local exchange service and has filed
applications to provide competitive local exchange service in Utah and
Oregon. The Company has completed construction of a fiber-optic route from
Las Vegas, Nevada to Phoenix, Arizona which will provide the Company's other
telecommunications operations in Arizona centralized equal access to long
distance carriers and will provide the Company with the fiber optic capacity
to provide transport services to other carriers along this route. The Company
has invested approximately $110,300,000 in ELI through the year ended
December 31, 1994.
The Company's Mohave Cellular subsidiary holds a one-third interest and
is general managing partner of a cellular limited partnership operating six
cell sites in Arizona.
On September 22, 1994, a subsidiary of the Company and a subsidiary of
Century Communications Corp. ("Century") entered into a joint venture
agreement for the purpose of acquiring, for approximately $89 million, and
operating two cable television systems in southern California (the
"Systems"). Century is a cable television company of which Leonard Tow, the
Chairman and Chief Executive Officer of the Company, is Chairman, Chief
Executive Officer, Chief Financial Officer and a director. In addition,
Claire Tow, a director of the Company is Senior Vice President and a director
of Century and Robert Siff, a director of the Company is a director of
Century. The joint venture is governed by a management board on which the
Company and Century are equally represented. The joint venture has entered
into an agreement pursuant to which a subsidiary of Century (the "Manager")
will manage the day-to-day operations of the Systems. The Manager will not
receive a management fee but will be reimbursed only for the actual costs it
incurs on behalf of the joint venture. With respect to the purchase of any
service or asset for the joint venture for use in the Systems, the Manager
is obligated to pass through to the joint venture any discount, up to 5%, off
the published prices of vendors and is entitled to retain any discount in
excess of 5%. On September 30, 1994, the joint venture acquired one of the
systems serving approximately 26,500 subscribers. The purchase of the second
system, serving approximately 19,200 subscribers, remains subject to
regulatory approval for the transfer of licenses.
Through a subsidiary, the Company intends to provide new
telecommunications toll services. State regulatory agencies have granted
authority for the Company to provide intrastate intraLATA and interLATA toll
services in New York and West Virginia and intrastate interLATA toll services
in California. The Company also intends to provide intrastate intraLATA and
interLATA toll services in Idaho, Tennessee and Utah where such authority is
not required. Upon receipt of required authority, the Company intends to
provide authorized intrastate toll services in Arizona, Montana, Nevada,
Oregon and Washington. The Company has authority and intends to provide
interstate toll services initially in its local telephone service areas.
In January 1995, the Company entered into a definitive agreement to
acquire Flex Communications by merger in a stock-for-stock transaction. Flex
is a switch-based, inter-exchange carrier providing long-distance, 800
Inbound long-distance, voice mail, paging, private data networks and cellular
services to approximately 3,500 customers in upstate New York. The
transaction is expected to close in 1995.
The GTE Telephone Properties acquired and to be acquired and the ALLTEL
Telephone Properties to be acquired increase the Company's number of local
exchange access lines serving customers to approximately 832,000. To better
manage its telecommunications properties, the Company is consolidating its
telecommunications operations support services and establishing a centralized
telecommunications infrastructure to manage these services. In this regard,
the Company has entered into an agreement with ALLTEL's information services
subsidiary, ALLTEL Information Services, Inc. ("AISI"), pursuant to which
AISI will provide certain operational support systems in a service bureau
environment for all of the Company's local telephone exchange operations;
such support systems include customer billing and customer service and
engineering information data bases. AISI will also provide network
management, data center operations and ongoing software modernization for
existing systems to meet new business requirements. This agreement is
expected to enhance significantly the Company's management and operation of
all of its local telephone exchange operations. Although such agreement
contemplates a multi-year arrangement, the Company has the unilateral right
to terminate such agreement if the parties do not execute a separate
agreement which involves the development of certain new operating support
systems.
NATURAL GAS
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Operating divisions of the Company provide natural gas transmission and
distribution services to primarily residential customers in Arizona, Colorado
and Louisiana. The total number of natural gas customers served as of December
31, 1994 was approximately 356,000. The provision of services and/or rates
charged are subject to the jurisdiction of federal and state regulatory
agencies. The Company purchases all needed natural gas, the supply of which
is believed to be adequate to meet current demands and to provide for
additional sales to new customers. The natural gas industry is subject to
seasonal demand, with the peak demand occurring during the heating season of
November 1 through March 31. The Company's natural gas sector experiences
third party competition from fuel oil, propane, and other natural gas
suppliers for most of its large consumption customers (of which there are
few) and from electricity for all of its customer base. The competitive
position of natural gas at any given time depends primarily on the relative
prices of natural gas and these other energy sources. Various federal and
state tax incentive programs call for replacing other fuels with compressed
natural gas. However, these regulations may, in certain circumstances, also
promote the use of other fuels to replace natural gas.
The Company continues to expand its northern Arizona natural gas
transmission and distribution service area. The service area has grown from
63,000 customers prior to expansion to 77,000 customers as of December 31,
1994.
ELECTRIC
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Operating divisions of the Company provide electric distribution
services to primarily residential customers in Arizona, Hawaii and Vermont.
Total number of electric customers served as of December 31, 1994 was
approximately 105,000. The provision of services and/or rates charged are
subject to the jurisdiction of federal and state regulatory agencies. The
Company purchases over 80% of needed electric energy, the supply of which is
believed to be adequate to meet current demands and to provide for additional
sales to new customers. As a whole, the Company's electric sector does not
experience material seasonal fluctuations. In response to regulatory
initiatives, the Company's electric sector is proceeding with demand-side
management programs and integrated resource planning techniques designed to
promote the most efficient use of electricity and to reduce the environmental
impacts associated with new generation facilities.
The Company's Kauai Electric Division ("KED") has restored all
transmission and distribution lines, poles and equipment that were damaged
as a result of Hurricane Iniki in September 1992. The Hawaii Public Utilities
Commission ("HPUC") approved a stipulation on December 9, 1992 which
addresses the regulatory treatment of certain costs associated with the
restoration of KED facilities. As part of this stipulation, KED agreed to
defer its next general rate increase application until 1994 with rates
becoming effective no earlier than January 1, 1995 (the "deferred rate
case"). Under the terms of this stipulation, KED is authorized to earn an
allowance for funds used during construction ("AFUDC") on the restoration
costs. The allowed restoration costs, plus associated AFUDC earnings, will
be included in rate base and recovered in the deferred rate case. Restoration
costs plus associated AFUDC earnings not ultimately allowed in rate base
should be recovered by the Company in the deferred rate case over an
amortization period to be determined in that case. Depreciation expense on
the restoration plant is being deferred and will be amortized over the
remaining useful life of the restored plant when rates are approved in the
deferred rate case. Lost gross margin (unrecovered costs of service and the
allowed return on investment based on the rate award received by the KED in
November, 1992) and interest, compounded monthly, on the lost gross margin
is authorized to be accrued and is subject to recovery in the deferred rate
case. KED made final modifications to its filed deferred rate case in July
1994 using a future test year of 1995. The deferred rate case requested an
increase in rates of $23,600,000, with the rate increase to be phased-in over
three steps ending in April of 1996. A final order from the HPUC regarding
the deferred rate case is currently expected later in 1995.
Prior to 1992, the United States Environmental Protection Agency
("EPA") named the Company a potentially responsible party ("PRP") with
respect to three sites which have been designated for federally supervised
clean-up under the Comprehensive Environmental Response, Compensation and
Liability Act. These three sites are Missouri Electric Works in Cape
Girardeau, Missouri; Northwest Transformer in Everson, Washington; and Rose
Chemicals in Holden, Missouri. The EPA has determined that the Company's
electric sector's participation in each site is less than 0.5%. The number
of named PRP's ranges from 40 to 700 at each site. Significant parties have
accepted responsibility and are currently funding the clean-up activity as
required. The Company's remaining financial liability is estimated to be
approximately $140,000.
WATER/WASTEWATER
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The Company provided water and/or wastewater treatment services to
approximately 270,000 primarily residential customer connections in Arizona,
California, Illinois, Indiana, Ohio and Pennsylvania as of December 31, 1994.
The provision of these services and/or rates charged are subject to the
jurisdiction of federal, state and local regulatory agencies. A significant
portion of the Company's water/wastewater treatment sector construction
expenditures necessary to serve new customers are made under agreements with
land developers who generally advance funds for construction and/or plant to
the Company that are later refunded by the Company in part as developers add
new customers and revenues are added in their developments.
The Company's water/wastewater treatment public utility properties
can become subjected to condemnation proceedings initiated by municipalities
or utility districts seeking to acquire and take control of the operation of
such property. During 1992, one operation in Illinois became subject to such
proceeding. This condemnation is being contested by the Company.
On August 31, 1994, RHC, Inc. ("Metro Utility Co."), an operator of
water and wastewater utilities serving portions of the suburban Chicago area,
was merged into the Company. The acquired operations serve approximately
10,000 customers, increasing the number of the Company's water/wastewater
treatment customers in Illinois to over 65,000. The Company issued 504,807
shares of Common Stock Series B in exchange for all of the common stock of
Metro Utility Co. The transaction was accounted for as a pooling of
interests.
In September 1992, the EPA filed a complaint with the United States
District Court for the Northern District of Illinois relating to alleged
violations by the Company's Illinois subsidiary with respect to National
Pollutant Discharge Elimination System permit requirements. The Company has
negotiated a proposed settlement of this action. Such settlement is now
undergoing the approval process within the EPA; once it is approved, it will
be submitted to the District Court for final approval. Under the settlement,
the Company will pay a fine of $490,000 and it will also make certain plant
improvements with an estimated cost of $2,200,000. These improvements are
presently under design. Construction is expected to begin in 1995 and be
completed before the end of 1996. The improvements are required in order to
comply with new discharge limits reached under the settlement. As a regulated
entity, the Company is entitled to earn a fair rate of return on these
improvements that are placed in service for the benefit of its customers. The
Company believes that the cost of these improvements will be recovered
through customer rates.
General
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The Company's public utility operations are conducted primarily in
small-and medium-size towns and communities. No material part of the
Company's business is dependent upon a single customer or upon a small group
of customers. The loss of one or more of such customers would not have a
material adverse effect on operating income. As a result of its
diversification, the Company is not dependent upon any single geographic area
or upon any one type of utility service for its revenues. Due to this
diversity, no single regulatory body regulates a utility service of the
Company accounting for more than 13% of its 1994 revenues.
The Company is subject to regulation by the respective state regulatory
agencies and federal regulatory agencies. The Company is not subject to the
Public Utility Holding Company Act. Order backlog is not a significant
consideration in the Company's business, and the Company has no contracts or
subcontracts which may be subject to renegotiation of profits or termination
at the election of the federal government. The Company holds franchises from
local governmental bodies, which vary in duration. The Company also holds
certificates of convenience and necessity granted by various state
commissions which are generally of indefinite duration. The Company has no
special working capital practices. The Company's research and development
activities are not material. There are no patents, trademarks, licenses or
concessions held by the Company that are material.
The Company had 4,294 employees at December 31, 1994.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales
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The Company does not have any foreign operations or material export
sales.
<PAGE>
Item 2. Description of Property
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The administrative offices of the Company are located at High
Ridge Park, Stamford, Connecticut, 06905 and are leased. The Company owns
property including: telecommunications outside plant, central office,
microwave radio and fiber-optic facilities; electric generation, transmission
and distribution facilities; gas transmission and distribution facilities;
water production, treatment, storage, transmission and distribution
facilities; and wastewater treatment, transmission, collection and discharge
facilities; all of which are necessary to provide services at the locations
listed below.
State Service(s) Provided
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Arizona Electric, Natural Gas, Telecommunications,*
Water, Wastewater treatment
California Telecommunications, Water
Colorado Natural Gas
Hawaii Electric
Idaho Telecommunications
Illinois Water, Wastewater treatment
Indiana Water
Louisiana Natural Gas
Ohio Water, Wastewater
Oregon Telecommunications
Montana Telecommunications
New York Telecommunications
Pennsylvania Telecommunications, Water
Tennessee Telecommunications
Utah Telecommunications
Vermont Electric
Washington Telecommunications
West Virginia Telecommunications
* Certain properties are subject to a mortgage deed pursuant to Rural
Electrification Administration and Rural Telephone Bank borrowings.
<PAGE>
Item 3. Legal Proceedings
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In September 1992, the United States Environmental Protection
Agency filed a complaint with the United States District Court for the
Northern District of Illinois relating to alleged violations by the Company's
Illinois subsidiary with respect to National Pollutant Discharge Elimination
System permit requirements. The Company has negotiated a proposed settlement
of this action. Such settlement is now undergoing the approval process within
the Environmental Protection Agency; once it is approved, it will be
submitted to the District Court for final approval. Under the settlement, the
Company will pay a fine of $490,000 and it will also make certain plant
improvements with an estimated cost of $2,200,000. These improvements are
presently under design. Construction is expected to begin in 1995 and be
completed before the end of 1996. The improvements are required in order to
comply with new discharge limits reached under the settlement. As a regulated
entity, the Company is entitled to earn a fair rate of return on these
improvements that are placed in service for the benefit of its customers. The
Company believes that the cost of these improvements will be recovered
through customer rates.
On February 19, 1993, the Company was served with a summons and
complaint in an action brought by the Sun City Taxpayers' Association in the
United States District Court for the District of Connecticut. The plaintiff
alleged that the Company, through its Sun City Water Company and Sun City
Sewer Company subsidiaries, misrepresented rate-base investment in rate
applications submitted to the Arizona Corporation Commission ("ACC") between
1968 and 1978 and claimed damages of $65,000,000 before trebling. The
plaintiff made substantially the same allegations in a regulatory proceeding
before the ACC in 1986 and the ACC rejected those allegations. On February
1, 1994, the Company's motion to dismiss this action was granted and the
complaint was dismissed by an opinion and order of the District Court. On
February 9, 1994, plaintiff filed a notice of appeal seeking review of the
court's ruling by the United States Court of Appeals for the Second Circuit.
The Second Circuit denied the appeal on January 23, 1995 and the Plaintiff
filed a Writ of Certiorari to the United States Supreme Court on February 14,
1995.
In June 1993, several stockholders commenced purported derivative
actions in the Delaware Court of Chancery against the Company's Board of
Directors. These actions have since been consolidated (the "Consolidated
Action"). These stockholders allege that the compensation approved by the
Board of Directors for the Company's Chairman is excessive and seek, among
other things, an accounting for alleged corporate waste and a declaration
that the Chairman's employment agreement and existing stock options are
invalid. These stockholders further allege that certain corporate
transactions involving the Company and Century Communications Corp.
("Century") benefitted Century to the detriment of the Company. In February
1994, a memorandum of understanding was executed among counsel for the
stockholders in the Consolidated Action and counsel for the Company's Board
of Directors. The memorandum of understanding contemplates that the parties
will attempt to agree upon and execute a stipulation of settlement resolving
all of the claims in the Consolidated Action. Consummation of the proposed
settlement will be subject to: (a) the completion by plaintiffs of
appropriate confirmatory discovery in the Consolidated Action; (b) the
drafting and execution of a stipulation of settlement; (c) notice to all
stockholders of the Company of the terms of the proposed settlement; and (d)
final approval of the stipulation of settlement by the Delaware Court of
Chancery and dismissal of the Consolidated Action with prejudice. It is
contemplated that the stipulation of settlement will provide for certain
modifications to the Chairman's compensation arrangements and for the
complete release and settlement of all claims of the plaintiffs and all
derivative claims of the Company against the Company's Board of Directors
arising out of the allegations in the Consolidated Action. The plaintiffs in
the Consolidated Action have completed their confirmatory discovery, and the
terms of the stipulation of settlement are being negotiated. Plaintiffs'
counsel will seek an award of attorneys' fees and expenses in connection with
the settlement. No understanding has been reached with respect to the amount
of fees and expenses to be sought, but the Company expects to recover the
fees and expenses, if any, to be awarded by the Delaware Court of Chancery
to plaintiffs' counsel under the Company's Directors' and Officers' liability
insurance policy.
Another action ("Thorpe") was filed in June 1993 in the Delaware
Court of Chancery. Like the plaintiffs in the Consolidated Action, plaintiffs
in Thorpe allege derivative claims challenging the Chairman's compensation as
excessive and the validity of certain stock options granted to the Chairman
and other members of the Company's Board of Directors. The plaintiffs in
Thorpe also assert derivative claims challenging the fairness of the 1991
merger between the cellular subsidiaries of the Company and Century. In
addition, these plaintiffs have alleged that the Chairman and Century paid a
premium to purchase control of the Company from the former Chairman, Richard
L. Rosenthal, and others. The plaintiffs in Thorpe have also asserted
individual and purported class claims challenging the disclosures made by the
defendants relating to the above matters and the allegedly improper accounting
treatment with respect to the Company's investment in Centennial Cellular
Corp. These plaintiffs seek, among other things, an accounting for alleged
corporate waste, a declaration that the Chairman's employment agreement
and existing stock options are invalid and unspecified monetary damages from
the director defendants. In November 1993, another purported derivative
action ("Biggs") was filed in the Delaware Court of Chancery against the
Company's Board of Directors and Century. The plaintiffs in Biggs challenge the
Chairman's compensation, the grant of stock options to the Chairman and
other members of the Company's Board of Directors and the 1991 cellular
subsidiary merger and the service agreement between Century and Centennial.
The Company's Board of Directors has moved to dismiss the complaints in these
derivative actions for failure to state a claim and for failure to comply
with the demand requirements applicable to a derivative suit. The motions
are currently pending. In May 1994, the Delaware Court of Chancery stayed
proceedings in the Thorpe and Biggs actions pending presentation of the
proposed stipulation of settlement of the Consolidated Action for approval by
the Court.
In June 1993, a stockholder of the Company ("Berlin") commenced a
purported class action in the United States District Court for the District
of Delaware against the Company and the Company's Board of Directors. The
stockholder's complaint, amended in July 1993, alleged that the proxy
statements disseminated by the Company from 1990 to 1993 failed to disclose
material information regarding, among other things, the Chairman's
compensation and certain purported related-party transactions and thereby
violated federal and state disclosure requirements. The relief sought
included a declaration that the results of the 1993 Annual Meeting of the
stockholders are null and void, a declaration that the Chairman's Employment
Agreement is invalid and unspecified damages. In September 1994, the District
Court granted in part and denied in part defendants' motion to dismiss the
amended complaint and denied defendants' motion for summary judgment. In
October 1994, defendants moved for summary judgment dismissing the remainder
of the claim. This motion is currently pending. In November 1994, plaintiff
moved to supplement her amended complaint to add a claim seeking to
invalidate the results of the 1994 Annual Meeting of Citizens stockholders
on the grounds that the Company's 1994 proxy statement allegedly failed to
disclose the amount of the management fee then proposed to be paid to Century
in connection with a proposed cable television joint venture. The proposed
supplemental complaint also seeks unspecified monetary damages. This motion
is currently pending.
In October 1994, the Company and eight other companies were served with
a Summons and Complaint by the Town of Walkill, New York ("the Town") in the
United States District Court for the Southern District of New York. The Town
seeks to recover an unspecified amount representing response costs resulting
from the release or threatened release of hazardous substances at the Town's
Landfill, and damages and restitution under common law theories for other
costs associated with environmental conditions at the Town's Landfill. The
Town also seeks a declaratory judgement under CERCLA that the Defendants are
strictly, jointly and severally liable for future necessary response costs.
The Company notified GTE Corporation of this action since any potential
liability for this matter has been retained by GTE Corporation pursuant to
the Asset Purchase Agreement dated May 18, 1993. GTE Corporation has assumed
the Company's defense in this action.
The Company believes the risk of material loss from the above actions
is remote.
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None in fourth quarter 1994.<PAGE>
Executive Officers
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Information as to Executive Officers of the Company as of January
31, 1995, follows:
Name Age Current Position and Office
- ---------- --- ---------------------------
Leonard Tow 66 Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer
Daryl A. Ferguson 56 President and Chief Operating
Officer
Robert J. DeSantis 39 Vice President, Treasurer and
Assistant Secretary
James P. Avery 38 Vice President, Energy
Richard A. Faust,Jr. 48 Vice President, Mohave County and
Assistant Secretary
J. Michael Love 43 Vice President, Corporate
Planning
Robert L. O'Brien 52 Vice President, Regulatory
Affairs
Donald K. Roberton 53 Vice President,
Telecommunications
Livingston E. Ross 46 Vice President and Controller
Ronald E. Walsh 55 Vice President, Water/Wastewater
and Assistant Secretary
There is no family relationship between any of the officers of the
Registrant. The term of office of each of the foregoing officers of the
Registrant will continue until the next annual meeting of the Board of
Directors and until a successor has been elected and qualified.
LEONARD TOW has been associated with the Registrant since April 1989
as a Director. In June 1990, he was elected Chairman of the Board and Chief
Executive Officer. In October 1991, he was appointed to the additional
position of Chief Financial Officer of the Registrant. He has also been a
Director, Chief Executive Officer and Chief Financial Officer of Century
Communications Corp. since its incorporation in 1973, and Chairman of its
Board of Directors since October 1989.
DARYL A. FERGUSON has been associated with the Registrant since July
1989. He was Vice President, Administration from July 1989 through March 1990
and Senior Vice President, Operations and Engineering from March 1990 through
June 1990. He has been President and Chief Operating Officer since June 1990.
During the period April 1987 through July 1989, he was President and Chief
Executive Officer of Microtecture Corporation. He is currently a Director of
Centennial Cellular Corp.
ROBERT J. DeSANTIS has been associated with the Registrant since
January 1986. He was Assistant to the Treasurer through May 1986 and
Assistant Treasurer from June 1986 through September 1991. He has been Vice
President and Treasurer since October 1991 and Assistant Secretary since May
1993.
JAMES P. AVERY has been associated with the Registrant since August
1981. He was Project Manager, Electric through June 1988, Assistant Vice
President, Electric Operations from June 1988 through December 1990 and Vice
President, Electric from December 1990 through May 1994. He has been Vice
President, Energy since June 1994.
RICHARD A. FAUST, JR. has been associated with the Registrant since
December 1990. He was associated with Louisiana General Services, Inc. from
1972 until that Company was merged with the Registrant in December 1990. He
served as Vice President, General Counsel and Secretary of Louisiana General
Services, Inc. from March 1984 through May 1993. He was elected Assistant
Secretary for the Registrant in June 1991 and Vice President, Mohave County,
(Arizona) in June 1993.
J. MICHAEL LOVE has been associated with the Registrant since May 1990
and from November 1984 through January 1988. He was Assistant Vice President,
Regulatory Affairs and Community Relations from June 1986 through January
1988. He left the Registrant in January 1988 to become President and General
Counsel of Southern New Hampshire Water Company. He rejoined the Registrant
in April 1990 and was Assistant Vice President, Corporate Planning from June
1990 through March 1991. He has been Vice President, Corporate Planning since
March 1991.
ROBERT L. O'BRIEN has been associated with the Registrant since March
1975. He has been Vice President, Regulatory Affairs since June 1981.
DONALD K. ROBERTON has been associated with the Registrant since
January 1991 and has been Vice President, Telecommunications since that date.
Prior to joining the Registrant, he was Vice President, Western Operations
at Henkels & McCoy from December 1989 through December 1990. From January
1984 through November 1989, he was Vice President with Centel
Communications Systems.
LIVINGSTON E. ROSS has been associated with the Registrant since August
1977. He was Manager of Reporting from September 1984 through March 1988,
Manager of General Accounting from April 1988 through September 1990 and
Assistant Controller from October 1990 through November 1991. He has been
Vice President and Controller since December 1991.
RONALD E. WALSH has been associated with the Registrant since January
1986. He was Attorney and Assistant Secretary from November 1987 through
August 1992. He has been Vice President, Water/Wastewater since August 1992.
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
----------------------------------------------------------------
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the New York Stock Exchange
under the symbols CZNA and CZNB for Series A and Series B, respectively. The
following table indicates the high and low prices per share as taken from the
daily quotations published in the "Wall Street Journal" during the periods
indicated. Prices have been adjusted retroactively for intervening stock
dividends, and the August 31, 1993 2-for-1 stock split, rounded to the
nearest 1/8th. (See Note 7 of Notes to Consolidated Financial Statements.)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ------------ ------------ -----------
High Low High Low High Low High Low
------------ ------------ ------------ ------------
1994:
- -----
Series A 17 1/8 14 15 7/8 13 1/4 14 1/2 13 1/4 13 3/4 12 1/2
Series B 17 1/4 13 7/8 15 7/8 13 1/4 14 1/2 13 1/4 13 3/4 12 5/8
1993:
- -----
Series A 16 3/4 12 3/4 17 1/2 15 1/8 17 1/4 12 5/8 18 7/8 15 3/8
Series B 16 3/4 12 7/8 17 1/2 15 17 1/4 12 5/8 18 3/4 15 3/8
The December 30, 1994 prices were: Series A $12.875 high, $12.50 low;
Series B $12.875 high, $12.625 low.
As of January 31, 1995, the approximate number of record security
holders of the Company's Common Stock Series A and Series B was 43,989. This
information was obtained from the Company's transfer agent.
DIVIDENDS
Quarterly stock dividends declared and issued on both Common Stock
Series A and Series B were 1.1% for the first quarter of 1994, 1.15% for the
second quarter of 1994, 1.3% for the third quarter of 1994 and 1.4% for the
fourth quarter of 1994. Quarterly stock dividends declared and issued on both
Common Stock Series A and Series B were 1.2% for the first quarter of 1993,
1.0% for the second quarter of 1993 and 1.1% for the third quarter of 1993
and 1.0% for the fourth quarter of 1993. An annual cash dividend equivalent
rate of .733 and .691 per share (adjusted for all stock splits and stock
dividends paid subsequent to all dividends declared through December 31, 1994
and rounded to the nearest 1/8th) was considered by the Company's Board of
Directors in establishing the Series A and Series B stock dividends during
1994 and 1993, respectively. (See Note 7 of Notes to Consolidated Financial
Statements.)
<PAGE>
Item 6. Selected Financial Data (In thousands, except for per-share amounts)
--------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Operating revenues $916,014 $619,392 $580,464 $545,025 $528,251
Income from continuing
operations $143,997 $125,630 $115,013 $112,354 $105,624
Earnings per-share of
Common Stock Series A
and Series B(1) $.77 $.67 $.63 $.62 $.57
Stock dividends
declared on Common
Stock Series A and
Series B(2) 5.04% 4.37% 5.61% 7.93% 6.54%
Total assets $3,576,566 $2,627,118 $1,887,981 $1,721,452 $1,491,199
Long-term debt $ 994,189 $ 547,673 $ 522,699 $ 484,021 $ 412,348
(1) Adjusted for subsequent stock dividends and splits; no adjustment has been
made for the Company's 1.5% first quarter 1995 stock dividend because
the effect is immaterial.
(2) Annual rate of quarterly stock dividends compounded. Cash dividends of
$.32 per share were paid by Louisiana General Services, Inc. in 1990
prior to its merger into the Company on December 4, 1990.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
(a) Liquidity and Capital Resources
-------------------------------
In 1994, the Company's primary sources of funds were from operations
and borrowings. Funds requisitioned from the 1994, 1993, 1992 and 1991 Series
Industrial Development Revenue Bond construction fund trust accounts were
used to pay for the construction of utility plant. Commercial paper notes
payable in the amount of $703,000,000 were outstanding as of December 31,
1994, of which $515,200,000 is classified as short-term debt as it represents
the balance of the amount that was issued to temporarily and partially fund
the acquisition of the GTE Telephone Properties; this debt is expected to be
repaid from maturing temporary investments, funds from operations and
proceeds from the issuance of equity securities.
On April 26, 1994, the Company issued $175,000,000 of debentures at
par with an interest rate of 7.6% and a maturity date of June 1, 2006. On
October 6, 1994, the Company issued $100,000,000 of debentures at par with an
interest rate of 7.68% and a maturity date of October 1, 2034. The proceeds
from the sale of the debentures were used to permanently fund the acquisition
of the GTE Telephone Properties. On June 16, 1994 and on September 9, 1994,
Citizens Utilities Rural Telephone Company, Inc., a subsidiary of the
Company, under its Rural Telephone Bank loan contract, was advanced
$2,394,000 and $3,848,000, respectively. These funds bear interest at a rate
of 5.3% and have an ultimate maturity date of December 31, 2027. On September
28, 1994, the Company arranged for the composite issuance of $14,640,000 of
1994 Series Industrial Development Revenue Bonds; the bonds were issued as
demand purchase bonds with an interest rate of 6.6% and mature on May 1,
2029.
On August 16, 1994, the Company filed a shelf-registration statement
with the Securities and Exchange Commission to register up to 1,600,000
shares of common stock Series B to fund acquisitions, from which 504,807
shares were issued on August 31, 1994 to fund the acquisition of Metro
Utility Co. and 622,500 restricted shares, previously issued for the 1993
acquisitions of Natural Gas Company of Louisiana and Franklin Electric Light
Company, Incorporated, were registered. On January 30, 1995, the Company,
pursuant to an underwritten public offering, issued 19,000,000 shares of its
Common Stock Series A at an issuance price of $13 3/8 per share and realized
$244,200,000 in net proceeds. These proceeds were used to repay short-term
debt.
The Company considers its operating cash flows and its ability to
raise debt and equity capital as the principal indicators of its liquidity.
Although working capital is not considered to be an indicator of the
Company's liquidity, the Company experienced a decrease in its working
capital at December 31, 1994. The decrease is primarily due to the issuance
of short-term debt to temporarily and partially fund the acquisition of the
GTE Telephone Properties.
Capital expenditures for the years 1994, 1993 and 1992 were
$311,420,000, $182,480,000 and $148,027,000, respectively, and for 1995 are
expected to be approximately $262,000,000. These expenditures were, and in
1995 will be, for utility and related facilities and properties, including
the GTE Telephone Properties acquired.
The Company anticipates that the funds necessary for its 1995 capital
expenditures will be provided from operations; from 1991, 1993 and 1994
Series Industrial Development Revenue Bond construction fund trust account
requisitions; from Rural Telephone Bank loan contract advances; from
commercial paper notes payable; from parties desiring utility service; from
debt, equity and other financings at appropriate times; and, if deemed
advantageous, from short-term borrowings under bank credit facilities. The
Company has committed lines of credit with banks under which it may borrow
up to $1,200,000,000.
During 1994, the Company was authorized net increases in annual
revenues for properties in Arizona, California, Pennsylvania and Vermont
totaling $7,206,000. The Company has requests for increases pending before
regulatory commissions in Arizona, California, Hawaii and Ohio.
Regulatory Matters
- ------------------
In September 1992, the United States Environmental Protection Agency
("EPA") filed a complaint with the United States District Court for the
Northern District of Illinois relating to alleged violations by the Company's
Illinois subsidiary with respect to National Pollutant Discharge Elimination
System permit requirements. The Company has negotiated a proposed settlement
of this action. Such settlement is now undergoing the approval process within
the EPA; once it is approved, it will be submitted to the District Court for
final approval. Under the settlement, the Company will pay a fine of $490,000
and it will also make certain plant improvements with an estimated cost of
$2,200,000. These improvements are presently under design. Construction is
expected to begin in 1995 and be completed before the end of 1996. The
improvements are required in order to comply with new discharge limits
reached under the settlement. As a regulated entity, the Company is entitled
to earn a fair rate of return on these improvements that are placed in
service for the benefit of its customers. The Company believes that the cost
of these improvements will be recovered through customer rates.
On February 19, 1993, the Company was served with a summons and
complaint in an action brought by the Sun City Taxpayers' Association in the
United States District Court for the District of Connecticut. The plaintiff
alleged that the Company, through its Sun City Water Company and Sun City
Sewer Company subsidiaries, misrepresented rate-base investment in rate
applications submitted to the Arizona Corporation Commission ("ACC") between
1968 and 1978 and claimed damages of $65,000,000 before trebling. The
plaintiff made substantially the same allegations in a regulatory proceeding
before the ACC in 1986 and the ACC rejected those allegations. On February
1, 1994, the Company's motion to dismiss this action was granted and the
complaint was dismissed by an opinion and order of the District Court. On
February 9, 1994, plaintiff filed a notice of appeal and is seeking review
of the court's ruling by the United States Court of Appeals for the Second
Circuit. The Second Circuit denied the appeal on January 23, 1995 and the
Plaintiff filed a Writ of Certiorari to the United States Supreme Court on
February 14, 1995.
Prior to 1992, the EPA named the Company a potentially responsible
party ("PRP") with respect to three sites which have been designated for
federally supervised clean-up under the Comprehensive Environmental Response,
Compensation and Liability Act. These three sites are Missouri Electric Works in
Cape Girardeau, Missouri; Northwest Transformer in Everson, Washington; and Rose
Chemicals in Holden, Missouri. The EPA has determined that the Company's
electric sector's participation in each site is less than 0.5%. The number
of named PRP's ranges from 40 to 700 at each site. Significant parties have
accepted responsibility and are currently funding the clean-up activity as
required. The Company's remaining financial liability is estimated to be
approximately $140,000.
Various state regulatory agencies, state legislatures and the federal
government have initiated proceedings intending to promote the development
of competition in telecommunications markets. These proceedings are focused
on removing the regulatory and legal barriers to competitive entry into the
interLATA toll, intrastate intraLATA toll and local exchange markets;
developing rules to govern the relationship between competitors; and
designing rebalanced rate structures for the incumbent local exchange company
("LEC") which would allow LECs the opportunity to compete effectively in
these markets while protecting the public's interest and access to
telecommunication services. Simultaneously, many states are investigating or
have implemented procedures for LECs to enter into incentive regulatory
frameworks ("IRF") as an alternative to traditional rate base, rate of return
regulation, and/or classifying services on the basis of the presence of
competition and allowing deregulation or flexible pricing regulation for the
services deemed competitive.
The Public Utility Commission of the State of California ("CPUC")
issued an order, effective January 1, 1995, authorizing competition for
intrastate intraLATA switched toll services, rebalancing local exchange and
toll rates, establishing more specific procedures for local exchange carriers
to enter into incentive regulatory frameworks ("IRF") and providing a
timetable for the elimination of the intrastate toll settlement pools for
mid-sized local exchange carriers. In support of CPUC efforts which preceded
its order, the Company's California telephone subsidiary (the "Subsidiary")
exited the toll settlement pools in 1991 and entered into a transition
contract with Pacific Bell. Pursuant to this contract, Pacific Bell agreed
to pay the Subsidiary $38,000,000 annually through the end of 1994 to
partially offset the decline in revenues which resulted from exiting the toll
settlement pools. The Subsidiary expected to conclude a general rate case
permitting the implementation of rebalanced, competitive rates effective
January 1, 1995 intended to protect the Subsidiary's overall revenues, other
than the $38,000,000 Pacific Bell contract payment, by enabling it to
compete effectively in the intrastate intraLATA switched toll services
market. Although this general rate case has not been finalized, the CPUC has
issued an interim rate order which became effective January 1, 1995 and
authorizes rebalanced competitive rates for the Subsidiary. In its general
rate case, the Subsidiary requested approval of an IRF which would allow it
to earn up to 5% in excess of its authorized rate of return. It is expected
that the approved IRF will be effective when the final rate order is issued
later in 1995.
The Company continues to invest in its subsidiary, Electric Lightwave,
Inc. ("ELI"), a competitive access provider in Arizona, California, Oregon,
Utah and Washington. Through ELI, the Company has been granted authority in
Washington to provide competitive local exchange service and has filed
applications to provide competitive local exchange service in Utah and
Oregon. The Company has completed construction of a fiber-optic route from
Las Vegas, Nevada to Phoenix, Arizona which will provide the Company's other
telecommunications operations in Arizona centralized equal access to long
distance carriers and will provide the Company with the fiber optic capacity
to provide transport services to other carriers along this route. The Company
has invested approximately $110,300,000 in ELI through the year ended
December 31, 1994.
The Company's Mohave Cellular subsidiary holds a one-third interest
and is general managing partner of a cellular limited partnership operating
six cell sites in Arizona.
Through a subsidiary, the Company intends to provide new
telecommunications toll services. State regulatory agencies have granted
authority for the Company to provide intrastate intraLATA and interLATA toll
services in New York and West Virginia and intrastate interLATA toll services
in California. The Company also intends to provide intrastate intraLATA and
interLATA toll services in Idaho, Tennessee and Utah where such authority is
not required. Upon receipt of required authority, the Company intends to
provide authorized intrastate toll services in Arizona, Montana, Nevada,
Oregon and Washington. The Company has authority and intends to provide
interstate toll services initially in its local telephone service areas.
New Accounting Pronouncements
- -----------------------------
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 112, "Employers' Accounting for Postemployment
Benefits" and SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities". The Company applied the provisions of these accounting
standards prospectively. Adoption of SFAS 112 did not have a material effect
on the Consolidated Financial Statements.
SFAS 115 requires fair value reporting for certain investments in debt
and equity securities with the unrealized gain or loss, net of tax effect,
recorded as a separate element of Shareholders' Equity. See Note 5 of Notes
to the Consolidated Financial Statements.
In October 1994, the Financial Accounting Standards Board issued SFAS
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments", effective for fiscal years ending after December 15,
1994. The Company has only limited involvement with gas futures contracts and
does not use these instruments for investment or trading purposes. Gas
futures contracts are used on a very limited and select basis to manage
well-defined commodity price risks associated with Company commitments to
deliver natural gas to customers at fixed prices. The Company's exposure
under such contracts at December 31, 1994 was immaterial.
(b) Results of Operations
---------------------
Telecommunications generated revenues of $461,094,000 in 1994 compared
with $177,500,000 in 1993 and $186,200,000 in 1992. The 1994 results reflect
revenues derived from operating the GTE Telephone Properties acquired on
December 31, 1993, June 30, 1994 and November 30, 1994. Operating the GTE
Telephone Properties during 1994 generated revenues of $261,700,000.
Telecommunications revenues decreased 5% in 1993, primarily due to regulatory
changes in the state of California. The decrease was partially offset by
$2,626,000 of increased local revenues as a result of customer growth and
$2,548,000 of increased toll revenues as a result of increased toll volume.
Natural gas revenues decreased $3,000,000 in 1994 due to a decrease in
transportation revenues. This decrease was partially offset by increased
industrial gas revenues and increased residential and commercial revenues
from the Company's Northern Arizona Gas operations. Natural gas revenues in
1993 increased 12% over 1992 primarily due to $7,100,000 of revenues from
Natural Gas Company of Louisiana ("NGL"), which was acquired by the Company
in 1993; $3,600,000 from increased revenue per MCF of gas sold to industrial
customers; $5,200,000 from increased average revenue per MCF of gas sold to
residential and commercial customers; and $9,300,000 from pass-ons to
residential and commercial customers of increases in the wholesale costs of
commodities purchased. Pass-ons are required under tariff provisions and do
not affect net income.
The Company's electric sector revenues increased 6% over 1993, and 1993
revenues increased 13% over 1992 primarily due to increased consumption of
$11,900,000 in 1994 and $4,700,000 in 1993; these increases were primarily
as a result of customer growth.
Revenues earned by the Company's water/wastewater treatment sector
increased 11% or $7,000,000 in 1994. This increase is primarily due to
favorable rate increases which contributed $4,800,000 in water revenues and
revenues of $2,800,000 generated by Metro Utility Co. acquired by merger in
August 1994. Water/Wastewater treatment sector revenues increased 10% in 1993
primarily due to $2,800,000 of rate increases, $2,000,000 from increased
customer usage and $1,300,000 of revenues received from a water property
acquisition in December 1992.
Electric energy and fuel oil purchased costs increased 4% in 1994 and
9% in 1993. Electric energy purchased costs for 1994 totaled $72,400,000, a
6% increase over the 1993 amount of $68,200,000, which was a 6% increase over
the 1992 cost of $64,100,000. The increased cost of electricity purchased in
1994 and 1993 was primarily due to increased customer demand; the increase
in 1993 was also partially due to increased supplier prices. Fuel oil
purchased in 1994 of $14,200,000 decreased from the 1993 amount of
$14,900,000 primarily due to a decrease in supplier prices. Fuel oil
purchased costs in 1993 increased 22% from the 1992 amount of $12,200,000,
primarily due to higher supplier prices and increased volume to satisfy
increased customer consumption. Natural gas purchased costs decreased
$1,300,000 in 1994, primarily due to a decrease in supplier prices. Natural
gas purchased costs increased 15% in 1993, primarily due to higher supplier
prices. Under tariff provisions, increases and decreases in the Company's
wholesale costs of electric energy, fuel oil and natural gas purchased are
passed on to customers.
Operating and maintenance expenses increased by 86% or $143,300,000 in
1994, primarily due to the acquisition of the GTE Telephone Properties.
Depreciation expense of $115,200,000 more than doubled the 1993 amount
of $54,700,000. The increase is attributable to increases in depreciable
plant as a result of the acquisitions of the GTE Telephone Properties.
Taxes other than income increased $23,700,000 or 67% over the 1993
period due to increased taxes on the newly acquired GTE Telephone Properties.
Interest expense for the year ended December 31, 1994 increased
$35,300,000 over the 1993 period as a result of the issuance of debt
securities, the proceeds of which were used to partially finance the
acquisition of the GTE Telephone Properties and an increase in industrial
development revenue bond borrowings. Interest expense decreased 4% in 1993,
primarily due to the refinancing of higher-coupon First Mortgage Bonds with
lower cost debentures and increased allowance for funds used during
construction related to borrowings, which is a reduction to interest expense.
Investment income decreased to $40,500,000 from $42,100,000 in 1993,
representing a 4% decline. This decrease is due to the liquidation of
investments to fund the GTE acquisition, partially offset by an increase in
income from the Company's Centennial investment. Investment income increased
5% in 1993, primarily due to the realization of gains on sales of securities
and an increase in income from the Company's Centennial investment, partially
offset by lower investment balances and market yields.
Income taxes increased 23% in 1994 and 19% in 1993, primarily due to
increased taxable income.
Cost increases, including those due to inflation, are expected to be
offset in due course by increases in revenues obtained under established
regulatory procedures.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The following documents are filed as part of this Report:
1. Financial Statements:
See Index on page F-1.
2. Supplementary Data:
Quarterly Financial Data is included in the Financial
Statements (see 1. above).
Item 9. Disagreements with Auditors on Accounting and Financial Disclosure
------------------------------------------------------------------
None
PART III
--------
The Company intends to file with the Commission a definitive proxy
statement for the 1995 Annual Meeting of Stockholders pursuant to Regulation
14A not later than 120 days after December 31, 1994. The information called
for by this Part III is incorporated by reference to that proxy statement.
<PAGE>
PART IV
---------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) The exhibits listed below are filed as part of this Report:
Exhibit
No. Description
- -------- -----------------
3.1 Certificate of Incorporation
3.2 By-laws
3.2.1 Amendment dated April 14, 1992, to the By-laws
3.200.1 Restated Certificate of Incorporation of Citizens Utilities
Company, with all amendments to March 9, 1994
3.200.2 By-laws of the Company, as amended to-date of Citizens Utilities
Company, with all amendments to March 9, 1994
4.100.1 Copy of Indenture of Securities, dated as of August 15, 1991, to
Chemical Bank, as Trustee
4.100.2 First Supplemental Indenture, dated August 15, 1991
4.100.3 Letter of Representations, dated August 20, 1991, from Citizens
Utilities Company and Chemical Bank, as Trustee, to Depository
Trust Company ("DTC") for deposit of securities with DTC
4.100.4 Second Supplemental Indenture, dated January 15, 1992, to
Chemical Bank, as Trustee
4.100.5 Letter of Representations, dated January 29, 1992, from Citizens
Utilities Company and Chemical Bank, as Trustee, to DTC, for
deposit of securities with DTC
4.100.6 Third Supplemental Indenture, dated April 15, 1994, to Chemical
Bank, as Trustee
4.100.7 Fourth Supplemental Indenture, dated October 1, 1994, to Chemical
Bank, as Trustee
The Company agrees to furnish to the Commission upon request copies of the
Realty and Chattel Mortgage, dated as of March 1, 1965, made by Citizens
Utilities Rural Company, Inc., to the United States of America (the Rural
Electrification Administration and Rural Telephone Bank) and the Mortgage
Notes which that mortgage secures; and the several subsequent supplemental
Mortgages and Mortgage Notes; copies of the instruments governing the long-
term debt of Louisiana General Services, Inc.; and copies of separate loan
agreements and indentures governing various Industrial development revenue
bonds.
10.1 Incentive Deferred Compensation Plan, dated April 16, 1991
10.6 Deferred Compensation Plans for Directors, dated November 26,
1984 and December 10, 1984
10.6.1 Directors' Retirement Plan, effective January 1, 1989
10.6.2 Non-Employee Directors' Deferred Fee Equity Plan, dated as of
June 28, 1994
10.9 Management Equity Incentive Plan, effective June 22, 1990
10.10 LGS 1979 Option Incentive Plan, as amended
10.11 LGS 1981 Incentive Option Plan, as amended
10.12 LGS 1981 Stock Option Plan, as amended
10.13 LGS Supplemental Executive Retirement Plan
10.16 Employment Agreement between Citizens Utilities Company and
Leonard Tow
10.17 1992 Employee Stock Purchase Plan
10.18 Amendment dated May 21, 1993, to the 1992 Employee Stock Purchase
Plan
10.19 Asset Purchase Agreements, dated May 18, 1993
10.20 Asset Purchase Agreements, dated November 28, 1994
12. Computation of ratio of earnings to fixed charges (this item is
included herein for the sole purpose of incorporation by
reference)
21. Subsidiaries of the Registrant
23. Auditors' Consent
24. Powers of Attorney
<PAGE>
Exhibit number 10.6 is incorporated by reference to the same exhibit designation
in the Registrant's Annual Report on Form 10-K for the year ended December 31,
1984. Exhibit number 10.6.1 is incorporated by reference to the same exhibit
designation in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989. Exhibit number 10.9 is incorporated by reference to
Appendix A to the Registrant's Proxy Statement dated May 14, 1990.
Exhibit numbers 10.10, 10.11, 10.12 and 10.13 are incorporated by
reference to the same exhibit designation in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990.
Exhibit numbers 4.100.1, 4.100.2 and 4.100.3 are incorporated by
reference to the same exhibit designation in the Registrant's
Quarterly Report on Form 10-Q for the nine months ended September
30, 1991. Exhibit numbers 3.1, 3.2, 4.100.4, 4.100.5, 10.1 and
10.16 are incorporated by reference to the same exhibit designation
in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991. Exhibit number 3.2.1 and 10.17 is incorporated
by reference to the same exhibit designation in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992.
Exhibit number 10.18 is incorporated by reference to the
Registrant's Proxy Statement, dated March 31, 1993. Exhibit number
10.19 is incorporated by reference to exhibit number 2.1 in the
Registrant's Form 8-K Current Report filed June 30, 1993. Exhibit
numbers 4.100.6 and 4.100.7 are incorporated by reference to the
Registrant's Form 8-K Current Reports filed on July 5, 1994 and
January 3, 1995, respectively. Exhibit numbers 3.200.1 and 3.200.2
are incorporated by reference to the same exhibit designation in
the Registrant's Form S-3 filed December 16, 1993. The Registrant's
Annual Reports on Form 10-K and Form 8-K Current Reports bear SEC
File Number Reference 0-1291.
(b) The Company filed on Form 8-K dated December 7, 1994, under Item 5 "Other
Events", a press release announcing the proposed ALLTEL acquisitions.
The Company filed on Form 8-K dated December 21, 1994, under Item 5 "Other
Events", and Item 7 "Financial Statements and Exhibits", the financial
statements of the ALLTEL properties to be acquired.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CITIZENS UTILITIES COMPANY
--------------------------
(Registrant)
By: /s/ Leonard Tow
-----------------
Leonard Tow
Chairman of the Board; Chief Executive Officer;
Chief Financial Officer; Member, Executive Committee and Director
March 15, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 15th day of March 1995.
Signature Title
- --------- -----
/s/ Robert J. DeSantis Vice President, Treasurer
__________________________________________ and Assistant Secretary
(Robert J. DeSantis)
/s/ Livingston E. Ross
_________________________________________ Vice President and Controller
(Livingston E. Ross)
Norman I. Botwinik* Director
- -----------------------------------------
(Norman I. Botwinik)
Aaron I. Fleischman* Member, Executive Committee
- ----------------------------------------- and Director
(Aaron I. Fleischman)
Stanley Harfenist* Member, Executive Committee
- ------------------------------------------ and Director
(Stanley Harfenist)
Andrew N. Heine* Director
- ------------------------------------------
(Andrew N. Heine)
Elwood A. Rickless* Director
- ------------------------------------------
(Elwood A. Rickless)
John L. Schroeder* Member, Executive Committee
- ------------------------------------------ and Director
(John L. Schroeder)
Robert D. Siff* Director
- ------------------------------------------
(Robert D. Siff)
Robert A. Stanger* Director
- ------------------------------------------
(Robert A. Stanger)
Edwin Tornberg* Director
- ------------------------------------------
(Edwin Tornberg)
Claire L. Tow* Director
- ------------------------------------------
(Claire L. Tow)
/s/ Robert J. DeSantis
*By: -------------------------------
(Robert J. DeSantis)
Attorney-in-Fact<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Index to Financial Statements
Independent Auditors' Report F-2
Consolidated balance sheets as of December 31, 1994, 1993 and 1992 F-3
Consolidated statements of income for the years ended
December 31, 1994, 1993 and 1992 F-4
Consolidated statements of shareholders' equity for the years
ended December 31, 1994, 1993 and 1992 F-5
Consolidated statements of cash flows for the years
ended December 31, 1994, 1993 and 1992 F-6
Notes to consolidated financial statements F-7 - F-21
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Shareholders
Citizens Utilities Company:
We have audited the consolidated financial statements of Citizens Utilities
Company and subsidiaries as of December 31, 1994, 1993 and 1992, and the
related consolidated statements of income, shareholders' equity and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citizens
Utilities Company and subsidiaries at December 31, 1994, 1993 and 1992, and
the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards (SFAS) 115, "Accounting
for Certain Investments in Equity and Debt Securities", effective January 1,
1994. As discussed in Notes 1 and 13 to the consolidated financial
statements, the Company adopted SFAS 109, "Accounting for Income Taxes", and
SFAS 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions", effective January 1, 1993.
KPMG Peat Marwick LLP
New York, New York
March 8, 1995
<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
---- ---- ----
ASSETS
- ------
Current assets:
Cash $ 14,224 $ 21,738 $ 19,752
Temporary investments 108,818 89,752 0
Accounts receivable:
Utility service 134,510 99,684 75,754
Other 34,713 15,088 15,932
Less allowance for
doubtful accounts 2,428 459 441
---------- --------- ----------
Total accounts receivable 166,795 114,313 91,245
---------- --------- ----------
Materials and supplies 18,330 10,061 7,794
Other current assets 5,887 4,873 4,400
---------- --------- ----------
Total current assets 314,054 240,737 123,191
---------- --------- ----------
Property, plant and equipment 3,583,723 2,153,891 1,503,471
Less accumulated depreciation 1,014,068 461,924 406,833
---------- --------- ----------
Net property, plant and
equipment 2,569,655 1,691,967 1,096,638
---------- --------- ----------
Investments 325,011 411,022 561,062
Regulatory assets 177,414 146,207 0
Deferred debits and other
assets 190,432 137,185 107,090
---------- --------- ----------
Total assets $3,576,566 $2,627,118 $1,887,981
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
- -----------------------------
Current liabilities:
Accounts payable $ 122,404 $ 84,015 $ 87,298
Income taxes accrued 92,366 82,632 59,947
Long-term debt due
within one year 13,986 1,620 10,850
Customers' deposits 19,919 19,436 17,150
Interest accrued 15,841 12,731 12,943
Other current liabilities 99,461 47,791 36,300
Short-term debt 515,200 380,000 0
------------ ---------- ----------
Total current liabilities 879,177 628,225 224,488
Customer advances
for construction 145,150 137,012 140,309
Contributions in aid of
construction 71,580 47,241 39,549
Deferred income taxes 248,150 213,471 95,222
Regulatory liabilities 30,830 28,376 0
Deferred credits 50,594 50,634 28,443
Long-term debt 994,189 547,673 522,699
Shareholders' equity 1,156,896 974,486 837,271
------------- ----------- ----------
Total liabilities and
shareholders' equity $3,576,566 $2,627,118 $1,887,981
============= =========== ==========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(In thousands, except for per-share amounts)
1994 1993 1992
---- ---- ----
Revenues:
Telecommunications $461,094 $177,497 $186,232
Natural gas 208,940 211,892 189,812
Electric 173,585 164,515 145,032
Water/Wastewater treatment 72,395 65,488 59,388
-------- -------- --------
Total revenues 916,014 619,392 580,464
-------- -------- --------
Operating expenses:
Natural gas purchased 116,419 117,724 102,556
Electric energy and fuel
oil purchased 86,576 83,119 76,286
Operating expenses 249,096 142,718 141,954
Maintenance expenses 61,779 24,816 24,893
Depreciation 115,175 54,698 50,127
Taxes other than income 58,845 35,157 34,174
-------- -------- -------
Total operating expenses 687,890 458,232 429,990
-------- -------- -------
Income from operations 228,124 161,160 150,474
Investment income 40,454 42,097 40,072
Other income - net 12,486 12,102 7,278
Interest expense 72,744 37,431 39,044
-------- ------- -------
Income before income taxes 208,320 177,928 158,780
Income taxes 64,323 52,298 43,767
-------- ------- -------
Net income $143,997 $125,630 $115,013
======== ======== ========
Earnings per share of
Common Stock Series A
and Series B $.77 $.67 $.63
==== ==== ====
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(In thousands, except for per-share amounts)
<TABLE>
<CAPTION>
Additional
Common Stock ($.25) Paid-in Retained
Series A Series B Capital Earnings Other Total
-------- -------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 $10,291 $3,323 $468,107 $236,660 $1,295 $719,676
Net income 115,013 115,013
Stock dividends in shares of
Common Stock Series A and
Series B 700 237 117,454 (118,391) 0
Stock split (3-for-2) 5,270 1,783 (7,053) 0
Stock plans 86 9,853 9,939
Tax benefit arising from stock
options exercised 531 531
Non-vested restricted stock (6,593) (6,593)
Conversions of Series A to
Series B (222) 222 0
Other (1,295) (1,295)
-------- -------- --------- ------- -------- --------
Balance December 31, 1992 $16,039 $5,651 $582,299 $233,282 $ 0 $837,271
NGL merger 142 497 2,949 3,588
Franklin merger 13 505 (35) 483
Net income 125,630 125,630
Stock dividends in shares of
Common Stock Series A and
Series B 1,029 387 129,963 (131,594) (215)
Stock split (2-for-1) 16,155 6,036 (22,191) 0
Stock plans 114 5,854 5,968
Tax benefit arising from stock
options exercised 537 537
Non-vested restricted stock 1,224 1,224
Conversions of Series A to
Series B (776) 776 0
-------- ----- ------- ------- ------- -------
Balance December 31, 1993 $ 32,447 $ 13,119 $ 698,688 $ 230,232 $ 0 $974,486
Metro Utility Co. merger 126 4,646 3,231 8,003
Net income 143,997 143,997
Stock dividends in shares of
Common Stock Series A and
Series B 1,621 686 137,736 (140,043) 0
Stock plans 88 281 18,759 19,128
Tax benefit arising from stock
options exercised 137 137
Non-vested restricted stock 2,015 2,015
Conversions of Series A to
Series B (570) 570 0
Unrealized gain on securities
classified as available-for-
sale, net of taxes 9,130 9,130
------- ----- ------ --------- ----- -----
Balance December 31, 1994 $33,586 $14,782 $861,981 $237,417 $9,130 $1,156,896
======= ======= ======== ======== ====== ==========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
---- ---- ----
Net cash provided by
operating activities $262,316 $194,949 $131,040
-------- -------- --------
Cash flows used for
investing activities:
Business acquisitions (700,222) (481,257) 0
Construction expenditures (287,708) (175,308) (148,563)
Securities purchases (18,219) (254,203) (356,816)
Securities sales 23,478 269,624 212,634
Securities maturities 89,885 54,465 72,651
Customer advances for
construction and
contributions in aid
of construction 24,546 6,959 5,033
Other (13,795) (7,086) 19,755
-------- -------- -------
(882,035) (586,806) (195,306)
-------- -------- -------
Cash flows from financing
activities:
Long-term debt borrowings 458,589 34,733 135,672
Long-term debt principal
payments (1,268) (26,644) (95,365)
Short-term debt borrowings 135,200 380,000 0
Issuance of Common Stock 18,465 3,780 989
Other 1,219 1,974 493
-------- ------- --------
612,205 393,843 41,789
-------- ------- --------
Increase (decrease) in cash (7,514) 1,986 (22,477)
Cash at January 1, 21,738 19,752 42,229
-------- ------- --------
Cash at December 31, $ 14,224 $ 21,738 $ 19,752
======== ========= =========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<PAGE>
CITIZENS UTILITIES COMPANY and SUBSIDIARIES
Notes to Consolidated Financial Statements
------------------------------------------
(1) Summary of Significant Accounting Policies:
-------------------------------------------
(a) Principles of Consolidation:
----------------------------
The Consolidated Financial Statements include the accounts of Citizens
Utilities Company and all subsidiaries after elimination of intercompany
balances and transactions. Certain reclassifications of balances previously
reported have been made to conform to current presentation.
(b) Revenues:
---------
Electric, natural gas and water/wastewater treatment - The Company records
revenues from electric, natural gas and water/wastewater treatment customers
when billed. These customers are billed on a cycle basis based on monthly
meter readings. The Company accrues unbilled revenues earned from the dates
customers were last billed to the end of the accounting period.
Telecommunications - The Company records revenues from telecommunications
services when earned. Revenues from local service are primarily derived from
providing local telephone services. Revenues from long-distance service are
derived from charges for access to the Company's local exchange network,
subscriber line charges and contractual arrangements. Certain toll and access
services revenues are estimated under cost separation procedures that base
revenues on current operating costs and investments in facilities to provide
such services.
(c) Construction Costs and Maintenance Expense:
-------------------------------------------
Property, plant and equipment are stated at original cost, including general
overhead and an allowance for funds used during construction ("AFUDC"). AFUDC
represents the borrowing costs and a return on common equity of funds used
to finance construction. AFUDC is capitalized as a component of additions to
property, plant and equipment and is credited to income. AFUDC does not
represent current cash earnings; however, under established regulatory rate-
making practices, after the related plant is placed in service, the Company
is permitted to include in the rates charged for utility services a fair
return on and depreciation of such AFUDC included in plant in service. The
amount relating to equity is included in other income ($11,402,000,
$10,123,000 and $6,398,000 for 1994, 1993 and 1992, respectively) and the
amount relating to borrowings is a reduction of interest expense ($3,031,000,
$2,678,000 and $1,805,000 for 1994, 1993 and 1992, respectively). The
weighted average rates used to calculate AFUDC were 12% in 1994 and 1993, and
14% in 1992. Maintenance and repairs are charged to operating expenses as
incurred. The book value, net of salvage, of routine property, plant and
equipment dispositions is charged against accumulated depreciation.
(d) Depreciation Expense:
---------------------
Depreciation expense, calculated using the straight-line method, is based
upon the estimated service lives of various classifications of property,
plant and equipment and represented approximately 4% of the gross depreciable
property, plant and equipment for 1994, 1993 and 1992.
(e) Regulatory Assets and Liabilities:
----------------------------------
The Company's regulated operations are subject to the provisions of
Statement of Financial Accounting Standards ("SFAS") 71; "Accounting for the
Effects of Certain Types of Regulation". SFAS 71 requires regulated entities
to record regulatory assets and liabilities as a result of actions of
regulators. Regulatory assets of $24,669,000 at December 31, 1994 were
recorded in connection with the provisions of SFAS 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions" (see Note 13 ). In
connection with the provisions of SFAS 109, "Accounting for Income Taxes", the
Company's regulatory assets were $152,745,000 and regulatory liabilities were
$30,830,000 at December 31, 1994. The regulatory assets and liabilities
related to SFAS 109 were recorded to offset deferred income taxes which
were recorded primarily as a result of the income tax benefits that were
previously flowed through to customers and to the allowance for funds used
during construction, partially offset by the effects of tax law changes and
the tax benefit of unamortized deferred investment tax credits.
The Company continuously monitors the applicability of SFAS 71 to its
regulated operations. SFAS 71 may, at some future date, be deemed
inapplicable due to changes in the regulatory and competitive environments
and/or a decision by the Company to accelerate deployment of new technology.
If the Company were to discontinue the application of SFAS 71 to one or more
of its regulated operations, the Company would be required to write off its
regulatory assets and regulatory liabilities associated with such
operation(s) and would be required to adjust the carrying amount of any
property, plant and equipment that would be deemed not recoverable. The
Company believes its regulated operations continue to meet the criteria for
SFAS 71.
(f) Accounting for Investments, Temporary Investments and Short-Term
Debt:
----------------------------------------------------------------
Investments include high credit quality, short- and intermediate-term
fixed-income securities (primarily state and municipal debt obligations) and
equity securities.
Prior to the adoption of SFAS 115, fixed income securities were stated at
amortized cost and marketable equity securities were stated at the lower of
cost or market. The Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of January 1, 1994. SFAS 115
requires, among other things, that securities be designated as available-for-
sale, held-to-maturity or trading.
Securities which the Company will hold for an indefinite period of time,
but which might be sold in the future as changes in market conditions or
economic factors occur, are classified as available-for-sale and are carried
at estimated fair market value. Net aggregate unrealized gains and losses
related to such securities, net of taxes, are included as a separate
component of Shareholders' Equity. Securities for which the Company has the
intent and ability to hold to maturity are designated as held-to-maturity and
are carried at amortized cost, adjusted for amortization of premiums and
accretion of discounts over the period to maturity. Securities are designated
as available-for-sale or held-to-maturity at the time of acquisition.
Interest, dividends and gains and losses realized on sales of securities are
reported in Investment income. The Company does not invest in securities
which would be designated as trading.
Temporary investments are investments in state and municipal securities
which mature in less than one year, the proceeds of which are to be used to
repay a portion of the short-term debt issued to partially and temporarily
fund the acquisition of the GTE Telephone Properties (see Note 3). Such
investments are considered held-to-maturity and are carried at amortized
cost. The fair value of temporary investments at December 31, 1994 and 1993
was $108,935,000 and $93,438,000, respectively.
Short-term debt outstanding was issued in the form of commercial paper
notes payable to temporarily and partially fund the acquisition of the GTE
Telephone Properties. This short-term debt had a weighted average interest
rate of 5.75% at December 31, 1994 and is expected to be repaid from maturing
temporary investments, funds from operations and proceeds from the issuance
of equity securities. The fair value of short-term debt at December 31, 1994
and 1993, was $515,200,000 and $380,000,000, respectively.
(g) Investment in Centennial Cellular Corp.:
----------------------------------------
The Company recorded its initial investment in Centennial Cellular Corp.
("Centennial") Convertible Redeemable Preferred Stock (the "Preferred
Security") and Class B Common Stock at the historical cost of the Company's
investment in Citizens Cellular Company, prior to its merger with Century
Cellular Corp. During 1994, the Company purchased 615,195 additional shares
of Centennial Class B Common Stock for $8,613,000 pursuant to a Centennial
rights offering. Pursuant to SFAS 115, beginning January 1, 1994, the
investment in the Centennial Class B Common Shares was classified as
available-for-sale and is carried at fair market value. The terms of the
Preferred Security provide that the Preferred Security accretes a liquidation
value preference at a fixed dividend rate of 7.5%, compounded quarterly, on
an initial liquidation value preference of $125,700,000 until the Preferred
Security reaches a liquidation value preference of $186,000,000 on August 31,
1996. The Company recognizes the non-cash accretion as it is earned in each
period as investment income and increases the book value of its investment
in Centennial by the same amount. On a quarterly basis, the Company assesses
whether the book value of the Preferred Security can be realized by comparing
such book value to the market value of Centennial's common equity and by
evaluating other relevant indicators of realizability, including Centennial's
ability to redeem the Preferred Security. The book value of the Preferred
Security would be deemed impaired to the extent that such book value exceeds
the estimated realizability of the Preferred Security based on all existing
facts and circumstances, including the Company's assessment of its ability
to realize the book value of the Preferred Security through mandatory
redemption (see Note 5).
(h) Income Taxes and Investment Tax Credits:
----------------------------------------
The Company and its subsidiaries are included in a consolidated federal
income tax return using a calendar year reporting period.
The Company adopted SFAS 109 in 1993 without restating prior years'
financial statements; the adoption of SFAS 109 had no material effect on net
income in 1993. SFAS 109 required a change from the deferred to the liability
method of computing deferred income taxes. Adoption of SFAS 109 resulted in
recording a net increase in the liability for deferred income taxes of
$115,437,000 at December 31, 1993. Such increase resulted principally from
income tax benefits previously flowed through to customers and to the
allowance for funds used during construction; partially offsetting these
items were the effects of tax law changes and the tax benefit associated with
the unamortized deferred investment tax credits. Due to the effects of
utility regulation, the Company recorded regulatory assets and liabilities
of $143,813,000 and $28,376,000, respectively, as offsets to the increase in
the deferred income taxes at December 31, 1993. Prior to the adoption of SFAS
109, deferred income taxes resulted from the tax effect of using accelerated
depreciation methods and certain other timing differences between income
reported on the Consolidated Financial Statements and taxable income reported
on the Company's income tax returns.
The investment tax credits relating to utility properties, as defined by
applicable regulatory authorities, have been deferred and are being amortized
to income over the lives of the related properties.
(i) Earnings Per Share:
-------------------
Earnings per share is based on the average number of outstanding shares.
Earnings per share is presented with adjustment for subsequent stock
dividends and stock splits. The calculation has not been adjusted for the
1.5% stock dividend declared on February 7, 1995, because its effect is
immaterial. The effect on earnings per share of the exercise of dilutive
options is immaterial.
(2) Property, Plant and Equipment:
------------------------------
The components of property, plant and equipment at December 31, 1994,
1993 and 1992 are as follows:
1994 1993 1992
---- ---- ----
($ in thousands)
Transmission and distribution
facilities $2,159,452 $1,417,320 $1,032,426
Production and generating
facilities 818,927 414,743 222,594
Pumping, storage and
purification facilities 93,942 80,175 71,238
Construction work in progress 210,213 68,868 45,616
Intangibles 7,773 5,968 3,145
Other 293,416 166,817 128,452
---------- ---------- ----------
$3,583,723 $2,153,891 $1,503,471
========== ========== ==========
(3) Mergers and Acquisitions:
-------------------------
The Company and GTE Corporation announced the signing of 10 definitive
agreements pursuant to which the Company agreed to acquire from GTE
Corporation, for $1.1 billion, certain telephone properties serving
approximately 500,000 local telephone access lines in nine states ("the GTE
Telephone Properties"). On December 31, 1993, 189,123 local telephone access
lines in Idaho, Tennessee, Utah and West Virginia were transferred to the
Company. On June 30, 1994, 270,883 local telephone access lines in New York
were transferred to the Company. On November 30, 1994, 37,802 local telephone
access lines in Arizona and Montana were transferred to the Company. On
December 30, 1994, 5,440 local telephone access lines in California were
transferred to the Company. The remaining GTE Telephone Property is located in
Oregon and is expected to be transferred to Citizens in 1995. The acquisitions
were accounted for using the purchase method of accounting and the results of
operations of the GTE Telephone Properties acquired have been included in the
accompanying financial statements from the dates of their acquisition.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and the GTE Telephone
Properties acquired as if the acquisitions had occurred on January 1, 1993.
The pro forma financial information does not necessarily reflect the results
of operations that would have occurred had the Company and the GTE Telephone
Properties constituted a single entity during such periods.
1994 1993
---- ----
($ in thousands, except for per-share amounts)
Revenues $1,054,000 $1,016,000
Net Income $165,000 $153,000
Earnings per share $.77 $.72
On August 31, 1994, RHC, Inc. ("Metro Utility Co."), an operator of water
and wastewater treatment utilities serving portions of the suburban Chicago
area, was merged into the Company. The acquired operations serve
approximately 10,000 customers, increasing the number of the Company's
water/wastewater treatment customers in Illinois to over 65,000. The
transaction was accounted for as a pooling of interests. Prior year financial
statements were not restated as the amounts are not significant.
On November 29, 1994, the Company and ALLTEL Corporation ("ALLTEL")
announced the signing of eight definitive agreements pursuant to which
Citizens agreed to acquire from ALLTEL, for $292,000,000, certain telephone
properties servicing approximately 110,000 local telephone access lines and
certain cable television systems servicing approximately 7,000 subscribers.
The properties are located in eight states: Arizona, California, Nevada, New
Mexico, Oregon, Tennessee, Utah and West Virginia. The closings are expected
to occur state by state throughout 1995 and the first half of 1996.
On September 22, 1994, a subsidiary of the Company and a subsidiary of
Century Communications Corp. ("Century") entered into a joint venture
agreement for the purpose of acquiring, for approximately $89 million, and
operating two cable television systems in southern California (the
"Systems"). Century is a cable television company of which Leonard Tow, the
Chairman and Chief Executive Officer of the Company, is Chairman, Chief
Executive Officer, Chief Financial Officer and a director. In addition,
Claire Tow, a director of the Company is Senior Vice President and a director
of Century and Robert Siff, a director of the Company is a director of
Century. The joint venture is governed by a management board on which the
Company and Century are equally represented. The joint venture has entered
into an agreement pursuant to which a subsidiary of Century (the "Manager")
will manage the day-to-day operations of the Systems. The Manager will not
receive a management fee but will be reimbursed only for the actual costs it
incurs on behalf of the joint venture. With respect to the purchase of any
service or asset for the joint venture for use in the Systems, the Manager
is obligated to pass through to the joint venture any discount, up to 5%, off
the published prices of vendors and is entitled to retain any discount in
excess of 5%. On September 30, 1994, the joint venture acquired one of the
systems serving approximately 26,500 subscribers. The purchase of the second
system, serving approximately 19,200 subscribers, remains subject to
regulatory approval for the transfer of licenses. The Company's interest
in the joint venture is accounted for under the equity method of accounting.
In January 1995, the Company entered into a definitive agreement to acquire
Flex Communications by merger in a stock-for-stock transaction. Flex is a
switch-based, inter-exchange carrier providing long-distance, 800 Inbound
long-distance, voice mail, paging, private data networks and cellular
services to approximately 3,500 customers in upstate New York. The
transaction is expected to close in 1995.
In 1993, the Company separately acquired Natural Gas Company of Louisiana
("NGL") and Franklin Electric Light Company, Incorporated ("Franklin") by
merger. In these mergers, the Company issued 568,748 shares and 51,500 shares
of Series B Common Stock for all of the common stock of NGL and Franklin,
respectively. The acquisitions were accounted for as poolings of interests.
Prior years' financial statements were not restated for the effects of these
transactions because the amounts were not significant.<PAGE>
(4) Dispositions:
-------------
The Company has agreed to transfer, in the form of a tax-free exchange, its
Pennsylvania Telephone property as partial consideration in the acquisition
of the ALLTEL Telephone Properties. The agreed-upon value for this property
is approximately $10,000,000.
During 1993, the Company disposed of its Santa Cruz County, Arizona water
and wastewater treatment properties, Idaho water property and Aalert Paging
Company. The sale of the Santa Cruz properties yielded net proceeds of
$1,694,000 and had a net investment of $94,000. The Company received net
proceeds of $1,221,000 from the sale of the Idaho water property and had a
net investment of $1,249,000. The sale of Aalert Paging Company yielded net
proceeds of $5,498,000 and had a net investment of $5,287,000. The resulting
gains and losses are included in Other income - net.
During 1992, the Company disposed of two water properties in California.
One property was transferred to a municipality through condemnation
proceedings. The Company received net proceeds of $3,400,000 and had a net
investment of $1,877,000. The other property was sold for net proceeds of
$6,618,000; the Company's net investment was $4,160,000. In December 1992,
the Company disposed of its Idaho electric operations. The Company received
$1,177,500 and had a net investment of $706,000. The resulting gains on
dispositions are included in other income-net.
(5) Investments:
------------
The components of investments at December 31, 1994, 1993 and 1992 are as
follows:
1994 1993 1992
---- ---- ----
($ in thousands)
State and municipal securities $174,790 $296,371 $448,605
Investment in Centennial 117,982 90,628 81,034
Other fixed income securities 411 7,670 10,680
Marketable equity securities 31,828 13,282 13,934
Other 0 3,071 6,809
-------- -------- --------
Total $325,011 $411,022 $561,062
======== ======== ========
The Company's investment in Centennial at December 31, 1994, includes
102,187 shares of Convertible Redeemable Preferred Stock ("the Preferred
Security") and 1,982,294 Class B Common Shares. The liquidation value
preference earned on the Preferred Security for 1994, 1993 and 1992 was
$13,481,000, $9,594,000 and $8,803,000, respectively, and was recorded as
investment income. The carrying value of the investment in Centennial at
December 31, 1994, as presented in the table above, represents the historical
book value of the Preferred Security of $49,842,000 plus $34,441,000 of
liquidation value preference earned on the Preferred Security through
December 31, 1994 and the market value of the Class B Common Stock of
Centennial of $33,699,000. The Preferred Security is mandatorily redeemable
in the year 2006. The Company believes it can realize its investment in
Centennial either by cash redemption by the issuer funded through refinancing
by the issuer, by temporary conversion to common equity securities followed
by the sale of the common equity securities, or by sale of its current
investment holdings.
The aggregate market value of marketable equity securities at December 31,
1993 was $27,492,000 and total unrealized gains were $14,210,000. Net
realized gains on marketable equity securities included in the determination
of net income for the years 1994, 1993 and 1992, respectively, were
$3,760,000, $0 and $259,000. The cost of securities sold was based on the
actual cost of the shares of each security held at the time of sale.
Marketable equity securities for each year include 1,807,095 shares
(1,500,000 original shares adjusted for stock dividends) of Class A Common
Stock of Century. These shares represent less than 2% of the total
outstanding common stock of Century. The Chairman and Chief Executive Officer
of the Company is also Chairman and Chief Executive Officer of Century.
Pursuant to the provisions of SFAS 115, the Company classified its
Investments into two categories: "held-to-maturity" and "available-for-sale"
at January 1, 1994. The Company recorded unrealized holding gains on
securities classified as available-for-sale as an increase to Investments.
The fair value of Investments at December 31, 1993 and 1992 were $534,496,000
and $649,366,000, respectively, based on relative market information about
each financial instrument.<PAGE>
The following summarizes the cost, unrealized gains and fair market value
for investments at December 31, 1994.
Unrealized Aggregate Fair
Investment Classification Amortized Cost Holding Gains Value
- ------------------------- -------------- ------------- --------------
($ in thousands)
Held-To-Maturity $259,484 $77,238 $336,722
Available-For-Sale 50,809 14,718 65,527
Held-to-Maturity Securities
---------------------------
Investment Maturities Amortized Cost Fair Value
- --------------------- -------------- ----------
($ in thousands)
2-5 years $141,030 $139,567
6-10 years 34,171 33,656
Thereafter 84,283 163,499
-------- ---------
$259,484 $336,722
======== =========
The Company sold $19,335,000 of securities classified as held-to-maturity
during 1994 for the purpose of financing the acquisition of the GTE Telephone
Properties; gains and losses of $372,000 and $94,000, respectively, were
realized on such sales. The amortized cost and related gains on available-
for-sale securities sold during 1994 were $384,000 and $3,760,000,
respectively.
(6) Long-term Debt:
---------------
Weighted average
interest rate at December 31,
December 31, 1994 Maturities 1994 1993 1992
----------------- ---------- ---- ---- ----
($ in thousands)
Debentures 7.68% 2001-2034 $425,000 $150,000 $150,000
Industrial development
revenue bonds 5.93% 2015-2029 325,125 284,777 242,391
Commercial paper notes
payable 5.75% Variable 187,800 58,953 62,680
Rural Electrification
Administration and Rural
Telephone Bank notes 5.80% 2006-2027 47,106 42,237 43,494
Subordinated notes 10.83% 1995-1998 2,045 11,692 12,261
Other long-term debt 8.18% 1998-2000 7,113 14 11,873
------- -------- -------- --------
6.67% $994,189 $547,673 $522,699
======= ======== ======== ========
Certain commercial paper notes payable have been classified as long-term
debt because these obligations are expected to be refinanced with long-term
debt securities. The Company has available lines of credit with commercial
banks in the amounts of $1,000,000,000 and $200,000,000, which expire on
December 13, 1995 and December 16, 1997, respectively, and have associated
facility fees of one-twentieth of one percent per annum and one-twelfth of
one percent per annum, respectively. The terms of the lines of credit provide
the Company with extension options.
The total principal amounts of industrial development revenue bonds at
December 31, 1994, 1993 and 1992, were $392,530,000, $377,890,000 and
$274,030,000, respectively. Amounts presented in the table above have been
reduced by funds held by trustees to be used for payment of qualifying
construction expenditures. Holders of certain industrial development revenue
bonds may tender at par prior to maturity. The next tender date is August 1,
1997, for $30,350,000 of principal amount of bonds. In the years 1994, 1993
and 1992, respectively, interest payments on short- and long-term debt were
$74,803,000, $40,217,000 and $37,913,000.<PAGE>
The fair value of long-term debt, presented as required by SFAS 107 at
December 31, 1994, 1993 and 1992, respectively, was $992,349,000, $602,710,000
and $550,724,000 based on relative market information and information about
each financial instrument.
The installment principal payments and maturities of long-term debt for the
next five years are as follows:
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
($ in thousands)
Installment principal
payments $ 4,233 $4,311 $3,963 $3,021 $2,156
Maturities 9,753 845 118 1,334 -
------- ------ ------ ------ ------
$13,986 $5,156 $4,081 $4,355 $2,156
======= ====== ====== ====== ======
(7) Capital Stock:
--------------
The common stock of the Company is in two series, Series A and Series B.
The Company is authorized to issue up to 200,000,000 shares of Common Stock
Series A and 300,000,000 shares of Common Stock Series B. Quarterly stock
dividends are declared and issued at the same rate on both Series A and
Series B. Series B shareholders have the option of enrolling in the "Series
B Common Stock Dividend Sale Plan." The Plan offers Series B shareholders the
opportunity to have their stock dividends sold by the Plan Broker and the net
cash proceeds of the sale distributed to them quarterly. Series A shares are
convertible share-for-share into Series B shares. Series B shares are not
convertible into Series A. Both series are the same in all other respects.
On April 14, 1992, the Company declared a 3-for-2 stock split of its Series
A and Series B Common Stock. The stock split was distributed on July 24,
1992, to shareholders of record on July 1, 1992. On May 21, 1993, the Company
declared a 2-for-1 stock split of its Series A and Series B common stock. The
stock split was distributed on August 31, 1993, to shareholders of record on
August 16, 1993.
On January 30, 1995, the Company, pursuant to an underwritten public
offering, issued 19,000,000 shares of its Common Stock Series A at an
issuance price of $13 3/8 per share. The $244,200,000 of net proceeds from the
issuance were used to permanently fund the acquisition of the GTE Telephone
Properties.Quarterly stock dividend rates declared on Common Stock Series A and
Series B are based upon cash equivalent rates and share market prices, and have
been as follows:
Dividend Rates
--------------
1994 1993 1992
---- ---- ----
First quarter 1.1% 1.2% 1.6%
Second quarter 1.15% 1.0% 1.5%
Third quarter 1.3% 1.1% 1.2%
Fourth quarter 1.4% 1.0% 1.2%
----- ----- -----
Total 4.95% 4.3% 5.5%
===== ===== =====
Compounded Total 5.04% 4.37% 5.61%
===== ===== =====
Annualized stock dividend cash equivalent rates considered by the Company's
Board of Directors in declaring stock dividends for 1994, 1993 and 1992,
respectively, were .733, .691 and .624 per share (adjusted for all stock
splits and stock dividends paid subsequent to all dividends declared through
December 31, 1994 and rounded to the nearest 1/8th).<PAGE>
The activity in shares of outstanding common stock for Series A and Series B
during 1994, 1993 and 1992 is summarized as follows:
Number of Shares
----------------
Series A Series B
-------- --------
Balance at January 1, 1992 41,166,000 13,289,000
Stock dividends 2,799,000 950,000
Stock split (3-for-2) 21,078,000 7,134,000
Stock plans 0 344,000
Conversions of Series A
to Series B (887,000) 887,000
----------- ----------
Balance at December 31, 1992 64,156,000 22,604,000
NGL merger 0 569,000
Franklin merger 0 52,000
Stock dividends 4,114,000 1,548,000
Stock split (2-for-1) 64,620,000 24,142,000
Stock plans 0 457,000
Conversions of Series A
to Series B (3,105,000) 3,105,000
------------ ----------
Balance at December 31, 1993 129,785,000 52,477,000
Metro Utility Co. merger 0 505,000
Stock dividends 6,484,000 2,744,000
Stock plans 355,000 1,122,000
Conversions of Series A
to Series B (2,278,000) 2,278,000
------------ ----------
Balance at December 31, 1994 134,346,000 59,126,000
============ ==========
The Company used 7,000 Series B shares (not adjusted for subsequent stock
dividends and a stock split) acquired from employees pursuant to the
Management Equity Incentive Plan in partial payment of the 1993 stock
dividend. These shares had a cost of $215,000.
The Company has 50,000,000 authorized shares of preferred stock ($.01 par),
none of which has been issued. The preferred stock may be issued by the
Board of Directors (without further approval by shareholders) in one or
more series, having such attributes as may be designated by the Board
of Directors at the time of issuance.
(8) Employee Stock Plans:
---------------------
On June 22, 1990, shareholders approved the Citizens Utilities Company
Management Equity Incentive Plan ("MEIP"). Under the MEIP, awards of the
Company's Series A or Series B common stock may be granted to eligible
officers, management employees and non-management exempt employees of the
Company and its subsidiaries in the form of incentive stock options, non-
qualified stock options, stock appreciation rights ("SARs"), restricted stock
or other stock-based awards. The MEIP is administered by the Compensation
Committee of the Board of Directors.
The maximum number of shares of common stock which may be issued pursuant
to awards at any time is 5% of the Company's common stock outstanding
provided that no more than 8,558,000 shares (adjusted for subsequent stock
dividends and stock splits) will be issued pursuant to incentive stock options
under the MEIP. No awards will be granted more than 10 years after the effective
date of the MEIP. The exercise price of stock options and SARs shall be equal to
or greater than the fair market value of the underlying common stock on the
date of grant. Stock options are generally not exercisable on the date of
grant but vest over a period of time.
Some options were awarded in tandem with related SARs. SARs provide the
MEIP participant with the alternative of electing not to exercise the related
stock option, but to receive instead an amount in cash or in common stock
equal to the difference between the option price and the fair market value
of the common stock on the date the SAR is exercised. Either the SAR or the
related option may be exercised, but not both. There were no SARs granted
during 1994 or 1993. During 1992, 613,000 SARs were exercised at an average
exercise price of $12.21 per share (not adjusted for subsequent stock
dividends and stock splits). This resulted in the cancellation of the 613,000
tandem stock options. At December 31, 1994, 1993 and 1992, no SARs were
outstanding.<PAGE>
Under the terms of the MEIP, subsequent stock dividends and stock splits
have the effect of increasing the option shares outstanding, which
correspondingly decreases the average exercise price of outstanding options.
The following summary of shares subject to option under the MEIP reflects the
original options granted, adjusted for subsequent stock splits, at original
option prices which have also been adjusted for subsequent stock splits.
Average option
Shares subject to option price per share
------------------------ ---------------
Balance at January 1, 1992 2,931,000 $ 8.06
Options granted 2,367,000 14.90
Options exercised (257,000) 6.60
Options cancelled or lapsed (1,294,000) 6.28
Adjustment for stock dividends* 173,000 -
------------ ------
Balance at December 31, 1992 3,920,000 12.54
Options granted 1,862,000 18.06
Options exercised (239,000) 7.62
Options cancelled or lapsed (25,000) 5.44
Adjustment for stock dividends* 201,000 -
------------ -----
Balance at December 31, 1993 5,719,000 14.14
Options granted 1,562,000 13.06
Options exercised (149,000) 8.04
Options cancelled or lapsed (69,000) 14.17
Adjustment for stock dividends* 287,000 -
----------- ------
Balance at December 31, 1994 7,350,000 $14.07
=========== ======
Options exercisable at
end of year 1,667,000 $11.85
=========== ======
* Represents adjustment to outstanding option shares to reflect stock
dividends.
During 1993 and 1992, the Company granted restricted stock awards to key
employees in the form of the Company's Common Stock Series B. There were no
restricted stock awards during 1994. The number of Series B shares issued as
restricted stock awards during 1993 and 1992 was 149,000 and 792,000,
respectively (adjusted for subsequent stock dividends and stock splits). None
of the restricted stock awards may be sold, assigned, pledged or otherwise
transferred, voluntarily or involuntarily, by the employee. The restrictions
lapse over three- and five-year periods. At December 31, 1994, 482,618 shares
(adjusted for subsequent stock dividends and stock splits) of restricted stock
were outstanding.
The Company's Employee Stock Purchase Plan ("ESP Plan") was approved by
shareholders on June 12, 1992 and amended on May 21, 1993. Under the ESP
Plan, eligible employees of the Company and its subsidiaries may subscribe
to purchase shares of Series B common stock at the lower of 85% of the
average market price on the first day of the purchase period or on the last
day of the purchase period. An employee may elect to have up to 20% of annual
base pay withheld in equal installments throughout the designated payroll-
deduction period for the purchase of shares. The value of an employee's
subscription may not exceed $25,000 in any one calendar year. As of December
31, 1994, there are 1,278,000 shares of Series B common stock reserved for
issuance under the ESP Plan. These shares will be adjusted for any future
stock dividends or stock splits. The ESP Plan will terminate when all
1,278,000 shares reserved have been subscribed for, unless terminated earlier
by the Board of Directors. The ESP Plan is administered by a committee of the
Board of Directors. As of December 31, 1994, the number of employees
participating in the ESP Plan was 1,561 and the total number of shares
subscribed for under the ESP Plan was 240,640.
<PAGE>
(9) Income Taxes:
-------------
The following is a reconciliation of the provision for income taxes at
federal statutory rates to the reported provision for income taxes:
1994 1993 1992
------------- --------------- ----------------
($ in thousands)
Consolidated tax
provision at
federal statutory
rate $72,912 35.0% $62,275 35.0% $53,985 34.0%
Allowance for funds
used during
construction (5,051) (2.4%) (4,480) (2.5%) (2,789) (1.8%)
Amortization of
investment tax
credits (1,949) (0.9%) (2,086) (1.2%) (2,140) (1.3%)
State income tax
provisions, net of
federal income tax
benefit 5,262 2.5% 6,432 3.6% 4,989 3.1%
Nontaxable investment
income (6,032) (2.9%) (8,339) (4.7%) (8,490) (5.3%)
All other - net (819) (0.4%) (1,504) (0.8%) (1,788) (1.1%)
-------- ------ -------- ------ -------- ------
$64,323 30.9% $52,298 29.4% $43,767 27.6%
======== ====== ======== ====== ======== ======
For 1994, 1993 and 1992, accumulated deferred income taxes amounted to
$230,556,000, $194,165,000 and $72,969,000, respectively, and the unamortized
deferred investment tax credits amounted to $17,594,000, $19,306,000 and
$22,253,000, respectively. Income taxes paid during the year were
$30,395,000, $24,139,000 and $22,798,000 for 1994, 1993 and 1992,
respectively.
The components of the net deferred income tax liability at December 31,
are as follows:
1994 1993
---- ----
($ in thousands)
Deferred tax liabilities
- ------------------------
Property, plant and equipment basis
differences $177,549 $148,756
Regulatory assets 62,578 57,134
Other-net 28,704 25,365
-------- --------
268,831 231,255
-------- --------
Deferred tax assets
- -------------------
Deferred investment tax credits 7,183 6,649
Regulatory liabilities 13,498 11,135
-------- -------
20,681 17,784
-------- -------
Valuation Allowance 0 0*
-------- --------
Deferred income taxes $248,150 $213,471
======== ========
* There was no change in the valuation allowance during 1993.<PAGE>
The provision for federal and state income taxes, as well as the taxes
charged or credited to Shareholders equity, includes amounts both payable
currently and deferred for payment in future periods as indicated below.
1994 1993 1992
---- ---- ----
Income Taxes Included in
the Income Statements: ($ in thousands)
- ------------------------
Current
Federal $28,347 $39,571 $37,501
State 3,595 8,682 7,118
------- ------- -------
31,942 48,253 44,619
------- ------- -------
Deferred
Federal 29,829 4,917 847
Investment tax credits (1,949) (2,086) (2,140)
State 4,501 1,214 441
------- ------ ------
32,381 4,045 (852)
------- ------ ------
Income taxes included in the
Income Statement 64,323 52,298 43,767
------- ------ ------
Income Taxes Included in
Shareholders' Equity:
- ------------------------
Deferred income taxes on
unrealized gains on
securities classified
as available-for-sale 5,588 - -
Current benefit arising
from stock options exercised (137) (537) (531)
-------- -------- --------
Income taxes included in
Shareholders' Equity 5,451 (537) (531)
-------- -------- --------
Total income taxes $69,774 $51,761 $43,236
======== ======== =========
<PAGE>
(10) Segment Information:
--------------------
Year Ended December 31,
-----------------------------------
1994 1993 1992
---- ---- ----
($ in thousands)
Telecommunications:
- -------------------
Revenues $461,094 $177,497 $186,232
Assets 1,805,893 910,276 325,618
Depreciation 81,659 22,744 22,452
Capital expenditures 177,419 66,619 20,672
Operating income before
income taxes 148,720 85,934 85,994
Natural gas:
- ------------
Revenues $208,940 $211,892 $189,812
Assets 306,979 289,121 243,582
Depreciation 10,827 10,646 10,106
Capital expenditures 31,235 25,677 22,280
Operating income before
income taxes 30,205 28,971 26,952
Electric:
- ---------
Revenues $173,585 $164,515 $145,032
Assets 458,457 446,284 356,829
Depreciation 15,251 12,924 11,038
Capital expenditures 43,132 43,673 74,502
Operating income before
income taxes 31,221 30,660 18,999
Water/Wastewater:
- -----------------
Revenues $ 72,395 $ 65,488 $ 59,388
Assets 455,312 400,288 320,985
Depreciation 7,438 8,384 6,531
Capital expenditures 38,884 37,426 25,456
Operating income before
income taxes 17,978 15,595 18,529
<PAGE>
(11) Quarterly Financial Data (unaudited):
-------------------------------------
Net Income
----------------------------------
($ in thousands) Per Share
- ---------------- --------------------
1994 Revenues Amount Series A Series B
---- -------- ------ -------- --------
First quarter $223,896 $31,655 $.17 $.17
Second quarter 188,674 38,016 .20 .20
Third quarter 242,309 38,687 .20 .20
Fourth quarter 261,135 35,639 .19 .19
Net Income
-----------------------------------
($ in thousands) Per Share
- ---------------- --------------------
1993 Revenues Amount Series A Series B
---- -------- ------ -------- --------
First quarter $165,915 $28,239 $.15 $.15
Second quarter 146,170 34,682 .18 .18
Third quarter 145,315 34,269 .18 .18
Fourth quarter 161,992 28,440 .15 .15
The quarterly net income per share amounts are rounded to the nearest
cent. Annual earnings per share may vary depending on the effect of such
rounding.
(12) Supplemental Cash Flow Information:
-----------------------------------
Schedule of net cash provided by operating activities for the years
ended December 31,
1994 1993 1992
---- ---- ----
($ in thousands)
Net income $143,997 $125,630 $115,013
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 115,175 54,698 50,127
Deferred income taxes
and amortization of
investment tax credits 32,381 4,045 (852)
Centennial investment
income (13,481) (9,594) (8,803)
Allowance for equity
funds used during
construction (11,402) (10,123) (6,398)
Change in accounts
receivable (20,663) (23,068) (12,372)
Change in accounts
payable 21,520 (3,773) (4,607)
Change in accrued
taxes and accrued
interest 13,024 24,960 19,672
Other (18,235) 32,174 (20,740)
--------- -------- ---------
Net cash provided
by operating
activities $262,316 $194,949 $131,040
========= ======== =========
(13) Pension and Retirement Plans:
-----------------------------
The Company and its subsidiaries have noncontributory pension plans
covering all employees who have met certain service and age requirements. The
benefits are based on years of service and final average pay or pay rate.
Contributions are made in amounts sufficient to fund the plans' current
service costs and to provide for benefits expected to be earned in the
future. Plan assets are invested in a diversified portfolio of equity and
fixed-income securities.<PAGE>
Pension costs for 1994, 1993 and 1992 include the following components:
1994 1993 1992
---- ---- ----
($ in thousands)
Service cost $5,777 $3,585 $3,277
Interest cost on projected
benefit obligations 8,166 5,038 4,544
Net amortization and deferral 172 1,751 132
Return on plan assets (9,754) (6,945) (5,438)
-------- ------- -------
Net pension cost $4,361 $3,429 $2,515
======== ======= ========
Assumptions used in the computation of pension costs and the actuarial
present value of projected benefit obligations included the following:
1994 1993 1992
---- ---- ----
Discount rate 8% 7.5% 8%
Expected long-term rate of
return on plan assets 8.5% 8% 8.5%
Rate of increase in
compensation levels 4.5% 4.5% 5%
As of December 31, 1994, 1993 and 1992, respectively, the fair values of
plan assets were $133,964,000, $73,233,000 and $68,506,000. The actuarial
present values of the accumulated benefit obligations were $86,186,000,
$57,216,000 and $48,661,000 for 1994, 1993 and 1992, respectively. The
actuarial present values of the vested accumulated benefit obligation for
1994, 1993 and 1992, respectively, were $77,053,000, $54,591,000 and
$46,819,000. The total projected benefit obligations for 1994, 1993 and 1992,
respectively, were $125,943,000, $75,531,000 and $63,199,000.
The Company provides certain medical, dental and life insurance benefits
for retired employees and their beneficiaries and covered dependents. In
January 1993, the Company implemented SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions". SFAS 106 requires the Company
to accrue the expected costs of providing postretirement benefits to
employees and to employees' beneficiaries and covered dependents during the
years the employee renders the necessary service. The Company's 1994 and 1993
annualized costs were approximately $6,605,000 and $3,671,000, respectively,
of which approximately $4,261,000 and $1,601,000 were recorded as regulatory
assets for states whose regulatory commissions to date have not but will
likely allow recovery of accrued costs in future rate proceedings. The
Company's annual cost includes 20-year prospective recognition of the
transition obligation. The Company's accumulated postretirement benefit
obligation at December 31, 1994 was approximately $54,986,000. The Company
is currently assessing the costs and benefits of alternative funding methods.
For measurement purposes, the Company used an 8% discount rate and a 9%
annual rate of increase in the per-capita cost of covered health-care
benefits, gradually decreasing to 6% in the year 2030 and remaining at that
level thereafter. The effect of a 1% increase in the assumed health-care cost
trend rates for each future year on the aggregate of the service and interest
cost components of the total postretirement benefit cost would be $529,000
and the effect on the accumulated postretirement benefit obligation for
health benefits would be $5,332,000. The Company recorded $27,357,000 of
accumulated postretirement benefit obligation pursuant to the acquisition of
the GTE Telephone Properties.
<PAGE>
The components of the net periodic postretirement benefit cost for the
years ended December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
($ in thousands)
Service cost $1,826 $ 845
Interest cost 3,418 1,710
Amortization of transition obligation 1,048 1,116
Other 313 0
------ ------
Net periodic postretirement
benefit cost $6,605 $3,671
====== ======
The following table sets forth the accrued postretirement benefit liability
recognized in the Company's balance sheets at December 31, 1994 and 1993:
1994 1993
---- ----
($ in thousands)
Accumulated postretirement benefit obligation:
Retirees ($14,946) ($13,919)
Fully eligible active plan participants (7,158) (2,749)
Other active plan participants (32,882) (7,328)
--------- --------
Total accumulated postretirement benefit
obligation (54,986) (23,996)
Unrecognized net (gain) loss (1,914) 1,563
Unrecognized prior service cost 2,932 (1,477)
Unrecognized transition obligation 18,676 21,201
--------- --------
Net accumulated postretirement benefit
obligation ($35,292) ($2,709)
========= ========
(14) Commitments and Contingencies:
------------------------------
The Company has budgeted expenditures for facilities in 1995 of
approximately $262,000,000 and certain commitments have been entered into in
connection therewith. On November 29, 1994, the Company and ALLTEL
Corporation announced the signing of eight definitive agreements pursuant to
which Citizens agreed to acquire from ALLTEL, for $292,000,000, certain
properties servicing approximately 110,000 local telephone access lines, and
certain cable television systems servicing approximately 7,000 subscribers.
The properties are located in eight states: Arizona, California, Nevada, New
Mexico, Oregon, Tennessee, Utah and West Virginia. The closings are expected
to occur state by state throughout 1995 and the first half of 1996.
EXHIBIT NO. 10.6.2
CITIZENS UTILITIES COMPANY
NON-EMPLOYEE DIRECTORS'
DEFERRED FEE EQUITY PLAN
ARTICLE 1
PURPOSES OF THE PLAN
1.1 Purposes.
The purpose of this Citizens Utilities Company Deferred
Fee Equity Plan For Non-Employee Directors (the "Plan") is to
provide each Director with an opportunity to defer some or all of
the Director's Fees and receive compensation for services in the
form of options to purchase Citizens' Common Stock or in Plan
Units which are equivalent to Citizens' Common Stock. The Plan
will implement corporate policy that all employees, officers and
directors are to be encouraged to share in the Company's long-
term prospects by taking part of their compensation in Common
Stock and options.
1.2 Introduction.
The Plan is comprised of two separate plans. Because a
number of administrative and procedural provisions of each of the
plans are similar or identical, the plans have been combined in a
single plan for convenience.
The Plan consists of an option plan through which a
director may elect to receive his or her Fees for a period of up
to five years (or a shorter period in the case of 1994) in an
equivalent amount of options to purchase Common Stock. This plan
is referred to as the Option Plan. The provisions of Articles 3
and 4 apply exclusively to the Option Plan.
The Plan also includes a separate stock plan through which
a director may elect (a "Stock Plan Election") to receive his or
her Fees for the next calendar year (or a shorter period in the
case of 1994 or a newly elected director) in an equivalent amount
of Plan Units. Upon termination of directorship, a Stock Plan
Participant will receive the value of his Plan Units in either
stock or cash or installments of cash as selected by the
Participant at the time of the related Stock Plan Election. The
provisions of Articles 5, 6, 7 and 8 apply exclusively to the
Stock Plan.
As defined below, the term "Plan" will include both the
Stock Plan and Option Plan; the term "Participant" includes an
Option Plan Participant and a Stock Plan Participant; the term
"Election" includes an Option Plan Election and a Stock Plan
Election; and the term "Committee" includes an Option Plan
Committee and the Stock Plan Committee; unless, in each case, the
context requires otherwise.
ARTICLE 2
DEFINITIONS
As used herein, the following words shall have following
meaning unless otherwise specifically provided:
2.1 "Accounting Date" means, for purposes of the Stock
Plan, each January 1, April 1, July 1 and October 1, except
that the first Accounting Date in 1995 shall be February 1.
2.2 "Administrator" means the person or persons appointed
by the Board of Directors to represent the Company in the
administration of each Plan pursuant to the provisions of
Article 10.1.
2.3 "Act" means the Securities Act of 1933.
2.4 "Applicable Rate of Interest" means, as of any date,
120% of the then applicable Federal rate of interest
pursuant to the Internal Revenue Code. The Federal short
term rate of interest shall be the interest component
applicable to deferred Fees from the date of deferral until
the date of investment in Plan Units under the Stock Plan.
The Federal medium term rate of interest shall apply to
distributions in annual installments deferred after
Termination pursuant to the Stock Plan.
2.5 "Beneficiary" means the person or persons designated
in writing by the Participant as entitled to receive a Stock
Plan Participant's Account upon his death, or to exercise an
Option Plan Participant's Option upon his death, or failing
such designation, the person or persons who, upon the death
of a Participant, shall have acquired by will, or the laws
of descent and distribution, the right to receive the
benefits specified under this Plan. Beneficiary
designations shall be made in writing and delivered to the
Administrator and shall comply with any applicable state law
relating to testamentary dispositions and other
requirements. A Participant may designate a new Beneficiary
or Beneficiaries at any time by notifying the Administrator.
The last such designation received by the Administrator
shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be
effective unless received by the Administrator prior to the
Participant's death, and in no event shall it be effective
as of a date prior to such receipt. "Beneficiary" shall
include the person or persons who, upon the disability or
incompetence of a Participant, shall have acquired on behalf
of the Participant, by legal proceeding or otherwise, the
right to receive the benefits specified in this Plan on
behalf of the Participant.
2.6 "Board of Directors" means the Board of Directors of
Citizens Utilities Company.
2.7 "Code" means the Internal Revenue Code of 1986.
2.8 "Company" means Citizens Utilities Company and its
successors and assignors.
2.9 "Common Stock" means Common Stock Series B, par value
$.25 per share, of the Company or any successor Common
Stock.
2.10 "Director" means any director of the Company who is
not a full-time employee of the Company.
2.11 "Effective Date" means, for Option Plan Elections
before July 20, 1994, August 1, 1994; and for other Option
Plan Elections, the next January 1.
2.12 "Exchange Act" means the Securities Exchange Act of
1934. "Rule 16b-3" shall mean such rule promulgated by the
Securities and Exchange Commission under the Exchange Act
and, unless the circumstances require otherwise, shall
include any other rule or regulation adopted under Sections
16(a) or 16(b) of the Exchange Act relating to compliance
with, or an exemption from, Section 16(b). Reference to any
section of the Exchange Act or any rule promulgated
thereunder shall include any successor section or rule.
2.13 "Fair Market Value", of the Common Stock as of any
Accounting Date or Time of Distribution for the purposes of
the Stock Plan, and as of any Effective Date for purposes of
the Option Plan, shall be the average of the daily high and
low prices of shares of Common Stock reported on a composite
tape for securities listed on The New York Stock Exchange
or, if such shares are not listed for trading on such
exchange, on any other established securities market for
which quotations are readily available, for the third,
fourth, fifth and sixth trading days of the month which
follow each Accounting Date or Time of Distribution or
Effective Date, as the case may be. Participants will be
credited with fractional share interests. If required, an
appropriate adjustment will be made for record dates,
payment dates and ex-distribution trading. The Stock Plan
Committee, the Option Plan Committee or the Board of
Directors may select in advance different trading days of
the month for determining Fair Market Value, in their
discretion.
2.14 "Option Plan Committee" means the Committee described
in Section 10.1 hereof to administer the Option Plan.
2.15 "Option Plan Election" is an election to receive
Options equivalent in value to Option Plan Fees to be earned
during the period August 1 - December 31, 1994 or during one
or more subsequent Plan Years.
2.16 "Option Plan Fees" are those Directors' Fees which may
be the subject of an Option Plan Election. These are limited
to future retainer fees at the rate in effect in the year in
which the Option Plan Election is made and board and
committee meeting fees, up to a maximum of $30,000 per year.
Option Plan Fees for 1994 shall be limited to $12,500.
2.17 "Option Plan Participant" means a Director who has
elected to receive Directors' Fees in the form of Options.
2.18 "Option Value" - For each Option Plan Election, the
Options granted hereunder shall be in an amount equivalent
to the value of the Directors' Fees subject to such Option
Plan Election. In order to implement this standard, the
Board of Directors has determined at the time of adoption of
the Plan that the "Option Value" of an Option with the terms
and conditions of the Option described herein to purchase
one share of Common Stock of the Company is 20% of the Fair
Market Value of such share on the Effective Date of the
Option in question.
2.19 "Plan" means this Citizens Utilities Company Deferred
Fee Equity Plan For Non-Employee Directors.
2.20 "Plan Unit" shall mean a credit established in a
Participant's Stock Plan Account reflecting the number of
shares of Common Stock which could be purchased at Fair
Market Value as of each Accounting Date as provided in
Section 6.1. A Plan Unit shall be deemed to be the
equivalent of a share of Common Stock and shall be subject
to adjustment in the event of change in Common Stock as
provided in Section 11.5.
2.21 "Plan Year" means the fiscal year of the Company,
currently the twelve-month period ended December 31.
2.22 "Stock Plan Account" shall mean the account
established for each Stock Plan Participant to reflect the
amount of Fees which such Participant has elected to defer
under the Stock Plan, any interest component and all Plan
Units which have been acquired with such Fees and interest
component.
2.23 "Stock Plan Committee" means the Committee described
in Section 10.1 hereof to administer the Stock Plan.
2.24 "Stock Plan Election" means a Stock Plan Participant's
delivery of a written notice of election to the
Administrator (a) electing to defer payment of his or her
Fees, and (b) further electing to receive payment of his or
her Stock Plan Account either (i) at Time of Distribution in
either (A) Common Stock or (B) cash, or (ii) in installments
in cash annually over a five-year period. All such
elections shall be irrevocable except as otherwise provided
in the Stock Plan.
2.25 "Stock Plan Fees" and "Fees" each mean the retainer
fees and Board of Directors and committee meeting attendance
fees unless the context otherwise requires.
2.26 "Stock Plan Participant" means a Director who has
elected to defer payment of all or a portion of his or her
Stock Plan Fees and to establish a Stock Plan Account.
2.27 "Termination" means retirement from the Board of
Directors or termination of service as a Director for death,
disability or any other reason.
2.28 "Time of Distribution" means a date ten (10) calendar
days after Termination, except as may be otherwise specified
in Article 7; provided that, if payment is to be made in
cash and the Time of Distribution is within six months after
the date of acquisition or crediting of Plan Units within
the contemplation of Rule 16b-3(c)(1) or any successor rule
under the Exchange Act, the Time of Distribution shall be
delayed, solely for such Plan Units, until more than six
months shall have elapsed from the date of acquisition or
crediting of such Common Stock or Plan Units.
2.29 "Trust Agreement" means any Trust Agreement entered
into between the Company and any Trustee in connection with
the Plan.
2.30 "Trustee" means any entity named as Trustee in the
Trust Agreement, or any successor corporate Trustee
thereunder.
ARTICLE 3
ELECTIONS BY OPTION PLAN PARTICIPANTS
3.1 Directors may elect to receive Fees in the form of
Options.
Option Plan Fees to be earned by Directors for the Plan
Years 1995 through 1999 may, at the election of a Director, be
received as Options as herein provided. Option Plan Fees to be
earned by Directors for the period August 1, 1994 through
December 31, 1994 may also, at the election of a Director, be
received as Options.
3.2 Annual Option Plan Elections
On or before December 15 of each year (except for 1994
when the Option Plan Election must be made on or before July 20,
1994) a Director may deliver to the Administrator his or her
Option Plan Election to receive a stated percentage of his or her
Option Plan Fees for one or more of the Plan Years 1995 through
1999 or the period August 1 - December 31, 1994, in Options to
purchase the number of shares of Common Stock specified in
Section 4.1.
For example: the annual Option Plan Election may cover
the Plan Year or Years set forth below (to the extent not
theretofore the subject of an Option Plan Election).
Date of Option Plan Election Plan Years or Periods
for Which Option Plan
Fees May Be Elected
On or before July 20, 1994 August 1-Dec. 31, 1994
On or Before July 20, 1994 1995 - 1999
On or Before December 15, 1995 1996 - 1999
On or Before December 15, 1996 1997 - 1999
On or Before December 15, 1997 1998 - 1999
On or Before December 15, 1998 1999
Elections must include the earliest Plan Year for which
un-elected Fees exist and (if additional years are included in
the Election) consecutive successive years. An Option Plan
Election covering Option Plan Fees for this period shall preclude
a Stock Plan Election purporting to cover the same Fees and the
Stock Plan Election shall be automatically modified to comply
with Section 10.4.
3.3 Effective Date
Option Plan Elections made on or before July 20, 1994
shall become effective on August 1, 1994. Later years' Option
Plan Elections shall become effective as of the next Option Plan
Effective Date.
3.4 Adjustment for Actual Fees Earned
If by the end of any Plan Year a Director shall not have
earned the amount of Option Plan Fees elected by him or her to be
received in Options, the number of shares of Common Stock covered
by Options granted for such Plan Year shall be diminished pro
rata. Any Fees earned which have not been subject of an Option
Plan Election shall be paid in cash in accordance with the normal
payment practices of the Company for Directors' Fees. If a
Participant's directorship should terminate during a Plan Year
which has been the subject of an Option Plan Election, all Fees
(including Option Plan Fees) earned by a director prior to
termination shall be paid to him or her or his or her
Beneficiary, in cash, on January 15 of the next calendar year
(and the related Option shall terminate as elsewhere herein
provided).
3.5 Cancellation of Election
At any time an Option Plan Participant may cancel one or
more Options or installments of Options held by him or her which
relate to future Plan Years and consequently have not been earned
as of the date of such cancellation. Cancellation shall be
effected by delivering a written notice of cancellation to the
Administrator. Such cancellation shall not affect any Options
held by the Participant relating to the year in which
cancellation occurs or to any prior year. Option Plan Fees to be
earned by a Director covered by a canceled Election shall
thenceforth be paid in cash in accordance with the Company's
practices, and may not thereafter become the subject of an Option
Plan Election.
ARTICLE 4
TERMS OF OPTIONS
4.1 Number of Shares covered by an Option.
The number of shares of Common Stock covered by an Option
resulting from an Option Plan Election shall be equal to the
Option Plan Fees covered by the Election divided by the Option
Value.
4.2 Maximum Duration.
The maximum exercise period for each Option granted under
the Option Plan shall be ten years from the Effective Date of the
Option.
4.3 Initial Exercisability in Installments.
Options representing Option Plan Fees to be earned in one
Plan Year shall become exercisable on January 1 of the following
Plan Year.
Options which relate to Fees to be earned in more than one
Plan Year shall become exercisable in installments on the January
1 of the year following the year in which Fees represented by the
installment are earned. For example: An Election covering the
years 1996, 1997 and 1998 would become exercisable: as to shares
representing 1996 Fees - January 1, 1997; as to shares
representing 1997 Fees - January 1, 1998; as to the remainder of
the shares - January 1, 1999. An Election covering Fees to be
earned in 1999 will first become exercisable on January 1, 2000.
Options relating to the period August 1, 1994 - December
31, 1994 shall first become exercisable on February 1, 1995.
4.4 Exercise Price
The Exercise Price for all shares of Common Stock
purchasable upon exercise of an Option shall be 90% of the Fair
Market Value as of the Effective Date applicable to the Option
exercised.
4.5 Notice of Exercise
An Option Plan Participant wishing to exercise an Option
may do so by giving written notice of exercise in the form
adopted for the Option Plan.
4.6 Payment of Purchase Price
At the choice of the holder of the Option, the Purchase
Price may be paid either in cash, or in shares of Common Stock
valued at Fair Market Value on the trading day immediately
preceding the date of exercise specified in the notice of
exercise.
4.7 Exercisability after Termination.
If a Participant's directorship terminates for any reason,
the Option shall continue to be exercisable by the Participant or
his or her Beneficiary for a period of twelve months after
termination of directorship, but only to the extent that the
Option was exercisable on the day of termination of the
directorship. In no event shall the exercise date be later than
the date specified in Section 4.2.
4.8 Option not transferable.
No Option granted under the Option Plan shall be
transferrable other than by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order
as defined by the Internal Revenue Code or Title I of the
Employee Retirement Income Security Act ("ERISA") or the rules
thereunder. During the lifetime of the Option Plan Participant
an Option shall be exercisable only by the Participant, or in the
event of his or her disability or incompetence, his or her
Beneficiary.
ARTICLE 5
ELECTIONS BY STOCK PLAN PARTICIPANTS
5.1 Directors may elect to receive Fees in the form of Plan
Units.
Directors may elect to receive Directors' Fees (to the
extent such Directors' Fees are not the subject of an Option Plan
Election) in the form of Plan Units.
5.2 Stock Plan Election to Defer.
A Director of the Company may become a Stock Plan
Participant by electing, on an annual basis and prior to June 30
of a Plan Year, to defer receipt of all or a portion of the Stock
Plan Fees payable to such Director for the next ensuing Plan
Year. An Election shall be effective upon the delivery by a
Stock Plan Participant to the Administrator of a written Stock
Plan Election to evidence his or her decision. Such Stock Plan
Election shall indicate the portion of Directors' Fees to be
deferred and credited to his or her Stock Plan Account.
The following special provisions shall apply to Directors'
Fees for 1994 and 1995: On or before July 20, 1994, a Director
may deliver a Stock Plan Election to the Administrator in which
he or she elects to defer receipt of all or a portion of the
Directors' Fees payable to such Director for services during the
period August 1, 1994 through December 31, 1994. In such a case,
all deferred Fees will be held by the Company in the
Participant's Stock Plan Account and will not be invested in Plan
Units until February 1, 1995. An election to defer Fees to be
accrued during the period January 1, 1995 through December 31,
1995 shall be made on or before July 20, 1994 as provided herein
except that the first Accounting Date for investment of such Fees
shall be April 1, 1995.
If a person becomes a Director after the beginning of any
Plan Year, he or she may elect to defer receipt of Fees for
future services in such Plan Year. Such Stock Plan Election must
be made in writing and delivered to the Administrator within
twenty days after the individual becomes a Director and will take
effect as of the first calendar quarter to start after the date
of such Election. In such a case, deferred Fees will be held by
the Company in the Participant's Stock Plan Account and will not
be invested in Common Stock or Plan Units until the first
Accounting Date which is at least six (6) months after the date
that such Stock Plan Election is first delivered to the
Administrator.
5.3 Effectiveness of Elections.
Elections for each Plan Year shall be effective and
irrevocable upon the delivery of a Stock Plan Election to the
Administrator, except as specifically provided in this Plan.
Fees deferred pursuant to such Stock Plan Election shall be
credited to the Participant's Stock Plan Account and distributed
at the times and in the manner set forth in such Election.
In the absence of an effective Stock Plan Election to take
effect on the Time of Distribution as to the time and/or manner
of distribution, the payout of a Stock Plan Account shall be in
one lump sum cash payment at the Time of Distribution or as soon
thereafter as possible, as provided by Section 2.28.
ARTICLE 6
STOCK PLAN ACCOUNTS AND PLAN UNITS
6.1 Crediting Stock Plan Accounts.
The Stock Plan Account of each Stock Plan Participant
shall be credited as of each Accounting Date with Plan Units
equal to the number of shares of Common Stock (including
fractional share entitlements) that could have been purchased
with 110% of the amount credited to his or her Stock Plan Account
by reason of the Fees deferred for the quarter ended on the
Accounting Date and any interest component at the Applicable Rate
of Interest. The quarterly crediting of the Plan Units with
deferred Fees has been established for administrative
convenience. As of the date of any payment of a stock dividend
or stock split by the Company, a Participant's Stock Plan Account
will be credited with Plan Units equal to the number of shares of
Common Stock (including fractional share entitlements) which are
payable by the Company with respect to the number of shares
(including fractional share entitlements) equal to the number of
Plan Units credited to the Participant's Stock Plan Account on
the record date for such stock dividend or stock split. As of
the date of any dividend in cash or property or other
distribution payable to holders of Common Stock, the
Participant's Stock Plan Account shall be credited with
additional Plan Units equal to the number of shares of Common
Stock (including fractional share entitlements) that could have
been purchased at the Fair Market Value as of such payment date
with the amount which would have been received as a dividend or
distribution on the number of shares (including fractional share
entitlements) equal to the Plan Units credited to the
Participant's Stock Plan Account as of the record date.
On a quarterly basis, or as otherwise appropriate to match
increases in Plan Units held in the Plan, the Company may, but
shall not be required to, purchase Common Stock on the open
market and hold the same in the "Deferred Fee Stock Plan for Non-
Employee Directors Account". Also, the Company may enter into a
Trust Agreement with a Trustee and may, but shall not be required
to, transfer to the Trustee either (a) the number of shares of
Common Stock approximately equal in Fair Market Value as of the
last Accounting Date to the aggregate dollar amount of credits in
the Participants' Stock Plan Accounts for Stock Plan Fees
deferred by the Directors and any interest component on such
Accounting Date, or (b) cash with instructions to purchase shares
of Common Stock either from the Company or in the open market, as
determined by the Company. Purchases in the open market by the
Trustee shall not be subject to any direct or indirect control or
influence over the times when, or the prices at which, or the
broker or dealer through which, the Trustee shall buy such
shares.
6.2 Establishment of Stock Plan Accounts.
The Company, Administrator or the Trustee, as appropriate,
shall establish a separate "Stock Plan Account" for each Stock
Plan Participant who defers Stock Plan Fees pursuant to the Plan,
and credit each Participant's Stock Plan Account with his or her
entitlement to deferred Fees, an interest component at the
Applicable Rate of Interest and Plan Units.
6.3 Adjustment of Stock Plan Accounts.
As of each Accounting Date of each Plan Year and on such
other dates as the Administrator directs, the value of each Stock
Plan Account shall be determined by the Company, the
Administrator, or the Trustee, as appropriate.
ARTICLE 7
PAYMENT OF STOCK PLAN ACCOUNTS
7.1 Time and Method of Distribution.
Distribution of a Participant's Stock Plan Account shall
commence at Time of Distribution. Distribution shall be made in
a lump sum or in equal annual cash installments over a period of
five years.
If a distribution is to be made in a lump sum it may made
either in shares of Common Stock or in cash. If a distribution
is to be made in cash, it shall be in an amount equal to the Fair
Market Value as of the Time of Distribution (or such later date
as may be required to continue an exemption under Rule 16b-3) of
all Plan Units credited to a Participant's Stock Plan Account
plus any uninvested deferred Stock Plan Fees and related interest
component. The distribution shall be paid to the Stock Plan
Participant or his or her Beneficiary.
If a distribution is to be made in shares of Common Stock,
the distribution shall be such number of shares of Common Stock
as shall equal the Plan Units credited to such Participant's
Stock Plan Account plus shares of Common Stock equivalent in Fair
Market Value to the amount of any accumulated uninvested deferred
Fees and interest component in such Participant's Stock Plan
Account as of the Time of Distribution. Any remaining fractional
interest shall be paid in cash.
If a distribution is made in annual installments, each
annual installment shall be in cash and equal to one-fifth of the
amount of the lump sum payable as of the Time of Distribution or
later date as aforesaid, with interest on each unpaid installment
at the Applicable Rate of Interest in effect on the date of
Termination by a Director of his directorship.
7.2 Election of Method of Distribution
At the time that a Director first makes an Stock Plan
Election to defer Fees for a Plan Year, such Director may elect
whether the payments to be made at the Time of Distribution for
that Plan Year shall be distributed in a lump sum or in five
equal annual cash installments.
At the same time, any Stock Plan Participant electing lump
sum payment may also elect for the payment of such lump sum to be
in shares of Common Stock credited to the Stock Plan Account or
in cash. A Stock Plan Participant may, in connection with his or
her retirement, death or disability, change his or her Stock Plan
Election as to the method of payment (shares or cash) of any lump
sum distribution from time to time.
Subject to the provisions of Articles 9 and 10, either the
Committee or the Administrator, in their sole discretion, may
direct the distribution of the Director's entitlement in a lump
sum or in annual installments, and the Committee or Administrator
may take into account, but need not take into account, any
request by a Director concerning the period over which his
entitlement will be distributed.
7.3 Merger, consolidation, sale of assets or tender for
shares.
In the event of a proposed merger or consolidation in
which the Company will not be the surviving corporation, or a
sale of a majority of the assets of the Company, or in the case
of a tender offer for the Company's Common Stock or a similar
corporate transaction which is expected in the view of the
Committee to result in another company, firm, or group acquiring
20% or more of the voting power of the Company's outstanding
securities, the Plan shall take steps to convert Plan Units held
by Participants into shares of Common Stock. The Plan shall
obtain such shares with a view to making the same available for
participation by Stock Plan Participants in the transaction
(subject to the fourth from last sentence of this Section). Such
shares may be obtained by the Plan from the "Deferred Fee Stock
Plan for Non-Employee Directors Account," any trust account for
the benefit of Plan Participants, the Company, or any other
source, including authorized and unissued, or issued and
reacquired, shares of Common Stock. In the event that shares of
Common Stock are convertible into or otherwise exchangeable for
securities of another corporation, or cash or other property
without the need for action or tender by an individual
shareholder, the Company shall take all necessary steps to carry
out such conversion or exchange and shall deliver to each Stock
Plan Participant the securities, cash or other property into
which his or her shares have been exchanged or converted. In the
event of a tender offer or similar event in which an individual
shareholder of the Company may elect to tender shares or
otherwise take steps to receive securities, cash or other
property, the Company shall so advise the Participants and take
such action, including tender, or shall refrain from action, as
directed in writing by each Stock Plan Participant. Prior to the
completion of such tender offer or similar event, no Participant
shall have any entitlement to any shares, and if such event is
not completed each Participant shall be entitled to Plan Units
and not shares of Common Stock. Upon the completion of such
tender offer or similar event, the Company shall distribute to
each Stock Plan Participant any shares of Common Stock,
securities, cash or other property held by the Plan for his or
her Stock Plan Account. The Administrator may delay such
distribution to any Stock Plan Participant in order to comply
with, or continue the availability of an exemption under, the Act
or Exchange Act. Upon the completion of such distribution the
Stock Plan shall terminate.
7.4 Change in Tax Law.
The Stock Plan is intended to be treated as an unfunded
deferred compensation plan under the Code. It is the intention
of the Company that the amounts deferred pursuant to this Plan
shall not be included in the gross income of the Participants or
their Beneficiaries until such time as the deferred amounts are
distributed from the Plan. If, at any time, it is determined or
claimed by the Internal Revenue Service ("Service") that amounts
deferred in earlier Plan Years have become currently taxable to
the Participants or their Beneficiaries, the Committee may, in
its discretion, terminate the Plan and distribute amounts
credited to the Stock Plan Participants or their Beneficiaries.
Such determination shall be based on a ruling or publicly
available pronouncement from the Service, or on the position
taken by the Service in audit, or a written opinion from tax
counsel.
ARTICLE 8
CREDITORS AND INSOLVENCY
8.1 Unfunded Status.
Any and all payments made to a Stock Plan Participant
pursuant to the Plan shall be made from the general assets of the
Company or assets available to its general creditors. Any
payments made in good faith under the terms of the Plan to a
Stock Plan Participant or his Beneficiary shall fully discharge
the Plan, the Company, the Trustee, if any, the Administrator and
the Committee from all further obligations with respect to such
payments. The Company intends that the Plan shall be considered
unfunded for all purposes, including tax purposes and purposes of
Title I of ERISA.
8.2 Claims of the Company's Creditors.
All assets held pursuant to the provisions of this Plan
shall be subject to the claims of general creditors of the
Company, including judgment creditors and bankruptcy creditors.
The rights of a Stock Plan Participant or Beneficiary to any
assets of the Plan or Trust shall be no greater than the rights
of an unsecured creditor of the Company.
No Stock Plan Participant shall have any claim or
entitlement to any shares of Common Stock which have been
purchased, acquired or held by the Plan, Company or any Trustee.
Any and all such shares shall be the property of the Company and
shall only represent funds or assets available to the Company
which it shall have designated to match its obligations and
accruals with respect to the Plan.
8.3 Notification of Trustee, if any.
If the Company has appointed a Trustee for the Plan, the
following provisions shall obtain: In the event the Company
becomes insolvent, the Board of Directors and the Chief Executive
Officer of the Company shall immediately notify the Trustee of
that fact. The Trustee shall not make any payments from the
Trust to any Stock Plan Participant or any Beneficiary under the
Plan after such notification is received or at any time after the
Trustee has knowledge of such insolvency. Under any such
circumstances, the Trustee shall make available any property held
in the Trust to satisfy the claims of the Company's general
creditors or, upon satisfaction of such claims, to the
Participants, as a court of competent jurisdiction may direct.
For purposes of this Plan, the Company shall be deemed to be
insolvent if the Company is subject to a pending voluntary or
involuntary proceeding as a debtor under the United States
Bankruptcy Code, or is unable to pay its debts as they mature.
All trust assets shall be subject to the claims of general
creditors of the Company to the fullest extent contemplated by
Revenue Procedure 92-64.
ARTICLE 9
PAYMENT OF SHARES
9.1 Delivery of Certificates for Stock.
At the Time of Distribution or as soon thereafter as
practicable, subject to the fourth paragraph of this Section, the
Company shall deliver to a Stock Plan Participant who has elected
to receive shares of Common Stock or to his Beneficiary a
certificate for the shares of Common Stock to which he or she is
entitled. At the time of exercise of an Option, subject to the
fourth paragraph of this Section, the Company shall deliver to
the Option Plan Participant or his or her Beneficiary a
certificate for shares of Common Stock to which he or she is
entitled. Such certificates shall be registered in the name of
the Participant or Beneficiary.
The Company shall not be required to issue or deliver any
certificates for, or make book-entry reflecting, shares of Common
Stock prior to (a) the listing of such shares on any stock
exchange or quotation system on which the Common Stock may then
be listed or quoted and (b) the completion of any registration,
qualification, approval or authorization of such shares under any
federal or state law, or any ruling or regulation or approval or
authorization of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable.
All certificates for shares of Common Stock delivered
under the Plan, and book entries reflecting such shares, shall be
subject to such restrictions as the Administrator may deem
advisable under the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed and any applicable federal
or state securities laws.
If the registration of ownership of Common Stock is then
being maintained by the Company or its transfer agent in book-
entry form, then the delivery of shares of Common Stock to the
Participant or his Beneficiary may be evidenced by book entry,
unless the Participant or Beneficiary requests otherwise in
writing.
9.2 Taxes.
The Company or the Trustee, as appropriate, shall deduct
the amount of any taxes, if so required by law, from any payments
made pursuant to the Plan and shall transmit the withheld amounts
to the appropriate taxing authority, and provide the Stock Plan
Participant or any Beneficiary of appropriate evidence of
withholding. In the case of exercise of an Option under the
Option Plan or payment in shares of Common Stock under the Stock
Plan, the Participant may request the Company to accept payment
of any related income or withholding taxes in the form of shares
of Common Stock valued at Fair Market Value on the trading day
immediately prior to the related exercise of the Option or
payment in shares of Common Stock, as the case may be.
9.3 Payment to Beneficiary; Exercise of Option by Beneficiary.
Upon the death of a Stock Plan Participant, the Stock Plan
Account of the deceased Stock Plan Participant shall be paid to
the Beneficiary either (i) in the same manner as it would have
been paid to the Stock Plan Participant or (ii) in a lump sum
settlement, as determined by the Committee or the Administrator
in their sole discretion, consistent with the guidelines referred
to in Article 10. Upon the death of a Option Plan Participant,
the Beneficiary may exercise any Option to the extent exercisable
on the date of death.
9.4 Redesignation of Beneficiary.
Amendments which serve only to change the Beneficiary
designation shall be permitted at any time and as often as
necessary.
ARTICLE 10
ADMINISTRATION
10.1 Appointment of Committee and Administrator.
The Board of Directors shall appoint a Stock Plan
Committee and an Option Plan Committee (which may be the same
Committee), each consisting of not less than two persons, to
administer and interpret the Plan. Members of a Committee shall
hold office at the pleasure of the Board of Directors and may be
dismissed at any time with or without cause.
The Board of Directors shall also designate one or more
officers or employees of the Company to be the Administrator to
have the primary administrative responsibility with respect to
each Plan, in coordination with and under the direction of the
Committee.
10.2 Powers of the Administrator and the Committee.
The Stock Plan and Option Plan Committees and the
Administrator shall together administer the Plan. The Committees
shall not, under any circumstances, have authority to select
those Directors who will be eligible to participate in the Plan
or to make decisions concerning the timing, pricing or amount of
any benefit, Plan Unit, share of Common Stock or Option under the
Plan. All such matters are determined solely by the provisions
of the Plan. The Committees shall interpret or supplement the
provisions of the Plan where desirable or necessary and may
resolve ambiguities or omissions or adopt procedures for the ad-
ministration of the Plan consistent with the purpose and
provisions of the Plan and any rules adopted by the Committee.
Whenever directions, designations, applications, requests or
other notices are to be given by a Participant under the Plan,
they shall be filed with the Administrator.
Except as provided in the next paragraph, all decisions,
determinations or actions of a Committee made or taken pursuant
to grants of authority under the Plan shall be made or taken in
the sole discretion of a Committee and shall be final, conclusive
and binding on all persons for all purposes.
If the taking of any action or the making of any
determination by a Committee or Administrator shall jeopardize
the effectiveness of the deferral of Fees or of credits in
Participants' Stock Plan Accounts or Options for federal income
tax purposes or any exemption of any plan of the Company from
Section 16(a) and (b) of the Exchange Act, the Committee or
Administrator, as the case may be, shall be deemed to be without
the power to take such action or make such determination.
10.3 Rendering of Quarterly Plan Accounts.
After the close of each quarter, the Administrator will
deliver to each Participant a statement showing the Plan Units
which have been credited to his or her account as of the end of
such quarter and any accumulated deferred fees. The accounting
shall also indicate the price per unit for all Plan Units
credited since the end of the previous account. The statement
will also show the Options held and/or elected by a Participant
and the terms of such Options.
10.4 Both Elections may apply to a Plan Year.
Subject to the limitations contained in each Plan, a
Director may elect to include all or any portion of his Fees to
be earned in any future Plan Year in one or both of the Plans,
but without duplication. If a Director has delivered an Option
Plan Election and a Stock Plan Election for the same Plan Year or
period, the Fees covered by such Elections shall be allocated as
specified in such elections or in other instructions from the
Directors. In the event of a conflict in instructions from a
Director, the Administrator shall advise the Director.
10.5 Advance Notification by Administrator
On or before May 31 of each year, the Administrator shall
notify each Director that he or she must deliver a written Stock
Plan Election to the Administrator prior to June 30 (or any later
cut-off date permitted by the Administrator) in order to defer
Fees during the next calendar year. On or before November 30 of
each year, the Administrator shall notify each Director that he
or she must deliver a written Option Plan Election to the
Administrator prior to December 15 (or any later cut-off date
permitted by the Administrator) in order to elect to receive
Options in payment for future services as a Director in upcoming
Plan Years.
ARTICLE 11
MISCELLANEOUS
11.1 Term of Plan.
The Plan shall become effective as provided in Section
11.9 and the Stock Plan shall continue through the Plan Year 2014
unless earlier terminated pursuant to Sections 7.3 or 7.4.
11.2 Shares Subject to the Plan.
As of any date the maximum number of shares of Common
Stock which the Plan may be obligated to deliver pursuant to the
Stock Plan and the maximum number of shares of Common Stock which
shall have been purchased by Participants pursuant to Options and
which may be issued pursuant to outstanding Options under the
Option Plan shall not be more than one (1%) percent of the total
outstanding shares of Common Stock Series A and Series B of the
Company as of such date, subject to adjustment in the event of
changes in the corporate structure of the Company affecting
capital stock. Any Common Stock transferred by the Company to a
Stock Plan Account or to the Trustee or delivered by the Company
upon exercise of an Option hereunder may consist, in whole or in
part, of authorized and unissued shares or treasury shares as the
Company shall determine. Cash transferred to the Trustee may be
used to purchase Common Stock in the open market or from the
Company.
In the event that the total number of shares of Common
Stock subject to, or issued pursuant to, the Plan at any one time
is in excess of the above-stated limit, the number need not be
reduced if such excess has resulted from a reduction in the
amount of issued and outstanding shares of Common Stock
subsequent to the time that such Options were granted or such
shares were issued. If any shares of Common Stock subject to
purchase by a Participant under an Option under the Plan are not
purchased, such shares of Stock shall be deemed not to have been
purchased pursuant to the Plan for purposes of this Section.
Shares of Common Stock received or retained by the Company in
payment of the exercise price of Options or in payment, or in
lieu of payment, of withholding taxes shall not reduce the number
of shares deemed to have been purchased pursuant to the Plan.
11.3 Non-alienation of Benefits.
The rights of a Stock Plan Participant to the payment of
deferred compensation, to funds or shares as provided in this
Plan and with respect to amounts credited to his or her Stock
Plan Account and the rights of an Option Plan Participant with
respect to an Option or to purchase shares of Common Stock upon
exercise of an Option are not transferable by a Participant other
than by will or the laws of descent and distribution and shall
not be assigned, transferred, pledged or encumbered or be subject
in any manner to alienation or anticipation. No Participant may
borrow against his or her Stock Plan Account or Options. No
Stock Plan Account nor Option shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind,
whether voluntary or involuntary, including, but not limited to,
any liability which is for alimony or other payments for the
support of a spouse or former spouse, or for any other relative
of a Participant. Neither a Participant's Stock Plan Account or
Option hereunder nor a Participant's rights to benefits hereunder
may be assigned to any other party by means of a judgment, decree
or order (including approval of a property settlement agreement)
relating to the provision of child support, alimony payments, or
marital property rights of a spouse, former spouse, child or
other dependent of the Participant. As contemplated by Revenue
Procedure 92-65 under the Code, a Stock Plan Participant's rights
to benefit payments under the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of
the Participant or the Participant's Beneficiary.
This Plan shall not in any manner be liable for or subject
to the debts, contracts, liabilities, engagements or torts of any
persons entitled to benefits hereunder.
In the event that, notwithstanding the foregoing, any
Participant's benefits are garnisheed or attached by order of any
court, the Administrator may elect to bring an action for a
declaratory judgment in a court of competent jurisdiction to
determine the proper recipient of the benefits to be paid by the
Plan. During the pendency of said action, any benefits that
become payable may be paid into the court as they become payable,
to be distributed by a court to the recipient as it deems proper
at the close of said action.
In addition, a Participant or Beneficiary shall have no
rights against or security interest in the assets of the Plan,
Company or Trust, if any, and shall have only the Company's
unsecured promise to pay benefits. All assets of the Trust, if
any, shall remain subject to the claims of the Company's general
creditors.
11.4 Participants' Rights.
Nothing contained in this Plan shall be construed as
giving any Participant the right to be retained as a Director of
the Company. Nothing contained in this Plan shall be construed
as limiting, in any way, any right that any party or parties may
have to remove a Participant as a Director of the Company or to
appoint or to elect another individual to replace a Participant
as a Director of the Company. Nothing contained in this Plan
shall be construed as giving any Participant the right to receive
any benefit not specifically provided by the Plan. Any other
provision of the Plan notwithstanding, a Stock Plan Participant
shall not have any interest in the amounts credited to his Stock
Plan Account until such Stock Plan Account is distributed in
accordance with the provisions of Article 7, and all deferred
Fees, and all earnings, gains and losses with respect thereto
shall remain subject to the claims of the Company's general
creditors in accordance with the provisions of the Stock Plan.
With respect to amounts credited to a Participant's Stock Plan
Account, the rights of the Stock Plan Participant, the
Beneficiary of the Participant or any other person claiming
through the Participant under this Stock Plan shall be solely
those of unsecured general creditors of the Company, and the
obligations of the Company hereunder shall be purely contractual.
Such benefits shall be paid from the general assets of the
Company. As contemplated by Revenue Procedure 92-65 under the
Code, Participants shall have the status of general unsecured
creditors of the Company and each Plan, and all rights
thereunder, shall constitute a mere promise of the Company to
make benefit payments in the future.
11.5 Adjustments in Event of Change in Common Stock.
Subject to the provision of Sections 6.1 and 7.3, in the
event of any stock dividend, stock split, recapitalization,
reclassification, consolidation of shares of Common Stock, merger
or consolidation of the Company or sale by the Company of all or
a portion of its assets, or tender offer for its securities, or
other event which could distort the implementation of the Plan or
the realization of its objectives, the Administrator shall make
such appropriate adjustments in the number and kind of securities
which a Plan Unit will represent or which may be paid out under
the Plan, and in the number of shares of Common Stock or other
securities or number and kind of securities, and the purchase
price therefor, for which an Option may be exercisable or in
terms, conditions or restrictions on securities as the
Administrator deems equitable.
In the event of a stock split or stock dividend, the
number of shares purchasable upon exercise of an Option shall be
increased to the new number of shares which result from the
shares covered by the Option immediately before the split or
dividend. The purchase price per share shall be reduced
proportionately and the total purchase price will remain the
same. In the case of a distribution in property other than cash
the number of shares covered shall be increased to reflect, in
shares valued at the then current market, the fair value of the
distribution.
All events occurring between the Effective Date of the
Option and its exercise shall result in an adjustment to the
Option terms.
11.6 Amendments; Other.
The Board or the Committee may amend the Plan to the
extent necessary or appropriate to effect compliance with Rule
16b-3 in order to continue or provide an exemption from Section
16(a) and (b) of the Exchange Act for either Plan or any other
equity plan of the Company, and the Administrator may change the
cut-off dates for Elections or the dates of effectiveness of
transactions or other events under the Plan to the same end;
provided that no such amendments or change shall materially
increase the benefits to or adversely affect the rights of the
Participants.
In addition, the Board may amend the Plan in any other
manner, provided, however, that no amendment shall adversely and
materially affect the rights of a Participant, taken as a whole,
to amounts previously credited to his or her Stock Plan Account
or to Options which have been granted unless such amendment is
required by Rule 16b-3 in order to continue or provide an
exemption from Section 16(b) of the Exchange Act for either Plan
or any other equity plan of the Company, or for the deferral of
Directors' Fees until the year of payout or exercise of Options
under either Plan for Federal income tax purposes.
Amendments may not be made more frequently than permitted
by Rule 16b-3. No amendment shall require shareholder approval
unless required under Rule 16b-3. If shareholders' approval is
necessary or desirable for the continued validity of the Plan or
if the failure to obtain such approval would adversely affect the
compliance of the Plan with Rule 16b-3, no such amendment shall
become effective unless approved by affirmative vote of the
Company's shareholders.
Transactions under each Plan are intended to comply with
applicable conditions of Rule 16b-3, except that a purchase under
the Option Plan may be deemed to occur on an Effective Date. To
the extent any provision of each Plan intended to comply, or
action by the Administrator, fails to so comply, it shall be
deemed null and void, to the extent permitted by law and declared
advisable by the Administrator.
11.7 Notices.
All elections, designations, requests, notices,
instructions and other communications from a Director,
Participant, Beneficiary or other person to the Administrator,
required or permitted under the Plan, shall be in such form as is
prescribed from time to time by the Administrator and shall be
mailed by first class mail, delivered by facsimile or otherwise
delivered to such location as shall be specified by the
Administrator.
11.8 Binding Effect.
The terms of the Plan shall be binding upon the Company
and its successors and assigns.
11.9 Effective Date of Plan.
The Plan shall be effective as of June 28, 1994, subject
to approval by the shareholders of the Company. All deferrals or
credits to an Stock Plan Account, and all Options, made prior to
such shareholder approval shall be contingent on such approval.
The existing Citizens Utilities Company Deferred Compensation
Plan for Directors shall continue to be available for
compensation deferrals and shall not be affected by the adoption
of this Plan.
<PAGE>
As of March 2, 1995
CITIZENS UTILITIES COMPANY
NON-EMPLOYEE DIRECTORS'
DEFERRED FEE EQUITY PLAN
<PAGE>
Page
ARTICLE 1
PURPOSES OF THE PLAN
1.1 Purposes. . . . . . . . . . . . . . . . . . . . 1
1.2 Introduction. . . . . . . . . . . . . . . . . . 1
ARTICLE 2
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
ELECTIONS BY OPTION PLAN PARTICIPANTS
3.1 Directors may elect to receive Fees in the
form of Options.. . . . . . . . . . . . . . . . 6
3.2 Annual Option Plan Elections. . . . . . . . . . 6
3.3 Effective Date. . . . . . . . . . . . . . . . . 7
3.4 Adjustment for Actual Fees Earned . . . . . . . 7
3.5 Cancellation of Election. . . . . . . . . . . . 7
ARTICLE 4
TERMS OF OPTIONS
4.1 Number of Shares covered by an Option . . . . . 7
4.2 Maximum Duration. . . . . . . . . . . . . . . . 8
4.3 Initial Exercisability in Installments. . . . . 8
4.5 Notice of Exercise. . . . . . . . . . . . . . . 8
4.6 Payment of Purchase Price . . . . . . . . . . . 8
4.7 Exercisability after Termination. . . . . . . . 8
4.8 Option not transferable . . . . . . . . . . . . 9
ARTICLE 5
ELECTIONS BY STOCK PLAN PARTICIPANTS
5.1 Directors may elect to receive Fees in the
form of Plan Units. . . . . . . . . . . . . . . 9
5.2 Stock Plan Election to Defer. . . . . . . . . . 9
5.3 Effectiveness of Elections. . . . . . . . . . 10
ARTICLE 6
STOCK PLAN ACCOUNTS AND PLAN UNITS
6.1 Crediting Stock Plan Accounts.. . . . . . . . 10
6.2 Establishment of Stock Plan Accounts. . . . . 11
6.3 Adjustment of Stock Plan Accounts.. . . . . . 11
ARTICLE 7
PAYMENT OF STOCK PLAN ACCOUNTS
7.1 Time and Method of Distribution.. . . . . . . 12
7.2 Election of Method of Distribution. . . . . . 12
7.3 Merger, consolidation, sale of assets or
tender for shares.. . . . . . . . . . . . . . 13
7.4 Change in Tax Law.. . . . . . . . . . . . . . 14
ARTICLE 8
CREDITORS AND INSOLVENCY
8.1 Unfunded Status . . . . . . . . . . . . . . . 14
8.2 Claims of the Company's Creditors.. . . . . . 14
8.3 Notification of Trustee, if any.. . . . . . . 15
ARTICLE 9
PAYMENT OF SHARES
9.1 Delivery of Certificates for Stock. . . . . . 15
9.2 Taxes.. . . . . . . . . . . . . . . . . . . . 16
9.3 Payment to Beneficiary; Exercise of Option
by Beneficiary. . . . . . . . . . . . . . . . 16
9.4 Redesignation of Beneficiary. . . . . . . . . 17
ARTICLE 10
ADMINISTRATION
10.1 Appointment of Committee and
Administrator.. . . . . . . . . . . . . . . . 17
10.2 Powers of the Administrator and the
Committee.. . . . . . . . . . . . . . . . . . 17
10.3 Rendering of Quarterly Plan Accounts. . . . . 18
10.4 Both Elections may apply to a Plan Year . . . 18
10.5 Advance Notification by Administrator . . . . 18
ARTICLE 11
MISCELLANEOUS
11.1 Term of Plan. . . . . . . . . . . . . . . . . 19
11.2 Shares Subject to the Plan. . . . . . . . . . 19
11.3 Non-alienation of Benefits. . . . . . . . . . 19
11.4 Participants' Rights. . . . . . . . . . . . . 20
11.5 Adjustments in Event of Change in Common
Stock.. . . . . . . . . . . . . . . . . . . . 21
11.6 Amendments; Other.. . . . . . . . . . . . . . 22
11.7 Notices.. . . . . . . . . . . . . . . . . . . 23
11.8 Binding Effect. . . . . . . . . . . . . . . . 23
11.9 Effective Date of Plan. . . . . . . . . . . . 23
EXHIBIT NO. 10.20
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Tennessee, Inc., a Tennessee corporation ("Seller").
RECITALS
WHEREAS, Seller is in the business of providing regulated local exchange
telephone service in certain areas of the State of Tennessee; and
WHEREAS, Seller desires to sell, convey, assign, transfer and deliver to
Buyer, and Buyer desires to purchase and accept from Seller, substantially all
of its telephone properties and related assets, upon the terms and conditions
set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
-------------------------------
Advanced Billing Amounts is defined in Section 2.4.
------------------------
Affiliate has the meaning given to that term in Rule 405 under the
---------
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
---------
Assumed Liabilities is defined in Section 2.5. 1.
-------------------
The Business means the business of providing local exchange and
------------
exchange access telecommunications services and other related regulated and
non-regulated activities, services and products associated with the Purchased
Exchanges, including without limitation such unregulated activities, services
and products of Seller conducted, offered or serviced by the Transferred
Employees or provided or related to Seller's subscribers or customers served in
or from the Purchased Exchanges (such unregulated activities, services and
products are considered an integral part of the Business for all purposes of
this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
---------------------------
CERCLA means the Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
---------------
Casualty Termination Notice is defined in Section 11.9.
---------------------------
Closing is defined in Section 8.1.
-------
Closing Date is defined in Section 8.1.
------------
Confidentiality Agreement means the Confidentiality Agreement dated
-------------------------
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Construction Advances is defined in Section 11.11.
---------------------
Contracts is defined in Section 2.2.2.
---------
Customer Deposits is defined in Section 11.11.
-----------------
Damaged Property is defined in Section 11.9.
----------------
Debtholder Consents is defined in Section 5.2(a).
-------------------
Direct Claim is defined in Section 13.4(b).
------------
Earned Accounts Receivable is defined in Section 2.4.
--------------------------
Effective Date is defined in Section 8.1.
--------------
Employee Plan Assets is defined in the Employee Transfer Agreement.
--------------------
Employee Transfer Agreement is defined in Section 12.1
---------------------------
Employment Agreements is defined in Section 9.1.18.
---------------------
Environmental Liabilities means all liabilities, obligations (including
-------------------------
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive or
treble damages), costs and expenses (including reasonable fees, disbursements
and expenses of counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental Requirements of any
Governmental Authority, or as a consequence of (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Purchased Property by any person or party or the
conduct of the Business or any part thereof, that does not comply with
Environmental Requirements, or (c) any claim, demand, notice, cause of action,
directive, order, judgment, fine or penalty asserted or sought under or
pursuant to any Environmental Requirements by an entity or person not a party
to this Agreement, to the extent that the condition or circumstance or event
giving rise to the claim, demand, notice, cause of action, directive, order,
judgment, fine or penalty relates to the ownership or operation of the
Purchased Property by any person or party or the conduct of the Business or any
part thereof.
Environmental Requirements means (i) any federal, state and local law,
--------------------------
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
-----
amended.
ERISA Plans is defined in Section 9.1.18.
-----------
Estimated Prorations is defined in Section 3.3(b).
--------------------
Estimated Purchase Price is defined in Section 3.3(a).
------------------------
Evaluation Material is defined in the first paragraph of the
-------------------
Confidentiality Agreement.
Excluded Contracts is defined in Section 2.4(g).
------------------
Excluded Property is defined in Section 2.4.
-----------------
Execution Date is defined in the preamble to this Agreement.
--------------
Executive Officers of an entity means the president and any vice president
------------------
of the entity in charge of a principal business unit, division or function.
Existing Environmental Requirements means those applicable provisions of
-----------------------------------
any Environmental Requirements that are both in effect and applicable to
Seller, the Business or the Purchased Property on or prior to the Effective
Date.
FCC means the Federal Communications Commission.
---
FCC Consents is defined in Section 5.4.
------------
FCC Licenses is defined in Section 2.2.4.
------------
Final Order means an action by the FCC, the PUC, or any other Governmental
-----------
Authority, as to which: (a) no request for stay of the action by the FCC, the
PUC, or such other Governmental Authority, as the case may be, is pending, no
such stay is in effect, and if any time period for filing any request for such
a stay is provided by statute or regulation, such time period has passed; (b)
no petition, motion or application for rehearing, reconsideration, or review,
of the action is pending before the FCC, the PUC, or such other Governmental
Authority, as the case may be, and the time provided for filing any such
petition, motion or application has passed; (c) the FCC, the PUC, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, the PUC's or
such other Government Authority's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal has passed.
Final Prorations is defined in Section 3.4.
----------------
Final Purchase Price is defined in Section 3.4.
--------------------
Financial Statements is defined in Section 9.1.11.
--------------------
GAAP means generally accepted accounting principles.
----
Governmental Authority is defined in Section 9.1.3.
----------------------
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
-------
amended.
Indemnifiable Losses is defined in Section 13.2(a).
--------------------
Indemnification Payment is defined in Section 13.2(a).
-----------------------
Indemnifying Party is defined in Section 13.2(a).
------------------
Indemnitee is defined in Section 13.2(a).
----------
Intellectual Property is defined in Section 11.1.1.
---------------------
IRC means the Internal Revenue Code of 1986, as amended.
---
IRS means the Internal Revenue Service.
---
June 1994 Base Amount means the sum of (i) the amount of Net
---------------------
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
---
Leases is defined in Section 2.3.
------
Marks is defined in Section 11.1.5.
-----
Materials and Supplies is the amount set forth on Seller's balance sheet as
----------------------
of a date certain comprising Seller's Materials and Supplies.
Net Telecommunications Plant is the amount set forth on Seller's balance
----------------------------
sheet as of a date certain comprising the sum of Seller's Telecommunications
Plant In Service, Plant Under Construction -- Short Term, Plant Under
Construction -- Long Term, and Telecommunications Plant -- Other, less
Accumulated Depreciation and Amortization.
Original Cost Documents means all original cost documentation relating to
-----------------------
the Telephone Plant.
Other Assets is defined in Section 2.2.5.
------------
NECA means the National Exchange Carrier Association.
----
Non-FCC Authorizations is defined in 2.2.6.
----------------------
Parent means ALLTEL Corporation, a Delaware corporation.
------
PBGC means the Pension Benefit Guaranty Corporation.
----
Permitted Exceptions is defined in Section 11.16.
--------------------
Plans is defined in Section 9.1.18.
-----
Press Release is defined in Section 17.2.
-------------
PUC means the Tennessee Public Service Commission.
---
Purchase Price is defined in Section 3. 1.
--------------
Purchased Exchanges is defined in Section 2.2.
-------------------
Purchased Property is defined in Section 2.2.
------------------
Real Property is defined in Section 2.2. 1.
-------------
Regulated Material means (i) any "hazardous substance" as defined in
------------------
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
--------------------
Retained Books and Records is defined in Section 2.4(e).
--------------------------
Retained Liabilities is defined in Section 2.5.2.
--------------------
Secured Indebtedness is defined in Section 5.2.
--------------------
Secured Parties is defined in Section 5.2.
---------------
Seller's Closing Certificate is defined in Section 7. 1. 1.
----------------------------
Tax Returns means a report, return or other information statement required
-----------
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes Seller.
Tax(es) means any foreign, federal, state, provincial, county or local
-------
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance, recording, ad valorem,
gains, value-added, unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social security, estimated,
add-on, minimum, privilege or withholding tax and any interest and penalties
and additions to such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
---------------
Third Party Claim is defined in Section 13.4(a).
-----------------
Transferred Employee is defined in Article II.A of the Employee Transfer
--------------------
Agreement.
Transferred Books and Records is defined in Section 2.2.3.
-----------------------------
Transition Services Agreement is defined in Section 10.1.
-----------------------------
Unregulated Business is defined in the definition of Business set forth in
--------------------
this Article 1.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the terms and conditions of
---------------------------
this Agreement, Seller agrees to sell, convey, transfer, assign and deliver to
Buyer, and Buyer agrees to purchase and accept, as of the Effective Date, all
of Seller's right, title and interest in and to the Purchased Property, free
and clear of all security interests, liens, or encumbrances, except for
Permitted Exceptions.
2.2 Purchased Property. For purposes of this Agreement, the "Purchased
------------------
Property" consists of the Telephone Plant, Contracts and Leases (to the extent
permitted following compliance with Section 5.3), Transferred Books and
Records, FCC Licenses, Non-FCC Authorizations and Other Assets in effect or
owned by Seller as of the Effective Date that are associated with (i) the
telephone exchanges listed in Schedule 2.2(a) (the "Purchased Exchanges"), and
(ii) the Unregulated Business described on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone Plant"
---------------
means the Real Property, machinery, equipment, vehicles and all other assets
and properties used, or held for future use, in connection with the conduct of
the Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, telephone cable (wherever located
and whether in service or under construction), microwave facilities (including
frequency spectrum assignments), telephone line facilities, telephones,
machinery, furniture, fixtures, tools, implements, conduits, stations,
substations, equipment (including, without limitation, central office
equipment, subscribers' station equipment and other equipment in general),
instruments, house-wiring connections and all other equipment of every nature
and kind owned by Seller or in which Seller holds an interest (other than as a
lessee) and used in connection with the Business. For purposes of this
Agreement, "Real Property" means the real property owned by Seller and used in
connection with the Business, including, without limitation, all land,
buildings, structures, easements, rights of way, appurtenances, improvements or
privileges located thereon and relating thereto. Without limiting the
generality of the foregoing, the Telephone Plant includes the assets that would
be properly included in the fixed asset accounts referenced in Part 32 of the
FCC's Rules and Regulations (47 C.F.R. Part 32), as such accounts are reflected
in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
---------
agreements that relate to the Business between Seller or any Affiliate of
Seller and (i) Seller's subscribers or customers, or (ii) other entities or
persons who are not Affiliates of Seller and have business relationships with
Seller relating to the Business, except for the Excluded Contracts (some of
which are specifically governed by other Sections in this Agreement or the
Employee Transfer Agreement).
2.2.3 Transferred Books and Records. For purposes of this Agreement,
-----------------------------
"Transferred Books and Records" means all of Seller's customer or subscriber
lists and records, accounts and billing records (including a copy of the
detailed general ledger and the summary trial balances, where available for the
past two fiscal years), detailed continuing property record list, plans,
blueprints, specifications, designs, drawings, surveys, engineering reports,
personnel records (where applicable), Original Cost Documents (where located in
the Purchased Exchanges but excluding Retained Books and Records) and all other
documents, computer data and records (including records and files on computer
disks or stored electronically) relating to the Business (excluding Retained
Books and Records), the Purchased Property, the Transferred Employees and/or
the Assumed Liabilities, except for the Retained Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
------------
all licenses, certificates, permits or other authorizations, including, without
limitation, Section 214 authorizations where applicable granted to Seller by
the FCC that are used in the conduct of the Business.
2.2.5 Other Assets. For purposes of this Agreement, Other Assets means
------------
all Non-FCC Authorizations to the extent transferable; all telephone numbers to
the extent transferable, listings, telephone directories and telephone
directory advertisements within such telephone directories, used in the
operation of the Business; all prepaid expenses relating to the Business; all
non-operating plant relating to the Business; all warranties relating to the
Purchased Property, to the extent transferable and all materials and supplies
relating to the Business.
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
----------------------
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses) granted to Seller by Governmental
Authorities that are used in or relate to the conduct of the Business
(including without limitation those that are listed or required to be listed on
Schedule 9.1.17(c)).
2.3 Leased Assets. Subject to the provisions of Sections 2.5.2(i) and
-------------
5.3, as of the Effective Date, Seller shall assign to Buyer all of its
interests, rights, benefits and obligations as lessee with respect to all real
and personal property leases that are necessary or useful in connection with
Seller's conduct of the Business (the "Leases").
2.4 Excluded Property. The sale contemplated by this Agreement shall not
-----------------
include the Excluded Property. For purposes of this Agreement, "Excluded
Property" means the following, subject to the provisions set forth in Article
4 and Sections 11.8, 11.9, 11.11, 11.12.3, 11.12.4, 11.12.5 and 11.13:
(a) Cash, cash equivalent and investments.
(b) All accounts receivable, trade or otherwise (excluding those
related to interexchange carriers), of Seller outstanding as of the Effective
Date relating to the Business (the "Accounts Receivable"), including, without
limitation, (i) any accounts receivable from any Affiliate of Seller; and
(ii) all amounts that have been earned by Seller in connection with the conduct
of the Business whether billed or unbilled as of the Effective Date (the
"Earned Accounts Receivable") which are addressed under Article 4; excluding,
however, all amounts that have been billed as of the Effective Date by Seller
in connection with the conduct of the Business but are unearned as of the
Effective Date, relating to service after the Effective Date (the "Advanced
Billing Amounts").
(c) All accounts receivable of Seller from interexchange carriers
whether billed or unbilled, relating to the Business which are outstanding as
of the Effective Date.
(d) Seller's interest in any business other than the Business,
including without limitation the cellular telephone business or personal
communication services business, and, in all cases, any applications or
licenses granted with respect thereto.
(e) Subject to Section 2.2.3, the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the other assets and
properties of Seller which are included in the Excluded Property, (iii) the
Retained Liabilities, (iv) employees of the Company who are not Transferred
Employees or (v) subject to Section 11.13, all Original Cost Documents that are
not located in the Purchased Exchanges (collectively, the "Retained Books and
Records").
(f) All trademarks, trade names, trade dress, logos and any other
intangible assets that use or incorporate the word "ALLTEL" and any other Marks
listed on Schedule 11.1.5.
(g) The contracts, leases and agreements listed or identified on
Schedule 2.4(g) (the "Excluded Contracts"), such other assets of Seller which
do not relate to the Business and which were not included in Net
Telecommunications Plant as of June 30, 1994, such other assets, if any, as
Seller lists and identifies on Schedule 2.4(g), and such other assets, if any,
as may be excluded in accordance with the provisions of Sections 11.9 or
14.1.7.
(h) Any prepaid taxes or tax refunds relating to the Purchased
Property and the Business for periods on or prior to the Effective Date.
2.5 Assumption of Liabilities.
-------------------------
2.5.1 Assumed Liabilities. Buyer hereby agrees to assume as of the
-------------------
Effective Date, and to timely perform and discharge after the Effective Date,
and to indemnity Seller against the specific liabilities, responsibilities and
obligations set forth below with respect to the Purchased Property (the
"Assumed Liabilities"):
(a) Conduct of Business after the Effective Date. All liabilities,
--------------------------------------------
responsibilities and obligations relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Purchased Property after
the Effective Date or the conduct of the Business by Buyer after the Effective
Date, including, without limitation, any liabilities, responsibilities and
obligations for Taxes relating to the conduct of the Business after the
Effective Date or the ownership, use or operation of the Purchased Property
after the Effective Date.
(b) Employment Matters. All liabilities, responsibilities and
------------------
obligations that are to be assumed by Buyer (or which Buyer may otherwise be
liable for pursuant to applicable law and which are not otherwise expressly
assumed or retained by Seller pursuant to this Agreement) under the Employee
Transfer Agreement.
(c) Environmental Matters. All liabilities, responsibilities and
---------------------
obligations that are to be assumed by Buyer under Article 14 (or which Buyer
may otherwise be liable for pursuant to applicable law and which are not
otherwise expressly assumed or retained by Seller pursuant to this Agreement)
with respect to Environmental Liabilities.
(d) Contracts, Leases. All liabilities, responsibilities and
-----------------
obligations that arise after the Effective Date in connection with or relating
to the performance or nonperformance of the Contracts and the Leases after the
Effective Date.
(e) Joint Construction Projects. All liabilities, responsibilities
---------------------------
and obligations to third parties that arise or relate to the period after the
Effective Date and that relate to arrangements and commitments permitted
hereunder between Seller and a third party for the construction of mutual
transmission facilities between various switching points (the "Joint
Construction Projects"), which Joint Construction Projects are listed on
Schedule 2.5.l(e).
(f) Construction in Progress. All liabilities, responsibilities and
------------------------
obligations to third parties that arise or relate to the period or are incurred
after the Effective Date, and relate to engineering and construction services
or similar services which are required to complete the construction and other
capital expenditure projects referred to in and permitted by Section 11.5.
(g) Customer Deposits and Construction Advances. All liabilities,
-------------------------------------------
responsibilities and obligations relating to Customer Deposits and Construction
Advances.
(h) Advanced Billing Amounts. All liabilities, responsibilities
------------------------
and obligations relating to Advanced Billing Amounts.
(i) Assumed Long Term Debt. All liabilities, obligations and
----------------------
responsibilities relating to long term debt assumed by Buyer, if any, pursuant
to Section 5.2(a) including, without limitation, indebtedness to Secured
Parties.
2.5.2 Retained Liabilities. Seller shall retain and have full
--------------------
responsibility and obligation with respect to, shall timely perform and
discharge, and shall indemnify Buyer against, all liabilities, responsibilities
and obligations of Seller relating to, arising out of, or in connection with,
or resulting from the use or ownership of the Purchased Property on or before
the Effective Date or the conduct of the Business by Seller on or before the
Effective Date, including any liability, obligation or debt, known or unknown,
fixed, contingent or otherwise, not specifically assumed by Buyer pursuant to
Section 2.5.1 or any other provision of this Agreement, and excluding those
liabilities, responsibilities and obligations that are specifically assumed by
Buyer pursuant to Section 2.5.1 or any other express provision of this
Agreement (the "Retained Liabilities"). Without limiting the generality of the
foregoing, but subject to liabilities that are specifically assumed by Buyer
pursuant to Section 2.5.1 or any other express provision of this Agreement, the
Retained Liabilities shall include the following liabilities, responsibilities
and obligations of Seller:
(a) All liabilities, responsibilities and obligations relating to
the use or ownership of the Purchased Property on or before the Effective Date
or to the conduct of the Business on or before the Effective Date.
(b) All current liabilities of Seller as of the Effective Date,
including, without limitation, trade, interest and other payables.
(c) All long-term debt of Seller not assumed by Buyer pursuant to
Section 5.2(a), including, without limitation, indebtedness to the Secured
Parties.
(d) Subject to Sections 11.8 and 11.17, all Taxes of Seller or its
consolidated or combined group relating to the conduct of the Business on or
before the Effective Date or the use, ownership or operation of the Purchased
Property on or before the Effective Date.
(e) Except as otherwise provided in the Employee Transfer Agreement,
all liabilities and obligations arising on or before the Effective Date with
respect to the Transferred Employees, and any such liabilities or obligations
that arise after the
Effective Date to the extent that such liabilities and obligations relate to
facts, circumstances or conditions arising or occurring on or before the
Effective Date.
(f) All liabilities, responsibilities and obligations arising out of
or related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date.
(g) All liabilities, responsibilities and obligations arising on or
before the Effective Date relating to collective bargaining or other union
contracts.
(h) All liabilities, responsibilities and obligations with respect
to the Excluded Property and the Excluded Contracts.
(i) All liabilities and obligations arising on or before the
Effective Date with respect to the Contracts and the Leases.
(j) All liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reductions) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10, but excluding any amounts which relate
to Advanced Billing Amounts.
Notwithstanding the foregoing, Buyer's and Seller's responsibility for
Environmental Liabilities shall be governed by the provisions of Article 14.
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
--------------
(a) In consideration of the sale of the Purchased Property and the
other undertakings of Seller in this Agreement, and subject to and in
accordance with the other terms and conditions of this Agreement, on the
Closing Date, Buyer will pay to Seller the sum of Twenty Five Million Forty One
Thousand Dollars ($25,041,000.00), subject to adjustment as provided in Section
3.2 (the "Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price, plus or minus, as the case may be, the Estimated Prorations. Such
delivery shall be made by bank wire transfer to an account that Seller shall
designate at least two (2) business days prior to the Effective Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price, plus or minus, as the case may be, the Estimated
Prorations, by 12:00 noon (Eastern Time) on the Closing Date, provided that all
conditions to Closing set forth in Article 7 have been satisfied, or waived by
the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
-----------------------------
(a) Adjustment Regarding Damaged Property.
-------------------------------------
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) Adjustment Regarding Customer Deposits and Construction
-------------------------------------------------------
Advances. The Purchase Price shall be decreased in an amount equal to the
- -------- dollar amount of Customer Deposits and Construction Advances
outstanding as of the Effective Date.
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
------------------------------------------ shall be adjusted,
plus or minus, as the case may be, in an amount equal to the amount by which
the sum of Net Telecommunications Plant and Materials and Supplies as of the
Effective Date exceeds or is less than the June 1994 Base Amount; provided,
however, that in determining Net Telecommunications Plant and Material and
Supplies as of the Effective Date no effect will be given for: (i) any
decrease thereof resulting from damage, loss or destruction of Damaged Property
which is repaired or replaced by Seller or for which Seller makes a
substitution, in accordance with Section 11.9(b); (ii) any increase thereof
resulting from expenditures made by Seller in connection with any such repair,
replacement or substitution of Damaged Property in accordance with Section
11.9(b); or (iii) any increase thereof resulting from Seller's expenditures
pursuant to its obligations under Sections 14.1.7(b) and (c) except for the
cost of purchasing specific items of new plant (i.e., storage tanks).
----
(d) Adjustment Regarding FAS 106. The Purchase Price shall be
----------------------------
reduced by the amount included as "Other Current Liabilities" of Seller
(item 14-Liabilities of Seller's balance sheet) as of the Effective Date which
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
(e) Adjustment Regarding Long Term Debt. The Purchase Price shall
-----------------------------------
be reduced by the amount of long term indebtedness of Seller that is assumed by
Buyer pursuant to Section 5.2(a).
3.3 Estimate of Purchase Price and Prorations. At least five (5) days
-----------------------------------------
prior to the date scheduled for Closing, Seller shall deliver to Buyer:
(a) An estimate of the Purchase Price based on Seller's good faith
estimate of the amount of each adjustment described in Section 3.2 (the
"Estimated Purchase Price") on the same basis and in accordance with the same
accounting principles, methods and practices applied in preparing the Financial
Statements and the Additional Financial Statements, if applicable, taking into
account all adjustments required in Section 3.2 (using Net Telecommunications
Plant and Materials and Supplies as of the end of the month immediately
preceding the month in which the Effective Date is scheduled to occur for
purposes of the Adjustment Regarding June 1994 Base Amount) and accompanied by
a reasonably detailed statement, certified by the chief financial or accounting
officer of Seller, describing how each such adjustment was determined; and
(b) An estimate of the prorations made by Seller in good faith in
the manner provided in Section 11.8 (the "Estimated Prorations").
3.4 Adjustments After Closing.
-------------------------
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using Net
Telecommunications Plant and Materials and Supplies as of the Effective Date)
and in accordance with the same accounting principles, methods and practices
used to prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined, and final
adjustments of the prorations referred to in Section 11.8. (For the purpose of
preparing Buyer's calculations and adjustments, Seller shall give Buyer access
to all books, records, and other information available to Seller that Buyer may
reasonably determine appropriate.) Within thirty (30) days following the
delivery of such calculations and adjustments, Seller shall notify Buyer of any
objection thereto, stating in reasonable detail the reasons therefor;
otherwise, such calculations and adjustments of the Purchase Price and the
prorations shall be final and binding on Seller and Buyer. (For the purpose of
reviewing Buyer's calculations and adjustments, Buyer shall give Seller access
to all books, records, and other information available to Buyer that Seller may
reasonably determine appropriate.) If Seller shall object, Seller and Buyer
shall work in good faith to agree on the correct amounts for the final Purchase
Price and the final Prorations, but if they fail to agree, either party may
exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price and the prorations shall become final, whether by expiration of
time or agreement of Seller and Buyer, (respectively, the "Final Purchase
Price" and the "Final Prorations"):
(i) if the Final Purchase Price (plus or minus, as applicable,
the Final Prorations) shall exceed the Estimated Purchase Price (plus or minus,
as applicable, the Estimated Prorations), Buyer shall cause to be transferred
to such account in the United States as Seller may specify, immediately
available funds, in U.S. Dollars, in an amount equal to such excess, together
with interest thereon at a rate of seven percent (7%) per annum from the
Effective Date through the date of such transfer, or
(ii) if the Estimated Purchase Price (plus or minus, as
applicable, the Estimated Prorations) shall exceed the Final Purchase Price
(plus or minus, as applicable, the Final Prorations), Seller shall cause to be
transferred to such account in the United States as Buyer may specify,
immediately available funds, in U.S. Dollars, in an amount equal to such
excess, together with interest thereon at a rate of seven percent (7%) per
annum from the Effective Date through the date of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. BILLING AND COLLECTION PROCEDURES
4.1 Determination of Earned Accounts Receivable. The parties
-------------------------------------------
acknowledge that Seller's accounts receivable as of the Effective Date will
include both Earned Accounts Receivable and Advanced Billing Amounts
(collectively, the "Total Accounts Receivable"). Within thirty (30) days after
the Effective Date, Buyer and Seller shall agree on a statement setting forth,
with respect to the Total Accounts Receivable as of the Effective Date, the
portions that are Earned Accounts Receivable and the portions that are Advanced
Billing Amounts; the methodology used to prepare such statement shall be
consistent with that used to prepare, and described on, the sample statement
set forth on Schedule 4.1 describing the portions of Seller's June 30, 1994
Earned Accounts Receivable and June 30, 1994 Advance Billing Amounts, which the
parties agree is a proper methodology for allocation of the Total Accounts
Receivable. In preparing such statement each party shall cooperate with the
other and provide the other with reasonable access to its applicable books and
records. If the parties fail to agree within the thirty (30) day period, Buyer
and Seller will continue to negotiate in good faith to resolve such
differences, but if they fail to so resolve such difference, either party may
exercise its rights pursuant to Article 16.
4.2 Purchase of Accounts Receivable.
-------------------------------
As of the Effective Date, Buyer shall purchase from Seller the Earned
Accounts Receivable outstanding as of the Effective Date, with payment for such
Earned Accounts Receivable being payable in the monthly installments set forth
below. Buyer shall be entitled to receive all cash collections with respect to
such Earned Accounts Receivable and, as payment for such Earned Accounts
Receivable, shall pay Seller on the final business day of the first three
calendar months following the Effective Date an amount equal to a percentage
(as set forth below) of such Earned Accounts Receivable net of the
Uncollectible Amount. The "Uncollectible Amount" shall be computed by
multiplying such Earned Accounts Receivable by Seller's uncollectible factor
based upon Seller's actual uncollectible net write-offs as a percentage of
current billings for the calendar year immediately preceding the year in which
the Closing occurs, which amount shall be agreed to by the parties at least
thirty (30) days prior to the Effective Date. Payment for the Earned Accounts
Receivable, net of the Uncollectible Amount purchased by Buyer as of the
Effective Date, shall be made in three installments, as follows:
Final business day of first month after Closing: 80%
Final business day of second month after Closing: 15%
Final business day of third month after Closing: 5%
Buyer shall have the right to review Seller's calculations of the Earned
Accounts Receivable and the Uncollectible Amount and Seller shall cooperate
with Buyer and provide Buyer and its representatives with reasonable access to
Seller's books and records in the course of such review. If such review
results in amounts different from Seller's calculations, Buyer and Seller will
negotiate in good faith to resolve such differences.
The parties agree that notwithstanding any disagreement between them with
respect to the calculation of the Earned Accounts Receivable or Advance Billing
Amounts, Buyer shall pay Seller, in accordance with the above schedule, all
agreed to Earned Accounts Receivable amounts net of the Uncollectible Amount.
When the disagreement concerning any such unagreed to item has been resolved,
the appropriate party shall promptly pay the other the amount of such resolved
item plus interest from the regularly scheduled payment date at a rate of 7%
per annum.
4.3 Carrier Access Billing. Seller shall render its own final carrier
----------------------
access bills to its interexchange carriers for minutes, messages and other
applicable charges up to and including the Effective Date which bills shall
contain no charges for services to be rendered after the Effective Date.
Seller shall be responsible for collecting and settling any disputes associated
with its bills to the interexchange carriers.
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
--------------------------------
5.4, as promptly as practicable after the Execution Date with respect to
applications to be filed with the PUC, but no later than forty-five (45) days
after the Execution Date, the parties shall file the applications and notices
described on Schedule 5.1 in such form as agreed to by the parties with the PUC
and other appropriate Governmental Authorities, seeking an order permitting the
transfer of service in the Purchased Exchanges, and the transfer or assignment
of the Non-FCC Authorizations, to Buyer (the "Regulatory Approvals"). Buyer
will be responsible for establishing the tariff for its post-Effective Date
operations in the state in which the Purchased Property is located, by
requesting adoption of tariffs which are the same or substantially the same as
Seller's pre-Effective Date tariffs. To the extent assignable, Seller will
assign the Non-FCC Authorizations to Buyer. Each party agrees to use its best
efforts to obtain the Regulatory Approvals and the parties agree to cooperate
fully with each other and with all Governmental Authorities to obtain the
Regulatory Approvals as described on Schedule 5.1 at the earliest practicable
date. The parties agree that the Regulatory Approvals containing asterisks on
Schedule 5.1 constitute material Regulatory Approvals (the "Material Regulatory
Approvals") which are subject to Sections 7.1.3 and 7.2.4, and the Regulatory
Approvals that do not contain an asterisk on Schedule 5.1 constitute Immaterial
Regulatory Approvals (the "Immaterial Regulatory Approvals") which are subject
to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Assumption, Releases or
---------------------------------------------------------
Terminations. (a) With respect to Seller's long-term indebtedness identified
- ------------- on Schedule 5.2(a), as promptly as practicable following the
Execution Date, but in any event no more than forty-five (45) days thereafter,
the parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consent") to
Buyer's assumption of, and Sellers' release from, such indebtedness on terms
acceptable to the parties. Each party shall bear their own costs and expenses
in obtaining such Debtholder Consent. Neither party, however, shall be
required to make any payment to the debtholder to obtain the Debtholder
Consent, except that Seller shall be responsible for any such payments as are
specified in the relevant debt agreement. The parties acknowledge that all
indebtedness with respect to which Debtholder Consents are obtained and which
is assumed by Buyer shall constitute an Assumed Liability pursuant to Section
2.5.1(i), and all indebtedness which is not so assumed by Buyer shall
constitute a Retained Liability.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consent with respect to any
indebtedness, Seller shall have the right to repay such indebtedness owed to
such non-consenting debtholder.
(c) Except with respect to indebtedness assumed by Buyer pursuant to
Section 5.2(a), Seller shall take, at Seller's sole cost and expense, all
actions necessary with respect to all persons or entities (collectively, the
"Secured Parties") holding a security interest or lien against the Purchased
Property to obtain the termination or release, as of the Effective Date, and
the prompt removal after the Effective Date, of all security agreements,
mortgages and financing statements relating to the Purchased Property (such
terminations and releases being hereinafter collectively referred to as the
"Secured Indebtedness Releases or Terminations"). Buyer agrees to cooperate in
good faith with Seller in obtaining the required Secured Indebtedness Releases
or Terminations.
5.3 Other Consents.
--------------
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to an assignment of such Lease or Contract. To the extent any of the
approvals, consents or waivers required to assign any Lease, Contract or
Immaterial Authorization have not been obtained with respect to any Lease,
Contract or Immaterial Authorization as of the Effective Date, Seller shall
continue to use its best efforts to obtain the consent of such other third
party that is required for the transfer or assignment of such Lease, Contract
or Immaterial Authorization after the Effective Date. Refusal by such other
third party to release Seller from a Lease or Contract shall not excuse Seller
from entering into an assignment of such Lease or Contract. From the Effective
Date until the earlier of (i) the time such approval, consent or waiver is
obtained, and (ii) six months after the Effective Date, Seller shall hold such
Leases, Contracts and Immaterial Authorizations or ancillary rights as agent
for Buyer, and preserve the benefit of and enforce the same as agent for Buyer
to the fullest extent permissible under the applicable Lease, Contract or
Immaterial Authorization. Buyer and Seller agree that upon request by either
party, at Closing, they will enter into an agency agreement in form and
substance mutually satisfactory to each party specifying the terms and
conditions upon which Seller will so act as Buyer's agent, which terms and
conditions shall include a six month term.
(b) If a third party refuses to consent to a Lease or Contract
assignment, and if the applicable Lease or Contract permits a sublease or
subcontract without the consent of the third party, the parties hereto, as of
the Effective Date, shall enter into a sublease or subcontract upon terms and
conditions as similar and comparable to an assignment of the Lease or Contract
as is reasonably feasible so as to enable Buyer to retain the ultimate benefits
of such Lease or Contract after the Effective Date.
(c) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to a Lease, Contract or Immaterial
Authorization assignment after the Seller has used its best efforts for a
period of six months after the Effective Date to obtain such consent, waiver or
approval, and if the applicable Lease or Contract does not permit a sublease or
subcontract without the consent of the third party, then Seller and Buyer shall
within thirty (30) days after expiration of such six-month period negotiate in
good faith and agree upon, and Seller shall pay to Buyer, an amount
representing fair compensation to Buyer for the harm caused by the failure to
obtain such consent, waiver or approval. Following such payment, Seller shall
have no further obligation to Buyer with respect to such Lease, Contract or
Immaterial Authorization except as otherwise provided in Section 11.12 with
respect to the Contracts and Excluded Contracts addressed in Section 11.12.
(d) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
------------ but no later than forty-five (45) days after the
Execution Date, the parties shall file all applications and requests described
on Schedule 5.4 in such form as agreed to by the parties with the FCC seeking,
and shall use their best efforts to obtain, the FCC's consent to assign all FCC
Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC
Consents"). Except as set forth on Schedule 5.4, the parties each agree that
in connection with taking the immediately above described actions, they will
not file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Purchased
Exchanges shall remain in the National Exchange Carrier Association Tariff
F.C.C. No. 5, provided, however, that such study areas shall remain in the NECA
Tariff FCC No. 5 after the Effective Date only for so long as Buyer, in its
sole discretion, shall determine. Each party agrees to use its best efforts,
and the parties agree to cooperate fully with each other and with the FCC, to
obtain the FCC Consents at the earliest practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
-------------- but in no event later than thirty (30) days after the
Execution Date, the parties will make such filings as may be required by the
HSR Act with respect to the sale contemplated by this Agreement. Thereafter,
the parties will file as promptly as practicable any supplemental information
that may be requested by the U.S. Federal Trade Commission or the U.S.
Department of Justice pursuant to the HSR Act. The parties agree to cooperate
in seeking early termination of the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
----------------------
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records relating to the Purchased Property (including,
without limitation, relevant tax information) and to the personal property and
Real Property comprising the Purchased Property. Buyer and Seller will
cooperate with each other to schedule such access. With the consent of Seller
(which consent will not be unreasonably withheld), Buyer and its
representatives shall have access to all interexchange carriers having business
relationships with the Business, to all customers of the Business, and to all
officers, employees and agents of Seller having knowledge or information
concerning the operations of the Business so as to afford Buyer the opportunity
to make such review, examination and investigation of the Business and the
Purchased Property as Buyer may desire to make, to evaluate the competitiveness
of the Business, and to enable Buyer to assimilate the Business into Buyer's
operations as soon as practicable after the Effective Date. To the extent it
so desires, Seller shall accompany Buyer on all of Buyer's access to
interexchange carriers, customers and agents of Seller. Buyer will be
permitted to make extracts from or copies of such books and records as may be
reasonably necessary. Buyer will not contact any employee, customer or
supplier of Seller as to this Agreement or the matters involved herein except
in accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall permit,
at Buyer's sole cost and expense:
(i) certain key employees and officers of Seller selected by
Buyer to attend workshops and training sessions of Buyer (including sessions to
train such employees in Buyer's business planning process in order to have the
Business after the Effective Date follow Buyer's business planning process and
procedures);
(ii) Seller's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with Seller about, and to participate in
Seller's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish such financial and operating data and other information
pertaining to the Business as Buyer may reasonably request in order, among
other things, to comply with Buyer's disclosure obligations under the federal
securities or other laws as such obligations relate to Buyer's prospective
ownership of the Business, including any disclosure required in connection with
the sale of any securities by Buyer; provided, however, that nothing herein
will obligate Seller to take actions that would unreasonably disrupt the normal
course of the business of Seller or violate the terms of any applicable Law or
any contract to which Seller is a party or to which any of its assets is
subject in providing such information, or to incur any costs with respect to
Buyer's external auditors (or Seller's external auditors in the event a report
by such auditors is requested by Buyer) providing accounting services with
respect to issuing an auditor's report required by Buyer. Any information or
document provided to Buyer or acquired by Buyer during this investigation shall
be deemed "Evaluation Material" as that term is defined in the Confidentiality
Agreement and shall be subject in all cases to the terms of the Confidentiality
Agreement; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business of
Seller that Buyer, upon consultation with counsel, determines is required to be
disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will afford the authorized
representatives of Buyer access to the Purchased Properties in order to conduct
the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall confer in good
faith with Buyer, as reasonably requested by Buyer from time to time, to report
on material operational matters, material reductions in work force and other
material employee matters, and the general status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
--------------------------
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
-----------------------------------
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Business or the transactions contemplated by this
Agreement; of which in any such case, Seller's representatives listed on
Schedule 6.3(b) become aware on or before the Effective Date. Seller shall use
reasonable best efforts to keep Buyer informed of the events described in this
Section 6.3(b) and shall permit Buyer access to all materials prepared by
Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
--------------------------------------------
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
----------------------------------------------------------
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing occurs, any
claim with respect to matters so specified shall be waived by Buyer unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
---------
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
--------------------
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material adverse
------------------------
changes to the Purchased Property as a whole or the financial position or
results of operations of the Business as a whole, and, subject to Section 11.9,
Seller shall not have suffered any material loss or damage to the Purchased
Property, whether or not insured, that would materially affect or impair
Buyer's ability to conduct the Business after the Effective Date. None of the
Additional Financial Statements of Seller delivered pursuant to Section 11.4
shall reflect a material change in the financial position or results of
operations of the Business from the financial position or results of operations
reflected in the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
---------------------
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
-------------------------------------
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.22. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
---------- pending or to the best of Buyer's knowledge threatened to
restrain or invalidate any of the transactions contemplated hereby which, in
the reasonable judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
--------------------- taken by Seller in connection with the
transactions contemplated by this Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
------------- comprehensive searches, dated as of a date within 30
days of the Execution Date or any time thereafter, of the public records
regarding liens and judgments with respect to the Business and the Purchased
Property.
7.1.11. Debtholder Consents. With respect to any long-term indebtedness to
------------------- be assumed by Buyer pursuant to Section 5.2(a),
Buyer shall have received the Debtholder Consents and shall have entered into
an assignment and assumption agreement with the Debtholder in form and
substance reasonably acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
--------------------------------------------- Seller to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any one or more of which may be waived at the option of Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties. There
----------------------------------------------------------- shall
have shall have been no material breach by Buyer of any of its covenants to be
performed in whole or in part prior to the Closing, and the representations and
warranties of Buyer in Section 9.2 shall be true and correct as of the
Effective Date, except for such representations or warranties made expressly as
of some other date, which shall be true and correct as of such other date (all
such representations and warranties to be qualified by any materiality
standards contained therein), and Buyer shall have delivered to Seller a
certificate ("Buyer's Closing Certificate"), dated as of the Effective Date and
signed by one of Buyer's Executive Officers, certifying each of the foregoing
or specifying those respects in which such covenants have not been performed or
such representations and warranties are not true and correct in which event if
the Closing occurs any claim with respect to matters so specified shall be
waived by Seller unless otherwise expressly agreed by Buyer at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
--------- required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the manner
-------------- specified in Section 3.1, the Estimated Purchase
Price as adjusted pursuant to Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
-------------------- Act shall have expired or been terminated and
each of the required Material Regulatory Approvals as set forth on Schedule 5.1
and FCC Consents as set forth on Schedule 5.4 shall have been obtained free of
any special terms, conditions, or restrictions which Seller determines, in good
faith in its reasonable discretion, will materially and adversely affect the
anticipated operational and financial benefits to Seller of the transactions
contemplated by this Agreement. For purposes of this Section 7.2.4, all such
approvals and consents shall be deemed to have been obtained upon the grant
thereof becoming a Final Order. In addition, there shall not have been entered
a preliminary or permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any jurisdiction, the effect of
which prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
--------------------- taken by Buyer in connection with the
transactions contemplated by this Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
---------- pending or to the best of Seller's knowledge threatened
to restrain or invalidate any of the transactions contemplated hereby which, in
the reasonable judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Releases. With respect to any long-term indebtedness to
------------------- be assumed by Buyer pursuant to Section 5.2(a),
Seller shall have received Debtholder Consents and release of debt (and, if
applicable, lien) documentation reasonably acceptable to Seller.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
----------- the closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at a place mutually agreed upon by the
parties at 9:00 a.m., local time, on the last calendar day (the "Closing Date")
of the calendar month in which occurs the tenth (10th) business day after the
date Seller notifies Buyer in writing (the "Notice") of its determination that
all required Material Regulatory Approvals and FCC Consents have been obtained
and provided that the other conditions set forth in Article 7 shall have been
satisfied, or at such other place and time as may be agreed upon by Seller and
Buyer. The transactions to be consummated at Closing shall be deemed to have
been consummated as of 11:59 p.m. on the last calendar day of the calendar
month in which occurs the tenth (10th) business day after the date of the
Notice (the "Effective Date"). If the Effective Date is not a day on which
financial institutions are open and operating, then the Closing Date shall be
the immediately following business day on which financial institutions are open
and operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
------------------------------- to Buyer the following documents duly
executed and acknowledged, as appropriate:
(a) Bills of sale, special warranty deeds, assignments and other
good and sufficient instruments of transfer (including, without limitation,
vehicle titles) to transfer title in the Purchased Property to Buyer, in form
and substance mutually satisfactory to Buyer and Seller.
(b) Seller's Closing Certificate.
(c) Instruments of assignment or, to the extent required by Section
5.3, subleases or subcontracts for the Leases and the Contracts, in each case
in form and substance mutually satisfactory to Buyer and Seller.
(d) Secured Indebtedness Releases and Terminations.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Director approval
and incumbency.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver
------------------------------ to Seller the following items and
documents duly executed and acknowledged as appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Instruments of assignment and assumption or, to the extent
required by Section 5.3, subleases or subcontracts for the Leases and the
Contracts, in each case in form and substance mutually satisfactory to
Seller and Buyer.
(h) Special warranty deeds (to the extent required to be executed by
Buyer) and other instruments of assignment and assumption (including, without
limitation, vehicle title and Assumed Liabilities) to transfer title to the
Purchased Property and assumed obligations thereunder to Buyer, in form and
substance mutually satisfactory to Buyer and Seller.
(i) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Director approval
and incumbency.
<PAGE>
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
----------------------------------------- environmental matters which
are exclusively addressed in Article 14 of this Agreement, Seller represents
and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
------------------------------------- corporate power and authority
under its Certificate of Incorporation and Bylaws to execute and deliver this
Agreement and to fulfill its respective obligations under this Agreement. The
execution and delivery by Seller of this Agreement and the fulfillment of its
obligations under this Agreement have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and, assuming the due execution and delivery of this
Agreement by Buyer, constitutes a valid and binding obligation of Seller,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the enforcement of
creditors' rights generally and subject to the qualification that general
equitable principles may limit the enforcement of certain remedies, including
the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Purchased Property. The
------------------------------------------------------ execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of its certificate of incorporation or bylaws or, (ii) except as set
forth in Schedule 9.1.13, or subject to obtaining the approvals and consents
reflected in Article 5, conflict with, violate or result in the breach of,
constitute a default under, accelerate the performance required by, or result
in the creation of any encumbrance upon any of the Purchased Property under any
provision of any Contract other than any such conflict, violation or breach
that alone or in the aggregate would not have an adverse effect on the Buyer,
the Business or the Purchased Property after the Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
-------------------------------------------------- approval, order
or authorization of, or registration, declaration or filing with, any court or
governmental agency, authority or instrumentality (" Governmental Authority")
is required to be obtained or made by or with respect to Seller or in
connection with the execution and delivery of this Agreement by Seller or the
fulfillment by Seller of its obligations under this Agreement, except (i) the
filings and approvals described in Article 5 (ii) real estate deeds and other
documents filed in connection with the transfer of the Real Property included
in the Purchased Property, (iii) certificates of title for the motor vehicles
included in the Purchased Property, and (iv) such other consents, approvals,
orders or authorizations, or registrations, declarations or filings, which if
not obtained or made would not result in a material adverse effect on Buyer,
the Business or the Purchased Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
------------------- execution and delivery of this Agreement and the
fulfillment by Seller of its obligations under this Agreement will not violate
any applicable existing statute, ordinance, rule, regulation or common law
obligation (collectively, "Law"), except where such violation would not have a
material adverse effect on the Business as a whole or on any significant part
of Purchased Property after the Effective Date.
9.1.5 Corporate Organization. Seller is a corporation duly organized,
---------------------- validly existing and in good standing under
the laws of Tennessee; it has full corporate power and authority to own its
properties and to carry on the Business as it is now being conducted and to
own, or hold under lease the Purchased Property.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee or
------- commission to any broker, finder, investment banker or other
intermediary in connection with the <PAGE>
transactions contemplated by this Agreement
in such a manner as to give rise to a claim against Buyer for any broker's or
finder's fees or similar fees or expenses.
9.1.7 Assumed Liabilities. Seller is not in default with respect to any
------------------- of its obligations or liabilities that will
become Buyer's Assumed Liabilities at the Effective Date or the performance,
observance or fulfillment of any covenant or condition relating thereto, and no
event has occurred and is continuing that constitutes a material breach or
default thereunder or that would constitute such a material breach or default
with the giving of notice or lapse of time, or both.
9.1.8 Title to Purchased Property. Seller has good, valid, undivided,
--------------------------- marketable and defensible title to all
owned Purchased Property, free and clear of all restrictions, charges, liens,
or encumbrances of any kind, except for (i) the Assumed Liabilities (ii) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(iii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iv) such other imperfections of
title and encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Purchased Property to which
such imperfection or encumbrance relates. No condemnation proceeding is
pending or, to the knowledge of Seller, threatened with respect to any part of
the Purchased Property and such Purchased Property is not in any violation of
any restrictive covenant relating thereto. Schedule 9.1.8-2 sets forth the
address and a general description of each item of Real Property owned by Seller
included in the Purchased Property. In addition, Schedule 9.1.8-2 sets forth a
list of the Real Property included in the Purchased Property in which Seller
holds other than a fee interest (such as easements and rights of way). Except
to the extent indicated in Schedules 9.1.8-1 and 9.1.8-2, Seller has the
unqualified right to transfer and convey to Buyer Seller's interest in such
Real Property.
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
------ Leases. Each of the Leases is valid, binding and enforceable
in accordance with its terms, and except as otherwise disclosed in Schedule
9.1.9, there is not any existing material default or existing material breach
of a covenant by Seller under any Lease. Seller enjoys peaceful and
undisturbed possession under all material Leases and, to Seller's knowledge,
the lessor under any such Lease is not (with or without notice or the lapse of
time, or both) in material breach or default thereunder, has performed all
material obligations required to be performed by it thereunder, and has not
given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Purchased
---------------------------- Property is in substantially good
operating condition and repair, normal wear and tear excepted, well maintained,
adequate for the present uses thereof and in compliance in all material
respects with applicable federal, state and local ordinances, regulations and
statutes relating to the ownership and operation of such property. Except as
set forth on Schedule 9. 1. 10, Seller has not received any written notice
within the past twelve (12) months of a violation of any ordinances,
regulations or building, zoning and other similar laws with respect to such
assets that would have a material adverse effect on the Business as a whole or
any significant part of the Purchased Property. Each parcel of Real Property
and, to the knowledge of Seller, of real estate leased by Seller and material
or necessary to the Business as presently conducted substantially complies with
all applicable Laws except where the failure to so comply individually or in
the aggregate, would not have a material adverse effect on the Business as a
whole or any such parcel after the Effective Date. Except as set forth on
Schedule 9.1.10, other than Seller, no person or party has actual possession or
has a right to possession of all or any material portion of any parcel of such
Real Property or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE
PERSONAL PURCHASED PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED OR
STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
--------------------
(a) Seller has delivered to Buyer a true and correct copy of its
audited financial statements, consisting of a balance sheet, income statement
and related statement of cash flows as of and for the respective periods ended
December 31, 1992, and December 31, 1993, together with the auditor's report
thereon (the "Financial Statements"). The Financial Statements were prepared
based upon the books and records of Seller, and fairly present in all material
respects the financial condition of Seller as of the appropriate periods and
the results of operations for the year then ended, in each case in conformity
with GAAP and to the best of Seller's knowledge and to the extent required by
applicable law, have been prepared in all material respects in conformity with
the regulations of the FCC and the PUC. The Financial Statements contain no
untrue statements of any material fact nor omit to state any material facts
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of Seller; and (ii) will fairly present the financial
condition of Seller and the results of operations of Seller for the periods
indicated, subject, in the case of interim Additional Financial Statements, to
normal year-end adjustments which will not be material in amount or effect; and
(iii) to the best of Seller's knowledge and to the extent required by
applicable Law, will be prepared in all material respects in conformity with
the regulations of the FCC and the PUC; and (iv) will not contain any untrue
statements of any material facts or omit to state any material facts required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) The unaudited balance sheet of Seller as of June 30, 1994 was
prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of Seller and fairly
presents the financial condition of Seller as of such date subject to normal
year-end adjustments which will not be material in amount or effect, and to the
best of Seller's knowledge and to the extent required by applicable Law, was
prepared in all material respects in conformity with the regulations of the FCC
and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
--------------------------- Schedule 9.1.12, since December 31,
1993, there has not been:
(a) Any material change in the financial condition, results of
operations, assets, liabilities, operations or future business prospects of the
Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Purchased Property or the
Business;
(c) Any disposition (including, without limitation, the grant of a
license, franchise, option or other right of any nature whatsoever to sell or
distribute) or encumbrance or agreement to dispose of or to encumber, or
pledge or grant of a security interest in or agreement to pledge or grant a
security interest in, any of the Purchased Property, or any increase or an
agreement to increase any indebtedness of Seller related to the Business or the
Purchased Property, except in the ordinary course of business;
(d) Any material change in Seller's tariffs or in the manner of
conducting the Business;
(e) Any dispute, litigation or other event or condition that
materially and adversely affects the business or prospects of the Business or
the Purchased Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Business or the Purchased Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Any transaction entered into by Seller that would have a
material adverse effect on the Business as a whole or the Purchased Property as
a whole;
(i) Any change in the accounting methods or practices of Seller with
respect to the Purchased Property or the Business except as required by GAAP or
any change in depreciation or amortization policies or rates heretofore adopted
by Seller with respect to the Purchased Property or the Business except as
required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees of the Business or, to Seller's knowledge,
any attempt to organize the Transferred Employees of the Business for the
purpose of collective bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993; or
(l) Any agreement or commitment by Seller (or any understanding
between Seller and any third party) to do or to take any of the actions
referred to in paragraphs (a) through (k) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
--------- the date of this Agreement in accordance with its terms,
and there is no outstanding notice of cancellation or termination in connection
therewith. Seller is not in material breach or default in connection with any
Contracts, and there is no basis for any claim of breach or default by Seller,
or to Seller's knowledge, any other party, in any material respect under any of
the Contracts. None of the Contracts, either separately or in the aggregate,
materially and adversely affects the Business or the Purchased Property. After
the Effective Date, all rights and obligations of Seller under the Contracts
shall continue unimpaired in Buyer (assuming that if any Contract requires the
consent of the other party thereto, such consent will have been obtained by the
parties hereto prior to the Effective Date). Except for the instruments
specifically listed in Schedule 9.1.13, Seller is not a party to or subject to:
(i) any agreement for the purchase or disposition of any material, equipment,
supplies, inventory or service, except individual purchase orders and contracts
in amounts less than Twenty-Five Thousand Dollars ($25,000.00); (ii) any
agreement to which Seller is a party or by which any of the Purchased Property
is bound relating to indebtedness for money borrowed including capital leases,
security arrangements relating thereto and any amendment or waiver thereof; and
(iii) any other agreement not of the type covered by any of the foregoing items
of this Section 9.1.13 requiring payments by Seller in excess of Seventy-Five
Thousand Dollars ($75,000.00) per agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract relating to the Business or
the Purchased Property between Seller and any Affiliate of Seller, and (b) each
material Contract relating to the Business or the Purchased Property between
Seller or an Affiliate of Seller and any third party. Seller has made
available to Buyer true and correct copies of all agreements and instruments
listed in Schedule 9.1.13. Schedule 9.1.13 specifically identifies, with
respect to those Contracts which are required to be listed thereon, the
Contracts which require the consent, approval or waiver of the other party
thereto for the assignment thereof.
9.1.14 Insurance. The Purchased Property of an insurable nature and of a
--------- character usually insured by companies carrying on
similar businesses is insured under insurance policies in such amounts and
against such losses or casualties as is (i) usual in such companies and (ii)
required under any of the Contracts or Leases. The insurance policies referred
to in this Section 9.1.14 are (i) listed on Schedule 9.1.14, and (ii) in full
force and effect and the premiums due thereon have been duly and timely paid.
The most current statement of values (the statement of values of property of an
insurable nature that is submitted to an insurance company to be used as a
basis for the calculation of premiums) relative to the Purchased Property as
presently insured has been made available to Buyer by Seller. On the Effective
Date, the coverage under the insurance policies and programs applicable to the
Purchased Property will be terminated, and Buyer will be responsible for
providing all insurance coverage for the Purchased Property. Following the
Effective Date, Seller shall be responsible for and shall pay any additional
premiums that might be required by an insurance company for insurance coverage
prior to the Effective Date relating to the Purchased Property and shall be
entitled to any refunds or dividends due from such companies relating to such
coverage. All claims that relate to the operation of the Purchased Property
prior to the Effective Date shall remain the sole responsibility of Seller.
Schedule 9.1.14 sets forth a list of the open material claims affecting the
Purchased Property, complete in all material respects, and a description of any
self-insurance levels, underlying limits and deductibles.
9.1.15 Taxes.
-----
(a) Except as disclosed on Schedule 9.1.15, (i) all Tax Returns
required to be filed by Seller on or before the Effective Date with respect to
the Business or the Purchased Property have or will have been filed, and all
taxes shown as due and payable on such Tax Returns have been or will be paid by
Seller when required by law; (ii) all penalties, interest or other charges that
have or will become due with respect to the late filing of any such Tax Return
or late payment of any such Tax have been or will be timely paid in full, (iii)
no deficiencies for any taxes, assessments or other governmental charges have
been asserted in writing or assessed against Seller with respect to the
Business that remain unpaid and that individually or in the aggregate are
material to the Business; (iv) Seller has withheld all required federal, state
and local payroll taxes and other similar taxes with respect to creditors and
third party vendors, and has remitted all amounts required to be remitted to
the appropriate taxing authorities; (v) there are no tax liens upon any of the
Purchased Property except for statutory liens covering taxes not yet due and
payable; (vi) none of the Purchased Property is tax-exempt use property within
the meaning of Section 168(h) of the IRC and none of the Purchased Property is
property that is or will be required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of
the Tax Reform Act of 1986; and (vii) Seller is not a "foreign person" within
the meaning of Section 1445(b)(2) of the IRC and shall provide an appropriate
affidavit for purposes of Section 1445(b)(2) of the IRC.
(b) Seller has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material, current audits or material audits for which notification has been
received (in either case, with respect to the Business) other than those set
forth on Schedule 9.1.15.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
------------------ respect to Taxes, there are no claims, actions,
lawsuits or legal or administrative proceedings pending, or, to the knowledge
of Seller, threatened against or affecting Seller or its properties that, if
determined adversely to Seller, would reasonably be expected to have a material
adverse effect on the Business as a whole or any significant part of the
Purchased Property. Seller does not know of any reasonable basis for any such
action, claim, lawsuit or proceeding or any governmental or regulatory
investigation relative to the Business or the Purchased Property. Seller is
not in default under any judgment, order or decree of any Governmental
Authority applicable to the Business or any significant part of the Purchased
Property which would reasonably be expected to have a material adverse effect
on the Business as a whole or any significant part of the Purchased Property
after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
----------------------------------------------
(a) Except as described on Schedule 9.1.17(a), with respect to
federal tariffs, Seller is an issuing carrier in the National Exchange Carrier
Association Tariff F.C.C. No. 5 for the purpose of providing interstate access
service. Except as described on Schedule 9.1.17(a), the state regulatory
tariffs applicable to the Business stand in full force and effect on the date
of this Agreement in accordance with all terms of such state tariffs, and there
is no outstanding notice of suspension, cancellation or termination or, to
Seller's knowledge, any threatened suspension, cancellation or termination in
connection therewith, nor is the Seller subject to any restrictions or
conditions applicable to its state regulatory tariffs that limit or would limit
the operation of the Business (other than restrictions or conditions generally
applicable to tariffs of that type). Except as described on Schedule
9.1.17(a), each such state tariff has been duly and validly approved by the
appropriate state regulatory agency. Except as otherwise disclosed on Schedule
9.1.17(a), Seller is not in material violation under the terms and conditions
of any such state tariff, and there is no basis for any claim of material
violation by Seller in any material respect under any such state tariff.
Except as described in Schedule 9.1.17(a), there are no applications by Seller
or complaints or petitions by others or proceedings pending or threatened
before the state regulatory authority relating to the Business or its
operations or the state regulatory tariffs. To the knowledge of Seller, there
are no material violations by subscribers or others under any such state tariff
that would be material to the Business. A true and correct copy of each state
tariff applicable to the Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses held by Seller
and used in the operation of the Business. Each such FCC License is in full
force and effect in accordance with its terms, and there is no outstanding
notice of suspension, cancellation or termination or, to Seller's knowledge,
any threatened suspension, cancellation or termination in connection therewith
nor are any of such FCC Licenses subject to any restrictions or conditions that
limit the operation of the Business (other than restrictions or conditions
generally applicable to licenses of that type). Subject to the Communications
Act of 1934, as amended, and the regulations thereunder, the FCC Licenses are
free from all security interests, liens, claims, or encumbrances of any nature
whatsoever. Except as set forth on Schedule 9.1.17(b), there are no
applications by Seller or material complaints or material petitions by others
or proceedings pending or threatened before the FCC relating to the Business or
the FCC Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's knowledge, no event has occurred with respect to any materially
necessary Non-FCC Authorization which permits, or after notice or lapse of time
or both would permit, revocation or termination thereof, or would result in any
other material impairment of the rights of the holder of such materially
necessary Non-FCC Authorization.
9.1.18 Employee Matters.
----------------
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term is
defined in Section 3(1) of ERISA maintained or contributed to by Seller or any
of its Affiliates in respect of any Transferred Employee (as defined below)
(such plans being hereinafter referred to collectively as the "ERISA Plans"),
and each other material retirement, pension, profit-sharing, money purchase,
deferred compensation, incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement maintained or
contributed to by Seller or its Affiliates in respect of or for the benefit of
any Transferred Employee or former employee, excluding any such plan, program,
agreement, or arrangement maintained or contributed to solely in respect of or
for the benefit of Transferred Employees or former employees employed or
formerly employed by Seller outside of the United States, as of the date hereof
(collectively, together with the ERISA Plans, referred to hereinafter as the
"Plans"). Schedule 9.1.18(a) also includes a list of each material written
employment, severance, termination or similar-type agreement between Seller or
its Affiliates and any Transferred Employee (the "Employment Agreements").
Except to the extent that any assets, liabilities, or accounts are transferred
from the Plans or Agreements (pursuant to an Employee Transfer Agreement or
otherwise) to plan(s) or agreement(s) maintained or contributed to by Buyer,
all such Plans and Agreements shall remain the liabilities of the Seller or its
Affiliates and Seller shall take any and all steps necessary to ensure that
Buyer shall not be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the performance of this
Agreement by Seller will not directly result now or at any time in the future
in (i) the payment by Seller or its Affiliates to any Transferred Employee of
any severance, termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of the IRC) being
made by Seller or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither Seller nor any of its Affiliates, any of the ERISA
Plans, any trust created thereunder, or any trustee or administrator thereof,
has engaged in any transaction as a result of which Seller could be subject to
any material liability pursuant to Section 409 of ERISA or to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed pursuant
to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by Seller or any of its Affiliates (other
than liability for premiums due to the PBGC), unless such liability is reserved
for or otherwise reflected on the Financial Statements or unless such liability
has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee or former employee of the Seller that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the IRC.
(iv) Neither the Seller nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Seller, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
IRC), whether or not waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer plan," as that term is defined in Section 3(37) of ERISA
and with respect to any such multiemployer plans (as so defined) listed in
Schedule 9.1.18(d), Seller has not made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA that would result in the incurrence of a material liability
by Seller that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees or former employees of Seller.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's
knowledge, due to any written or oral communications by any representative of
the Seller nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither Seller nor any of its Affiliates is a party to nor is Seller
subject to, any collective bargaining agreement covering any Transferred
Employee. There are currently no strikes, slowdowns, work stoppages or
lockouts by or with respect to any Transferred Employee covered by collective
bargaining agreements. Except as set forth on Schedule 9.1.18(g), to the best
knowledge of Seller, during the twelve (12) months preceding the Execution Date
there have not been any union organizational campaigns by or directed at the
employees of Seller.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Purchased
Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of Seller, together with
the elections made prior to the Effective Date with respect to such accounts
through the Effective Date.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on Schedule
-------------------------------- 9.1.19 copies of schedules (at the
level of detail agreed to by the parties but in any case including details
regarding net book value and continuing property records lists associated
therewith) of its Telephone Plant as of June 30, 1994, including, to the extent
available, a schedule specifically identifying the Telephone Plant that is
associated with the Unregulated Business. The account balances reflected on
the schedule of Telephone Plant correspond, in all material respects, to the
associated account balances reflected on the Continuing Property Records.
9.1.20. Accuracy of Certain Information. Seller hereby represents and
-------------------------------- warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially complete list of
all vehicles included in the Purchased Property (including trailers, equipment
mounted on trailers and self-propelled equipment) together with the
manufacturer, model and year of each such vehicle, and indicates whether such
vehicle is owned or leased by Seller.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing and
collection revenues of Seller from the Business for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, Seller has no
--------- materials and supplies, plant or equipment used in the
Business that has been disallowed from rate base or excluded from the revenue
calculations for any pool (unless due to the deregulation of the service for
which such assets are used) or in the most recent rate order issued by the PUC
or the FCC or any determination by an administrator of an interstate or
intrastate pool, and has not received written notification that the PUC or the
FCC or any pool administrator proposes to exclude any assets from rate base or
revenue calculations for the pools, or any tariff filed with or approved in the
most recent rate order of the PUC or the FCC, in each case which materials and
supplies, plant or equipment, in the aggregate, would be in excess of one
percent (1%) of Net Telecommunications Plant.
9.1.22 Payments. All material payments of any kind required to be made by
-------- Seller to third parties under any Contract and maturing
prior to the Effective Date have been, or will be as of the Effective Date,
properly and timely paid or provided for, unless otherwise subject to a bona
fide dispute disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically indicate
-------------------- on Schedule 9.1.23, (i) Seller is in
compliance in all material respects with all Laws applicable to the Purchased
Property and the Business and holds all governmental permits or licenses
required in order to conduct the Business and to own and operate the Purchased
Property; (ii) the present uses of the Purchased Property in the conduct of the
Business do not violate in any material respect any Law and (iii) no written
notice or warning from any governmental or regulatory authority with respect to
any failure or alleged failure by Seller to comply with any Law or questioning
the validity of any governmental permit or license, with respect to the
Business or the Purchased Property has been issued or given, nor to the
knowledge of Seller, is any such notice or warning proposed or threatened.
Seller is not aware of any fact, event or circumstance relating to Seller that
is reasonably likely to cause a regulatory agency to deny or withhold its
approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account books and
--------------- other accounting records of Seller relating to the
Business are current, correct and complete and reasonably well organized, in
all material respects and to the best of Seller's knowledge and to the extent
required by applicable Law, conform in all material respects with the rules and
regulations of the FCC and PUC. Seller and its Affiliates have retained
substantially all Original Cost Documents regarding the expenditures made by
Seller within the immediately preceding two-year period that relate to Seller's
Net Telecommunications Plant, and such Original Cost Documents are correct and
complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value (as
---------------------- reflected on Seller's books) of Seller's
materials and supplies relating to the Business which are obsolete or in excess
of the requirements of the Business, will not materially exceed Seller's
reserve for obsolete or excess Materials and Supplies as reflected on Seller's
books.
9.1.26 Assets Necessary to the Business. The Purchased Property includes
-------------------------------- all of the assets and properties
(including all licenses and agreements) currently being used or which are
reasonably necessary to carry on the Business as currently conducted, other
than the assets and properties included in the Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
-------------------- description of the Unregulated Business, in
detail reasonably acceptable to Buyer.
9.1.29. Capital Improvements Required by PUC. Except as set forth on
------------------------------------ Schedule 9.1.29, there are no
changes, modifications, upgrades or enhancements required by the PUC to be made
to the Purchased Property or the operation thereof.
9.2 Representations and Warranties of Buyer. Buyer represents and
--------------------------------------- warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
---------------------- validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority to own, lease or otherwise hold the assets owned, leased or held by
it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
------------------------------------- corporate power and authority
under its Certificate of Incorporation and Bylaws to execute and deliver this
Agreement, to carry on the Business as presently conducted and to fulfill all
other obligations of Buyer under this Agreement. The execution and delivery by
Buyer of this Agreement and the fulfillment by it of its obligations under this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to purchase, own and
hold the Purchased Properties upon the consummation of the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Buyer and, assuming the due execution and delivery of this
Agreement by Seller, constitutes a valid and binding obligation of Buyer,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the <PAGE>
enforcement of
creditors' rights generally and subject to the qualifications
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.2.3 No Restrictions Against Purchase of the Purchased Properties. The
------------------------------------------------------------
execution and delivery of this Agreement by Buyer do not, and the fulfillment
by Buyer of its obligations under this Agreement will not, conflict with,
violate or result in the breach of any provision of the certificate of
incorporation or bylaws of Buyer or, subject to obtaining the approvals and
consents referred to in Article 5, conflict with, violate or result in the
breach of, constitute default under, or accelerate the performance required by
any Contract to which Buyer is a party. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to Buyer in
connection with the execution and delivery of this Agreement by Buyer or the
fulfillment by Buyer of its obligations under this Agreement, except (i) the
filings and approvals described in Article 5, (ii) real estate deeds and other
documents filed in connection with the transfer of the Real Property included
in the Purchased Property, and (iii) certificates of title for the motor
vehicles included in the Purchased Property.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
------------------- and the fulfillment by Buyer of its obligations
under this Agreement will not violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee or
------- commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
in such a manner as to give rise to a claim against Seller for any broker's or
finder's fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
------------------ proceedings pending or, to the knowledge of
Buyer, threatened against Buyer or its properties that would prevent the
consummation of the transactions contemplated by this Agreement.
9.2.7 FCC Tariffs. Except as described on Schedule 5.4, in connection
----------- with obtaining assignment to Seller's FCC's Licenses, as
described in Section 5.4, Buyer will not file any application or request for a
waiver of Part 36 (study areas), Part 61 (tariffs), and Part 69 (price caps and
study areas) of the FCC Rules, and that on the Effective Date the study areas
relating to the Purchased Exchanges shall remain in the National Exchange
Carrier Association Tariff FCC No. 5, provided, however, that such study areas
shall remain in the NECA Tariff FCC No. 5 after the Effective Date only for so
long as Buyer, in its sole discretion, shall determine.
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
----------------------------- or prior to March 15, 1995, the parties
shall, as promptly as practicable but in any event within 30 days after Buyer's
written request, negotiate in good faith and enter into a Transition Services
Agreement, to be effective no later than the Effective Date, pursuant to which
Seller will provide to Buyer, at Buyer's expense, such financial, accounting,
billing, computer, network, administrative and other services (including
services relating to the conversion of systems and processes) as may be
reasonably requested by Buyer, which agreement shall be in form and substance
as mutually agreed to by both Buyer and Seller (the "Transition Services
Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
---------------------
11.1.1 Definition. "Intellectual Property" means all inventions (whether
---------- patentable or not and whether or not such inventions are
described or claimed in any patent or patent application), designs (useful or
ornamental), and works subject to copyright that may be embodied in, without
exclusion, invention disclosures, specifications, manuals, drawings, functional
or system block diagrams, flow charts, circuit diagrams, design or user
documentation, engineering notebooks, schematics, test programs, documented
procedures, documented processes, documented flows, devices, software, or
firmware, that relate to the function, design, development, manufacture,
testing, use, operation, maintenance or repair of any product, apparatus,
article of manufacture, process, method or service. "Intellectual Property"
shall also include patents, patent applications (including continuations,
continuations-in-part, divisions, reissues, reexamined patents and patent
applications and extensions thereof), copyrights (whether common law or
statutory, registered or unregistered), or trade secrets, residing in the
subject matter above.
11.1.2 Grant by Seller.
---------------
(a) Subject to the terms and conditions of this Agreement, effective
on the Effective Date, Seller shall grant to Buyer, and Buyer shall accept, a
nonexclusive, fully paid, royalty-free, perpetual license for the Intellectual
Property that, on the Effective Date, Seller owns or controls or with respect
to which Seller has an unrestricted right to grant such license without
permission from, or any consideration to, any third party, and if Seller has a
restricted right to grant such license, Seller will use its best efforts to
assist Buyer (provided that Buyer shall be responsible for any fees associated
therewith) in obtaining the consent for the use of any such license, provided
that the above grant and any assistance required by Seller shall be effective
with respect to only such Intellectual Property that Seller has placed in
public use on, or prior to, the Effective Date and that is presently used by
Seller, in the ordinary and normal course of the Business, and shall exclude
any Intellectual Property listed in Schedule 2.4(g). The above license shall
include the right of Buyer to grant sublicenses after the Effective Date to
vendors and customers of Buyer and to other third parties, as is necessary in
the ordinary and normal course of the Business with respect to the Purchased
Property.
(b) The grant set forth in Section 11.1.2(a) is made subject to
preexisting agreements; however, Seller represents that it is aware of no other
agreement that precludes the grant made herein.
(c) The above Sections 11.1.2(a) and (b) set forth Seller's entire
obligation with respect to the license of Intellectual Property to Buyer.
Except as specifically provided otherwise in this Agreement or any other
agreement between Buyer and Seller, Seller shall have no continuing obligation
beyond the Effective Date to provide support of any kind in Buyer's use of such
Intellectual Property.
(d) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(e) Additional agreements, if any, between Buyer and Seller
regarding possession and use by Buyer of computer software that is owned by
Seller, or that is licensed by an Affiliate of Seller to Seller, are set forth
in Schedule 11.1.2.
11.1.3 Nonassertion. In addition to granting to Buyer the license set
------------ forth in Section 11.1.2, Seller agrees that, with
respect to the Intellectual Property that as of the Effective Date Seller owns
or controls or under which it has the right to grant licenses, Seller shall not
assert against Buyer, or Affiliates of Buyer, or vendees, mediate or immediate,
of Buyer, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from Buyer's activities practiced in the
ordinary and normal course of the Business.
<PAGE>
11.1.4 Infringement.
------------
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by
Buyer of any Intellectual Property under this Agreement will not infringe other
intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnity or hold
harmless Buyer from any damages, costs or expenses resulting from any
obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, a customer of Buyer's or
anyone claiming under Buyer constitutes direct or contributory infringement or
misuse of any intellectual property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, a customer
of Buyer's, or anyone claiming under Buyer constitutes direct or contributory
infringement, or misuse, or misappropriation of any intellectual property right
of any third party.
11.1.5 Trademark Phaseout. Buyer acknowledges that Seller or its
------------------ Affiliates are the owners of certain trade
names, trade dress, trademarks, service marks, logos and related intangible
property (collectively, "Marks") used in connection with the Business,
including, without limitation, the items listed on Schedule 11.1.5, and Buyer
understands and agrees that the Marks, or any right or license to the Marks are
not being transferred pursuant to this Agreement. Buyer acknowledges Seller's
exclusive and proprietary rights in the use of the Marks, and Buyer agrees that
it shall not use the Marks (or any names or Marks confusingly similar to the
Marks) except as expressly set forth in this Section 11.1.5. After the
Effective Date, all Marks of Seller shall be replaced by Buyer as soon as
possible, but in no event later than one hundred eighty (180) days after the
Effective Date for Marks affixed to items with a valid continuing use in
Buyer's conduct of the Business, including, without limitation, buildings,
vehicles, heavy equipment, hard hats, tools, tool boxes, kits (safety and
others), signs, manual covers and notebooks. After the Effective Date, Buyer
will not use, and will destroy or deliver to Seller, all such items with Marks
affixed to them that have no valid continuing use in Buyer's conduct of the
Business, including items affecting customer or employee relations or items
that do not reflect Buyer's true identity. Specific items to be destroyed or
returned include items with Marks affixed to them including, without
limitation, giveaways; order, purchase or materials forms; requisitions;
invoices; statements; time sheets/labor reports; bill inserts; stationery;
personalized note pads; maps; organization charts; bulletins/releases;
sales/price literature; manuals or catalogs; report covers/folders; program
materials; and materials such as media contact lists/cards. The one hundred
eighty (180) day time period for replacement of Marks affixed to telephone
directories that were already published or closed for publication as of the
Effective Date shall be extended to the production of replacements for such
directories.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
-------- with the Marks, and acknowledges that the Marks and all
rights therein and the goodwill pertaining thereto belong exclusively to
Seller, and that the Marks have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
---------------- after the Effective Date by Buyer using the Marks
shall be provided in accordance with all applicable federal, state and local
laws, and that the same shall not reflect adversely upon the good name of
Seller, and that the conduct of the Business will be of a standard and skill
equivalent to that employed by Seller prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
----------------------------------------------- acknowledges that
its failure to cease use of the Marks as provided in this Agreement, or its
improper use of the Marks, will result in immediate and irreparable damage to
Seller. Buyer acknowledges and admits that there is no adequate remedy at law
for such failure to terminate use of the Marks, or for such improper use of the
Marks, and Buyer agrees that in the event of such failure or improper use,
Seller shall be entitled to equitable relief by way of temporary restraining
order or injunction or any other relief available under this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
------------------------------------------- it is a sophisticated
entity that was advised by knowledgeable counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement and by the
Effective Date will have conducted its own independent review and evaluation of
the Purchased Property. Accordingly, Buyer covenants and agrees that (i)
except for the representations and warranties set forth in this Agreement and
the Schedules (and the Financial Statements, the Additional Financial
Statements, and actuarial reports required pursuant to the Employee Transfer
Agreement), Buyer has not relied and will not rely upon any document or written
or oral information furnished to or discovered by it or its representatives,
(ii) there are no representations or warranties by or on behalf of Seller or
its Affiliates or representatives except for those expressly set forth in this
Agreement and in any other written agreement entered into with Seller or any of
its Affiliates in connection with this Agreement, and (iii) to the fullest
extent permitted by law, Buyer's rights and obligations with respect to all of
the foregoing matters will be solely as set forth in this Agreement or in such
other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
--------------- hereto and their respective officers, directors,
employees and representatives will comply with the Confidentiality Agreement,
the provisions of which are expressly incorporated herein in their entirety by
this reference.
11.4 Additional Financial Statements.
-------------------------------
Seller shall deliver to Buyer the following financial statements of Seller
(collectively, the "Additional Financial Statements") within the time periods
set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
------------------- Date, Seller shall conduct the Business in the
ordinary course in accordance with prudent business judgment and consistent
with past practice and policy and shall (i) preserve the Business as an ongoing
business, (ii) keep available to the Business its services and the services of
its Affiliates at least to the same extent as such were generally available
from January 1, 1994 through the Execution Date and are available on the date
hereof, (iii) not take any action that would jeopardize any material and
beneficial contractual relationships with persons having business dealings with
the Business, and (iv) preserve all of the Business' tariffs, certificates,
licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except with the prior
written consent of Buyer, which the Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. With respect to the
Business, Seller will refrain from entering into any material transaction or
contract other than in the ordinary course of business and will not make any
material change in the general nature of the Business or in its methods of
management, marketing, accounting or operations (including repair and
maintenance functions).
(b) Seller will not, with respect to the Business, (i) create or
incur any indebtedness for borrowed money or otherwise, except in the ordinary
course of business, (ii) enter into or terminate, as lessor or lessee, any
Lease other than in the ordinary course of business, (iii) create any liens or
other security interest, except in the ordinary course of business, or (iv)
change in any material respect or terminate any of the insurance policies
referred to in Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will not sell, lease, dispose of
or otherwise transfer, or make any contract for the sale, lease, disposition or
transfer of any Purchased Property other than, with respect to any individual
item (other than vehicles) having a value of less than Seventy-Five Thousand
Dollars ($75,000.00) and with respect to all items (other than vehicles) the
aggregate value of which shall not exceed Two Hundred Fifty Thousand Dollars
($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the PUC, Seller will not (i) institute any
proceeding with respect to, or otherwise change, amend or supplement any tariff
or (ii) enter into or agree to any stipulation, order, or decree of, or
settlement with the PUC that, in case of (i) or (ii) above, would have a
material adverse effect on the revenue, authorized return on equity or earnings
of the Business. Seller will not file any application, petition, motion,
brief, testimony, settlement agreement or other pleading in any proceeding
before the PUC, or before the FCC (except for filings on behalf of all of
Parent's local exchange telephone companies) or appeals related thereto, unless
Seller shall have first provided Buyer with a copy of the same and provided
Buyer a reasonable opportunity to comment to Seller with respect thereto. If
Buyer determines it should intervene in any proceeding before the PUC in which
Buyer's position is or may be different from Seller's, Seller, without waiving
any other rights related thereto, will not oppose Buyer's intervention in such
proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of Seller or pursuant to any Contract, not (i)
enter into or amend any employment agreement with any individual that will
become a Transferred Employee, or enter into or amend any union agreement or
commitment (including any new commitment to pay retirement or other benefits,
or amendments to the Seller's retirement plans), (ii) effect any net increase
over five percent (5%) since the Execution Date in the number of employees of
the Seller who will become Transferred Employees, or (iii) increase over 5% the
benefit provided under any plans concerning employee benefits or increase the
general rates of compensation of the Transferred Employees, or change the
manner by which compensation (including fringe benefits) is determined and paid
to any Transferred Employee.
(f) Seller will not engage in any intercompany transactions with any
Affiliate of Seller, except for transactions consistent with past practices.
(g) Seller shall maintain the Purchased Property in good repair,
order and condition, reasonable wear and use excepted, and shall maintain the
Transferred Books and Records and Retained Books and Records in the usual,
regular and ordinary manner on a basis consistent with prior years.
(h) Seller will not make any commitment to take any actions
prohibited by the provisions of this Section 11.5.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
---------------------------------------- Buyer and Seller shall have
met and reviewed Seller's construction and other capital expenditure plans for
the calendar years 1994 and 1995 (or such later date agreed to by the parties).
The construction and capital expenditure plans which Buyer shall have approved
(both as to the type of project and the dollars expended) shall be set forth on
Schedule 11.6, and the parties agree that when such expenditures have been
incurred they will constitute an addition to a component of Seller's Net
Telecommunications Plant thereby becoming subject to Section 3.2(c). Seller
agrees to use its best efforts substantially to complete such plans within the
projected time schedules; provided, that Seller will not incur any liability
for unbudgeted expenditures in excess of $200,000.00 in the aggregate without
the prior written consent of Buyer. All construction work that is in progress
on the Effective Date will be accounted for by identifying and accruing all
associated time reporting, material invoices or contractor invoices inputted or
received on or before the Effective Date, and all payments therefor shall be
the responsibility of Seller and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
------------------ such other instruments and information as Buyer
may reasonably request in order to convey to Buyer title to the Purchased
Property, to be delivered from time to time upon Buyer's reasonable request.
11.8 Prorations.
----------
(i) The following liabilities shall be prorated between Seller
and Buyer: (a) utility charges (which shall include, without limitation, water,
sewer, electricity, gas and other utility charges) with respect to the Real
Property, the property subject to the Leases and customer owned equipment, (b)
rental charges (which shall include, without limitation, rental charges and
other lease payments under the Leases), (c) real and personal property taxes
and (d) regulatory and telephone relay service fees, with respect to
measurement periods during which the Effective Date occurs (all such periods of
time being hereinafter called "Proration Periods"), the liabilities described
in clauses (a) and (b) of the preceding sentence shall be apportioned between
Seller and Buyer as of the Effective Date, with Buyer bearing only the expense
thereof in the proportion that the number of days in the applicable Proration
Period after the Effective Date bears to the total number of days covered by
such Proration Period. Real and personal property taxes shall be prorated
between Buyer and Seller based on the period the Purchased Property was owned
by each respective party during the fiscal period for which such taxes were
unposed by the taxing jurisdiction (as such fiscal period is reflected on the
bill rendered by such taxing jurisdiction). Buyer and Seller shall pay or be
reimbursed for real and personal property taxes (including instances in which
such property taxes have been paid before the Effective Date) prorated on this
basis. Unless otherwise handled as an adjustment to the Purchase Price and
then, only to such extent, if a payment on a prorated bill is due after the
Effective Date, the party that is legally or contractually required to make
such payment shall make such payment and promptly forward an invoice to the
other party for its pro rata share, if any. If the other party does not pay
the invoice within thirty (30) calendar days of receipt, the amount of such
payment shall bear interest at the rate of seven percent (7%) per annum
beginning from the date thirty (30) calendar days after receipt until time of
payment.
(ii) All prepayments made by Seller with respect to service or
maintenance agreements with third parties shall be prorated between Seller and
Buyer to the extent Buyer shall receive the benefits of such prepayments after
the Effective Date.
(iii) All Universal Service Fund payments by NECA or its state
equivalent received by either of the parties with respect to a Proration Period
concerning the Purchased Exchange shall be apportioned between Seller and Buyer
as of the Effective Date, with Buyer receiving and being allowed to retain only
that portion of the payment that the number of days in the applicable Proration
Period after the Effective Date bears to the total number of days covered by
such Proration Period.
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
---------------------------------------- loss or destruction of any
sort (including, without limitation, by theft, unauthorized use, fire, act of
God or condemnation) occurs prior to the Effective Date to any of the tangible
properties that constitute the Purchased Property, Seller shall promptly notify
Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Purchased
Properties (the "Damaged Property") will exceed One Million Two Hundred Fifty
Two Thousand Fifty Dollars ($1,252,050.00), either party may, by written notice
to the other party (the "Casualty Termination Notice") within thirty (30) days
after the date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed One
Million Two Hundred Fifty Two Thousand Fifty Dollars ($1,252,050.00), or the
Casualty Termination Notice is not given by either party, then Seller, within
forty-five (45) days after the damage or destruction, shall agree in writing,
(i) to repair or replace, prior to the Effective Date or at some
later date as may be mutually agreed to by the parties, at Seller's sole cost
and expense, the Damaged Property, and Seller will be entitled to make all
claims related to the Damaged Property and to receive and retain all proceeds
of insurance payable with respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated by
this Agreement, the Damaged Property will be excluded from the Purchased
Property and will become an Excluded Asset, Seller will substitute therefor an
equivalent item or items of Purchased Property if the Damaged Property is
personal property and if the Damaged Property is Real Property substitute Real
Property therefor but only if such substituted personal property or Real
Property is satisfactory to Buyer, and Seller will be entitled to make all
claims related to the Damaged Property and to receive and retain all proceeds
of insurance payable with respect to the Damaged Property.
(c) if Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the Manner contemplated by this
Agreement, the Damaged Property will remain part of the Purchased Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and Seller shall be entitled to make all claims related to the Damaged
Property and to receive and retain any proceeds of insurance received by Seller
with respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated by
this Agreement, the Damaged Property will be excluded from the Purchased
Property and will become Excluded Assets, Seller will be entitled to make all
claims related to the Damaged Property and to receive and retain all proceeds
of insurance payable with respect to the Damaged Property, and the Purchase
Price Adjustment contemplated by Section 3.2(a)(2) will be made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 Settlements and Cost Studies. Seller agrees that, with respect to
---------------------------- all toll revenues, settlements, pools,
separations studies, Universal Service Fund payments or similar activities,
Seller shall be responsible for (and shall receive the benefit or suffer the
burden of) the results of any such activities that are related to the conduct
of the Business or the ownership or operation of the Purchased Property on or
before the Effective Date.
11.11 Construction Advances and Customer Deposits. Seller agrees to
------------------------------------------- transfer to Buyer as of
the Effective Date all of Seller's rights to hold and control the construction
deposits of the Business (and interest thereon, if any) held by Seller as of
the Effective Date (the "Construction Advances") and the customer deposits,
advances and interest of the Business held by Seller as of the Effective Date
(the "Customer Deposits"), and Buyer agrees to hold, disburse and retain such
Construction Advances and Customer Deposits in accordance with the tariffs,
laws and Contracts related thereto. The parties acknowledge that the Purchase
Price adjustment pursuant to Section 3.2(b) is intended to compensate Buyer for
the liability associated with the Construction Advances and Customer Deposits.
11.12 Other Contracts.
---------------
11.12.1 Telephone Directories Published by ALLTEL Publishing Corporation.
----------------------------------------------------------------
The Directory Publishing Agreement dated as of November 15, 1994 by and between
Seller and ALLTEL Publishing Corporation (the ""Directory Publishing
Agreement") is an Excluded Contract on Schedule 2.4(g), except as hereinafter
provided. Within thirty (30) days after the Execution Date, Buyer shall cause
its existing directory provider to indicate in writing whether it will provide
directory publication services to Buyer, as of the Effective Date (or as of
such later date as described below) with regard to all of the Purchased
Exchanges on the same terms and conditions as it is presently providing such
services to Buyer, and Buyer shall inform Seller within such thirty (30) day
period of Buyer's existing telephone directory provider's written intention.
If Buyer's existing directory provider's indication is that it will not provide
directory publication services for all of the Purchased Exchanges on the same
terms and conditions that it is presently providing such services to Buyer,
then the Directory Publishing Agreement shall be deemed to become a Contract
for the purposes of this Agreement. Promptly, thereafter, the Buyer and ALLTEL
Publishing Corporation shall agree to meet in good faith to negotiate any
necessary amendments to the Directory Publishing Agreement, to be effective as
of the Effective Date, to provide for a retention rate equal to or greater than
the higher of (x) 60% or (y) the retention rate provided for in any
substantially similar directory publishing agreement between ALLTEL Publishing
Corporation and a non-Affiliate of ALLTEL Publishing Corporation that was
entered into within 18 months prior to the Effective Date. If Buyer's existing
directory provider indicates that it will provide directory publication for all
the Purchased Exchanges, as provided above, the Directory Publishing Agreement
shall remain in effect as to the directory of each of the Purchased Exchanges
for which (i) the directory is scheduled to be or is published prior to the
Effective Date or (ii) the canvass for the directory has begun prior to the
Effective Date and it is scheduled to be published after the Effective Date.
Under such circumstances, the Buyer's existing directory provider will not
begin providing directory publication services for such exchange until canvass
and production begins for the next succeeding directory related to such
Purchased Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
----------------------------- provider indicates that it will
provide directory publication for all of the Purchased Exchanges, as provided
in Section 11.12.1 of this Agreement, Seller and Buyer agree to cooperate and
to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the Seller
even if in the possession of a third party (the "Directory Records") related to
directories of the Purchased Exchanges that are published by Seller or its
Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production functions
of any directories related to the Purchased Exchanges that are scheduled to
begin canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the other
reasonable access to such documentation, reports and accounting records related
to directory publication as may be necessary to insure a proper transition of
directory production in accordance with the terms of such agreements in effect
on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Purchased Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate in
good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any directories
that will be canvassed and published by Buyer's existing directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing, use
-------------- their best efforts to allow Buyer to negotiate a
billing and collection agreement ("B&C Agreement") reasonably satisfactory to
Buyer with each interexchange carrier ("IXC") and each local exchange carrier
("LEC") for which Seller provides, on the Execution Date, billing and
collection services in any Purchased Exchange (each such IXC or LEC is
hereinafter referred to as a "Carrier"). Seller and Buyer shall cooperate with
each other and make available to each other all documents and records relevant
and necessary to allow Buyer to finalize negotiations of B&C Agreements, as
necessary, and to perform such B&C Agreements after the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts to
----------------------- assist Buyer in obtaining a written
agreement with such equipment manufacturers (such as Northern Telecom and
Stromberg-Carlson; collectively "Equipment Manufacturers") as Buyer may
request, covering such software license agreements and other agreements as are
necessary to enable Buyer to operate the equipment manufactured and sold by the
Equipment Manufacturers included in the Purchased Property in substantially the
same manner as operated by Seller prior to the Effective Date. The agreements
shall contain material terms and conditions (including license and warranty,
but not necessarily including pricing) that are substantially the same as those
provisions in the corresponding agreements between Seller and the Equipment
Manufacturers. Buyer understands and agrees that the price and fee provisions
of such agreements will be as negotiated between Buyer and the Equipment
Manufacturers. The above obligation of Seller shall be expressly conditioned
upon the acceptance by Buyer of all material obligations accepted by Seller in
such corresponding agreements. It is the responsibility of Buyer to enter into
appropriate agreements with the Equipment Manufacturers in respect of service,
support, training, maintenance, and future development (hardware and software)
for the Purchased Property, such agreements to include terms and conditions
agreed to between Buyer and the Equipment Manufacturers. To the extent
assignable, Seller agrees to assign, and to the extent non-assignable, Seller
agrees to assist Buyer in obtaining the Equipment Manufacturers' consent to the
assignment of training credits remaining at the Effective Date on Purchased
Property furnished by the Equipment Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that certain
-------------------- agreements between Seller (or Affiliates of
Seller) and third parties relate both to the Purchased Property and the
Excluded Property. Seller agrees to use its best efforts to assist Buyer in
obtaining contractual arrangements with such third parties relating to the
Purchased Property, which arrangements will be reasonably satisfactory to
Buyer; provided that neither Seller nor any of its Affiliates shall be
obligated under this Section 11.12.5 to make any payment to any such third
party unless such payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Closing, the parties
------------------------------ shall retain the Retained Books and
Records or the Transferred Books and Records, as applicable, until the shorter
of the date that other party consents in writing to their destruction or the
seventh anniversary of the Effective Date. Each party shall provide full and
free access to the Transferred Books and Records and Retained Books and
Records, as the case may be, to duly authorized representatives of the other
party at any time during regular business hours for the period in which such
Books and Records are required to be retained. Either party may make copies of
any such Books and Records as it deems desirable, at its own expense. After
the Effective Date, upon reasonable notice, Seller shall provide Buyer with
reasonable assistance in locating any of Seller's Original Cost Documents which
Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 Purchase Price Allocation. Prior to the Effective Date Buyer and
------------------------- Seller shall agree to the allocation (the
"Allocation") of the Purchase Price and the Assumed Liabilities to the
individual assets or classes of assets (within the meaning of Section 1060 of
the IRC). Buyer, Seller, and their respective Affiliates, shall file all Tax
Returns and schedules thereto (including, without limitation, those returns and
forms required by Section 1060 of the IRC) consistent with the Allocation
unless otherwise required by applicable Law.
11.16 Real Property Transfers. Within sixty (60) days after the Execution
----------------------- Date, Seller shall deliver to Buyer copies
of all existing title insurance policies and surveys covering the Real
Property. Thereafter, no later than sixty (60) days before the Effective Date,
Seller shall deliver (at its expense) to Buyer a preliminary title binder (on a
standard form reasonably acceptable to Buyer), issued by Lawyers Title
Insurance Corporation or another title insurance company reasonably acceptable
to Buyer, with respect to all Real Property included in the Purchased Property
and in which Seller purports to own fee title. Such title binders shall be in
form, substance and amount reasonably satisfactory to Buyer (ALTA Owners
Policies where available but based upon boundary surveys as described below)
and shall be current as of a date no earlier than ninety (90) days prior to the
Effective Date. The parties agree that the dollar amount of title insurance to
be inserted on each policy shall equal the dollar value set forth on Seller's
continuing property records list as of December 31, 1993 for land and
buildings. Such title binders shall reflect that, upon consummation of the
sale contemplated by this Agreement, Buyer will be vested with good, fee
simple, marketable and insurable title to such Real Property, subject only to
(i) standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v) Leases
and (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby (collectively, the "Permitted Exceptions"). If a preliminary
title binder indicates an exception other than a Permitted Exception that would
impair marketability in any material respect, Seller shall, at its expense,
cause such exception to be removed on or before the Effective Date. With
respect to each parcel of Real Property covered by a preliminary title binder,
Seller shall deliver to Buyer (at Seller's expense and on or prior to sixty
(60) days before the Effective Date) a certified current boundary survey
showing (x) access to the property, and (y) all improvements on the property
and any encroachments across the property line by any improvements of Seller or
owners of adjacent property and (at Seller's expense and within sixty (60) days
after the Effective Date) owner's title insurance policies for the Real
Property (ALTA Owners Policies where available but based upon boundary surveys
as set forth above).
<PAGE>
11.17 Transfer Taxes and Sales Taxes.
------------------------------
(a) Seller and Buyer shall take all reasonable measures to provide that
the sale contemplated by this Agreement qualifies for any available exclusion
from sales and use taxes for occasional, casual or isolated sales.
(b) Buyer and Seller each shall bear and be responsible for paying one-
half of any sales, use, transfer, gross receipts, or similar taxes (including
related penalties and interest) imposed by state or local tax authorities with
respect to the transfer of Purchased Property to Buyer (including, without
limitation, the Real Property), regardless of whether the tax authority seeks
to collect the tax from the transferor or the recipient. Seller shall be
responsible for filing the applicable return in a timely manner and
administering the payment of such sales, use, transfer, gross receipts or
similar tax, and Buyer and Seller shall be responsible for defending or
pursuing any proceedings related thereto, provided that any expenses related
thereto shall be shared equally between Buyer and Seller. Twenty (20) days
prior to filing of any such returns, Seller shall deliver to the Buyer those
returns for review. Ten (10) business days prior to filing of any such
returns, Buyer shall approve the information contained therein and the filing
of such returns.
(c) Buyer and Seller shall give prompt written notice to the other party
of any proposed adjustment or assessment of a sales, use, transfer, gross
receipts or similar tax on the sale contemplated hereby, or of any examination
of the sale in a sales, use, transfer or similar tax audit. In any
proceedings, whether formal or informal, Buyer and Seller shall permit the
other party to participate and defend such proceeding, and shall take all
actions and execute all documents required to allow such participation.
Neither Buyer nor Seller shall negotiate a settlement or compromise of any
sales, use, transfer, gross receipts or similar tax on the sale of the
Purchased Property without the written consent of the other party, which
consent shall not be unreasonably withheld. Seller shall be responsible for
the income or franchise taxes imposed with respect to its transfer of the
Purchased Property.
11.18 Bulk Sales Laws. Seller and Buyer waive compliance with applicable
--------------- laws under any version of Article 6 of the Uniform
Commercial Code adopted by any state or any similar law relating to the sale of
inventory, equipment or other assets in bulk in connection with the sale of the
Purchased Property.
11.19 Customer Notification. For a period of at least two (2) months
--------------------- prior to the Effective Date, Seller will
permit Buyer to insert preprinted single-page subscriber education materials
into billing documentation to be delivered during such period to subscribers
affected by the sale. All reasonable costs and expenses related to such
insertion and delivery shall be borne and paid by Seller. Other means of
notifying subscribers may be employed by either party, at the expense of the
initiating party, but in no event shall any notification be initiated without
the prior consent of the other party (which consent shall not be unreasonably
withheld) or earlier than three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as otherwise provided in Section
--------------------- 11.22, Seller shall have a period of ten (10)
business days after the Execution Date (the "Supplemental Schedule Period") to
supplement or otherwise modify the Schedules to this Agreement by delivering to
Buyer, within the Supplemental Schedule Period, a substitute schedule or
schedules (collectively, the "Supplemental Schedules"), bearing the legend
"This Schedule _, dated _______________, is executed and delivered in
accordance with Section 11.20 of the Asset Purchase Agreement, dated as of
November 28, 1994 which shall be duly executed by Seller and submitted to
Buyer. Buyer shall have a period of ten (10) business days after the
expiration of the Supplemental Schedule Period to review the Supplemental
Schedules and within such ten (10) business day period notify Seller in writing
(which writing may be transmitted by facsimile) of any objections thereto. If
Buyer's objections are not resolved to the satisfaction of Buyer within five
(5) days of such notification, Buyer may terminate this Agreement, effective
immediately upon written notification of that termination. In the event that
Buyer does not terminate this Agreement, then Buyer waives all rights to a
claim of indemnification based upon or as the result of any changes in the
Schedules as reflected in the Supplemental Schedules. For purposes of
determining breaches of representations, warranties or covenants hereunder, the
Supplemental Schedules provided by Seller shall be deemed Schedules for all
purposes.
11.21 FCC Tariffs. Except as described on Schedule 5.4, in connection
----------- with obtaining assignment to Seller's FCC Licenses, as
described in Section 5.4, during the period from the Execution Date until the
Effective Date, neither party shall file any application or request for a
waiver of Part 36 (study areas), Part 61 (tariffs), and Part 69 (price caps and
study areas) of the FCC Rules, and that on the Effective Date the study areas
relating to the Purchased Exchanges shall remain in the Natural Exchange
Carrier Association Tariff FCC No. 5; provided, however, that such study areas
shall remain in the NECA Tariff FCC No. 5 after the Effective Date only for so
long as Buyer, in its sole discretion, shall determine.
11.22 Post-Execution Lease and Contract Review. Buyer shall have a
---------------------------------------- period of forty-five (45)
calendar days after the Execution Date to review the Leases and Contracts
listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify Seller in
writing (which writing may be transmitted by facsimile) of the identity of
those Leases and Contracts that Buyer reasonably believes are material to the
operation of the Business as a whole or any significant part of the Purchased
Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent to their assignment before the
Effective Date can occur. If Buyer does not notify Seller in writing within
such forty-five (45) calendar day period of the identity of the material Leases
and Contracts requiring consent, then Buyer shall be deemed to have agreed that
none of the Leases and Contracts which are listed on Schedules 9.1.9 and 9.1.13
require consent to their assignment, in accordance with Section 7.1.6, before
the Effective Date can occur. If Buyer does notify Seller in writing within
such forty-five (45) calendar day period of the identity of the material Leases
and Contracts requiring consent, then Seller shall have a period of ten (10)
business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile of any objections thereto.
Thereafter , Buyer and Seller shall negotiate in good faith and agree in
writing as to the identity of those Leases and Contracts which are material to
the operation of the Business as a whole or any significant part of the
Purchased Property and which by their terms will require Seller, in accordance
with Section 7.1.6, to obtain a consent to their assignment before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
--------------------------- transfer of employees and employee
benefits matters in a separate agreement, entitled Employee Transfer Agreement,
the terms and provisions of which are incorporated into this Agreement as if
fully set forth herein and a copy of which is attached hereto as Schedule 12.1
(the "Employee Transfer Agreement").
<PAGE>
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, and 9.2.5 shall survive without limitation as to time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive until sixty (60) days after the expiration of the
applicable statute of limitations (including all extensions).
(iii) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination Date. Any claim for indemnification with respect to any alleged
breach of any representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts relating thereto, which notice is given prior to the Termination Date,
may not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty will be deemed
to have been properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 2.5.1 (except for Section 2.5.1(a) with respect to Taxes), Section
2.5.2 (except for Section 2.5.2(d)), Section 4.3, Section 5.2, Section 5.3,
this Article 13, and in Sections 11.1, 11.2, 11.3, 11.6, 11.7, 11.10, 11.12,
11.13, 11.15, 11.16 and 11.18, Articles 16 and 17 and in the Employee Transfer
Agreement, will survive the Closing and remain in effect indefinitely, or in
the case of Sections 2.5.1(a) (with respect to Taxes), 2.5.2(d), 11.17, and the
property tax proration provisions set forth in Section 11.8, will survive until
sixty (60) days after expiration of the applicable statute of limitations. All
other covenants contained in this Agreement will terminate, without further
action, upon the occurrence of the Effective Date and any claim following the
Effective Date for an alleged breach of any such covenant may not be pursued,
and is irrevocably waived, upon the occurrence of the Effective Date, except
that Buyer may make a claim for Seller's breach of the covenants contained in
Section 11.5 at any time within eighteen months after the Effective Date. The
immediately preceding sentence shall not apply to, or limit to preclude, a
party's rights and remedies if the sale contemplated by this Agreement is not
concluded as a result of the other party's breach of this Agreement.
13.2 Limitations on Liability.
------------------------
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, and
(iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in connection
with any actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expenses, in any such case (x) reduced by the
amount of insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one hand,
and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. Without limiting the foregoing, as a
material inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under the common law
or federal or state securities, trade regulation or other laws, by reason of
the liabilities and obligations, and any breach of the representations,
warranties or covenants, referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and conditions of this
Article 13, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections 9.1.6
and 9.1.8) or 13.3(b)(i) (except with respect to indemnification for a breach
of the representations contained in Section 9.2.5) until the aggregate amount
of claims that may be asserted for such Indemnifiable Losses incurred by the
Indemnitee exceeds Sixty Two Thousand Six Hundred Two Dollars ($62,602.00) and
then only to the extent of the excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6 and 9.1.8) and of Buyer under Section 13.3(b)(i) (except with
respect to indemnification for a breach of the representations contained in
Section 9.2.5) will not exceed the sum of One Million Eight Hundred Seventy
Eight Thousand Seventy Five Dollars ($1,878,075.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 13.
13.3 Indemnification.
---------------
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates, directors,
officers, agents and representatives from all Indemnifiable Losses relating to,
resulting from or arising out of (i) a breach by Seller of any of the
representations and warranties contained in Section 9.1, except for any such
breach of representations and warranties which was specified on Seller's
Closing Certificate all of which are waived upon Closing, (ii) a breach by
Seller of any covenant of Seller contained in this Agreement or in the Employee
Transfer Agreement, except for any such breach of covenants which was specified
on Seller's Closing Certificate all of which are waived upon Closing, (iii)
the Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted,
or sought before or after the Effective Date, in respect of the conduct of the
Business or any part of the Business (including contractual obligations in
connection with sales or transfers of assets made by Seller prior to the
Effective Date), or the ownership or operation of the Business, on or prior to
the Effective Date, regardless of whether known or unknown, asserted or
unasserted, on the Effective Date. Notwithstanding anything to the contrary
contained herein except for Section 11.17, Seller shall not be liable for and
shall not be required to indemnify Buyer for any Taxes arising with respect to
the post-Effective Date period, regardless of whether the claim is based on
breach of a representation, warranty, covenant or otherwise.
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) the Assumed Liabilities, (iv) any Third Party Claim,
filed, asserted, or sought after the Effective Date, in respect of the conduct
of the Business or any part of the Business or the ownership or operation of
the Business, after the Effective Date.
(c) All environmental matters or issues, including without
limitation, the indemnification obligations contained in Article 14 with
respect to Environmental Liabilities, are to be governed by Article 14 and are
not addressed, limited or governed by the provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
13.4 Defense of Claims.
-----------------
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action, proceeding, or investigation by any
entity or person that is not a party to this Agreement or an Affiliate of such
a party (a "Third Party Claim") against such Indemnitee, with respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Article 13 to the extent the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 13.
(c) If after the making of any Indemnification Payment the amount of
the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of
the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
---------------------------
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
------------------------------ to conduct environmental due
diligence regarding the Purchased Property in accordance with this Section
14.1, for a period not to exceed 120 days after the Environmental Data Delivery
Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
----------------- result of the environmental due diligence
authorized by this Section 14.1 will be subject to the terms and conditions of
the Confidentiality Agreement, except as otherwise expressly provided in this
Section 14.l. Buyer shall provide to Seller copies of all reports, assessments
and other information composed or compiled by Buyer's environmental
consultant(s) and shall treat all such information in accordance with the
procedures of Section 14.1.5(c). Within thirty (30) days after the Execution
Date (the "Environmental Data Delivery Date"), Seller will provide to Buyer
copies of all surveys and reports in Seller's possession concerning the
existence or possible existence of asbestos or materials containing asbestos
relating to any of the Real Property, a list of all underground storage tanks
which to Seller's knowledge are located on, or have been removed within the
last three years from, any Real Property owned or real estate leased or
operated by Seller in connection with the Business and any other reports,
studies or documents in Seller's possession relating to Seller's potential
liability under any Existing Environmental Requirements. The parties further
agree that, if Seller discloses the existence or suspected existence of
materials containing asbestos with respect to a given parcel of Real Property
and the asbestos does not exceed applicable limits, if Buyer desires to make
renovations or structural changes to the property after the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
------------------------- environmental consultants to assist in
its environmental due diligence concerning the Purchased Property and shall
notify Seller of the environmental consultant or consultants Buyer intends to
retain. Thereafter, Seller shall have five (5) business days after receipt of
such notification to notify Buyer in writing of Seller's objection (which must
be for good cause) and substantiate the basis for that objection. If Seller
does not object for good cause and substantiate that objection within said five
(5) business day period, Seller shall be deemed to have consented to Buyer's
selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
--------------- assessment activities of the Purchased Property,
including inspecting individual sites, submitting environmental questionnaires
to Seller and reviewing existing environmental reports, correspondence, permits
and related materials regarding the Purchased Property. Phase I environmental
assessment activities shall not include any sampling or intrusive testing other
than tank tightness testing and hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Purchased Property.
(b) If Buyer enters the Purchased Property, a representative of
Seller may be, but is not required to be, present during such entry on the
Purchased Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of Seller's Business and the Purchased Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
---------------- environmental assessment activities of the
Purchased Property (including, but not limited to, the taking and analysis of
soil, surface water and groundwater samples, testing of buildings, drilling
wells and taking soil borings) after first conducting a Phase I assessment of a
particular site provided that such Phase II assessment activities are conducted
in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the Purchased Property, Buyer must notify Seller of its desire
at least five (5) business days in advance of the proposed date of such
sampling or testing and provide a description of the scope of work regarding
such sampling or intrusive testing. If Seller does not notify Buyer in writing
of Seller's objection to such proposed sampling or testing within five (5)
business days after receipt of such notice, Seller shall be deemed to have
consented to the proposed sampling or testing. Seller shall not unreasonably
object to Buyer's request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental Data")
within three (3) business days of Buyer's receipt of such data and shall
promptly provide Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during the sampling
or intrusive testing of a particular site; provided, however, that Seller shall
have no obligation to Buyer to take any action whatsoever regarding such
samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Purchased Property only
after first notifying the Seller, and without such notice at any time after
such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
--------------------------------------
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders, penalties, fines,
costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Purchased Property and
resulting from any act or omission of Buyer or its environmental consultant(s)
provided that Buyer shall not be liable for any Environmental Liabilities
incurred by any such party merely discovered by the environmental due diligence
performed by Buyer or its environmental consultants. In addition, in the event
the transactions contemplated herein with regard to any portion of the
Purchased Property do not close, Buyer agrees to restore such portion of the
Purchased Property to the condition which existed prior to Buyer's inspections
and testing thereof to the extent such portion of the Purchased Property was
damaged by such inspections and testing.
14.1.7 Effect of Due Diligence Results.
-------------------------------
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Purchased Property; and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than Five Hundred Thousand Eight Hundred Twenty Dollars
($500,820.00) (the "Environmental Liabilities Amount") To be effective, any
such conditional termination of this Agreement must be delivered in writing to
Seller, which writing must specifically acknowledge that the termination is
subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) respond to and fully remediate the Environmental Liabilities
based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) in such manner and on such terms and conditions as are
mutually satisfactory to Buyer and Seller, remove from the Purchased Property
the item or items of Purchased Property that have occasioned the Environmental
Liabilities based upon Existing Environmental Requirements and either
substitute therefor an equivalent item or items of Purchased Property
satisfactory to Buyer, or make other adjustments to the terms and conditions of
the sale contemplated by this Agreement all in such manner and on such terms
and conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but Seller
fails to perform its obligations thereunder in full on or before the Closing
(subject to Section 14.1.7(d)), Buyer's conditional termination under paragraph
(a) above automatically shall become final and unconditional unless the parties
agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Purchased Property are
less than the Environmental Liabilities Amount in the aggregate, Seller agrees,
at its sole cost, to either (i) remove from the Purchase Property the item or
items of Purchased Property that have occasioned the Environmental Liabilities
based upon Existing Environmental Requirements and either make a substitution
or other adjustment therefor prior to the Closing in accordance with Section
14.1.7(b)(iii) above, or (ii) prior to the Closing (subject to Section
14.1.7(d)), otherwise respond to and remediate those Environmental Liabilities
based upon Existing Environmental Requirements in accordance with Section
14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the cost of such
substitution or the conduct of such response action would exceed the
Environmental Liabilities Amount in which case Seller's sole obligation under
this Section 14.1.7(c) shall be to pay the Environmental Liabilities Amount
toward the completion of such substitution or response and remediation actions.
If Seller discharges its obligations under this Section 14.1.7 by expending the
Environmental Liabilities Amount on such substituted property or response and
remediation action (such expenses to be verified by Seller by delivery by
Seller to Buyer of a reasonably detailed statement setting forth such
expenses), or paying to Buyer the Environmental Liabilities Amount, Buyer shall
sign and deliver to Seller at the Closing a release of Seller from any further
liability to Buyer for such remediation and shall indemnify Seller against any
liability for such Environmental Liabilities or Environmental Requirements.
(d) If Seller elects to respond to and fully remediate Environmental
Liabilities based upon Existing Environmental Requirements pursuant to Section
14.1.7(b)(i) or (c)(ii), and such response and remediation has not been
completed by the date scheduled for Closing, the parties on or prior to Closing
shall enter into an Environmental Remediation Agreement in form and substance
reasonably satisfactory to the parties and proceed to Closing; provided,
however, that in the case of response and remediation under Section
14.1.7(b)(i), Buyer may elect to postpone the Closing until sufficient response
and remediation has been completed so that the remaining response and
remediation is equal to or less than the Environmental Liabilities Amount.
14.2 Environmental Indemnification.
-----------------------------
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
----------------------- indemnification provided under this Section
14.2 shall be the sole remedy for allocating responsibility regarding
environmental matters related to the sale contemplated by this Agreement, the
Business and the Purchased Property of which Buyer does not receive notice
prior to the Closing (either from Seller in Schedule 14.3 or pursuant to notice
given pursuant to Section 17.1 or in any written communication made to Buyer
from Buyer's environmental consultants (collectively the "Known Environmental
Matters")). Except as expressly provided in this Section 14.2, at Closing each
party, for itself and its successors and assigns, by virtue of consummating the
sale contemplated by this Agreement and without further action on the part of
such party, shall waive and release the other party from any and all liability
under any other cause of action at law or in equity concerning the Known
Environmental Matters, whether raised pursuant to (i) Environmental
Requirements, (ii) any other applicable federal, state or local statute,
ordinance, rule or regulation, or (iii) common law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
--------------- 14.2.4 and 14.2.5, Seller agrees to indemnify and
hold harmless Buyer, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities under Existing Environmental Requirements arising
from acts or omissions occurring, or from the use or ownership of, or any
condition or circumstance, relating to, the Purchased Property or the Business
that occurred or arose prior to or on the Effective Date on the Purchased
Property or in connection with the operation of the Business prior to or on the
Effective Date. The foregoing indemnity in this Section 14.2.2 shall only
apply to matters that do not constitute Known Environmental Matters (such
matters being referred to as the "Unknown Environmental Matters"). Such
indemnification under this Section 14.2.2 shall be provided only for claims for
Unknown Environmental Matters noticed to the other party pursuant to the
procedures of Section 14.2.3, within eighteen (18) months after the Effective
Date. Subject to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to
indemnify and hold harmless Seller, its Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all Environmental Liabilities, with respect to any Environmental
Requirements in existence now or hereafter in effect, arising from acts or
omissions occurring after the Effective Date, or from the use or ownership of
the Purchased Property after the Effective Date, or any condition or
circumstance relating to the Purchased Property or the Business that occurred
or arose after the Effective Date on the Purchased Property or in connection
with the operation of the Business after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
------ must give written notice to the other party, including
information sufficient to inform the other party of, and allow such other party
to confirm the nature of, the claim and any activities required to address the
claim, in sufficient detail for the indemnifying party to confirm that all
costs incurred or to be incurred by the party to be indemnified under this
Section 14.2 are required by Environmental Requirements, as applicable to
Buyer, and Existing Environmental Requirements, as applicable to Seller, and
are reasonable and cost-effective. If the indemnifying party disagrees with
the party to be indemnified as to the necessity of costs or the reasonableness
or cost-effectiveness of the remediation method selected, the parties shall
negotiate in good faith to achieve at a mutually satisfactory solution. If the
parties cannot agree as to costs or methods of remediation, the matter shall be
resolved in accordance with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
-------------- shall not include incidental or consequential
damages except to the extent such damages have been recovered by a third person
and are the subject of a Third Party claim for which indemnification is
available under the express terms of this Article 14. Any indemnifiable claim
under this Section 14.2 shall be reduced to account for any insurance, storage
tank fund, or other proceeds received by the party to be indemnified, as a
result of the indemnifiable losses involved. The parties agree to take all
reasonable steps to mitigate any indemnifiable claim under this Section 14.2,
including complying with any registration and reporting requirements necessary
to qualify for reimbursement from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
------------------------------ provision of this Agreement, this
Article 14, or any applicable law, the indemnification obligations of Seller
under this Section 14.2 shall not exceed the aggregate amount of Nine Hundred
Thirty Nine Thousand Thirty Seven Dollars ($939,037.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article 14
----------------------------- shall be treated by Buyer and Seller
as purchase price adjustments, and Buyer and Seller shall file all Tax Returns
consistent with such treatment. Notwithstanding anything to the contrary
contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
------------------ prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) above if such party
shall not have performed diligently and in good faith the obligations required
to be performed by such party hereunder prior to the date of termination;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
---------------------
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8, 17.11,
17.13, 17.14 and Article 16 shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
---------------- resolve disputes arising out of this Agreement
without litigation. Accordingly, except as provided in Section 16.5, or in the
case of a suit to compel compliance with this dispute resolution process, the
parties agree to use the following alternative dispute resolution procedure as
their sole remedy with respect to any controversy or claim arising out of or
relating to this Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party, each
-------------------------- party shall appoint a knowledgeable,
responsible representative to meet and negotiate in good faith to resolve any
dispute arising under this Agreement. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in evidence in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
----------- representatives of the parties do not resolve the dispute
within sixty (60) days of the initial written request, the dispute shall be
submitted to binding arbitration by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Either
party may demand such arbitration in accordance with the procedures set out in
those rules. The arbitration hearing shall be commenced within sixty (60) days
of the demand for arbitration and the arbitration shall be held in a mutually
agreeable location. The arbitrator shall control the scheduling (so as to
process the matter expeditiously) and any discovery. The parties may submit
written briefs. The arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings. The times
specified in this Section 16.3 may be extended upon mutual agreement of the
parties or by the arbitrator upon a showing of good cause. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
------------------------- expenses in submitting and presenting its
position with respect to any such dispute to the arbitrator, and the fees and
expenses of such arbitration procedures, including the fees of the arbitrator
will be shared equally by Buyer and Seller, except that a party seeking
discovery shall reimburse the responding party the cost of production of
documents (including search time and reproduction costs); provided, however,
that if the arbitrator determines that the position taken in the dispute by the
non-prevailing party taken as a whole is unreasonable, the nonprevailing party
will bear all such fees and expenses, and reimburse the prevailing party for
all of its reasonable costs and expenses in submitting and presenting its
position.
16.5 Certain Limitations. The provisions of this Article 16 with respect
------------------- to the resolution of disputes without litigation
shall not apply to any dispute, controversy or claim arising out of the
provisions of Section 11.1, or the Confidentiality Agreement, or to a party's
seeking to proceed under Section 17.14, it being understood and agreed that in
the event of a breach by either party of the provisions of Section 11.1, or the
Confidentiality Agreement, or in the event that a party seeks to proceed under
Section 17.14, the non-defaulting party shall be entitled to proceed to protect
and enforce its rights by an action at law, a suit in equity or other
appropriate proceeding, whether for specific enforcement of any agreement
contained in Section 11.1, or the Confidentiality Agreement or in aid of the
exercise of any power granted by Section 11.1, 17.14 or the Confidentiality
Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required or
------- permitted hereunder shall be in writing and, unless otherwise
provided in this Agreement, will be deemed to have been given when delivered in
person or dispatched by electronic facsimile transfer (confirmed in writing by
certified mail, concurrently dispatched) or one business day after having been
dispatched for next-day delivery by a nationally recognized overnight courier
service to the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
<PAGE>
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
-------------- preparing any press release, public announcement, news
media response or other forth of release of information concerning this
Agreement or the transactions contemplated hereby that is intended to provide
such information to the news media or the public (a "Press Release"). Neither
party shall issue or cause the publication of any such Press Release without
the prior written consent of the other party; provided, however, that nothing
herein will prohibit either party from issuing or causing publication of any
such Press Release to the extent that such action is required by applicable Law
or the rules of any national stock exchange applicable to such party or its
Affiliates, in which case the party wishing to make such disclosure wig, if
practicable under the circumstances, notify the other party of the proposed
time of issuance of such Press Release and consult with and allow the other
party reasonable tune to comment on such Press Release in advance of its
issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each party
-------- will pay any expenses (including, without limitation,
attorneys' fees) incurred by it incident to this Agreement and in consummating
the transactions provided for herein. All regulatory filing fees required
pursuant to Sections 5.1, 5.4 and 5.5 shall be split equally between the
parties. Each party will pay the appropriate costs and filing fees relating to
any other applications required to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
---------------------- inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Buyer may not assign or
delegate any of its rights or duties hereunder without the prior written
consent of the Seller; provided that Buyer may assign or delegate its rights
and obligations under this Agreement without the prior written consent of
Seller, to any directly or indirectly wholly owned subsidiary of Buyer provided
such subsidiary assumes in writing all of the duties and obligations of Buyer
hereunder, but no such assignment and assumption shall in any way operate to
enlarge, alter or change any obligation of or due to Seller or relieve Buyer of
its obligations hereunder and provided that Buyer agrees to cause such
subsidiary to perform each of its agreements and covenants herein, and shall be
jointly and severally liable for any non-performance thereof. Seller may not
assign or delegate any of its rights or duties hereunder without the prior
written consent of the Buyer. Upon the sale, assignment or transfer by Buyer
of the Business or the Purchased Property to a non-Affiliate of Buyer not in
the ordinary course of business of Buyer, Seller's representations and
warranties and indemnification obligation for breach thereof shall terminate.
Any assignment made in violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
---------- subsequent writing signed by authorized representatives of
both parties.
17.6 Captions. The captions set forth in this Agreement are for
-------- convenience only and shall not be considered as part of
this Agreement, nor as in any way limiting or amplifying the terms and
provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean collectively
---------------- this document, the Schedules hereto, any agreements
expressly incorporated herein, and the Confidentiality Agreement. This
Agreement supersedes and revokes any prior discussions and representations,
other agreements, commitments, arrangements or understandings of any sort
whatsoever, whether oral or written, that may have been made or entered into by
the parties relating to the matters contemplated hereby. This Agreement
constitutes the entire agreement by and among the parties, and there are no
representations, warranties, agreements, commitments, arrangements or
understandings except as expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
------ neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
17.9 Third Parties. Except as expressly provided herein, nothing
------------- contained in this Agreement is intended to confer upon
any person, other than the parties and their successors and permitted assigns,
any rights or remedies under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
------------ counterparts, any or all of which shall constitute one
and the same instrument.
17.11 Governing Law. This Agreement shall in all respects be governed by
------------- and construed in accordance with the internal laws of
the State of Delaware (except that no effect shall be given to any conflicts of
law principles of the State of Delaware that would require the application of
the laws of any other jurisdiction). In accordance with Title 6, Section 2708
of the Delaware Code Annotated, the parties agree to the jurisdiction of the
courts of Delaware and to be served with legal process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested by one
------------------ of the parties, the other party will execute and
deliver, or cause to be executed and delivered, all such documents and
instruments as may be reasonably necessary to consummate and make effective the
transactions contemplated by this Agreement.
17.13 Certain Interpretive Matters and Definitions.
--------------------------------------------
(a) Unless the context otherwise requires, (i) all references to Sections,
Articles or Schedules are to Sections, Articles or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the meaning so assigned
to it, (iii) each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iii) all references to the
"knowledge of a party" will be deemed to refer to the actual knowledge of the
Executive Officers of the party after reasonable investigation, and (iv) all
references to a party's "best efforts" and references of like import will be
deemed to refer to the best efforts of such party in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor of, or
against, either of the parties by reason of the extent to which any such party
or its counsel participated in the drafting thereof or by reason of the extent
to which any such provision is inconsistent with any prior draft of such
provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and remedies
-------------------- available at law or in equity, any party hereto
may pursue, to the fullest extent available, the remedy of specific performance
in order to compel the other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
ALLTEL TENNESSEE, INC.:
By: /s/ Tim G. Griffin
--------------------
Name: Tim G. Griffin
Title: Vice President
CITIZENS UTILITIES COMPANY:
By: /s/ Leonard Tow
-----------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of Navajo Communications Co., Inc.
a New Mexico corporation (the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires
to purchase and accept from Seller, the Shares (as defined below), upon the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets
on the Company's Balance Sheet), and (iv) Other Current Assets (item 10-
Assets on the Company's Balance Sheet) to the extent such other current
assets do not represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such
investments consist of RTB Stock which relates to REA Debt which is to remain
outstanding immediately after the Effective Date, and which RTB Stock is
owned by the Company immediately after the Effective Date, (ii) Unamortized
Debt Expense (item 16-Assets on the Company's Balance Sheet) to the extent
such debt expense relates to debt which is to remain outstanding immediately
after the Effective Date, and (iii) Deferred Maintenance and Retirements
(Item 17 - Assets on the Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued -
Other (item 9 - Liability on the Company's Balance Sheet), (v) Interest
Accrued-Other (item 13-Liabilities on the Company's Balance Sheet) to the
extent such interest relates to debt which is to remain outstanding
immediately after the Effective Date, and (vi) that portion of Other Deferred
Credits (item 25 - Liabilities on the Company's Balance Sheet) that relates
to liabilities that are associated with the requirements of Financial
Accounting Standard 106 attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing local
exchange and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products associated with
the Exchanges, including without limitation such unregulated activities,
services and products of the Company conducted, offered or serviced by the
Transferred Employees or provided or related to the Company's subscribers or
customers served in or from the Exchanges (such unregulated activities,
services and products (the "Unregulated Business") are considered an integral
part of the Business for all purposes of this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company par value $1.00.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations (including
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive
or treble damages), costs and expenses (including reasonable fees,
disbursements and expenses of counsel, experts, consultants and expert
witnesses), fines, penalties, interest or bonds, based upon any Environmental
Requirements of any Governmental Authority, or as a consequence of (a) the
release or threatened release of a Regulated Material in amounts that require
response or remediation into the outdoor environment, (b) any circumstance
or condition relating to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof, that does
not comply with Environmental Requirements, or (c) any claim, demand, notice,
cause of action, directive, order, judgment, fine or penalty asserted or
sought under or pursuant to any Environmental Requirements by an entity or
person not a party to this Agreement, to the extent that the condition or
circumstance or event giving rise to the claim, demand, notice, cause of
action, directive, order, judgment, fine or penalty relates to the ownership
or operation of the Property by any person or party or the conduct of the
Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any
other natural resource), or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Regulated Material, and (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages
due to, or threatened as a result of, the presence of or exposure to any
Regulated Material in each case as now amended and as now or hereafter in
effect. The term Environmental Requirements includes, without limitation,
CERCLA, the Superfund Amendments and Reauthorization Act, the federal Water
Pollution Control Act of 1972, the federal Clean Air Act, the federal Clean
Water Act, the federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the federal
Solid Waste Disposal Act, the federal Toxic Substances Control Act and the
federal Insecticide, Fungicide and Rodenticide Act, each as now amended and
as now or hereafter in effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Exchanges is defined in Section 2.2.
Excluded Books and Records means the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the Excluded
Property or (iii) the Retained Liabilities, (iv) employees of the Company
that are not Transferred Employees, and (v) subject to Section 11.13, all
Original Cost Documents that are not located in the Exchanges.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
the Company's interest in any cellular telephone or personal communications
services business, and, in each case, any applications or licenses granted
with respect thereto, and the assets disposed, transferred or dividended by
the Company pursuant to Section 11.22 and any assets excluded pursuant to
Sections 11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice
president of the entity in charge of a principal business unit, division or
function.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other
Governmental Authority, as to which: (a) no request for stay of the action
by the FCC, the PUC, or such other Governmental Authority, as the case may
be, is pending, no such stay is in effect, and if any time period for filing
any request for such a stay is provided by statute or regulation, such time
period has passed; (b) no petition, motion or application for rehearing,
reconsideration, or review, of the action is pending before the FCC, the PUC,
or such other Governmental Authority, as the case may be, and the time
provided for filing any such petition, motion or application has passed; (c)
the FCC, the PUC, or such other Governmental Authority, as the case may be,
does not have the action under reconsideration on its own motion and the time
in which such reconsideration is permitted has passed; and (d) no appeal to
a court, of the FCC's, the PUC's or such other Government Authority's action,
as the case may be, is pending or in effect, and the deadline for filing any
such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company
is a party, or to which any Affiliate of the Company is a party and which are
used in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the Company's Materials and
Supplies (item 8 - Assets on the Company's Balance Sheet).
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant
Under Construction -- Short Term (item 23 - Assets on the Company's Balance
Sheet), Plant Under Construction -- Long Term (item 24 - Assets on the
Company's Balance Sheet), and Telecommunications Plant -- Other (item 25 -
Assets on the Company's Balance Sheet), less Accumulated Depreciation and
Amortization (item 27 - Assets on the Company's Balance Sheet).
Original Cost Documents means all original cost documentation relating
to the Telephone Plant.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Service Commission of New Mexico, the Arizona
Corporation Commission, and the Public Service Commission of Utah.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under
Environmental Requirements or, as applicable, Existing Environmental
Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 4,487,900 shares of the Common Stock owned by Seller.
Tax Returns means a report, return or other information statement
required to be supplied to a federal, state or local taxing Governmental
Authority with respect to Taxes, including, where permitted or required,
combined or consolidated returns for any group of entities that includes the
Company.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty,
real and personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll, severance,
recording, ad valorem, gains, value-added, unemployment compensation, general
corporate, profits, registration, unincorporated business, alternative,
social security, estimated, add-on, minimum, privilege or withholding tax and
any interest and penalties and additions to such taxes (civil or criminal)
related thereto or to the nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance
Sheet), "Regulatory Liabilities" (Item 24 - Liabilities on the Company's
Balance Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the
Company's Balance Sheet), and "Donations of Telephone Plant" (Item 26 -
Liabilities on the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth
in this Article 1.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer
agrees to purchase and accept, as of the Effective Date, the Shares, free and
clear of all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists
of the Telephone Plant, Contracts and Leases (to the extent permitted
following compliance with Section 5.3), Company Books and Records, FCC
Licenses, the Non-FCC Authorizations and other assets in effect or owned by
the Company as of the Effective Date that are associated with (i) the
telephone exchanges listed in Schedule 2.2(a) (the "Exchanges"), and (ii) the
Unregulated Business described on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone
Plant" means the Real Property, machinery, equipment, vehicles and all other
assets and properties used, or held for future use, in connection with the
conduct of the Business, including, without limitation, all improvements,
plants, systems, structures, construction work in progress, telephone cable
(wherever located and whether in service or under construction), microwave
facilities (including frequency spectrum assignments), telephone line
facilities, telephones, machinery, furniture, fixtures, tools, implements,
conduits, stations, substations, equipment (including, without limitation,
central office equipment, subscribers' station equipment and other equipment
in general), instruments, house-wiring connections and all other equipment
of every nature and kind owned by the Company or in which the Company holds
an interest (other than as a lessee) and used in connection with the
Business. For purposes of this Agreement, "Real Property" means the real
property owned by the Company and used in connection with the Business,
including, without limitation, all land, buildings, structures, easements,
rights of way, appurtenances, improvements or privileges located thereon and
relating thereto. Without limiting the generality of the foregoing, the
Telephone Plant includes the assets that would be properly included in the
fixed asset accounts referenced in Part 32 of the FCC's Rules and Regulations
(47 C.F.R. Part 32), as such accounts are reflected in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate
of the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement,
"Company Books and Records" means all of the Company's customer or subscriber
lists and records, accounts and billing records (including a copy of the
detailed general ledger and the summary trial balances, where available for
the past two fiscal years), detailed continuing property record lists, plans,
blueprints, specifications, designs, drawings, surveys, engineering reports,
personnel records (where applicable), Original Cost Documents (where located
in the Exchanges but excluding Excluded Books and Records) and all other
documents, computer data and records (including records and files on computer
disks or stored electronically) relating to the Business (excluding Excluded
Books and Records), the Property and the Transferred Employees, except for
the Excluded Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses"
means all licenses, certificates, permits or other authorizations, including,
without limitation, Section 214 authorizations where applicable, granted to
the Company by the FCC.
2.2.5 [INTENTIONALLY DELETED]
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or
other authorizations (other than FCC Licenses) granted to the Company by
Governmental Authorities (including without limitation those that are listed
or required to be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance
with the other terms and conditions of this Agreement, on the Closing Date,
Buyer will pay to Seller the sum of Fifty Four Million One Hundred One
Thousand Dollars ($54,101,000.00), subject to adjustment as provided in
Section 3.2 (the "Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated
Purchase Price. Such delivery shall be made by bank wire transfer to an
account that Seller shall designate at least two (2) business days prior to
the Effective Date.
(ii) Buyer will use its best efforts to make the wire transfer
of the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing
Date, provided that all conditions to Closing set forth in Article 7 have
been satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable,
the Purchase Price will be decreased by the reasonable estimate of the cost
to repair or replace the Damaged Property, as determined by the mutual
agreement of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable,
the Purchase Price will be decreased by the reasonable estimate of the cost
to replace the Damaged Property, as determined by the mutual agreement of
Buyer and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase
Price shall be adjusted, plus or minus, as the case may be, in an amount
equal to the amount by which the sum of Net Telecommunications Plant and
Materials and Supplies as of the Effective Date exceeds or is less than the
June 1994 Base Amount; provided, however, that in determining Net
Telecommunications Plant and Material and Supplies as of the Effective Date,
no effect will be given for: (i) any decrease thereof resulting from damage,
loss or destruction of Damaged Property which is repaired or replaced by
Seller or the Company or for which Seller or the Company makes a
substitution, in accordance with Section 11.9(b); (ii) any increase thereof
resulting from expenditures made by Seller or the Company in connection with
any such repair, replacement or substitution of Damaged Property in
accordance with Section 11.9(b); or (iii) any increase thereof resulting from
Seller's expenditures pursuant to its obligations under Section 14.1.7(b) and
(c) except for the cost of purchasing specific items of new plant (i.e.,
storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase
Price will be adjusted, plus or minus, as the case may be, in an amount equal
to the amount by which, in each case as of the Effective Date: (i) Adjusted
Total Current Assets plus Adjusted Total Non-Current Assets exceeds or is
less than (ii) Adjusted Total Current and Non-Current Liabilities plus Total
Long Term Debt to the extent such Total Long-Term Debt shall remain
outstanding immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment
Regarding Assets and Liabilities in Section 3.2(d)) and accompanied by a
reasonably detailed statement, certified by the chief financial or accounting
officer of Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer
shall deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for
purposes of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c)
and the Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and
in accordance with the same accounting principles, methods and practices used
to prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For
the purpose of preparing Buyer's calculations and adjustments, Seller shall
give Buyer access to all books, records, and other information regarding the
Company available to Seller that Buyer may reasonably determine appropriate.)
Within thirty (30) days following the delivery of such calculations and
adjustments, Seller shall notify Buyer of any objection thereto, stating in
reasonable detail the reasons therefor; otherwise, such calculations and
adjustments of the Purchase Price shall be final and binding on Seller and
Buyer. (For the purpose of reviewing Buyer's calculations and adjustments,
Buyer shall give Seller access to all books, records, and other information
regarding the Company available to Buyer that Seller may reasonably determine
appropriate.) If Seller shall object, Seller and Buyer shall work in good
faith to agree on the correct amounts for the final Purchase Price, but if
they fail to agree, either party may exercise its rights pursuant to Article
16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) if the Final Purchase Price shall exceed the Estimated
Purchase Price, Buyer shall cause to be transferred to such account in the
United States as Seller may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon
at a rate of seven percent (7%) per annum from the Effective Date through the
date of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon
at a rate of seven percent (7%) per annum from the Effective Date through the
date of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect
to amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications
to be filed with the PUC and with respect to Material Regulatory Approvals,
the parties shall file the applications and notices described on Schedule 5.1
in such form as agreed to by the parties with the PUC and other appropriate
Governmental Authorities, seeking an order permitting the transfer of control
of the Company to Buyer (the "Regulatory Approvals"). Each party agrees to
use its best efforts to obtain the Regulatory Approvals and the parties agree
to cooperate fully with each other and with all Governmental Authorities to
obtain the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and
7.2.4, and the Regulatory Approvals that do not contain an asterisk on
Schedule 5.1 constitute Immaterial Regulatory Approvals (the "Immaterial
Regulatory Approvals") which are subject to Section 5.3, but not Sections
7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness
identified on Schedule 5.2(a) (the "Long Term Indebtedness"), where required
by the underlying debt instruments, as promptly as practicable following the
Execution Date, but in any event no more than forty-five (45) days
thereafter, the parties shall contact the holders of such indebtedness to
request, and use their best efforts to obtain, such holders' consent
("Debtholder Consents") to the transfer of control of the Company on terms
acceptable to the parties. The parties acknowledge that all Long Term
Indebtedness for which Debtholder Consents have been obtained before the
Effective Date and all other Long Term Indebtedness for which Debtholder
Consent is not required, shall remain outstanding immediately after the
Effective Date and shall be included as a Purchase Price adjustment pursuant
to Section 3.2(d). Each party shall bear their own costs and expenses in
obtaining such Debtholder Consent. Neither party, however, shall be required
to make any payment to the debtholder to obtain the Debtholder Consent,
except that Seller shall be responsible for any such payments as are
specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in
full (including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall
repay on or prior to the Effective Date, Seller shall take, at Seller's sole
cost and expense, all actions necessary with respect to all persons or
entities (collectively, the "Secured Parties") holding any security interest
or lien against the Property, to obtain the termination or release, as of the
Effective Date, and the prompt removal after the Effective Date, of all
security agreements, mortgages and financing statements relating to the
Property (such terminations and releases being hereinafter collectively
referred to as the "Indebtedness Releases or Terminations"). Buyer agrees
to cooperate in good faith with Seller in obtaining the required Indebtedness
Releases or Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the
parties hereto shall mutually seek the consent, approval or waiver of the
other party to any Lease or Contract that requires consent, approval or
waiver as a condition to the transfer of control of the Company to Buyer as
a result of Buyer's purchase of the Shares. To the extent any of the
approvals, consents or waivers required with respect to any Lease, Contract
or Immaterial Authorization have not been obtained with respect to any Lease,
Contract or Immaterial Authorization as of the Effective Date, Seller shall
continue to use its best efforts to obtain the consent of such other third
party that is required for the transfer of control of such Lease, Contract
or Immaterial Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if
a third party refuses or has failed to consent to the transfer of control of
a Lease, Contract or Immaterial Authorization after the Seller has used its
best efforts for a period of six months after the Effective Date to obtain
such consent, waiver or approval, then Seller and Buyer shall within thirty
(30) days after expiration of such six-month period negotiate in good faith
and agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or
Immaterial Authorization except as otherwise provided in Section 11.12 with
respect to the Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in
obtaining such consents, approvals or waivers to the extent such costs or
expenses are specified in the relevant Lease, Contract or Immaterial
Authorization, or under applicable Law, and shall reimburse Buyer to the
extent Buyer makes any transfer payments which are specified in amount and
required under any Lease or Contract to the lessor or other party thereto,
provided that seven (7) business days before Buyer makes any transfer
payments, Buyer will notify Seller of its intent to do so and after making
such transfer payment, Buyer will provide evidence satisfactory to Seller
that such transfer payment was made. Buyer and Seller will negotiate in good
faith to determine the extent to which each will bear any other costs and
expenses arising in connection with obtaining such consents, approvals and
waivers.
5.4 FCC Consents. As promptly as practicable after the Execution
Date, but no later than forty-five (45) days after the Execution Date, the
parties shall file all applications and requests described on Schedule 5.4
in such form as agreed to by the parties with the FCC seeking, and shall use
their best efforts to obtain, the FCC's consent to the transfer of control
of all FCC Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer
(the "FCC Consents"). The parties each agree that in connection with taking
the immediately above described actions, they will not file any application
or request for a waiver of Part 36 (study areas), Part 61 (tariffs), and
Part 69 (price caps and study areas) of the FCC Rules, and that on the
Effective Date the study areas relating to the Exchanges shall remain in the
National Exchange Carrier Association Tariff F.C.C. No. 5, provided, however,
that such study areas shall remain in the NECA Tariff FCC No. 5 after the
Effective Date only for so long as Buyer, in its sole discretion, shall
determine. Each party agrees to use its best efforts, and the parties agree
to cooperate fully with each other and with the FCC, to obtain the FCC
Consents at the earliest practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution
Date but in no event later than thirty (30) days after the Execution Date,
the parties will make such filings as may be required by the HSR Act with
respect to the sale contemplated by this Agreement. Thereafter, the parties
will file as promptly as practicable any supplemental information that may
be requested by the U.S. Federal Trade Commission or the U.S. Department of
Justice pursuant to the HSR Act. The parties agree to cooperate in seeking
early termination of the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to
all interexchange carriers having business relationships with the Company,
to all customers of the Company, and to all officers, employees and agents
of the Company having knowledge or information concerning the operations of
the Company so as to afford Buyer the opportunity to make such review,
examination and investigation of the Company and the Property as Buyer may
desire to make, to evaluate the competitiveness of the Company and the
Business, and to enable Buyer to assimilate the Company and the Business
into Buyer's operations as soon as practicable after the Effective Date. To
the extent it so desires, Seller shall accompany Buyer on all of Buyer's
access to interexchange carriers, customers and agents of the Company. Buyer
will be permitted to make extracts from or copies of such books and records
as may be reasonably necessary. Buyer will not contact any employee,
customer or supplier of the Company as to this Agreement or the matters
involved herein except in accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and
Seller's consent (which consent will not be unreasonably withheld), Seller
shall cause the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including
sessions to train such employees in Buyer's business planning process in
order to have the Company after the Effective Date follow Buyer's business
planning process and procedures);
(ii) The Company's management to work with Buyer during
Buyer's planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to
participate in the Company's planning for, any material reduction in work
force or other arrangements regarding employees required or implemented
pursuant to the Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's
request, Seller will furnish, and cause the Company to furnish, such
financial and operating data and other information pertaining to the Company
as Buyer may reasonably request in order, among other things, to comply with
Buyer's disclosure obligations under the federal securities or other laws as
such obligations relate to Buyer's prospective ownership of the Company,
including any disclosure required in connection with the sale of any
securities by Buyer; provided, however, that nothing herein will obligate
Seller or the Company to take actions that would unreasonably disrupt the
normal course of the business of the Company or violate the terms of any
applicable Law or any contract to which the Company is a party or to which
any of its assets is subject in providing such information, or to incur any
costs with respect to Buyer's external auditors (or the Company's external
auditors in the event a report by such auditors is requested by Buyer)
providing accounting services with respect to issuing an auditor's report
required by Buyer. Any information or document provided to Buyer or acquired
by Buyer during this investigation shall be deemed "Evaluation Material" as
that term is defined in the Confidentiality Agreement and shall be subject
in all cases to the terms of the Confidentiality Agreement; provided,
however, that following consultation with Seller, Buyer may disseminate
financial or other information with respect to the Business or the Company
that Buyer, upon consultation with counsel, determines is required to be
disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer
may disclose Evaluation Material (as defined in the Confidentiality
Agreement) to representatives of rating agencies, underwriters, underwriters'
counsel, public accountants, prospective lenders and other third parties
involved in any of Buyer's offering of securities or other financings and to
fixed income and equity analysts to the extent such parties reasonably have
a need to know any such information; provided, that such parties shall (y)
be advised of the confidential nature of any Evaluation Material they
receive, and (z) agree in writing to be bound to the provisions of the
Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this
Agreement not to be true and correct as of the date on which it was made or
as of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may
be contemplated), or the institution or overt threat or settlement of
significant litigation, involving the transactions contemplated by this
Agreement; of which in any such case, Buyer's representatives listed on
Schedule 6.3(a) become aware on or before the Effective Date. Buyer shall
use reasonable best efforts to keep Seller informed of the events described
in this Section 6.3(a) and shall permit Seller access to all materials
prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or
as of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may
be contemplated), or the institution or overt threat or settlement of
significant litigation, involving the Company, the Business or the
transactions contemplated by this Agreement; of which in any such case,
Seller's representatives listed on Schedule 6.3(b) become aware on or before
the Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit
Buyer access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option
of Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations
and warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification)
contained therein) shall be true and correct as of the Effective Date, except
for such representations or warranties that are made expressly as of some
other date, which shall be true and correct (after giving effect to any
material adverse effect qualification (or any other materiality
qualification) contained therein) as of such other date, and Seller shall
have delivered to Buyer a certificate in the form attached hereto as Schedule
7.1.1 ("Seller's Closing Certificate"), dated as of the Effective Date and
signed by one of Seller's Executive Officers, certifying each of the
foregoing, or specifying those respects in which such covenants have been
materially breached or such representations and warranties (after giving
effect to any material adverse effect qualification (or any other materiality
qualification) contained therein) are not true and correct in which event,
if the Closing occurs, any claim with respect to matters so specified shall
be waived by Buyer unless otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set
forth on Schedule 5.4 shall have been obtained free of any special terms,
conditions or restrictions which Buyer determines, in good faith and in its
reasonable discretion, will materially and adversely affect the anticipated
operational and financial benefits to Buyer of the transactions contemplated
by this Agreement. For purposes of this Section 7.1.3, all such approvals
and consents shall be deemed to have been obtained upon the grant thereof
becoming a Final Order. In addition, there shall not have been entered a
preliminary or permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any jurisdiction, the effect
of which prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material
adverse changes to the Property as a whole or the financial position or
results of operations of the Company as a whole, and, subject to Section
11.9, the Company shall not have suffered any material loss or damage to the
Property, whether or not insured, that would materially affect or impair the
Company's ability to conduct the Business after the Effective Date. None of
the Additional Financial Statements of the Company delivered pursuant to
Section 11.4 shall reflect a material change in the financial position or
results of operations of the Company from the financial position or results
of operations reflected in the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have
delivered to Buyer all consents, approvals or waivers of lessors or other
third parties to the Material Agreements as so identified by an asterisk on
Schedules 9.1.9 and 9.1.13, as such Schedules may be amended pursuant to
Section 11.24. All of such delivered consents, approvals or waivers shall
be in effect as of the Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the
reasonable judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution
Date or any time thereafter, of the public records regarding liens and
judgments with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to
Section 5.2(a), Buyer if required by the underlying debt instrument shall
have received the Debtholder Consents and shall have entered into any other
necessary agreements with the holders of such Long-Term Indebtedness
evidencing such Debtholder Consent in form and substance reasonably
acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option
of Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties.
There shall have shall have been no material breach by Buyer of any of its
covenants to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 9.2 shall be true and
correct as of the Effective Date, except for such representations or
warranties made expressly as of some other date, which shall be true and
correct as of such other date (all such representations and warranties to be
qualified by any materiality standards contained therein), and Buyer shall
have delivered to Seller a certificate ("Buyer's Closing Certificate"), dated
as of the Effective Date and signed by one of Buyer's Executive Officers,
certifying each of the foregoing or specifying those respects in which such
covenants have not been performed or such representations and warranties are
not true and correct in which event if the Closing occurs any claim with
respect to matters so specified shall be waived by Seller unless otherwise
expressly agreed by Buyer at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the
manner specified in Section 3.1, the Estimated Purchase Price as adjusted
pursuant to Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set
forth on Schedule 5.4 shall have been obtained free of any special terms,
conditions, or restrictions which Seller determines, in good faith in its
reasonable discretion, will materially and adversely affect the anticipated
operational and financial benefits to Seller of the transactions contemplated
by this Agreement. For purposes of this Section 7.2.4, all such approvals
and consents shall be deemed to have been obtained upon the grant thereof
becoming a Final Order. In addition, there shall not have been entered a
preliminary or permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any jurisdiction, the effect
of which prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the
reasonable judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to
Section 5.2(a), Seller, if required by the underlying debt instrument, shall
have received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at a place mutually agreed upon by the parties at
9:00 a.m., local time, on the last calendar day (the "Closing Date") of the
calendar month in which occurs the tenth (10th) business day after the date
Seller notifies Buyer in writing (the "Notice") of its determination that all
required Material Regulatory Approvals and FCC Consents have been obtained
and provided that the other conditions set forth in Article 7 shall have been
satisfied, or at such other place and time as may be agreed upon by Seller
and Buyer. The transactions to be consummated at Closing shall be deemed to
have been consummated as of 11:59 p.m. on the last calendar day of the
calendar month in which occurs the tenth (10th) business day after the date
of the Notice (the "Effective Date"). If the Effective Date is not a day on
which financial institutions are open and operating, then the Closing Date
shall be the immediately following business day on which financial
institutions are open and operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall
deliver to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for
transfer or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence
satisfactory to Buyer that all Long-Term Indebtedness (and interest, premiums
and penalties thereon) to be repaid pursuant to Section 5.2(b) has been (or
will be at Closing) repaid in full.
(e) All of the documents and papers required of Seller as
conditions to Closing, including without limitation, the Regulatory
Approvals, FCC Consents and the documents required to be delivered by Seller
pursuant to Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant
to Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall
deliver to Seller the following items and documents duly executed and
acknowledged as appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2),
in the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as
conditions to Closing, including, without limitation, the Regulatory Approval
and FCC Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant
to Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the
Buyer certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and
Bylaws to execute and deliver this Agreement and to fulfill its respective
obligations under this Agreement. The execution and delivery by Seller of
this Agreement and the fulfillment of its obligations under this Agreement
have been duly authorized by all necessary corporate action on the part of
Seller. This Agreement has been duly executed and delivered by Seller and,
assuming the due execution and delivery of this Agreement by Buyer,
constitutes a valid and binding obligation of Seller, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualification that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller
of its obligations under this Agreement will not, (i) conflict with or
violate any provision of Seller's or the Company's certificate of
incorporation or bylaws or, (ii) except as set forth in Schedule 9.1.13, or
subject to obtaining the approvals and consents reflected in Article 5,
conflict with, violate or result in the breach of, constitute a default
under, accelerate the performance required by, or result in the creation of
any encumbrance upon any of the Property under any provision of any Contract
other than any such conflict, violation or breach that alone or in the
aggregate would not have an adverse effect on the Buyer, the Company, the
Business or the Property after the Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court or governmental agency, authority or instrumentality,
including, without limitation, the Navajo Nation ("Governmental Authority")
is required to be obtained or made by or with respect to Seller or the
Company or in connection with the execution and delivery of this Agreement
by Seller or the fulfillment by Seller of its obligations under this
Agreement, except (i) the filings and approvals described in Article 5,
(ii) as described in Schedule 9.1.3, and (ii) such other consents, approvals,
orders or authorizations, or registrations, declarations or filings, which
if not obtained or made would not result in a material adverse effect on
Buyer, the Company, the Business or the Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
execution and delivery of this Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any applicable existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect
on the Company, the Business as a whole or on any significant part of
Property after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware;
it has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee
or commission to any broker, finder, investment banker or other intermediary
in connection with the transactions contemplated by this Agreement in such
a manner as to give rise to a claim against Buyer for any broker's or
finder's fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any
of its obligations or liabilities, or the performance, observance or
fulfillment of any covenant or condition relating thereto, and no event has
occurred and is continuing that constitutes a material breach or default
thereunder or that would constitute such a material breach or default with
the giving of notice or lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(ii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii) such other imperfections
of title and encumbrances, if any, as do not interfere in any material
respect with the present use or value of the item of owned Property to which
such imperfection or encumbrance relates. No condemnation proceeding is
pending or, to the knowledge of Seller or the Company, threatened with
respect to any part of the Property and such Property is not in any violation
of any restrictive covenant relating thereto. Schedule 9.1.8-2 sets forth
the address and a general description of each item of Real Property owned by
the Company included in the Property. In addition, Schedule 9.1.8-2 sets
forth a list of the Real Property included in the Property in which the
Company holds other than a fee interest (such as easements and rights of
way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there
is not any existing material default or existing material breach of a
covenant by the Company under any Lease. The Company enjoys peaceful and
undisturbed possession under all material Leases and, to Seller's and the
Company's knowledge, the lessor under any such Lease is not (with or without
notice or the lapse of time, or both) in material breach or default
thereunder, has performed all material obligations required to be performed
by it thereunder, and has not given notice of such lessor's intent to
terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is
in substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation
of such Property. Except as set forth on Schedule 9. 1. 10, the Company has
not received any written notice within the past twelve (12) months of a
violation of any ordinances, regulations or building, zoning and other
similar laws with respect to such assets that would have a material adverse
effect on the Company, the Business as a whole or any significant part of the
Property. Each parcel of Real Property and, to the knowledge of Seller and
the Company, of real estate leased by the Company and material or necessary
to the Business as presently conducted substantially complies with all
applicable Laws except where the failure to so comply individually or in the
aggregate, would not have a material adverse effect on the Company, the
Business as a whole or any such parcel after the Effective Date. Except as
set forth on Schedule 9.1.10, other than the Company, no person or party has
actual possession or has a right to possession of all or any material portion
of any parcel of such Real Property or such leased real estate. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 9.1.10, SELLER MAKES NO REPRESENTATIONS
OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED OR STATUTORY, AS TO THE
CONDITION OR FITNESS OF THE TANGIBLE PERSONAL PROPERTY INCLUDED IN THE
PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED OR STATUTORY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND WARRANTY ARISING
FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet,
income statement and related statement of cash flows as of and for the
respective periods ended December 31, 1992, and December 31, 1993, together
with the auditor's report thereon (the "Financial Statements"). The
Financial Statements were prepared based upon the books and records of the
Company, and fairly present in all material respects the financial condition
of the Company as of the appropriate periods and the results of operations
for the year then ended, in each case in conformity with GAAP and to the best
of Seller's knowledge and to the extent required by applicable Law, have been
prepared in all material respects in conformity with the regulations of the
FCC and the PUC. The Financial Statements contain no untrue statements of
any material fact nor omit to state any material facts required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in
accordance with GAAP (except for the omission of notes thereto with respect
to interim Additional Financial Statements), consistent with past practices,
from the books and records of the Company; and (ii) will fairly present the
financial condition of the Company and the results of operations of the
Company for the periods indicated, subject, in the case of interim Additional
Financial Statements, to normal year-end adjustments which will not be
material in amount or effect; and (iii) to the best of Seller's knowledge and
to the extent required by applicable Law, will be prepared in all material
respects in conformity with the regulations of the FCC and the PUC; and
(iv) will not contain any untrue statements of any material facts or omit to
state any material facts required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes
thereto, consistent with past practices, from the books and records of the
Company and fairly presents the financial condition of the Company as of such
date subject to normal year-end adjustments which will not be material in
amount or effect, and to the best of Seller's knowledge and to the extent
required by applicable Law, was prepared in all material respects in
conformity with the regulations of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities,
operations or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or
the Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance
or agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of
the Property, or any increase or an agreement to increase any indebtedness
of the Company, except in the ordinary course of business;
(d) Any material change in the Company's tariffs or in the manner
of conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation
or other event or condition that materially and adversely affects the
business or prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on
the Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the
Company except as required by GAAP or any change in depreciation or
amortization policies or rates heretofore adopted by the Company except as
required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's
knowledge, any attempt to organize the Transferred Employees for the purpose
of collective bargaining;
(k) Any event that would have been prohibited under Section 11.5
if Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or
other acquisition by the Company of any outstanding shares of capital stock
or other securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity
other than loans, advances, capital contributions or investments made in the
ordinary course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or
the Company and any third party) to do or to take any of the actions referred
to in paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as
of the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith.
The Company is not in material breach or default in connection with any
Contracts, and there is no basis for any claim of breach or default by the
Company, or to Seller's the Company's knowledge, any other party, in any
material respect under any of the Contracts. None of the Contracts, either
separately or in the aggregate, materially and adversely affects the Company,
the Business or the Property. After the Effective Date, all rights and
obligations of the Company under the Contracts shall continue unimpaired in
the Company (assuming that if any Contract requires the consent of the other
party thereto, such consent will have been obtained by the parties hereto
prior to the Effective Date). Except for the instruments specifically listed
in Schedule 9.1.13, the Company is not a party to or subject to: (i) any
agreement for the purchase or disposition of any material, equipment,
supplies, inventory or service, except individual purchase orders and
contracts in amounts less than Twenty-Five Thousand Dollars ($25,000.00);
(ii) any agreement to which the Company is a party or by which any of the
Property is bound relating to indebtedness for money borrowed including
capital leases, security arrangements relating thereto and any amendment or
waiver thereof; and (iii) any other agreement not of the type covered by any
of the foregoing items of this Section 9.1.13 requiring payments by the
Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required
to be listed thereon, the Contracts which require the consent, approval or
waiver of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a
character usually insured by companies carrying on similar businesses is
insured under insurance policies in such amounts and against such losses or
casualties as is (i) usual in such companies and (ii) required under any of
the Contracts or Leases. The insurance policies referred to in this Section
9.1.14 are (i) listed on Schedule 9.1.14, and (ii) in full force and effect
and the premiums due thereon have been duly and timely paid. The most
current statement of values (the statement of values of property of an
insurable nature that is submitted to an insurance company to be used as a
basis for the calculation of premiums) relative to the Property as presently
insured has been made available to Buyer by Seller. On the Effective Date,
the coverage under the insurance policies and programs of Seller and its
Affiliates applicable to the Company will be terminated, and Buyer will be
responsible for providing all insurance coverage for the Company. Following
the Effective Date, Seller shall be responsible for and shall pay any
additional premiums that might be required by an insurance company for
insurance coverage prior to the Effective Date relating to the Company and
shall be entitled to any refunds or dividends due from such companies
relating to such coverage. Schedule 9.1.14 sets forth a list of the open
material claims affecting the Company complete in all material respects, and
a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be
filed on or prior to the Effective Date (taking into account all extensions
of due dates) by or with respect to the Company and has paid or adequately
provided for all Taxes shown thereon as owing, except where the failure to
file such Tax Returns or pay any such Taxes would not, or could not
reasonably be expected to, have a material adverse effect on Buyer, the
Business, or the Company after the Effective Date, (ii) all such Tax Returns
were or will be correct and complete in all material respects, (iii) to the
knowledge of Seller, all withholding Tax requirements imposed on or with
respect to the Company have been or will be satisfied in full in all
respects, and (iv) all penalties, interest or other charges that have or will
become due with respect to the late filing of any such Tax Return or late
payment of any such Tax have been or will be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case, with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no
material written claim against the Company for any Taxes, and no material
assessment, deficiency or adjustment has been asserted or, to the knowledge
of Seller proposed with respect to any Tax Return of or with respect to the
Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in
force any extension of time with respect to the due date for the filing of
any Tax Return of or with respect to the Company or any waiver or agreement
for any extension of time for the assessment or payment of any Tax of or with
respect to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements
includes adequate provisions for the payment in full of all federal and state
income taxes of the Company for all taxable periods or portions thereof
during the period beginning with respect to each Tax Return statute of
limitations and ending no later than December 31, 1993. The balance sheet
included in the Financial Statements has attached thereto a schedule (the
"Tax Schedule") which sets forth provisions for such federal and state income
taxes.
(f) All accrued rights or obligations under any written or
unwritten Tax allocation or sharing agreements or arrangements affecting the
Company are reflected in the intercompany accounts of the Company. All such
Tax allocation or sharing agreements or arrangements have been or will be
cancelled on or prior to the Effective Date. No payments are or will become
due by the Company after the Effective Date pursuant to any such agreement
or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the
property of the Company is held in an arrangement for which partnership Tax
Returns are being filed, and the Company does not own any interest in any
controlled foreign corporation (as defined in Section 957 of the Code) or
passive foreign investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the
property of the Company or any of its Subsidiaries is subject to a safe-
harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954 as in effect after the Economic Recovery Act of 1981 and before the Tax
Reform Act of 1986) or is "tax-exempt use property" (within the meaning of
Section 168(h) of the IRC) or "tax-exempt bond financed property" (within the
meaning of Section 168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will
not be required to include any amount in income for any taxable period
beginning after December 31, 1993 as a result of a change in accounting
method for any taxable period ending on or before December 31, 1992 or
pursuant to any agreement with any Tax authority with respect to any such
taxable period.
(j) The Company has not consented to have the provisions of
Section 341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this
Agreement, neither Buyer nor the Company will be obligated to make a payment
to an individual that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the IRC without
regard to whether such payment is reasonable compensation for personal
services performed or to be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the
proper governmental authorities or properly deposited as required by
applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or
with respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that,
if determined adversely to the Company, would reasonably be expected to have
a material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of
any reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the
Business as a whole or the Property. The Company is not in default under any
judgment, order or decree of any Governmental Authority which would
reasonably be expected to have a material adverse effect on the Company, the
Business as a whole or any significant part of the Property after the
Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, the Company is an issuing
carrier in the National Exchange Carrier Association Tariff F.C.C. No. 5 for
the purpose of providing interstate access service. Except as described on
Schedule 9.1.17(a), the state regulatory tariffs applicable to the Company
stand in full force and effect on the date of this Agreement in accordance
with all terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation or termination in
connection therewith, nor is the Company subject to any restrictions or
conditions applicable to its state regulatory tariffs that limit or would
limit the operation of the Business (other than restrictions or conditions
generally applicable to tariffs of that type). Except as described on
Schedule 9.1.17(a), each such state tariff has been duly and validly approved
by the appropriate state regulatory agency. Except as otherwise disclosed
on Schedule 9.1.17(a), the Company is not in material violation under the
terms and conditions of any such state tariff, and there is no basis for any
claim of material violation by the Company in any material respect under any
such state tariff. Except as described in Schedule 9.1.17(a), there are no
applications by the Company or complaints or petitions by others or
proceedings pending or threatened before the state regulatory authority
relating to the Company, the Business or its operations or the state
regulatory tariffs. To the knowledge of Seller and the Company, there are
no material violations by subscribers or others under any such state tariff
that would be material to the Company or the Business. A true and correct
copy of each state tariff applicable to the Company or the Business has been
delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance
with its terms, and there is no outstanding notice of suspension,
cancellation or termination or, to Seller's or the Company's knowledge, any
threatened suspension, cancellation or termination in connection therewith
nor are any of such FCC Licenses subject to any restrictions or conditions
that limit the operation of the Business (other than restrictions or
conditions generally applicable to licenses of that type). The FCC Licenses
are free from all security interests, liens, claims, or encumbrances of any
nature whatsoever. Except as set forth on Schedule 9.1.17(b), there are no
applications by the Company or material complaints or material petitions by
others or proceedings pending or threatened before the FCC relating to the
Company or the FCC Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its
terms. To Seller's and the Company's knowledge, no event has occurred with
respect to any materially necessary Non-FCC Authorization which permits, or
after notice or lapse of time or both would permit, revocation or termination
thereof, or would result in any other material impairment of the rights of
the holder of such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term
is defined in Section 3(1) of ERISA maintained or contributed to by the
Company or any of its Affiliates in respect of any Transferred Employee (as
defined below) (such plans being hereinafter referred to collectively as the
"ERISA Plans"), and each other material retirement, pension, profit-sharing,
money purchase, deferred compensation, incentive compensation, bonus, stock
option, stock purchase, severance pay, unemployment benefit, vacation pay,
savings, medical, dental, post-retirement medical, accident, disability,
weekly income, salary continuation, health, life or other insurance, fringe
benefit, or other employee benefit plan, program, agreement, or arrangement
maintained or contributed to by the Company or its Affiliates in respect of
or for the benefit of any Transferred Employee or former employee, excluding
any such plan, program, agreement, or arrangement maintained or contributed
to solely in respect of or for the benefit of Transferred Employees or former
employees employed or formerly employed by the Company outside of the United
States, as of the date hereof (collectively, together with the ERISA Plans,
referred to hereinafter as the "Plans"). Seller has supplied Buyer with a
true and complete copy of each Plan and all amendments thereto. Schedule
9.1.18(a) also includes a list of each material written employment,
severance, termination or similar-type agreement between the Company or its
Affiliates and any Transferred Employee (the "Employment Agreements").
Except to the extent that any assets, liabilities, or accounts are
transferred from the Plans or Agreements (pursuant to an Employee Transfer
Agreement or otherwise) to plan(s) or agreement(s) maintained or contributed
to by Buyer, all such Plans and Agreements shall remain the liabilities of
the Seller or its Affiliates and Seller shall take any and all steps
necessary to ensure that neither Buyer nor the Company shall be a sponsor of
any such Plan or Agreement subsequent to the Effective Date. Except as
otherwise disclosed on Schedule 9.1.18(a), the execution and delivery of this
Agreement by Seller and the performance of this Agreement by Seller will not
directly result now or at any time in the future in (i) the payment by the
Company or its Affiliates to any Transferred Employee of any severance,
termination, or similar type payments or benefits or (ii) any "parachute
payment" (as such term is defined in Section 28OG of the IRC) being made by
the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company
could be subject to any material liability pursuant to Section 409 of ERISA
or to either a civil penalty assessed pursuant to Section 502(i) of ERISA or
a tax imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or
is reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability
is reserved for or otherwise reflected on the Financial Statements or unless
such liability has been, or prior to the Effective Date will be, satisfied
in full.
(iii) There is no contract or Employment Agreement covering
any Transferred Employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in,
a transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the IRC), whether or not waived, as of the last day of the most recent fiscal
year of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and
administered in all material respects in accordance with its provisions and
with all applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent
applicable, Section 401(k) of the IRC, has been determined by the IRS to be
so qualified, and nothing has occurred since the date of the most recent such
determination (other than the effective date of certain amendments to the
IRC, the remedial amendment period for which has not yet expired) that would
adversely affect the qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to
any aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA
Plans is a "multi-employer plan," as that term is defined in Section 3(37)
of ERISA and with respect to any such multiemployer plans (as so defined)
listed in Schedule 9.1.18(d), Seller has not made or incurred a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined
in Sections 4203 and 4205 of ERISA that would result in the incurrence of a
material liability by the Company that is not reserved for or otherwise
reflected on the Financial Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or
the Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is
the Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered
by collective bargaining agreements. Except as set forth on Schedule
9.1.18(g), to the best knowledge of Seller and the Company, during the twelve
(12) months preceding the Execution Date there have not been any union
organizational campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of
any lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing
Date, a list of those Transferred Employees that Seller believes to have
participated in the health or dependent care reimbursement accounts of the
Company, together with the elections made prior to the Effective Date with
respect to such accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on
Schedule 9.1.19 copies of schedules (at the level of detail agreed to by the
parties but in any case including details regarding net book value and
continuing property records lists associated therewith) of the Company's
Telephone Plant as of June 30, 1994, including, to the extent available, a
schedule specifically identifying the Telephone Plant that is associated with
the Unregulated Business. The account balances reflected on the schedule of
Telephone Plant correspond, in all material respects, to the associated
account balances reflected on the Company's Continuing Property Records.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially complete list
of all vehicles included in the Property (including trailers, equipment
mounted on trailers and self-propelled equipment) together with the
manufacturer, model and year of each such vehicle, and indicates whether such
vehicle is owned or leased by the Company.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing
and collection revenues of the Company for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, the Company
has no materials and supplies, plant or equipment that has been disallowed
from rate base or excluded from the revenue calculations for any pool (unless
due to the deregulation of the service for which such assets are used) or in
the most recent rate order issued by the PUC or the FCC or any determination
by an administrator of an interstate or intrastate pool, and has not received
written notification that the PUC or the FCC or any pool administrator
proposes to exclude any assets from rate base or revenue calculations for the
pools, or any tariff filed with or approved in the most recent rate order of
the PUC or the FCC, in each case which materials and supplies, plant or
equipment, in the aggregate, would be in excess of one percent (1%) of Net
Telecommunications Plant.
9.1.22 Payments. All material payments of any kind required to be made
by the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically
indicate on Schedule 9.1.23, (i) the Company is in compliance in all material
respects with all Laws applicable to it, the Property and the Business and
holds all governmental permits or licenses required in order to conduct the
Business and to own and operate the Property; (ii) the present uses of the
Property in the conduct of the Business do not violate in any material
respect any Law and (iii) no written notice or warning from any governmental
or regulatory authority with respect to any failure or alleged failure by the
Company to comply with any Law or questioning the validity of any
governmental permit or license, has been issued or given, nor to the
knowledge of Seller or the Company, is any such notice or warning proposed
or threatened. Neither Seller nor the Company is aware of any fact, event
or circumstance relating to the Company that is reasonably likely to cause
a regulatory agency to deny or withhold its approval to the transactions
contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account books
and other accounting records of the Company are current, correct and complete
and reasonably well organized, in all material respects and to the knowledge
of Seller and the Company, to the extent required by applicable Law, conform
in all material respects with the rules and regulations of the FCC and PUC.
The Company and its Affiliates have retained substantially all Original Cost
Documents regarding the expenditures made by the Company within the
immediately preceding two-year period that relate to the Company's Net
Telecommunications Plant, and such Original Cost Documents are correct and
complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value
(as reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements
of the Business, will not materially exceed the Company's reserve for
obsolete or excess Materials and Supplies as reflected on the Company's
books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 Indian and BIA Consents.
(a) Schedule 9.1.27 sets forth all easements, rights-of-way,
franchises, licenses, permits, consents, approvals, certificates and other
authorizations of tribal authorities and the United States Bureau of Indian
Affairs (the "BIA") held by the Company (collectively "Indian
Authorizations"). All such Indian Authorizations are in full force and
effect, the Company is not in material default thereunder, and there are no
other Indian Authorizations required to be obtained by the Company from, or
filings required to be made by the Company with, any tribal authority or the
BIA; except where the failure to obtain such Indian Authorizations or to make
such filings would not have a material adverse effect on the Company, the
Business as a whole or on any significant part of the Property after the
Effective Date.
(b) Except as disclosed on Schedule 9.1.27, there are no material
claims, actions, lawsuits or other proceedings pending, or, to the knowledge
of Seller or the Company threatened, with respect to any of the Property
located, or any operations of the Business conducted, on Indian reservations
or tribal lands, and no tribal authority has given written notice of or, to
Seller's or the Company's knowledge, has threatened, any cancellation,
revocation, termination or material amendment or modification of any Indian
Authorization.
(c) Except as set forth on Schedule 9.1.27, no consent, approval
or waiver from, or filing with, any tribal authority or the BIA is required
to be obtained or made in connection with the execution and delivery by
Seller of this Agreement, or Seller's fulfillment of its obligations under
this Agreement.
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by PUC and Government Authorities.
Except as set forth on Schedule 9.1.29, there are no changes, modifications,
upgrades or enhancements required by the PUC or any Government Authority to
be made to the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this
Agreement or as otherwise set forth in Schedule 9.1.30 the Company has no
liabilities or obligations of any nature, secured or unsecured (absolute,
accrued, contingent or otherwise and whether due or to become due), of a
nature required to be recorded or disclosed in a corporate balance sheet
prepared in accordance with GAAP, except liabilities and obligations which
are not materially in excess of amounts reflected, reserved against or
disclosed in the December 31, 1993 Financial Statements or the notes thereto
and except for liabilities and obligations incurred in the ordinary course
of business since December 31, 1993. Except as may be reflected in the
December 31, 1993 Financial Statements or the notes thereto or on Schedule
9.1.30, the Company has no obligations under guarantees, endorsements or
indemnities of the obligations of any other person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all
persons holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner
of the Shares, which comprise 100% of the outstanding shares of all classes
of capital stock of the Company. Seller has legal, valid and marketable
title to the Shares, free and clear of all liens, claims, options, security
interests or other encumbrances of any character whatsoever ("Encumbrances").
The sale and delivery of the Shares to Buyer pursuant to Article 2 will vest
in Buyer legal, valid and marketable title to the Shares free and clear of
all Encumbrances other than Encumbrances created or suffered by Buyer and
restrictions on sales of the Shares under applicable federal and state
securities laws.
9.1.33 Capital Stock. The Common Stock is the only capital stock
authorized to be issued by the Company. The Shares are the only shares of
Common Stock outstanding. All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments (other than this Agreement) which
could obligate Seller or the Company to issue any shares of capital stock or
dispose of any ownership interest therein. There are no outstanding
obligations of the Company to issue or deliver, or to repurchase, redeem or
otherwise acquire any capital stock or other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the
right to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of New Mexico; it has full corporate power and authority to own its
properties and to carry on the Business as it is now being conducted, and to
own or hold under the lease, the Property.
9.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or
otherwise hold the assets owned, leased or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
corporate power and authority under its Certificate of Incorporation and
Bylaws to execute and deliver this Agreement, to own the Shares and to
fulfill all other obligations of Buyer under this Agreement. The execution
and delivery by Buyer of this Agreement and the fulfillment by it of its
obligations under this Agreement have been duly authorized by all necessary
corporate action on the part of Buyer. Buyer has the requisite legal
capacity to purchase, own and hold the Shares upon the consummation of the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by Buyer and, assuming the due execution and delivery
of this Agreement by Seller, constitutes a valid and binding obligation of
Buyer, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally and subject to the qualifications
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.2.3 No Restrictions Against Purchase of the Shares. The execution and
delivery of this Agreement by Buyer do not, and the fulfillment by Buyer of
its obligations under this Agreement will not, conflict with, violate or
result in the breach of any provision of the certificate of incorporation or
bylaws of Buyer or, subject to obtaining the approvals and consents referred
to in Article 5, conflict with, violate or result in the breach of,
constitute default under, or accelerate the performance required by any
Contract to which Buyer is a party. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect
to Buyer in connection with the execution and delivery of this Agreement by
Buyer or the fulfillment by Buyer of its obligations under this Agreement,
except (i) the filings and approvals described in Article 5, and (ii) the
filings and approvals listed on Schedule 9.2.3.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
and the fulfillment by Buyer of its obligations under this Agreement will not
violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee
or commission to any broker, finder, investment banker or other intermediary
in connection with the transactions contemplated by this Agreement in such
a manner as to give rise to a claim against Seller for any broker's or
finder's fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or
legal proceedings pending or, to the knowledge of Buyer, threatened against
Buyer or its properties that would prevent the consummation of the
transactions contemplated by this Agreement.
9.2.7 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC's Licenses, as described in Section 5.4,
Buyer will not file any application or request for a waiver of Part 36 (study
areas), Part 61 (tariffs), and Part 69 (price caps and study areas) of the
FCC Rules, and that on the Effective Date the study areas relating to the
Exchanges shall remain in the National Exchange Carrier Association Tariff
FCC No. 5, provided, however, that such study areas shall remain in the NECA
Tariff FCC No. 5 after the Effective Date only for so long as Buyer, in its
sole discretion, shall determine.
9.2.8 Investment. Buyer understands that the Shares that it will
acquire pursuant to this Agreement have not been registered under the
Securities Act of 1933, as amended (the "Act"), and cannot be offered for
sale, sold or otherwise transferred unless the Shares subsequently are so
registered or qualified for exemption from registration under the Act. The
Shares are being acquired under this Agreement by Buyer in good faith solely
for its own account, for investment and not with a view toward resale or
other distribution within the meaning of the Act. The Shares will not be
offered for sale, sold or otherwise transferred by Buyer without either
registration or exemption from registration under the Act and applicable
state securities laws. Buyer has such knowledge and experience in financial
and business matters that Buyer is capable of evaluating the merits and risks
of Buyer's investment in the Shares. Buyer understands and is able to bear
any economic risks associated with such investment (including the necessity
of holding the Shares for an indefinite period of time, inasmuch as the
Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer
on or prior to March 15, 1995, the parties shall, as promptly as practicable
but in any event within 30 days after Buyer's written request, negotiate in
good faith and enter into a Transition Services Agreement, to be effective
no later than the Effective Date, pursuant to which Seller will provide to
the Company, at the Company's expense, such financial, accounting, billing,
computer, network, administrative and other services (including services
relating to the conversion of systems and processes) as may be reasonably
requested by Buyer, which agreement shall be in form and substance as
mutually agreed to by both Buyer and Seller (the "Transition Services
Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed
in any patent or patent application), designs (useful or ornamental), and
works subject to copyright that may be embodied in, without exclusion,
invention disclosures, specifications, manuals, drawings, functional or
system block diagrams, flow charts, circuit diagrams, design or user
documentation, engineering notebooks, schematics, test programs, documented
procedures, documented processes, documented flows, devices, software, or
firmware, that relate to the function, design, development, manufacture,
testing, use, operation, maintenance or repair of any product, apparatus,
article of manufacture, process, method or service. "Intellectual Property"
shall also include patents, patent applications (including continuations,
continuations-in-part, divisions, reissues, reexamined patents and patent
applications and extensions thereof), copyrights (whether common law or
statutory, registered or unregistered), or trade secrets, residing in the
subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall
be responsible for any fees associated therewith) in obtaining the consent
of any necessary third party for the use of any Intellectual Property that
the Company has placed in public use on, or prior to, the Effective Date and
that is presently used by the Company, but excluding any Intellectual
Property listed in Schedule 11.22.
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except
as specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond
the Effective Date to provide support of any kind in the Company's use of
such Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates
shall retain ownership of all Intellectual Property owned by Seller or its
Affiliates as of the Effective Date. Buyer further agrees and understands
that the retained ownership shall include the right of Seller to grant
licenses to vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is
owned by Seller, or that is licensed by an Affiliate of Seller to Seller, are
set forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the
Intellectual Property that as of the Effective Date the Company owns or
controls or under which it has the right to grant licenses, Seller shall not
assert against Buyer, or Affiliates of Buyer, or vendees, mediate or
immediate, of Buyer or the Company, a claim of infringement, misappropriation
or misuse of such Intellectual Property right arising from the Company's
activities practiced in the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that
Seller has not made or given, and does not make or give, any warranty as to
the value, enforceability, or validity of any Intellectual Property or that
the use by the Company of any Intellectual Property under this Agreement will
not infringe other intellectual property rights not licensed under this
Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any
activity, subsequent to the Effective Date, engaged in by Buyer, the Company,
a customer of Buyer's or the Company's or anyone claiming under Buyer or the
Company constitutes direct or contributory infringement or misuse of any
intellectual property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses
resulting from any obligation, proceeding or suit based upon any claim that
any activity conducted or engaged in, subsequent to the Effective Date, by
Buyer, the Company, a customer of Buyer's or the Company's, or anyone
claiming under Buyer or the Company constitutes direct or contributory
infringement, or misuse, or misappropriation of any intellectual property
right of any third party.
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the
owners of, and have permitted the Company to use, certain trade names, trade
dress, trademarks, service marks, logos and related intangible property
(collectively, "Marks") used in connection with the Business, including,
without limitation, the items listed on Schedule 11.1.5, and Buyer
understands and agrees that the Marks, or any right or license of the Company
to the Marks are not being transferred pursuant to this Agreement. Buyer
acknowledges Seller's exclusive and proprietary rights in the use of the
Marks, and Buyer agrees that it shall cause the Company not to use the Marks
(or any names or Marks confusingly similar to the Marks) except as expressly
set forth in this Section 11.1.5. After the Effective Date, Buyer shall
cause the Company to replace all Marks of Seller as soon as possible, but in
no event later than one hundred eighty (180) days after the Effective Date
for Marks affixed to items with a valid continuing use in the Company's
conduct of the Business, including, without limitation, buildings, vehicles,
heavy equipment, hard hats, tools, tool boxes, kits (safety and others),
signs, manual covers and notebooks. After the Effective Date, Buyer will
cause the Company to not use, and will destroy or deliver to Seller, all such
items with Marks affixed to them that have no valid continuing use in the
Company's conduct of the Business, including items affecting customer or
employee relations or items that do not reflect the Company's true identity.
Specific items to be destroyed or returned include items with Marks affixed
to them including, without limitation, giveaways; order, purchase or
materials forms; requisitions; invoices; statements; time sheets/labor
reports; bill inserts; stationery; personalized note pads; maps; organization
charts; bulletins/releases; sales/price literature; manuals or catalogs;
report covers/folders; program materials; and materials such as media contact
lists/cards. The one hundred eighty (180) day time period for replacement
of Marks affixed to telephone directories that were already published or
closed for publication as of the Effective Date shall be extended to the
production of replacements for such directories.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as
to reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
with the Marks, and acknowledges that the Marks and all rights therein and
the goodwill pertaining thereto belong exclusively to Seller, and that the
Marks have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company using the Marks shall be provided in
accordance with all applicable federal, state and local laws, and that the
same shall not reflect adversely upon the good name of Seller, and that the
conduct of the Business will be of a standard and skill equivalent to that
employed prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's failure to cease use of the Marks as provided
in this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that there
is no adequate remedy at law for such failure to terminate use of the Marks,
or for such improper use of the Marks, and Buyer agrees that in the event of
such failure or improper use, Seller shall be entitled to equitable relief
by way of temporary restraining order or injunction or any other relief
available under this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and,
to the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and
agrees that (i) except for the representations and warranties set forth in
this Agreement and the Schedules (and the Financial Statements, the
Additional Financial Statements, and actuarial reports required pursuant to
the Employee Transfer Agreement), Buyer has not relied and will not rely upon
any document or written or oral information furnished to or discovered by it
or its representatives, (ii) there are no representations or warranties by
or on behalf of Seller or its Affiliates or representatives except for those
expressly set forth in this Agreement and in any other written agreement
entered into with Seller or any of its Affiliates in connection with this
Agreement, and (iii) to the fullest extent permitted by law, Buyer's rights
and obligations with respect to all of the foregoing matters will be solely
as set forth in this Agreement or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and
representatives will comply with the Confidentiality Agreement, the
provisions of which are expressly incorporated herein in their entirety by
this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of
each month beginning with November, 1994, and continuing up to and including
the month next preceding the month in which the Closing occurs, a balance
sheet and income statement as of and for such month, and as of and for the
year-to-date period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company
to conduct the Business in the ordinary course in accordance with prudent
business judgment and consistent with past practice and policy and to (i)
preserve the Business as an ongoing business, (ii) keep available to the
Business its services and the services of its Affiliates at least to the same
extent as such were generally available from January 1, 1994 through the
Execution Date and are available on the date hereof, (iii) not take any
action that would jeopardize any material and beneficial contractual
relationships with persons having business dealings with the Business, and
(iv) preserve all of the Business' tariffs, certificates, licenses,
authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same
manner as it is presently being conducted on the Execution Date. Seller will
cause the Company to refrain from entering into any material transaction or
contract other than in the ordinary course of business and to not make any
material change in the general nature of the Business or in its methods of
management, marketing, accounting or operations (including repair and
maintenance functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course
of business, (ii) enter into or terminate, as lessor or lessee, any Lease
other than in the ordinary course of business, (iii) create any liens or
other security interest, except in the ordinary course of business, or (iv)
change in any material respect or terminate any of the insurance policies
referred to in Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance
with the plans attached in Schedule 11.5(c), Seller will cause the Company
not to sell, lease, dispose of or otherwise transfer, or make any contract
for the sale, lease, disposition or transfer of any Property other than, with
respect to any individual item (other than vehicles) having a value of less
than Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items
(other than vehicles) the aggregate value of which shall not exceed Two
Hundred Fifty Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the PUC, Seller will cause the Company not
to (i) institute any proceeding with respect to, or otherwise change, amend
or supplement any tariff or (ii) enter into or agree to any stipulation,
order, or decree of, or settlement with the PUC that, in the case of (i) or
(ii) above, would have a material adverse effect on the revenue, authorized
return on equity or earnings of the Business. Seller will cause the Company
not to file any application, petition, motion, brief, testimony, settlement
agreement or other pleading in any proceeding before the PUC, or before the
FCC (except for filings on behalf of all of Seller's local exchange telephone
companies) or appeals related thereto, unless Seller shall have first
provided Buyer with a copy of the same and provided Buyer with a reasonable
opportunity to comment to Seller with respect thereto. If Buyer determines
it should intervene in any proceeding before the PUC in which Buyer's
position is or may be different from the Seller's or the Company's, Seller
will not, and will cause the Company not to, without waiving any other rights
related thereto, oppose Buyer's intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law or
in the ordinary course of business of the Company or pursuant to any
Contract, Seller will cause the Company not to (i) enter into or amend any
employment agreement with any individual that will become a Transferred
Employee, or enter into or amend any union agreement or commitment (including
any new commitment to pay retirement or other benefits, or amendments to the
Company's retirement plans), (ii) effect any net increase over five percent
(5%) since the Execution Date in the number of employees of the Company who
will become Transferred Employees, or (iii) increase over 5% the benefit
provided under any plans concerning employee benefits or increase the general
rates of compensation of the Transferred Employees, or change the manner by
which compensation (including fringe benefits) is determined and paid to any
Transferred Employee.
(f) Seller will cause the Company not to engage in any
intercompany transactions with any Affiliate thereof, except for transactions
consistent with past practice.
(g) Seller shall cause the Company to maintain the Property in
good repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to
take any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate
with any other person or entity or acquire a material amount of assets of any
other person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital
expenditure plans which Buyer shall have approved (both as to the type of
project and the dollars expended) shall be set forth on Schedule 11.6, and
the parties agree that when such expenditures have been incurred they will
constitute an addition to a component of Net Telecommunications Plant thereby
becoming subject to Section 3.2(c). Seller agrees to cause the Company to
use its best efforts substantially to complete such plans within the
projected time schedules; provided, that the Company will not incur any
liability for unbudgeted expenditures in excess of $200,000.00 in the
aggregate without the prior written consent of Buyer. All construction work
that is in progress on the Effective Date will be accounted for by
identifying and accruing all associated time reporting, material invoices or
contractor invoices inputted or received on or before the Effective Date, and
all payments therefor shall be the responsibility of the Company and will
constitute an addition to a component of Seller's Net Telecommunications
Plant thereby becoming subject to Section 3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to
Buyer such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the
Property, Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed Two Million Seven Hundred Five Thousand
Fifty Dollars ($2,705,050.00), either party may, by written notice to the
other party (the "Casualty Termination Notice") within thirty (30) days after
the date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed Two
Million Seven Hundred Five Thousand Fifty Dollars ($2,705,050.00), or the
Casualty Termination Notice is not given by either party, then Seller, within
forty-five (45) days after the damage or destruction, shall agree in writing
to take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will
be entitled to make all claims related to the Damaged Property and to receive
and retain all proceeds of insurance payable with respect to the Damaged
Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain
as a substitute therefor an equivalent item or items of Property if the
Damaged Property is personal property, and Real Property if the Damaged
Property is Real Property, but only if such substituted personal property or
Real Property is satisfactory to Buyer, and the Company will be entitled to
make all claims related to the Damaged Property and to receive and retain all
proceeds of insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated by
this Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive
and retain all proceeds of insurance payable with respect to the Damaged
Property, and the Purchase Price Adjustment contemplated by Section 3.2(a)(2)
will be made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may
elect to postpone the Closing and the Effective Date, until the expiration
of any such periods or the full performance of such obligations, which
election shall be binding upon all parties hereto.
11.10 Settlements and Cost Studies. The parties agree that, with
respect to all toll revenues, settlements, pools, separations studies,
Universal Service Fund payments or similar activities, Seller shall receive
the benefit or suffer the burden of the results of any such activities that
are related to the conduct of the Business or the ownership or operation of
the Company on or before the Effective Date.
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing
Corporation. The Directory Publishing Agreement dated as of November 15,
1994, by and between Company and ALLTEL Publishing Corporation (the
"Directory Publishing Agreement") is an Excluded Contract on Schedule
11.22(h), except as hereinafter provided. Within thirty days after the
Execution Date, Buyer shall cause its existing directory provider to indicate
in writing whether it will provide directory production services to the
Company, as of the Effective Date (or as of such later date as described
below) with regard to all of the Exchanges on the same terms and conditions
as it is presently providing such services to Buyer, and Buyer shall inform
Seller within such thirty day period of Buyer's existing telephone directory
provider's written intention. If Buyer's existing directory provider's
indication is that it will not provide directory publication services for all
of the Exchanges on the same terms and conditions that it is presently
providing such services to Buyer, then the Directory Publishing Agreement
shall be deemed to become a Contract for the purposes of this Agreement.
Promptly, thereafter, the Buyer and ALLTEL Publishing Corporation shall agree
to meet in good faith to negotiate any necessary amendments to the Directory
Publishing Agreement, to be effective as of the Effective Date, to provide
for a retention rate equal to or greater than the higher of (x) 60% or
(y) the retention rate provided for in any substantially similar directory
publishing agreement between ALLTEL Publishing Corporation and a non-
Affiliate of ALLTEL Publishing Corporation that was entered into within 18
months prior to the Effective Date. If Buyer's existing directory provider
indicates that it will provide directory publication for all the Exchanges,
as provided above, the Directory Publishing Agreement shall remain in effect
as to the directory of each of the Exchanges for which (i) the directory is
scheduled to be or is published prior to the Effective Date or (ii) the
canvass for the directory has begun prior to the Effective Date and it is
scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not begin
providing directory publication services for such Exchange until canvass and
production begins for the next succeeding directory related to such Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
provider indicates that it will provide directory publication for all of the
Exchanges, as provided in Section 11.12.1 of this Agreement, Seller and Buyer
agree to cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the
Seller even if in the possession of a third party (the "Directory Records")
related to directories of the Exchanges that are published by Seller or its
Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production
functions of any directories related to the Exchanges that are scheduled to
begin canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the
other reasonable access to such documentation, reports and accounting records
related to directory publication as may be necessary to insure a proper
transition of directory publication in accordance with the terms of such
agreements in effect on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Company's Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate
in good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any
directories that will be canvassed and published by Buyer's existing
directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing,
use their best efforts to allow Buyer to negotiate, on behalf of the Company,
a billing and collection agreement ("B&C Agreement") reasonably satisfactory
to Buyer with each interexchange carrier ("IXC") and each local exchange
carrier ("LEC") for which the Company provides, on the Execution Date,
billing and collection services in any Exchange (each such IXC or LEC is
hereinafter referred to as a "Carrier"). Seller and Buyer shall cooperate
with each other and make available to each other all documents and records
relevant and necessary to allow the Company to finalize negotiations of B&C
Agreements, as necessary, and to perform such B&C Agreements after the
Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (such as Northern Telecom and Stromberg-Carlson;
collectively "Equipment Manufacturers") as Buyer may request, covering such
software license agreements and other agreements as are necessary to enable
the Company after the Effective Date to operate the equipment manufactured
and sold by the Equipment Manufacturers included in the Property in
substantially the same manner as operated by the Company prior to the
Effective Date. The agreements shall contain material terms and conditions
(including license and warranty, but not necessarily including pricing) that
are substantially the same as those provisions in the corresponding
agreements between the Company and the Equipment Manufacturers as of the
Effective Date. Buyer understands and agrees that the price and fee
provisions of such agreements will be as negotiated between Buyer, on behalf
of the Company, and the Equipment Manufacturers. The above obligation of
Seller shall be expressly conditioned upon the acceptance by Buyer, on behalf
of the Company, of all material obligations accepted by Seller in such
corresponding agreements. It is the responsibility of Buyer, on behalf of
the Company, to enter into appropriate agreements with the Equipment
Manufacturers in respect of service, support, training, maintenance, and
future development (hardware and software) for the Property, such agreements
to include terms and conditions agreed to between Buyer, on behalf of the
Company, and the Equipment Manufacturers. Seller agrees to assist Buyer, on
behalf of the Company, in obtaining the Equipment Manufacturers' consent, if
necessary, to enable the Company after the Effective Date to avail itself of
all training credits remaining at the Effective Date on Property furnished
by the Equipment Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third
parties relate both to the Property and the Excluded Property. Seller agrees
to use its best efforts to assist Buyer in obtaining, on behalf of the
Company, contractual arrangements with such third parties relating to the
Property, which arrangements will be reasonably satisfactory to Buyer;
provided that neither the Company nor any Affiliate of the Company shall be
obligated under this Section 11.12.5 to make any payment to any such third
party unless such payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company
to retain the Company Books and Records, in either case, until the shorter
of the date that other party consents in writing to their destruction or the
seventh anniversary of the Effective Date. Each party shall provide full and
free access to the Company Books and Records and Retained Books and Records,
as the case may be, to duly authorized representatives of the other party at
any time during regular business hours for the period in which such Books and
Records are required to be retained. Either party may make copies of any
such Books and Records as it deems desirable, at its own expense. After the
Effective Date, upon reasonable notice, Seller shall provide Buyer and the
Company with reasonable assistance in locating any of the Company's Original
Cost Documents which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver
(at its expense) to Buyer a preliminary title binder (on a standard form
reasonably acceptable to Buyer), issued by Lawyers Title Insurance Company
or another title insurance company reasonably acceptable to Buyer, with
respect to all Real Property included in the Property and in which the
Company purports to own fee title. Such title binders shall be in form,
substance and amount reasonably satisfactory to Buyer (ALTA Owners Policies
where available but based upon boundary surveys as set forth below) and shall
be current as of a date no earlier than ninety (90) days prior to the
Effective Date. The parties agree that the dollar amount of title insurance
to be inserted on each policy shall equal the dollar value set forth on the
Company's continuing property records list as of December 31, 1993 for land
and buildings. Such title binders shall reflect that the Company is vested
with good, fee simple, marketable and insurable title to such Real Property,
subject only to (i) standard printed exceptions; (ii) inchoate liens for
current taxes and assessments not yet delinquent, (iii) standard utility and
roadway easements, covenants and restrictions, whether or not of record, that
do not individually or in the aggregate materially detract from the value,
or impair the use of the Real Property affected thereby, (iv) existing zoning
or similar laws or ordinances that do not interfere with the operation of the
Business, (v) Leases, (vi) survey exceptions that do not individually or in
the aggregate materially detract from the value or impair the use of the Real
Property affected thereby, (vii) standard title plat exceptions to the extent
the matters shown on such title plats do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby and (viii) standard water rights exceptions (collectively,
the "Permitted Exceptions"). If a preliminary title binder indicates an
exception other than a Permitted Exception that would impair marketability
in any material respect, Seller shall, at its expense, cause such exception
to be removed on or before the Effective Date. With respect to each parcel
of Real Property covered by a preliminary title binder, Seller shall deliver
to Buyer (at Seller's expense and on or prior to sixty (60) days before the
Effective Date) a certified current boundary survey showing (x) access to the
property and (y) all improvements on the property and any encroachments
across the property line by any improvements of the Company or owners of
adjacent property and (at Seller's expense and within sixty (60) days after
the Effective Date) owner's title insurance policies for the Real Property
(ALTA Owners Policies where available but based upon boundary surveys as set
forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer
to insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by
the sale. All reasonable costs and expenses related to such insertion and
delivery shall be borne and paid by the Company. Other means of notifying
subscribers may be employed by either party, at the expense of the initiating
party, but in no event shall any notification be initiated without the prior
consent of the other party (which consent shall not be unreasonably withheld)
or earlier than three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as otherwise provided in Section
11.24, Seller shall have a period of ten (10) business days after the
Execution Date (the "Supplemental Schedule Period") to supplement or
otherwise modify the Schedules to this Agreement by delivering to Buyer,
within the Supplemental Schedule Period, a substitute schedule or schedules
(collectively, the "Supplemental Schedules"), bearing the legend "This
Schedule _, dated _______________, is executed and delivered in accordance
with Section 11.20 of the Stock Purchase Agreement, dated as of November 28,
1994 which shall be duly executed by Seller and submitted to Buyer. Buyer
shall have a period of ten (10) business days after the expiration of the
Supplemental Schedule Period to review the Supplemental Schedules and within
such ten (10) business day period notify Seller in writing (which writing may
be transmitted by facsimile) of any objections thereto. If Buyer's
objections are not resolved to the satisfaction of Buyer within five (5) days
of such notification, Buyer may terminate this Agreement, effective
immediately upon written notification of that termination. In the event that
Buyer does not terminate this Agreement, then Buyer waives all rights to a
claim of indemnification based upon or as the result of any changes in the
Schedules as reflected in the Supplemental Schedules. For purposes of
determining breaches of representations, warranties or covenants hereunder,
the Supplemental Schedules provided by Seller shall be deemed Schedules for
all purposes.
11.21 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC Licenses, as described in Section 5.4, during
the period from the Execution Date until the Effective Date, neither party
shall file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges
shall remain in the Natural Exchange Carrier Association Tariff FCC No. 5;
provided, however, that such study areas shall remain in the NECA Tariff FCC
No. 5 after the Effective Date only for so long as Buyer, in its sole
discretion, shall determine.
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall
take, and shall cause the Company to take, all action necessary to effect,
on or prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate
Receivables") shall be netted against all "Advances and Notes-Parent Company"
(item 2 - Liabilities on the Company's Balance Sheet), "Accounts Payable-
Affiliates" (item 5 - Liabilities on the Company's Balance Sheet), "Dividends
Accrued - Affiliates" (item 10 - Liabilities on the Company's Balance Sheet)
and "Interest Accrued - Alltel" (item 12 - Liabilities on the Company's
Balance Sheet) (collectively, "Affiliate Payables"). To the extent there is
a net excess of Affiliate Receivables, a cash payment or payments will be
made to the Company which cash will then be disposed of by the Company, and
to the extent there is a net excess of Affiliate Payables, such Affiliate
Payables will be contributed to the Company as a contribution to the
Company's capital, and take any other action necessary, such that the
balances of each of the Affiliate Receivable and Affiliate Payable accounts,
and of any other intercompany accounts, as of the Effective Date will be
zero.
(c) The Company shall dispose of, transfer or otherwise cause to
be zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 -
Assets on the Company's Balance Sheet) and all "Investments in Affiliates"
(item 14 - Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to
be zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such
investments consist of RTB Stock which relates to REA Debt which is to remain
outstanding immediately after the Effective Date, and all "Unamortized Debt
Expense" (Item 16 - Assets on the Company's Balance Sheet), except to the
extent such unamortized debt expense relates to debt which is to remain
outstanding immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to
be zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets
on the Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to
be zero as of the Effective Date, (i) all "Other Current Assets" (item 10 -
Assets on the Company's Balance Sheet) to the extent such other current
assets represent cash accounts, and (ii) all "Other Non-Current Assets" (item
19 - Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's
interest in any business other than the Business, and those other assets,
including agreements and contracts ("Excluded Contracts"), set forth on
Schedule 11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial
Accounting Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income
(item 8-Liabilities on the Company's Balance Sheet) shall be zero as of the
Effective Date.
(k) The balance in the Company's Notes Payable - Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding
(item 4 - Liabilities on the Company's Balance Sheet), Other Current
Liabilities (item 14 - Liabilities on the Company's Balance Sheet) and
Dividends Accrued - Other (item 11 - Liabilities on the Company's Balance
Sheet) accounts shall be zero as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet), and Interest
Accrued - Other (item 13 - Liabilities on the Company's Balance Sheet), to
the extent each of such amounts relate to debt which is not to remain
outstanding immediately after the Effective Date, shall be zero as of the
Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section
11.23.1, Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or
governmental charges imposed by any taxing jurisdiction (but not including
Income Taxes, as hereinafter defined, which shall be paid by Seller), and all
recording or filing fees, notarial fees and other similar costs of Closing
with respect to the transfer of the Shares or otherwise on account of this
Agreement or the transactions contemplated herein (but not including any
transactions contemplated by this Agreement to be effected pursuant to the
transactions contemplated by Section 11.22 or otherwise between Seller and
the Company, which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that
permits consolidated, combined or unitary income Tax Returns, if any) for all
periods ending on or before or which include the Effective Date, all items
of income, gain, loss, deduction, and credit or other items (collectively
"Tax Items") attributable to the operations of the Company during such
periods or portions thereof determined by an interim closing of the books as
of the Effective Date. Seller will sign and file timely all such Tax Returns
with the appropriate United States, state and local Governmental Authorities.
Buyer will provide or cause to be provided any consent request to file such
Tax Returns on behalf of the Company. Seller will make all payments shown
thereon as owing with respect to any such Tax Returns.
(c) With respect to any taxable period that would otherwise
include but not end on the Effective Date, to the extent permissible pursuant
to applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income
Tax Returns (other than Tax Returns described in Section 10.5.1(b)) for the
Company required to be filed with the appropriate United States, state, and
local Governmental Authorities for any taxable period that ends on or before
the Effective Date that have not been filed prior to the Effective Date.
Seller will sign and file timely all such Tax Returns with the applicable
Governmental Authority and make all payments shown thereon as owing with
respect to such Tax Returns. If requested by Seller, Buyer will deliver or
cause the Company to deliver to Seller a power of attorney authorizing Seller
to sign such Tax Returns. Notwithstanding the foregoing, if Seller is
legally precluded from filing any such Tax Return, Buyer shall sign such Tax
Return. Seller shall deliver a copy of each such Tax Return to Buyer within
10 days prior to filing such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed
all Tax Returns for the Company that are required to be filed with the
appropriate United States, state, and local Governmental Authorities for any
taxable period which begins before and ends after the Effective Date. In the
case of Income Taxes, Buyer shall cause such Tax Return to be prepared and
shall cause to be included in such Tax Return all Tax Items required to be
included therein. Buyer shall determine (by an interim closing of the books
as of the Effective Date) the portion, if any, of the Income Tax due with
respect to the period covered by such Tax Return which is attributable to the
Company for a Pre-Effective Date Taxable Period (as hereinafter defined).
At least 15 days prior to the due date (taking into account all extensions
of due date) of such Tax Return, Buyer shall deliver to Seller a copy of such
Tax Return and of its determinations. If the amount reflected as a liability
for Income Taxes on the Tax Schedule less Prior Reimbursements (as hereafter
defined) is less than the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period, Seller shall pay to
Buyer the amount of such shortfall not less than 5 days prior to the due date
(taking into account all extensions of due dates) of such Tax Return (or the
due date of the applicable estimated Tax payments, if earlier). If the
amount of Income Tax so determined to be attributable to the Pre-Effective
Date Taxable Period is less than the amount reflected as a liability for
Income Taxes on the Tax Schedule, to the extent not previously paid to Seller
or the applicable Governmental Authority by the Company and subject to
Section 11.23.1(f), Buyer will pay to Seller the amount of such excess not
less than 5 days prior to the due date (taking into account all extensions
of due dates) of such Tax Return (or the due date of the applicable estimated
Tax payments, if earlier). As used in this Agreement, "Pre-Effective Date
Taxable Period" means all or a portion of (i) any taxable period up to and
including the Effective Date or (ii) any taxable period with respect to which
the Tax is computed by reference to Tax Items, assets, capital or operations
of the Company arising on or before, or existing as of, the Effective Date.
As used in this Agreement, "Income Taxes" means all Taxes measured in whole
or in part on or by net income imposed by the United States, any state of the
United States or any political subdivision thereof, and will include any such
Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as
a liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that
have previously been (A) paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) or (B) paid by Buyer or the Company to
Seller or to the applicable Governmental Authority with respect to Income
Taxes properly attributable to Pre-Effective Date Taxable Periods that are
reflected on Tax Returns described in Section 11.23.1(b), Section 11.23.1(d)
or Section 11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax
Returns that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to
such information and personnel as Seller may require in order to properly
prepare such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon
by the applicable Governmental Authority) received by Buyer after the
Effective Date and attributable to Taxes paid by Seller or the Company (or
any predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of
any Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives
or is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund
together with any interest received from or credited thereon the applicable
Governmental Authority, net of any Taxes imposed upon Seller or any affiliate
by reason of the receipt of such refund, credit or interest (calculated at
the maximum statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of
state or local Law) with respect to the purchase of the Shares hereunder.
Both Seller, as the common parent of the affiliated group of corporations
(which includes the Company) that file a consolidated federal income Tax
Return and Buyer are eligible to and will make a timely and effective
election under Section 338(h)(10) of the IRC (and any comparable provision
of state or local Law) with respect to such purchase (collectively, together
with the elections under Section 338(g) of the Code and any comparable
provision of state or local Law, the "Section 338(h)(10) Elections"). To
facilitate such election, within thirty (30) days of the Closing, Buyer will
deliver to Seller a completed Internal Revenue Service Form 8023 and the
required schedules thereto and any similar forms under applicable state or
local Law (the "Forms") with respect to Buyer's purchase of the Shares, which
Forms shall have been duly executed by an authorized person for Buyer.
Provided that the information on such Forms is, in the reasonable
determination of Seller, correct and complete in all material respects,
Seller will, at the Closing, cause such Forms to be duly executed by an
authorized person for Seller and deliver such Forms to Buyer. If any changes
or supplements are required to the Forms as a result of information that is
first available after the Closing, Seller and Buyer will promptly agree upon
and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates
to take, any action to modify or revoke the elections contained in or the
content of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any
Pre-Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii)
joined in the filing of a combined or unitary Tax Return with the Company on
or prior to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a),
any Taxes attributable to the transactions contemplated by this Agreement;
and
(ii) Any breach of any representation, warranty or covenants
of Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a
result of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of
the Company which Taxes are not attributable to any Pre-Effective Date
Taxable Period; and
(ii) Any breach of any representation, warranty or covenant
of Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the
indemnification of a party under this Section 11.23.2 (referred to herein as
a "Tax Indemnified Party"), the Tax Indemnified Party shall promptly notify
the party obligated under this Section 11.23.2 to so indemnify (referred to
herein as the "Tax Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that
(A) within 30 days after the notice described in Section 11.23.2(c)(i) has
been delivered (or such earlier date that any payment of Taxes is due by the
Tax Indemnified Party but in no event sooner than 5 days after the Tax
Indemnifying Party's receipt of such notice), the Tax Indemnifying Party
requests that such claim be contested, (B) the Tax Indemnifying Party shall
have agreed to pay the Tax Indemnified Party all costs and expenses that the
Tax Indemnified Party incurs in connection with contesting such claim,
including, without limitation, reasonable attorneys' and accountants' fees
and disbursements, and (C) if the Tax Indemnified Party is requested by the
Tax Indemnifying Party to pay the Tax claimed and sue for a refund, the Tax
Indemnifying Party shall have advanced to the Tax Indemnified Party, on an
interest-free basis, the amount of such claim. The Tax Indemnified Party
shall not make any payment of such claim for at least 30 days (or such
shorter period as may be required by applicable Law) after the giving of the
notice required by Section 11.23.2(c)(i), shall give to the Tax Indemnifying
Party any information reasonably requested relating to such claim, and
otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a
determination in a court or other tribunal of initial or appellate
jurisdiction, all as the Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of
an amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or
decree of a court or other tribunal or a final and binding settlement with
an administrative agency having jurisdiction thereof, the Tax Indemnified
Party shall promptly repay to the Tax Indemnifying Party the amount advanced
to the extent of any refund received by the Tax Indemnified Party with
respect to a claim together with any interest received thereon from the
applicable Governmental Authority and any recovery of legal fees from such
Governmental Authority, net of any Taxes as are required to be paid by the
Tax Indemnified Party with respect to such refund, interest or legal fees
(calculated at the maximum applicable statutory rate of Tax without regard
to any other Tax Items). Notwithstanding the foregoing, the Tax Indemnified
Party shall not be required to make any payment hereunder before such time
as the Tax Indemnifying Party shall have made all payments or indemnities
then due with respect to the Tax Indemnified Party pursuant to this
Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the
provisions of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding,
the representations, warranties, covenants, agreements, rights and
obligations of the parties hereto with respect to any Tax covered by this
Agreement shall survive the Effective Date and shall not terminate until
sixty days after the expiration of the statute of limitations (including
extensions) applicable to such Tax.
11.24 Post-Execution Lease and Contract Review. Buyer shall have a
period of forty-five (45) calendar days after the Execution Date to review
the Leases and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively,
and to notify Seller in writing (which writing may be transmitted by
facsimile) of the identity of those Leases and Contracts that Buyer
reasonably believes are material to the operation of the Business as a whole
or any significant part of the Property and which by their terms will require
Seller, in accordance with Section 7.1.6, to obtain a third party consent as
a condition to the transfer of control of the Company to Buyer as a result
of Buyer's purchase of the Shares, before the Effective Date can occur. If
Buyer does not notify Seller in writing within such forty-five (45) calendar
day period of the identity of the material Leases and Contracts requiring
consent, then Buyer shall be deemed to have agreed that none of the Leases
and Contracts which are listed on Schedules 9.1.9 and 9.1.13 require consent,
in accordance with Section 7.1.6, before the Effective Date can occur. If
Buyer does notify Seller in writing within such forty-five (45) calendar day
period of the identity of the material Leases and Contracts requiring
consent, then Seller shall have a period of ten (10) business days upon
receipt of such notification to notify Buyer in writing (which writing may
be transmitted by facsimile) of any objections thereto. Thereafter, Buyer
and Seller shall negotiate in good faith and agree in writing as to the
identity of those Leases and Contracts which are material to the operation
of the Business as a whole or any significant part of the Property and which
by their terms will require Seller, in accordance with Section 7.1.6, to
obtain a third party consent as a condition to the transfer of control of the
Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material
Leases and Contracts by placing an asterisk next to the appropriate Lease or
Contract on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13
shall be deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in a separate agreement,
entitled Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer
Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to
this Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as
to time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) All other representations and warranties shall survive
for eighteen (18) months.
The date of expiration of any representation or warranty shall be
referred to herein as the "Termination Date." Representations and warranties
under this Agreement shall be of no further force or effect after the
applicable Termination Date. Any claim for indemnification with respect to
any alleged breach of any representation or warranty not asserted by notice
given as herein provided that specifically identifies a particular breach and
the underlying facts relating thereto, which notice is given prior to the
Termination Date, may not be pursued and is irrevocably waived and released
after such time. Without limiting the generality or effect of the foregoing,
no claim for indemnification with respect to any representation or warranty
will be deemed to have been properly made except to the extent it is based
upon a Third Party Claim or a Direct Claim.
(b) Unless a specified period is set forth in this
Agreement (in which event such specified period will control), the covenants
contained in Section 5.2, Section 5.3, this Article 13, and in Sections 11.1,
11.2, 11.3, 11.6, 11.7, 11.10, 11.12, 11.13, 11.16 and Articles 16 and 17 and
in the Employee Transfer Agreement, will survive the Closing and remain in
effect indefinitely. Covenants regarding Taxes shall survive as set forth
in Section 11.23.2(d). All other covenants contained in this Agreement will
terminate, without further action, upon the occurrence of the Effective Date
and any claim following the Effective Date for an alleged breach of any such
covenant may not be pursued, and is irrevocably waived, upon the occurrence
of the Effective Date, except that Buyer may make a claim for Seller's breach
of the covenants contained in Section 11.5 at any time within eighteen months
after the Effective Date. The immediately preceding sentence shall not apply
to, or limit to preclude, a party's rights and remedies if the sale
contemplated by this Agreement is not concluded as a result of the other
party's breach of this Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement,
and (iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in
connection with any actions, suits, demands, assessments, judgments and
settlements and reasonable attorneys' fees and expenses, in any such case (x)
reduced by the amount of insurance proceeds recovered from any person or
entity as a result of the Indemnifiable Losses involved and (y) provided that
the underlying liability or obligation is not solely the result of any action
taken or omitted to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one
hand, and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise
implied or imputed, by a party to this Agreement. Without limiting the
foregoing, as a material inducement to entering into this Agreement, to the
fullest extent permitted by law, each of the parties waives any claim or
cause of action that it otherwise might assert, including, without
limitation, under the common law or federal or state securities, trade
regulation or other laws, by reason of the liabilities and obligations, and
any breach of the representations, warranties or covenants, referred to in
Section 13.3, except for claims or causes of action brought under and subject
to the terms and conditions of this Article 13, and except for claims or
causes of action arising due to the actual fraud under the common law, not
otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of
any applicable law, no Indemnitee will be entitled to make a claim against
an Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section
9.2.5) until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds One Hundred Thirty
Five Thousand Two Hundred Fifty Two Dollars ($135,252.00) and then only to
the extent of the excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32 and 9.1.33) and of Buyer under Section
13.3(b)(i) (except with respect to indemnification for a breach of the
representations contained in Section 9.2.5) will not exceed the sum of Four
Million Fifty Seven Thousand Five Hundred Seventy Five Dollars
($4,057,575.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss
or interruption of business, profits, business opportunities or goodwill,
loss of use of facilities, loss of capital, claims of customers, or any cost
or expense related thereto, except to the extent such damages have been
recovered by a third person and are the subject of a Third Party Claim for
which indemnification is available under the express terms of this Section
13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), directors, officers, agents and
representatives from all Indemnifiable Losses relating to, resulting from or
arising out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee
Transfer Agreement, except for any such breach of covenants which was
specified on Seller's Closing Certificate all of which are waived upon
Closing, (iii) the Retained Liabilities, (iv) any Third Party Claim, whether
filed, asserted, or sought before or after the Effective Date, in respect of
the operations of the Company or the conduct of the Business or any part of
the Business (including contractual obligations in connection with sales or
transfers of assets made by the Company prior to the Effective Date), or the
ownership or operation of the Business, on or prior to the Effective Date,
regardless of whether known or unknown, asserted or unasserted, on the
Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct
of the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect
to the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10; and
(iii) All liabilities, responsibilities and obligations arising out
of or related to the litigation, claims and other matters set forth on
Schedule 9.1.16 and any other litigation, claims, actions, lawsuits or legal
proceedings based on facts, circumstances or conditions arising, existing or
occurring on or before the Effective Date, regardless of whether known or
unknown, asserted or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the
Company Date to the extent Buyer receives a Purchase Price adjustment in its
favor pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any
of the representations or warranties contained in Section 9.2, except for any
such breach which was specified on Buyer's Closing Certificate all of which
are waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer
contained in this Agreement or in the Employee Transfer Agreement, except for
any such breach which was specified on Buyer's Closing Certificate all of
which are waived upon Closing, (iii) any Third Party Claim, filed, asserted,
or sought after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business or the
ownership or operation of the Company or the Business, after the Effective
Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23
and Article 14, respectively, and are not addressed, limited or governed by
the provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by
Buyer and Seller as purchase price adjustments and Buyer and Seller shall
file all Tax Returns consistent with such treatment. Notwithstanding
anything to the contrary contained herein, Buyer shall not be indemnified or
reimbursed for any adjustment to the basis of any asset resulting from an
adjustment to the purchase price or any additional or reduced taxes resulting
from any such basis adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any action, proceeding, or investigation by
any entity or person that is not a party to this Agreement or an Affiliate
of such a party (a "Third Party Claim") against such Indemnitee, with respect
to which an Indemnifying Party is obligated to provide indemnification under
this Agreement, the Indemnitee will give such Indemnifying Party reasonably
prompt written notice thereof, but in any event not later than thirty (30)
calendar days after receipt of actual notice of such Third Party Claim;
provided, however, that the failure of the Indemnitee to notify the
Indemnifying Party during the required notification period shall only relieve
the Indemnifying Party from its obligation to indemnity the Indemnitee
pursuant to this Article 13 to the extent that Indemnifying Party is
materially prejudiced by such failure (whether as a result of the forfeiture
of substantive rights or defenses or otherwise); and provided, however, that
the Indemnitee must, in any event, notify the Indemnifying Party prior to the
Termination Date as required pursuant to Section 13.1(a) in order for such
party to be indemnified. Indemnifying Party shall be entitled, upon written
notice to the Indemnitee, to assume the investigation and defense thereof
with counsel reasonably satisfactory to the Indemnitee. Whether or not the
Indemnifying Party elects to assume the investigation and defense of any
Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof,
provided, however, that the Indemnitee shall pay the fees and disbursements
of such separate counsel unless (i) the employment of such separate counsel
has been specifically authorized in writing by the Indemnifying Party, (ii)
the Indemnifying Party has failed to assume the defense of such Third Party
Claim within a reasonable time after receipt of notice thereof with counsel
reasonably satisfactory to such Indemnitee or (iii) the named parties to the
proceeding in which such claim, demand, action or cause of action has been
asserted include both the Indemnifying Party and such Indemnitee and, in the
reasonable judgment of counsel to such Indemnitee, there exists one or more
defenses that may be available to the Indemnitee that are in conflict with
those available to the Indemnifying Party. Notwithstanding the foregoing,
the Indemnifying Party shall not be liable for the fees and disbursements of
more than one counsel for all Indemnified Parties in connection with any one
proceeding or any similar or related proceedings arising from the same
general allegations or circumstances. Without the prior written consent of
the Indemnitee, the Indemnifying Party will not enter into any settlement of
any Third Party Claim that would lead to liability or create any financial
or other obligation on the part of the Indemnitee unless such settlement
includes as an unconditional term thereof the release of the Indemnitee from
all liability in respect of such Third Party Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within
which to respond in writing to such Direct Claim; provided, however, that the
failure of the Indemnitee to notify the Indemnifying Party shall only relieve
the indemnifying Party from its obligation to indemnify the Indemnitee
pursuant to this Article 13 to the extent the Indemnifying Party is
materially prejudiced by such failure (whether as a result of the forfeiture
of substantive rights or defenses or otherwise); and provided, however, that
the Indemnitee must, in any event, notify the Indemnifying Party prior to the
Termination Date as required pursuant to Section 13.1(a) in order for such
party to be indemnified. If the Indemnifying Party does not so respond
within such thirty (30) calendar day period, the Indemnifying Party will be
deemed to have rejected such claim, in which event the Indemnitee will be
free to pursue such remedies as may be available to the Indemnitee on the
terms and subject to the provisions of this Article 13.
(c) If after the making of any Indemnification Payment the amount
of the Indemnifiable Loss to which such payment relates is reduced by
recovery, settlement or otherwise under any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by or against any other entity,
the amount of such reduction (less any costs, expenses, premiums or taxes
incurred in connection therewith) will promptly be repaid by the Indemnitee
to the Indemnifying Party. Upon making any Indemnification Payment, the
Indemnifying Party will, to the extent of such Indemnification Payment, be
subrogated to all rights of the Indemnitee against any third party that is
not an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to
which the Indemnification Payment relates; provided that (i) the Indemnifying
Party shall then be in compliance with its obligations under this Agreement
in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers
full payment of its Indemnifiable Loss, all claims of the Indemnifying Party
against any such third party on account of said Indemnification Payment will
be subrogated and subordinated in right of payment to the Indemnitee's rights
against such third party. Without limiting the generality or effect of any
other provision of this Article 13, each such Indemnitee and Indemnifying
Party will duly execute upon request all instruments reasonably necessary to
evidence and perfect the above-described subrogation and subordination
rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as
a result of the environmental due diligence authorized by this Section 14.1
will be subject to the terms and conditions of the Confidentiality Agreement,
except as otherwise expressly provided in this Section 14.l. Buyer shall
provide to Seller copies of all reports, assessments and other information
composed or compiled by Buyer's environmental consultant(s) and shall treat
all such information in accordance with the procedures of Section 14.1.5(c).
Within thirty (30) days after the Execution Date (the "Environmental Data
Delivery Date"), Seller will provide to Buyer copies of all surveys and
reports in Seller's or the Company's possession concerning the existence or
possible existence of asbestos or materials containing asbestos relating to
any of the Real Property, a list of all underground storage tanks which to
Seller's or the Company's knowledge are located on, or have been removed
within the last three years from, any Real Property owned or real estate
leased or operated by the Company in connection with the Business and any
other reports, studies or documents in Seller's or the Company's possession
relating to the Company's potential liability under any Existing
Environmental Requirements. The parties further agree that, if Seller
discloses the existence or suspected existence of materials containing
asbestos with respect to a given parcel of Real Property and the asbestos
does not exceed applicable limits, if Buyer desires to make renovations or
structural changes to the property after the Effective Date (which changes
require the removal of asbestos), the removal will be at the expense of
Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental
consultant or consultants Buyer intends to retain. Thereafter, Seller shall
have five (5) business days after receipt of such notification to notify
Buyer in writing of Seller's objection (which must be for good cause) and
substantiate the basis for that objection. If Seller does not object for
good cause and substantiate that objection within said five (5) business day
period, Seller shall be deemed to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I
environmental assessment activities of the Property, including inspecting
individual sites, submitting environmental questionnaires to Seller and the
Company and reviewing existing environmental reports, correspondence, permits
and related materials regarding the Property. Phase I environmental
assessment activities shall not include any sampling or intrusive testing
other than tank tightness testing and hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days'
notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may
be, but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the
normal use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not
limited to, the taking and analysis of soil, surface water and groundwater
samples, testing of buildings, drilling wells and taking soil borings) after
first conducting a Phase I assessment of a particular site provided that such
Phase II assessment activities are conducted in accordance with this Section
14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at
a site included in the Property, Buyer must notify Seller of its desire at
least five (5) business days in advance of the proposed date of such sampling
or testing and provide a description of the scope of work regarding such
sampling or intrusive testing. If Seller does not notify Buyer in writing
of Seller's objection to such proposed sampling or testing within five (5)
business days after receipt of such notice, Seller shall be deemed to have
consented to the proposed sampling or testing. Seller shall not unreasonably
object to Buyer's request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental
Data") within three (3) business days of Buyer's receipt of such data and
shall promptly provide Seller with "matched" or "paired" samples, in
accordance with standard sampling and testing protocols, that are obtained
during the sampling or intrusive testing of a particular site; provided,
however, that Seller shall have no obligation to Buyer to take any action
whatsoever regarding such samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information
shall be kept strictly confidential. The Environmental Data shall be
prepared at the request of counsel to Buyer and, to the fullest extent
permitted by law, shall be the work product of such counsel and constitute
confidential attorney/client communications. The Environmental Data shall
be transferred among Buyer and its consultant(s) in a manner that will
preserve, to the greatest extent possible, such privileges. Buyer expressly
agrees that until the Closing, it will not distribute the Environmental Data
to any third party without Seller's written consent. After the Closing,
Buyer agrees that it will not distribute the Environmental Data to any third
party without Seller's written consent, except as required by law or by
express provisions of Buyer's corporate compliance program if Seller is
provided written notice at least ten (10) business days prior to such
distribution, provided, however, that for a period of two (2) years after the
Effective Date, Buyer may distribute the Environmental Data to any potential
purchaser of the Company or the Property only after first notifying the
Seller, and without such notice at any time after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and
against any and all claims, liabilities, damages, losses, orders, penalties,
fines, costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Property and resulting
from any act or omission of Buyer or its environmental consultant(s) provided
that Buyer shall not be liable for any Environmental Liabilities incurred by
any such party merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property
do not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to
the extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements
cannot be completed for less than One Million Eighty Two Thousand Twenty
Dollars ($1,082,020.00) (the "Environmental Liabilities Amount") To be
effective, any such conditional termination of this Agreement must be
delivered in writing to Seller, which writing must specifically acknowledge
that the termination is subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of
the sale contemplated by this Agreement all in such manner and on such terms
and conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under
that writing in full. If the parties fail to sign the writing specifying
Seller's obligations within thirty (30) days following Buyer's conditional
termination (or such longer period acceptable to Buyer) or sign that writing
but the Company fails to perform its obligations thereunder in full on or
before the Closing (subject to Section 14.1.7(d)), Buyer's conditional
termination under paragraph (a) above automatically shall become final and
unconditional unless the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence
conducted in accordance with this Section 14.1 indicate that the costs of
responding to and remediating Environmental Liabilities based upon Existing
Environmental Requirements with respect to one or more items of the Property
or with respect to the Company are less than the Environmental Liabilities
Amount in the aggregate, Seller agrees, to cause the Company at the Company's
sole cost, to either (i) make a mutually satisfactory adjustment to the terms
and conditions of the transactions contemplated by this Agreement prior to
the Closing in accordance with Section 14.1.7(b)(iii) above, or (ii) prior
to the Closing (subject to Section 14.1.7(d)), otherwise respond to and
remediate those Environmental Liabilities based upon Existing Environmental
Requirements in accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii)
above, unless the cost of conducting such response action would exceed the
Environmental Liabilities Amount in which case Seller's sole obligation under
this Section 14.1.7(c) shall be to pay the Environmental Liabilities Amount
toward the completion of such response and remediation actions. If Seller
discharges its obligations under this Section 14.1.7 by expending the
Environmental Liabilities Amount on such response and remediation action
(such expenses to be verified by Seller by delivery by Seller to Buyer of a
reasonably detailed statement setting forth such expenses), or paying to
Buyer the Environmental Liabilities Amount, Buyer shall sign and deliver to
Seller at the Closing a release of Seller from any further liability to Buyer
for such remediation and shall indemnify Seller against any liability for
such Environmental Liabilities or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response
and remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the
Closing until sufficient response and remediation has been completed so that
the remaining response and remediation is equal to or less than the
Environmental Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that
the indemnification provided under this Section 14.2 shall be the sole remedy
for allocating responsibility regarding environmental matters related to the
sale contemplated by this Agreement, the Company, the Business and the
Property of which Buyer does not receive notice prior to the Closing (either
from Seller in Schedule 14.3 or pursuant to notice given pursuant to Section
17.1 or in any written communication made to Buyer from Buyer's environmental
consultants (collectively the "Known Environmental Matters")). Except as
expressly provided in this Section 14.2, at Closing each party, for itself
and its successors and assigns, by virtue of consummating the sale
contemplated by this Agreement and without further action on the part of such
party, shall waive and release the other party from any and all liability
under any other cause of action at law or in equity concerning the Known
Environmental Matters, whether raised pursuant to (i) Environmental
Requirements, (ii) any other applicable federal, state or local statute,
ordinance, rule or regulation, or (iii) common law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) and their
respective officers, directors, employees, agents, successors and assigns
from and against any and all Environmental Liabilities under Existing
Environmental Requirements arising from acts or omissions occurring with
respect to, or from the use or ownership of, or any condition or circumstance
relating to, the Company or the Property that occurred or arose prior to or
on the Effective Date. The foregoing indemnity in this Section 14.2.2 shall
only apply to matters that do not constitute Known Environmental Matters
(such matters being referred to as the "Unknown Environmental Matters").
Such indemnification under this Section 14.2.2 shall be provided only for
claims for Unknown Environmental Matters noticed to the other party pursuant
to the procedures of Section 14.2.3, within eighteen (18) months after the
Effective Date. Subject to the provisions of Sections 14.2.3 and 14.2.4,
Buyer agrees to indemnify and hold harmless Seller, its Affiliates and their
respective officers, directors, employees, agents, successors and assigns
from and against any and all Environmental Liabilities, with respect to any
Environmental Requirements in existence now or hereafter in effect, arising
from acts or omissions occurring after the Effective Date, or from the use
or ownership of the Property after the Effective Date, or any condition or
circumstance relating to the Company, the Property or the Business that
occurred or arose after the Effective Date on the Property or in connection
with the Company or the operation of the Business after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including information sufficient
to inform the other party of, and allow such other party to confirm the
nature of, the claim and any activities required to address the claim, in
sufficient detail for the indemnifying party to confirm that all costs
incurred or to be incurred by the party to be indemnified under this Section
14.2 are required by Environmental Requirements, as applicable to Buyer, and
Existing Environmental Requirements, as applicable to Seller, and are
reasonable and cost-effective. If the indemnifying party disagrees with the
party to be indemnified as to the necessity of costs or the reasonableness
or cost-effectiveness of the remediation method selected, the parties shall
negotiate in good faith to achieve at a mutually satisfactory solution. If
the parties cannot agree as to costs or methods of remediation, the matter
shall be resolved in accordance with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent
such damages have been recovered by a third person and are the subject of a
Third Party claim for which indemnification is available under the express
terms of this Article 14. Any indemnifiable claim under this Section 14.2
shall be reduced to account for any insurance, storage tank fund, or other
proceeds received by the party to be indemnified, as a result of the
indemnifiable losses involved. The parties agree to take all reasonable
steps to mitigate any indemnifiable claim under this Section 14.2, including
complying with any registration and reporting requirements necessary to
qualify for reimbursement from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not
exceed the aggregate amount of Two Million Twenty Eight Thousand Seven
Hundred Eighty Seven Dollars ($2,028,787.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article
14 shall be treated by Buyer and Seller as purchase price adjustments, and
Buyer and Seller shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer shall not
be indemnified or reimbursed for any adjustment to the basis of any asset
resulting from an adjustment to the purchase price or any additional or
reduced taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that
a party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to
exercise any right of termination pursuant to this subsection (f) if such
party shall not have performed diligently and in good faith the obligations
required to be performed by such party hereunder prior to the date of
termination;
(g) by Buyer if a Governmental Authority, the approval of which
is a condition to Buyer's obligations under Section 7.1, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby; or
(h) by Seller, if a Governmental Authority, the approval of which
is a condition to Seller's obligations under Section 7.2, has provided
written notice that it shall not consent to or approve the transactions
contemplated hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force
and effect and there shall be no further liability hereunder on the part of
either party or its Affiliates, directors, officers, shareholders, agents or
other representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages,
whether pursuant to breach of contract or in tort, or other remedies
available at law or in equity, from the other party as a result of the other
party's breach of this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8,
17.11, 17.13, 17.14 and Article 16 shall survive any termination of this
Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit to
compel compliance with this dispute resolution process, the parties agree to
use the following alternative dispute resolution procedure as their sole
remedy with respect to any controversy or claim arising out of or relating
to this Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party,
each party shall appoint a knowledgeable, responsible representative to meet
and negotiate in good faith to resolve any dispute arising under this
Agreement. The discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize other
alternative dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall
not be admissible in the arbitration described below or in any lawsuit.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may, if
otherwise admissible, be admitted in evidence in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
representatives of the parties do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Either party may
demand such arbitration in accordance with the procedures set out in those
rules. The arbitration hearing shall be commenced within sixty (60) days of
the demand for arbitration and the arbitration shall be held in a mutually
agreeable location. The arbitrator shall control the scheduling (so as to
process the matter expeditiously) and any discovery. The parties may submit
written briefs. The arbitrator shall rule on the dispute by issuing a
written opinion within thirty (30) days after the close of hearings. The
times specified in this Section 16.3 may be extended upon mutual agreement
of the parties or by the arbitrator upon a showing of good cause. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time
and reproduction costs); provided, however, that if the arbitrator determines
that the position taken in the dispute by the non-prevailing party taken as
a whole is unreasonable, the nonprevailing party will bear all such fees and
expenses, and reimburse the prevailing party for all of its reasonable costs
and expenses in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with
respect to the resolution of disputes without litigation shall not apply to
any dispute, controversy or claim arising out of the provisions of Section
11.1, or the Confidentiality Agreement, or to a party's seeking to proceed
under Section 17.14, it being understood and agreed that in the event of a
breach by either party of the provisions of Section 11.1, or the
Confidentiality Agreement, or in the event that a party seeks to proceed
under Section 17.14, the non-defaulting party shall be entitled to proceed
to protect and enforce its rights by an action at law, a suit in equity or
other appropriate proceeding, whether for specific enforcement of any
agreement contained in Section 11.1, or the Confidentiality Agreement or in
aid of the exercise of any power granted by Section 11.1, 17.14 or the
Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required
or permitted hereunder shall be in writing and, unless otherwise provided in
this Agreement, will be deemed to have been given when delivered in person
or dispatched by electronic facsimile transfer (confirmed in writing by
certified mail, concurrently dispatched) or one business day after having
been dispatched for next-day delivery by a nationally recognized overnight
courier service to the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or
other forth of release of information concerning this Agreement or the
transactions contemplated hereby that is intended to provide such information
to the news media or the public (a "Press Release"). Neither party shall
issue or cause the publication of any such Press Release without the prior
written consent of the other party; provided, however, that nothing herein
will prohibit either party from issuing or causing publication of any such
Press Release to the extent that such action is required by applicable Law
or the rules of any national stock exchange applicable to such party or its
Affiliates, in which case the party wishing to make such disclosure will, if
practicable under the circumstances, notify the other party of the proposed
time of issuance of such Press Release and consult with and allow the other
party reasonable time to comment on such Press Release in advance of its
issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each
party will pay any expenses (including, without limitation, attorneys' fees)
incurred by it incident to this Agreement and in consummating the
transactions provided for herein. All regulatory filing fees required
pursuant to Sections 5.1, 5.4 and 5.5 shall be split equally between the
parties. Each party will pay the appropriate costs and filing fees relating
to any other applications required to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Buyer may not assign or delegate any of its rights
or duties hereunder without the prior written consent of the Seller; provided
that Buyer may assign or delegate its rights and obligations under this
Agreement without the prior written consent of Seller, to any directly or
indirectly wholly owned subsidiary of Buyer provided such subsidiary assumes
in writing all of the duties and obligations of Buyer hereunder, but no such
assignment and assumption shall in any way operate to enlarge, alter or
change any obligation of or due to Seller or relieve Buyer of its obligations
hereunder and provided that Buyer agrees to cause such subsidiary to perform
each of its agreements and covenants herein, and shall be jointly and
severally liable for any non-performance thereof. Seller may not assign or
delegate any of its rights or duties hereunder without the prior written
consent of the Buyer. Upon the sale, assignment or transfer by Buyer of the
Company, the Business or the Property to a non-Affiliate of Buyer not in the
ordinary course of business of Buyer, Seller's representations and warranties
and indemnification obligation for breach thereof shall terminate. Any
assignment made in violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor
as in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean
collectively this document, the Schedules hereto, any agreements expressly
incorporated herein, and the Confidentiality Agreement. This Agreement
supersedes and revokes any prior discussions and representations, other
agreements, commitments, arrangements or understandings of any sort
whatsoever, whether oral or written, that may have been made or entered into
by the parties relating to the matters contemplated hereby. This Agreement
constitutes the entire agreement by and among the parties, and there are no
representations, warranties, agreements, commitments, arrangements or
understandings except as expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege available to each party at law or in
equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same
instrument.
17.11 Governing Law. This Agreement shall in all respects be governed
by and construed in accordance with the internal laws of the State of
Delaware (except that no effect shall be given to any conflicts of law
principles of the State of Delaware that would require the application of the
laws of any other jurisdiction). In accordance with Title 6, Section 2708
of the Delaware Code Annotated, the parties agree to the jurisdiction of the
courts of Delaware and to be served with legal process from any of such
courts.
17.12 Further Assurances. From time to time, as and when requested by
one of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be
reasonably necessary to consummate and make effective the transactions
contemplated by this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or
to this Agreement, (ii) each term defined in this Agreement has the meaning
so assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iii) all
references to the "knowledge of a party" will be deemed to refer to the
actual knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor
of, or against, either of the parties by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior
draft of such provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and
remedies available at law or in equity, any party hereto may pursue, to the
fullest extent available, the remedy of specific performance in order to
compel the other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of
the date first above written.
ALLTEL CORPORATION:
By: /s/ Max E. Bobbitt
------------------
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS UTILITIES COMPANY:
By: /s/ Leonard Tow
---------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of ALLTEL Nevada, Inc., a Nevada
corporation (the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, the Shares (as defined below), upon the terms
and conditions set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets on
the Company's Balance Sheet), and (iv) Other Current Assets (item 10-Assets on
the Company's Balance Sheet) to the extent such other current assets do not
represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and which RTB Stock is owned by the
Company immediately after the Effective Date, (ii) Unamortized Debt Expense
(item 16-Assets on the Company's Balance Sheet) to the extent such debt expense
relates to debt which is to remain outstanding immediately after the Effective
Date, and (iii) Deferred Maintenance and Retirements (Item 17 - Assets on the
Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued - Other
(item 9 - Liability on the Company's Balance Sheet), (v) Interest Accrued-Other
(item 13-Liabilities on the Company's Balance Sheet) to the extent such
interest relates to debt which is to remain outstanding immediately after the
Effective Date, and (vi) that portion of Other Deferred Credits (item 25 -
Liabilities on the Company's Balance Sheet) that relates to liabilities that
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing local
exchange and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products associated with
the Exchanges, including without limitation such unregulated activities,
services and products of the Company conducted, offered or serviced by the
Transferred Employees or provided or related to the Company's subscribers or
customers served in or from the Exchanges (such unregulated activities,
services and products (the "Unregulated Business") are considered an integral
part of the Business for all purposes of this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company, no par value.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations (including
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive or
treble damages), costs and expenses (including reasonable fees, disbursements
and expenses of counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental Requirements of any
Governmental Authority, or as a consequence of (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Property by any person or party or the conduct of
the Business or any part thereof, that does not comply with Environmental
Requirements, or (c) any claim, demand, notice, cause of action, directive,
order, judgment, fine or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to this
Agreement, to the extent that the condition or circumstance or event giving
rise to the claim, demand, notice, cause of action, directive, order, judgment,
fine or penalty relates to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Exchanges is defined in Section 2.2.
Excluded Books and Records means the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the Excluded Property
or (iii) the Retained Liabilities, (iv) employees of the Company that are not
Transferred Employees, and (v) subject to Section 11.13, all Original Cost
Documents that are not located in the Exchanges.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
the Company's interest in any cellular telephone or personal communications
services business, and, in each case, any applications or licenses granted with
respect thereto, and the assets disposed, transferred or dividended by the
Company pursuant to Section 11.22 and any assets excluded pursuant to Sections
11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice president
of the entity in charge of a principal business unit, division or function.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other Governmental
Authority, as to which: (a) no request for stay of the action by the FCC, the
PUC, or such other Governmental Authority, as the case may be, is pending, no
such stay is in effect, and if any time period for filing any request for such
a stay is provided by statute or regulation, such time period has passed; (b)
no petition, motion or application for rehearing, reconsideration, or review,
of the action is pending before the FCC, the PUC, or such other Governmental
Authority, as the case may be, and the time provided for filing any such
petition, motion or application has passed; (c) the FCC, the PUC, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, the PUC's or
such other Government Authority's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company is
a party, or to which any Affiliate of the Company is a party and which are used
in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's Balance
Sheet as of a date certain comprising the Company's Materials and Supplies
(item 8 - Assets on the Company's Balance Sheet).
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant Under
Construction -- Short Term (item 23 - Assets on the Company's Balance Sheet),
Plant Under Construction -- Long Term (item 24 - Assets on the Company's
Balance Sheet), and Telecommunications Plant -- Other (item 25 - Assets on the
Company's Balance Sheet), less Accumulated Depreciation and Amortization (item
27 - Assets on the Company's Balance Sheet).
Original Cost Documents means all original cost documentation relating to
the Telephone Plant.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Service Commission of Nevada.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 260,553.67 shares of the Common Stock owned by Seller.
Tax Returns means a report, return or other information statement required
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance, recording, ad valorem,
gains, value-added, unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social security, estimated,
add-on, minimum, privilege or withholding tax and any interest and penalties
and additions to such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance Sheet),
"Regulatory Liabilities" (Item 24 - Liabilities on the Company's Balance
Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the Company's
Balance Sheet), and "Donations of Telephone Plant" (Item 26 - Liabilities on
the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance Sheet
as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth in
this Article 1.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, the Shares, free and clear of
all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists of
the Telephone Plant, Contracts and Leases (to the extent permitted following
compliance with Section 5.3), Company Books and Records, FCC Licenses, the Non-
FCC Authorizations and other assets in effect or owned by the Company as of the
Effective Date that are associated with (i) the telephone exchanges listed in
Schedule 2.2(a) (the "Exchanges"), and (ii) the Unregulated Business described
on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone Plant"
means the Real Property, machinery, equipment, vehicles and all other assets
and properties used, or held for future use, in connection with the conduct of
the Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, telephone cable (wherever located
and whether in service or under construction), microwave facilities (including
frequency spectrum assignments), telephone line facilities, telephones,
machinery, furniture, fixtures, tools, implements, conduits, stations,
substations, equipment (including, without limitation, central office
equipment, subscribers' station equipment and other equipment in general),
instruments, house-wiring connections and all other equipment of every nature
and kind owned by the Company or in which the Company holds an interest (other
than as a lessee) and used in connection with the Business. For purposes of
this Agreement, "Real Property" means the real property owned by the Company
and used in connection with the Business, including, without limitation, all
land, buildings, structures, easements, rights of way, appurtenances,
improvements or privileges located thereon and relating thereto. Without
limiting the generality of the foregoing, the Telephone Plant includes the
assets that would be properly included in the fixed asset accounts referenced
in Part 32 of the FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate of
the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement, "Company
Books and Records" means all of the Company's customer or subscriber lists and
records, accounts and billing records (including a copy of the detailed general
ledger and the summary trial balances, where available for the past two fiscal
years), detailed continuing property record lists, plans, blueprints,
specifications, designs, drawings, surveys, engineering reports, personnel
records (where applicable), Original Cost Documents (where located in the
Exchanges but excluding Excluded Books and Records) and all other documents,
computer data and records (including records and files on computer disks or
stored electronically) relating to the Business (excluding Excluded Books and
Records), the Property and the Transferred Employees, except for the Excluded
Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
all licenses, certificates, permits or other authorizations, including, without
limitation, Section 214 authorizations where applicable, granted to the Company
by the FCC.
2.2.5 [INTENTIONALLY DELETED]
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses) granted to the Company by Governmental
Authorities (including without limitation those that are listed or required to
be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance with
the other terms and conditions of this Agreement, on the Closing Date, Buyer
will pay to Seller the sum of Fifty Million Four Hundred Twenty One Thousand
Dollars ($50,421,000.00), subject to adjustment as provided in Section 3.2 (the
"Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price. Such delivery shall be made by bank wire transfer to an account that
Seller shall designate at least two (2) business days prior to the Effective
Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing Date,
provided that all conditions to Closing set forth in Article 7 have been
satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
shall be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which the sum of Net Telecommunications Plant and Materials and
Supplies as of the Effective Date exceeds or is less than the June 1994 Base
Amount; provided, however, that in determining Net Telecommunications Plant and
Material and Supplies as of the Effective Date, no effect will be given for:
(i) any decrease thereof resulting from damage, loss or destruction of Damaged
Property which is repaired or replaced by Seller or the Company or for which
Seller or the Company makes a substitution, in accordance with Section 11.9(b);
(ii) any increase thereof resulting from expenditures made by Seller or the
Company in connection with any such repair, replacement or substitution of
Damaged Property in accordance with Section 11.9(b); or (iii) any increase
thereof resulting from Seller's expenditures pursuant to its obligations under
Section 14.1.7(b) and (c) except for the cost of purchasing specific items of
new plant (i.e., storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase Price
will be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which, in each case as of the Effective Date: (i) Adjusted Total
Current Assets plus Adjusted Total Non-Current Assets exceeds or is less than
(ii) Adjusted Total Current and Non-Current Liabilities plus Total Long Term
Debt to the extent such Total Long-Term Debt shall remain outstanding
immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment Regarding
Assets and Liabilities in Section 3.2(d)) and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer of
Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for purposes
of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c) and the
Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and in
accordance with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For the
purpose of preparing Buyer's calculations and adjustments, Seller shall give
Buyer access to all books, records, and other information regarding the Company
available to Seller that Buyer may reasonably determine appropriate.) Within
thirty (30) days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments of
the Purchase Price shall be final and binding on Seller and Buyer. (For the
purpose of reviewing Buyer's calculations and adjustments, Buyer shall give
Seller access to all books, records, and other information regarding the
Company available to Buyer that Seller may reasonably determine appropriate.)
If Seller shall object, Seller and Buyer shall work in good faith to agree on
the correct amounts for the final Purchase Price, but if they fail to agree,
either party may exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) if the Final Purchase Price shall exceed the Estimated
Purchase Price, Buyer shall cause to be transferred to such account in the
United States as Seller may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND
NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications to
be filed with the PUC and with respect to Material Regulatory Approvals, the
parties shall file the applications and notices described on Schedule 5.1 in
such form as agreed to by the parties with the PUC and other appropriate
Governmental Authorities, seeking an order permitting the transfer of control
of the Company to Buyer (the "Regulatory Approvals"). Each party agrees to use
its best efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with all Governmental Authorities to obtain
the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and 7.2.4,
and the Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness identified
on Schedule 5.2(a) (the "Long Term Indebtedness"), where required by the
underlying debt instruments, as promptly as practicable following the Execution
Date, but in any event no more than forty-five (45) days thereafter, the
parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consents") to
the transfer of control of the Company on terms acceptable to the parties. The
parties acknowledge that all Long Term Indebtedness for which Debtholder
Consents have been obtained before the Effective Date and all other Long Term
Indebtedness for which Debtholder Consent is not required, shall remain
outstanding immediately after the Effective Date and shall be included as a
Purchase Price adjustment pursuant to Section 3.2(d). Each party shall bear
their own costs and expenses in obtaining such Debtholder Consent. Neither
party, however, shall be required to make any payment to the debtholder to
obtain the Debtholder Consent, except that Seller shall be responsible for any
such payments as are specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in full
(including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall repay
on or prior to the Effective Date, Seller shall take, at Seller's sole cost and
expense, all actions necessary with respect to all persons or entities
(collectively, the "Secured Parties") holding any security interest or lien
against the Property, to obtain the termination or release, as of the Effective
Date, and the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the Property (such
terminations and releases being hereinafter collectively referred to as the
"Indebtedness Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Indebtedness Releases or
Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to the transfer of control of the Company to Buyer as a result of
Buyer's purchase of the Shares. To the extent any of the approvals, consents
or waivers required with respect to any Lease, Contract or Immaterial
Authorization have not been obtained with respect to any Lease, Contract or
Immaterial Authorization as of the Effective Date, Seller shall continue to use
its best efforts to obtain the consent of such other third party that is
required for the transfer of control of such Lease, Contract or Immaterial
Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to the transfer of control of a
Lease, Contract or Immaterial Authorization after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, then Seller and Buyer shall within thirty (30)
days after expiration of such six-month period negotiate in good faith and
agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or Immaterial
Authorization except as otherwise provided in Section 11.12 with respect to the
Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
but no later than forty-five (45) days after the Execution Date, the parties
shall file all applications and requests described on Schedule 5.4 in such form
as agreed to by the parties with the FCC seeking, and shall use their best
efforts to obtain, the FCC's consent to the transfer of control of all FCC
Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC
Consents"). The parties each agree that in connection with taking the
immediately above described actions, they will not file any application or
request for a waiver of Part 36 (study areas), Part 61 (tariffs), and Part 69
(price caps and study areas) of the FCC Rules, and that on the Effective Date
the study areas relating to the Exchanges shall remain in the National Exchange
Carrier Association Tariff F.C.C. No. 5, provided, however, that such study
areas shall remain in the NECA Tariff FCC No. 5 after the Effective Date only
for so long as Buyer, in its sole discretion, shall determine. Each party
agrees to use its best efforts, and the parties agree to cooperate fully with
each other and with the FCC, to obtain the FCC Consents at the earliest
practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
but in no event later than thirty (30) days after the Execution Date, the
parties will make such filings as may be required by the HSR Act with respect
to the sale contemplated by this Agreement. Thereafter, the parties will file
as promptly as practicable any supplemental information that may be requested
by the U.S. Federal Trade Commission or the U.S. Department of Justice pursuant
to the HSR Act. The parties agree to cooperate in seeking early termination of
the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to all
interexchange carriers having business relationships with the Company, to all
customers of the Company, and to all officers, employees and agents of the
Company having knowledge or information concerning the operations of the
Company so as to afford Buyer the opportunity to make such review, examination
and investigation of the Company and the Property as Buyer may desire to make,
to evaluate the competitiveness of the Company and the Business, and to enable
Buyer to assimilate the Company and the Business into Buyer's operations as
soon as practicable after the Effective Date. To the extent it so desires,
Seller shall accompany Buyer on all of Buyer's access to interexchange
carriers, customers and agents of the Company. Buyer will be permitted to make
extracts from or copies of such books and records as may be reasonably
necessary. Buyer will not contact any employee, customer or supplier of the
Company as to this Agreement or the matters involved herein except in
accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall cause
the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including sessions
to train such employees in Buyer's business planning process in order to have
the Company after the Effective Date follow Buyer's business planning process
and procedures);
(ii) The Company's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to participate
in the Company's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish, and cause the Company to furnish, such financial and
operating data and other information pertaining to the Company as Buyer may
reasonably request in order, among other things, to comply with Buyer's
disclosure obligations under the federal securities or other laws as such
obligations relate to Buyer's prospective ownership of the Company, including
any disclosure required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller or the Company to
take actions that would unreasonably disrupt the normal course of the business
of the Company or violate the terms of any applicable Law or any contract to
which the Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or the Company's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with respect
to issuing an auditor's report required by Buyer. Any information or document
provided to Buyer or acquired by Buyer during this investigation shall be
deemed "Evaluation Material" as that term is defined in the Confidentiality
Agreement and shall be subject in all cases to the terms of the Confidentiality
Agreement; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business or
the Company that Buyer, upon consultation with counsel, determines is required
to be disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Company, the Business or the transactions
contemplated by this Agreement; of which in any such case, Seller's
representatives listed on Schedule 6.3(b) become aware on or before the
Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit Buyer
access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing occurs, any
claim with respect to matters so specified shall be waived by Buyer unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material adverse
changes to the Property as a whole or the financial position or results of
operations of the Company as a whole, and, subject to Section 11.9, the Company
shall not have suffered any material loss or damage to the Property, whether or
not insured, that would materially affect or impair the Company's ability to
conduct the Business after the Effective Date. None of the Additional
Financial Statements of the Company delivered pursuant to Section 11.4 shall
reflect a material change in the financial position or results of operations of
the Company from the financial position or results of operations reflected in
the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.24. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution Date
or any time thereafter, of the public records regarding liens and judgments
with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Buyer if required by the underlying debt instrument shall have received
the Debtholder Consents and shall have entered into any other necessary
agreements with the holders of such Long-Term Indebtedness evidencing such
Debtholder Consent in form and substance reasonably acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties. There
shall have shall have been no material breach by Buyer of any of its covenants
to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 9.2 shall be true and
correct as of the Effective Date, except for such representations or warranties
made expressly as of some other date, which shall be true and correct as of
such other date (all such representations and warranties to be qualified by any
materiality standards contained therein), and Buyer shall have delivered to
Seller a certificate ("Buyer's Closing Certificate"), dated as of the Effective
Date and signed by one of Buyer's Executive Officers, certifying each of the
foregoing or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct in
which event if the Closing occurs any claim with respect to matters so
specified shall be waived by Seller unless otherwise expressly agreed by Buyer
at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the manner
specified in Section 3.1, the Estimated Purchase Price as adjusted pursuant to
Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions,
or restrictions which Seller determines, in good faith in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Seller of the transactions contemplated by this
Agreement. For purposes of this Section 7.2.4, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Seller, if required by the underlying debt instrument, shall have
received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar month
in which occurs the tenth (10th) business day after the date Seller notifies
Buyer in writing (the "Notice") of its determination that all required Material
Regulatory Approvals and FCC Consents have been obtained and provided that the
other conditions set forth in Article 7 shall have been satisfied, or at such
other place and time as may be agreed upon by Seller and Buyer. The
transactions to be consummated at Closing shall be deemed to have been
consummated as of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the Notice (the
"Effective Date"). If the Effective Date is not a day on which financial
institutions are open and operating, then the Closing Date shall be the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for transfer
or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence satisfactory
to Buyer that all Long-Term Indebtedness (and interest, premiums and penalties
thereon) to be repaid pursuant to Section 5.2(b) has been (or will be at
Closing) repaid in full.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver
to Seller the following items and documents duly executed and acknowledged as
appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement and to fulfill its respective obligations
under this Agreement. The execution and delivery by Seller of this Agreement
and the fulfillment of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and, assuming the due
execution and delivery of this Agreement by Buyer, constitutes a valid and
binding obligation of Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally and subject to the qualification
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of Seller's or the Company's certificate of incorporation or bylaws
or, (ii) except as set forth in Schedule 9.1.13, or subject to obtaining the
approvals and consents reflected in Article 5, conflict with, violate or result
in the breach of, constitute a default under, accelerate the performance
required by, or result in the creation of any encumbrance upon any of the
Property under any provision of any Contract other than any such conflict,
violation or breach that alone or in the aggregate would not have an adverse
effect on the Buyer, the Company, the Business or the Property after the
Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court or governmental agency, authority or instrumentality ("
Governmental Authority") is required to be obtained or made by or with respect
to Seller or the Company or in connection with the execution and delivery of
this Agreement by Seller or the fulfillment by Seller of its obligations under
this Agreement, except (i) the filings and approvals described in Article 5,
(ii) as described in Schedule 9.1.3, and (ii) such other consents, approvals,
orders or authorizations, or registrations, declarations or filings, which if
not obtained or made would not result in a material adverse effect on Buyer,
the Company, the Business or the Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
execution and delivery of this Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any applicable existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect on
the Company, the Business as a whole or on any significant part of Property
after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; it
has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Buyer for any broker's or finder's
fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any of
its obligations or liabilities, or the performance, observance or fulfillment
of any covenant or condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default thereunder or that
would constitute such a material breach or default with the giving of notice or
lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(ii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii) such other imperfections of
title and encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Property to which such
imperfection or encumbrance relates. No condemnation proceeding is pending or,
to the knowledge of Seller or the Company, threatened with respect to any part
of the Property and such Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by the Company included
in the Property. In addition, Schedule 9.1.8-2 sets forth a list of the Real
Property included in the Property in which the Company holds other than a fee
interest (such as easements and rights of way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there is
not any existing material default or existing material breach of a covenant by
the Company under any Lease. The Company enjoys peaceful and undisturbed
possession under all material Leases and, to Seller's and the Company's
knowledge, the lessor under any such Lease is not (with or without notice or
the lapse of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it thereunder,
and has not given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is in
substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation of
such Property. Except as set forth on Schedule 9. 1. 10, the Company has not
received any written notice within the past twelve (12) months of a violation
of any ordinances, regulations or building, zoning and other similar laws with
respect to such assets that would have a material adverse effect on the
Company, the Business as a whole or any significant part of the Property. Each
parcel of Real Property and, to the knowledge of Seller and the Company, of
real estate leased by the Company and material or necessary to the Business as
presently conducted substantially complies with all applicable Laws except
where the failure to so comply individually or in the aggregate, would not have
a material adverse effect on the Company, the Business as a whole or any such
parcel after the Effective Date. Except as set forth on Schedule 9.1.10, other
than the Company, no person or party has actual possession or has a right to
possession of all or any material portion of any parcel of such Real Property
or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PROPERTY INCLUDED IN THE PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
OR STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet, income
statement and related statement of cash flows as of and for the respective
periods ended December 31, 1992, and December 31, 1993, together with the
auditor's report thereon (the "Financial Statements"). The Financial
Statements were prepared based upon the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
as of the appropriate periods and the results of operations for the year then
ended, in each case in conformity with GAAP and to the best of Seller's
knowledge and to the extent required by applicable Law, have been prepared in
all material respects in conformity with the regulations of the FCC and the
PUC. The Financial Statements contain no untrue statements of any material
fact nor omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of the Company; and (ii) will fairly present the financial
condition of the Company and the results of operations of the Company for the
periods indicated, subject, in the case of interim Additional Financial
Statements, to normal year-end adjustments which will not be material in amount
or effect; and (iii) to the best of Seller's knowledge and to the extent
required by applicable Law, will be prepared in all material respects in
conformity with the regulations of the FCC and the PUC; and (iv) will not
contain any untrue statements of any material facts or omit to state any
material facts required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of the Company and
fairly presents the financial condition of the Company as of such date subject
to normal year-end adjustments which will not be material in amount or effect,
and to the best of Seller's knowledge and to the extent required by applicable
Law, was prepared in all material respects in conformity with the regulations
of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities, operations
or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or the
Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance or
agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of the
Property, or any increase or an agreement to increase any indebtedness of the
Company, except in the ordinary course of business;
(d) Any material change in the Company's tariffs or in the manner of
conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation or
other event or condition that materially and adversely affects the business or
prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on the
Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the Company
except as required by GAAP or any change in depreciation or amortization
policies or rates heretofore adopted by the Company except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's knowledge,
any attempt to organize the Transferred Employees for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity other
than loans, advances, capital contributions or investments made in the ordinary
course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or the
Company and any third party) to do or to take any of the actions referred to in
paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith. The
Company is not in material breach or default in connection with any Contracts,
and there is no basis for any claim of breach or default by the Company, or to
Seller's the Company's knowledge, any other party, in any material respect
under any of the Contracts. None of the Contracts, either separately or in the
aggregate, materially and adversely affects the Company, the Business or the
Property. After the Effective Date, all rights and obligations of the Company
under the Contracts shall continue unimpaired in the Company (assuming that if
any Contract requires the consent of the other party thereto, such consent will
have been obtained by the parties hereto prior to the Effective Date). Except
for the instruments specifically listed in Schedule 9.1.13, the Company is not
a party to or subject to: (i) any agreement for the purchase or disposition of
any material, equipment, supplies, inventory or service, except individual
purchase orders and contracts in amounts less than Twenty-Five Thousand Dollars
($25,000.00); (ii) any agreement to which the Company is a party or by which
any of the Property is bound relating to indebtedness for money borrowed
including capital leases, security arrangements relating thereto and any
amendment or waiver thereof; and (iii) any other agreement not of the type
covered by any of the foregoing items of this Section 9.1.13 requiring payments
by the Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required to
be listed thereon, the Contracts which require the consent, approval or waiver
of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a character
usually insured by companies carrying on similar businesses is insured under
insurance policies in such amounts and against such losses or casualties as is
(i) usual in such companies and (ii) required under any of the Contracts or
Leases. The insurance policies referred to in this Section 9.1.14 are (i)
listed on Schedule 9.1.14, and (ii) in full force and effect and the premiums
due thereon have been duly and timely paid. The most current statement of
values (the statement of values of property of an insurable nature that is
submitted to an insurance company to be used as a basis for the calculation of
premiums) relative to the Property as presently insured has been made available
to Buyer by Seller. On the Effective Date, the coverage under the insurance
policies and programs of Seller and its Affiliates applicable to the Company
will be terminated, and Buyer will be responsible for providing all insurance
coverage for the Company. Following the Effective Date, Seller shall be
responsible for and shall pay any additional premiums that might be required by
an insurance company for insurance coverage prior to the Effective Date
relating to the Company and shall be entitled to any refunds or dividends due
from such companies relating to such coverage. Schedule 9.1.14 sets forth a
list of the open material claims affecting the Company complete in all material
respects, and a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be filed
on or prior to the Effective Date (taking into account all extensions of due
dates) by or with respect to the Company and has paid or adequately provided
for all Taxes shown thereon as owing, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, have a material adverse effect on Buyer, the Business, or the Company after
the Effective Date, (ii) all such Tax Returns were or will be correct and
complete in all material respects, (iii) to the knowledge of Seller, all
withholding Tax requirements imposed on or with respect to the Company have
been or will be satisfied in full in all respects, and (iv) all penalties,
interest or other charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have been or will
be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case, with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no material
written claim against the Company for any Taxes, and no material assessment,
deficiency or adjustment has been asserted or, to the knowledge of Seller
proposed with respect to any Tax Return of or with respect to the Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect
to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements includes
adequate provisions for the payment in full of all federal and state income
taxes of the Company for all taxable periods or portions thereof during the
period beginning with respect to each Tax Return statute of limitations and
ending no later than December 31, 1993. The balance sheet included in the
Financial Statements has attached thereto a schedule (the "Tax Schedule") which
sets forth provisions for such federal and state income taxes.
(f) All accrued rights or obligations under any written or unwritten
Tax allocation or sharing agreements or arrangements affecting the Company are
reflected in the intercompany accounts of the Company. All such Tax allocation
or sharing agreements or arrangements have been or will be cancelled on or
prior to the Effective Date. No payments are or will become due by the Company
after the Effective Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the property
of the Company is held in an arrangement for which partnership Tax Returns are
being filed, and the Company does not own any interest in any controlled
foreign corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the property
of the Company or any of its Subsidiaries is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section 168(h) of
the IRC) or "tax-exempt bond financed property" (within the meaning of Section
168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will not
be required to include any amount in income for any taxable period beginning
after December 31, 1993 as a result of a change in accounting method for any
taxable period ending on or before December 31, 1992 or pursuant to any
agreement with any Tax authority with respect to any such taxable period.
(j) The Company has not consented to have the provisions of Section
341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this Agreement,
neither Buyer nor the Company will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the IRC without regard to whether
such payment is reasonable compensation for personal services performed or to
be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the proper
governmental authorities or properly deposited as required by applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that, if
determined adversely to the Company, would reasonably be expected to have a
material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of any
reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the Business
as a whole or the Property. The Company is not in default under any judgment,
order or decree of any Governmental Authority which would reasonably be
expected to have a material adverse effect on the Company, the Business as a
whole or any significant part of the Property after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, the Company is an issuing
carrier in the National Exchange Carrier Association Tariff F.C.C. No. 5 for
the purpose of providing interstate access service. Except as described on
Schedule 9.1.17(a), the state regulatory tariffs applicable to the Company
stand in full force and effect on the date of this Agreement in accordance with
all terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation or termination in connection
therewith, nor is the Company subject to any restrictions or conditions
applicable to its state regulatory tariffs that limit or would limit the
operation of the Business (other than restrictions or conditions generally
applicable to tariffs of that type). Except as described on Schedule
9.1.17(a), each such state tariff has been duly and validly approved by the
appropriate state regulatory agency. Except as otherwise disclosed on Schedule
9.1.17(a), the Company is not in material violation under the terms and
conditions of any such state tariff, and there is no basis for any claim of
material violation by the Company in any material respect under any such state
tariff. Except as described in Schedule 9.1.17(a), there are no applications
by the Company or complaints or petitions by others or proceedings pending or
threatened before the state regulatory authority relating to the Company, the
Business or its operations or the state regulatory tariffs. To the knowledge
of Seller and the Company, there are no material violations by subscribers or
others under any such state tariff that would be material to the Company or the
Business. A true and correct copy of each state tariff applicable to the
Company or the Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension, cancellation or
termination or, to Seller's or the Company's knowledge, any threatened
suspension, cancellation or termination in connection therewith nor are any of
such FCC Licenses subject to any restrictions or conditions that limit the
operation of the Business (other than restrictions or conditions generally
applicable to licenses of that type). The FCC Licenses are free from all
security interests, liens, claims, or encumbrances of any nature whatsoever.
Except as set forth on Schedule 9.1.17(b), there are no applications by the
Company or material complaints or material petitions by others or proceedings
pending or threatened before the FCC relating to the Company or the FCC
Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's and the Company's knowledge, no event has occurred with respect to
any materially necessary Non-FCC Authorization which permits, or after notice
or lapse of time or both would permit, revocation or termination thereof, or
would result in any other material impairment of the rights of the holder of
such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term is
defined in Section 3(1) of ERISA maintained or contributed to by the Company or
any of its Affiliates in respect of any Transferred Employee (as defined below)
(such plans being hereinafter referred to collectively as the "ERISA Plans"),
and each other material retirement, pension, profit-sharing, money purchase,
deferred compensation, incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement maintained or
contributed to by the Company or its Affiliates in respect of or for the
benefit of any Transferred Employee or former employee, excluding any such
plan, program, agreement, or arrangement maintained or contributed to solely in
respect of or for the benefit of Transferred Employees or former employees
employed or formerly employed by the Company outside of the United States, as
of the date hereof (collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Seller has supplied Buyer with a true and
complete copy of each Plan and all amendments thereto. Schedule 9.1.18(a) also
includes a list of each material written employment, severance, termination or
similar-type agreement between the Company or its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except to the extent that
any assets, liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or otherwise) to plan(s)
or agreement(s) maintained or contributed to by Buyer, all such Plans and
Agreements shall remain the liabilities of the Seller or its Affiliates and
Seller shall take any and all steps necessary to ensure that neither Buyer nor
the Company shall be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the performance of this
Agreement by Seller will not directly result now or at any time in the future
in (i) the payment by the Company or its Affiliates to any Transferred Employee
of any severance, termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of the IRC) being
made by the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company could
be subject to any material liability pursuant to Section 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability is
reserved for or otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
IRC), whether or not waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer plan," as that term is defined in Section 3(37) of ERISA
and with respect to any such multiemployer plans (as so defined) listed in
Schedule 9.1.18(d), Seller has not made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA that would result in the incurrence of a material liability
by the Company that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or the
Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is the
Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered by
collective bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller and the Company, during the twelve (12) months
preceding the Execution Date there have not been any union organizational
campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of the Company, together
with the elections made prior to the Effective Date with respect to such
accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on Schedule
9.1.19 copies of schedules (at the level of detail agreed to by the parties but
in any case including details regarding net book value and continuing property
records lists associated therewith) of the Company's Telephone Plant as of
June 30, 1994, including, to the extent available, a schedule specifically
identifying the Telephone Plant that is associated with the Unregulated
Business. The account balances reflected on the schedule of Telephone Plant
correspond, in all material respects, to the associated account balances
reflected on the Company's Continuing Property Records.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially complete list of
all vehicles included in the Property (including trailers, equipment mounted on
trailers and self-propelled equipment) together with the manufacturer, model
and year of each such vehicle, and indicates whether such vehicle is owned or
leased by the Company.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing and
collection revenues of the Company for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, the Company has
no materials and supplies, plant or equipment that has been disallowed from
rate base or excluded from the revenue calculations for any pool (unless due to
the deregulation of the service for which such assets are used) or in the most
recent rate order issued by the PUC or the FCC or any determination by an
administrator of an interstate or intrastate pool, and has not received written
notification that the PUC or the FCC or any pool administrator proposes to
exclude any assets from rate base or revenue calculations for the pools, or any
tariff filed with or approved in the most recent rate order of the PUC or the
FCC, in each case which materials and supplies, plant or equipment, in the
aggregate, would be in excess of one percent (1%) of Net Telecommunications
Plant.
9.1.22 Payments. All material payments of any kind required to be made by
the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically indicate
on Schedule 9.1.23, (i) the Company is in compliance in all material respects
with all Laws applicable to it, the Property and the Business and holds all
governmental permits or licenses required in order to conduct the Business and
to own and operate the Property; (ii) the present uses of the Property in the
conduct of the Business do not violate in any material respect any Law and
(iii) no written notice or warning from any governmental or regulatory
authority with respect to any failure or alleged failure by the Company to
comply with any Law or questioning the validity of any governmental permit or
license, has been issued or given, nor to the knowledge of Seller or the
Company, is any such notice or warning proposed or threatened. Neither Seller
nor the Company is aware of any fact, event or circumstance relating to the
Company that is reasonably likely to cause a regulatory agency to deny or
withhold its approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account books and
other accounting records of the Company are current, correct and complete and
reasonably well organized, in all material respects and to the knowledge of
Seller and the Company, to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC and PUC. The
Company and its Affiliates have retained substantially all Original Cost
Documents regarding the expenditures made by the Company within the immediately
preceding two-year period that relate to the Company's Net Telecommunications
Plant, and such Original Cost Documents are correct and complete in all
material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value
(as reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements of
the Business, will not materially exceed the Company's reserve for obsolete or
excess Materials and Supplies as reflected on the Company's books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by PUC. Except as set forth on
Schedule 9.1.29, there are no changes, modifications, upgrades or enhancements
required by the PUC to be made to the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this Agreement
or as otherwise set forth in Schedule 9.1.30 the Company has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), of a nature required to be
recorded or disclosed in a corporate balance sheet prepared in accordance with
GAAP, except liabilities and obligations which are not materially in excess of
amounts reflected, reserved against or disclosed in the December 31, 1993
Financial Statements or the notes thereto and except for liabilities and
obligations incurred in the ordinary course of business since December 31,
1993. Except as may be reflected in the December 31, 1993 Financial Statements
or the notes thereto or on Schedule 9.1.30, the Company has no obligations
under guarantees, endorsements or indemnities of the obligations of any other
person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons
holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner of
the Shares, which comprise 100% of the outstanding shares of all classes of
capital stock of the Company. Seller has legal, valid and marketable title to
the Shares, free and clear of all liens, claims, options, security interests or
other encumbrances of any character whatsoever ("Encumbrances"). The sale and
delivery of the Shares to Buyer pursuant to Article 2 will vest in Buyer legal,
valid and marketable title to the Shares free and clear of all Encumbrances
other than Encumbrances created or suffered by Buyer and restrictions on sales
of the Shares under applicable federal and state securities laws.
9.1.33 Capital Stock. The Common Stock is the only capital stock
authorized to be issued by the Company. The Shares are the only shares of
Common Stock outstanding. All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments (other than this Agreement) which
could obligate Seller or the Company to issue any shares of capital stock or
dispose of any ownership interest therein. There are no outstanding
obligations of the Company to issue or deliver, or to repurchase, redeem or
otherwise acquire any capital stock or other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the right
to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Nevada;
it has full corporate power and authority to own its properties and to carry on
the Business as it is now being conducted, and to own or hold under the lease,
the Property.
9.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold the assets owned, leased or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement, to own the Shares and to fulfill all
other obligations of Buyer under this Agreement. The execution and delivery by
Buyer of this Agreement and the fulfillment by it of its obligations under this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to purchase, own and
hold the Shares upon the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by Buyer and,
assuming the due execution and delivery of this Agreement by Seller,
constitutes a valid and binding obligation of Buyer, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualifications that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.2.3 No Restrictions Against Purchase of the Shares. The execution and
delivery of this Agreement by Buyer do not, and the fulfillment by Buyer of its
obligations under this Agreement will not, conflict with, violate or result in
the breach of any provision of the certificate of incorporation or bylaws of
Buyer or, subject to obtaining the approvals and consents referred to in
Article 5, conflict with, violate or result in the breach of, constitute
default under, or accelerate the performance required by any Contract to which
Buyer is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the fulfillment by
Buyer of its obligations under this Agreement, except (i) the filings and
approvals described in Article 5, and (ii) the filings and approvals listed on
Schedule 9.2.3.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
and the fulfillment by Buyer of its obligations under this Agreement will not
violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Seller for any broker's or finder's
fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
proceedings pending or, to the knowledge of Buyer, threatened against Buyer or
its properties that would prevent the consummation of the transactions
contemplated by this Agreement.
9.2.7 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC's Licenses, as described in Section 5.4, Buyer
will not file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the National Exchange Carrier Association Tariff FCC No. 5, provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
9.2.8 Investment. Buyer understands that the Shares that it will acquire
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Act"), and cannot be offered for sale, sold or otherwise
transferred unless the Shares subsequently are so registered or qualified for
exemption from registration under the Act. The Shares are being acquired under
this Agreement by Buyer in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Act. The Shares will not be offered for sale, sold or otherwise
transferred by Buyer without either registration or exemption from registration
under the Act and applicable state securities laws. Buyer has such knowledge
and experience in financial and business matters that Buyer is capable of
evaluating the merits and risks of Buyer's investment in the Shares. Buyer
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding the Shares for an indefinite
period of time, inasmuch as the Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
or prior to March 15, 1995, the parties shall, as promptly as practicable but
in any event within 30 days after Buyer's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no later
than the Effective Date, pursuant to which Seller will provide to the Company,
at the Company's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services relating to the
conversion of systems and processes) as may be reasonably requested by Buyer,
which agreement shall be in form and substance as mutually agreed to by both
Buyer and Seller (the "Transition Services Agreement").
<PAGE>
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed
in any patent or patent application), designs (useful or ornamental), and works
subject to copyright that may be embodied in, without exclusion, invention
disclosures, specifications, manuals, drawings, functional or system block
diagrams, flow charts, circuit diagrams, design or user documentation,
engineering notebooks, schematics, test programs, documented procedures,
documented processes, documented flows, devices, software, or firmware, that
relate to the function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus, article of
manufacture, process, method or service. "Intellectual Property" shall also
include patents, patent applications (including continuations, continuations-
in-part, divisions, reissues, reexamined patents and patent applications and
extensions thereof), copyrights (whether common law or statutory, registered or
unregistered), or trade secrets, residing in the subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall be
responsible for any fees associated therewith) in obtaining the consent of any
necessary third party for the use of any Intellectual Property that the Company
has placed in public use on, or prior to, the Effective Date and that is
presently used by the Company, but excluding any Intellectual Property listed
in Schedule 11.22.
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except as
specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in the Company's use of such
Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are set
forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the Intellectual
Property that as of the Effective Date the Company owns or controls or under
which it has the right to grant licenses, Seller shall not assert against
Buyer, or Affiliates of Buyer, or vendees, mediate or immediate, of Buyer or
the Company, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from the Company's activities practiced in
the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by the
Company of any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, the Company, a customer
of Buyer's or the Company's or anyone claiming under Buyer or the Company
constitutes direct or contributory infringement or misuse of any intellectual
property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, the
Company, a customer of Buyer's or the Company's, or anyone claiming under Buyer
or the Company constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the owners
of, and have permitted the Company to use, certain trade names, trade dress,
trademarks, service marks, logos and related intangible property (collectively,
"Marks") used in connection with the Business, including, without limitation,
the items listed on Schedule 11.1.5, and Buyer understands and agrees that the
Marks, or any right or license of the Company to the Marks are not being
transferred pursuant to this Agreement. Buyer acknowledges Seller's exclusive
and proprietary rights in the use of the Marks, and Buyer agrees that it shall
cause the Company not to use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this Section 11.1.5.
After the Effective Date, Buyer shall cause the Company to replace all Marks of
Seller as soon as possible, but in no event later than one hundred eighty (180)
days after the Effective Date for Marks affixed to items with a valid
continuing use in the Company's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats, tools, tool boxes,
kits (safety and others), signs, manual covers and notebooks. After the
Effective Date, Buyer will cause the Company to not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that have no valid
continuing use in the Company's conduct of the Business, including items
affecting customer or employee relations or items that do not reflect the
Company's true identity. Specific items to be destroyed or returned include
items with Marks affixed to them including, without limitation, giveaways;
order, purchase or materials forms; requisitions; invoices; statements; time
sheets/labor reports; bill inserts; stationery; personalized note pads; maps;
organization charts; bulletins/releases; sales/price literature; manuals or
catalogs; report covers/folders; program materials; and materials such as media
contact lists/cards. The one hundred eighty (180) day time period for
replacement of Marks affixed to telephone directories that were already
published or closed for publication as of the Effective Date shall be extended
to the production of replacements for such directories.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as to
reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
with the Marks, and acknowledges that the Marks and all rights therein and the
goodwill pertaining thereto belong exclusively to Seller, and that the Marks
have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company using the Marks shall be provided in
accordance with all applicable federal, state and local laws, and that the same
shall not reflect adversely upon the good name of Seller, and that the conduct
of the Business will be of a standard and skill equivalent to that employed
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's failure to cease use of the Marks as provided
in this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that there is
no adequate remedy at law for such failure to terminate use of the Marks, or
for such improper use of the Marks, and Buyer agrees that in the event of such
failure or improper use, Seller shall be entitled to equitable relief by way of
temporary restraining order or injunction or any other relief available under
this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and agrees
that (i) except for the representations and warranties set forth in this
Agreement and the Schedules (and the Financial Statements, the Additional
Financial Statements, and actuarial reports required pursuant to the Employee
Transfer Agreement), Buyer has not relied and will not rely upon any document
or written or oral information furnished to or discovered by it or its
representatives, (ii) there are no representations or warranties by or on
behalf of Seller or its Affiliates or representatives except for those
expressly set forth in this Agreement and in any other written agreement
entered into with Seller or any of its Affiliates in connection with this
Agreement, and (iii) to the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will be solely as set
forth in this Agreement or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and representatives
will comply with the Confidentiality Agreement, the provisions of which are
expressly incorporated herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company to
conduct the Business in the ordinary course in accordance with prudent business
judgment and consistent with past practice and policy and to (i) preserve the
Business as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same extent as such
were generally available from January 1, 1994 through the Execution Date and
are available on the date hereof, (iii) not take any action that would
jeopardize any material and beneficial contractual relationships with persons
having business dealings with the Business, and (iv) preserve all of the
Business' tariffs, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. Seller will cause
the Company to refrain from entering into any material transaction or contract
other than in the ordinary course of business and to not make any material
change in the general nature of the Business or in its methods of management,
marketing, accounting or operations (including repair and maintenance
functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course of
business, (ii) enter into or terminate, as lessor or lessee, any Lease other
than in the ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or (iv) change in
any material respect or terminate any of the insurance policies referred to in
Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will cause the Company not to
sell, lease, dispose of or otherwise transfer, or make any contract for the
sale, lease, disposition or transfer of any Property other than, with respect
to any individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items (other
than vehicles) the aggregate value of which shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the PUC, Seller will cause the Company not to
(i) institute any proceeding with respect to, or otherwise change, amend or
supplement any tariff or (ii) enter into or agree to any stipulation, order, or
decree of, or settlement with the PUC that, in the case of (i) or (ii) above,
would have a material adverse effect on the revenue, authorized return on
equity or earnings of the Business. Seller will cause the Company not to file
any application, petition, motion, brief, testimony, settlement agreement or
other pleading in any proceeding before the PUC, or before the FCC (except for
filings on behalf of all of Seller's local exchange telephone companies) or
appeals related thereto, unless Seller shall have first provided Buyer with a
copy of the same and provided Buyer with a reasonable opportunity to comment to
Seller with respect thereto. If Buyer determines it should intervene in any
proceeding before the PUC in which Buyer's position is or may be different from
the Seller's or the Company's, Seller will not, and will cause the Company not
to, without waiving any other rights related thereto, oppose Buyer's
intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of the Company or pursuant to any Contract,
Seller will cause the Company not to (i) enter into or amend any employment
agreement with any individual that will become a Transferred Employee, or enter
into or amend any union agreement or commitment (including any new commitment
to pay retirement or other benefits, or amendments to the Company's retirement
plans), (ii) effect any net increase over five percent (5%) since the Execution
Date in the number of employees of the Company who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under any plans
concerning employee benefits or increase the general rates of compensation of
the Transferred Employees, or change the manner by which compensation
(including fringe benefits) is determined and paid to any Transferred Employee.
(f) Seller will cause the Company not to engage in any intercompany
transactions with any Affiliate thereof, except for transactions consistent
with past practice.
(g) Seller shall cause the Company to maintain the Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to take
any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate with
any other person or entity or acquire a material amount of assets of any other
person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital expenditure
plans which Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the parties agree
that when such expenditures have been incurred they will constitute an addition
to a component of Net Telecommunications Plant thereby becoming subject to
Section 3.2(c). Seller agrees to cause the Company to use its best efforts
substantially to complete such plans within the projected time schedules;
provided, that the Company will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the prior
written consent of Buyer. All construction work that is in progress on the
Effective Date will be accounted for by identifying and accruing all associated
time reporting, material invoices or contractor invoices inputted or received
on or before the Effective Date, and all payments therefor shall be the
responsibility of the Company and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the Property,
Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed Two Million Five Hundred Twenty One
Thousand Fifty Dollars ($2,521,050.00), either party may, by written notice to
the other party (the "Casualty Termination Notice") within thirty (30) days
after the date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed Two
Million Five Hundred Twenty One Thousand Fifty Dollars ($2,521,050.00), or the
Casualty Termination Notice is not given by either party, then Seller, within
forty-five (45) days after the damage or destruction, shall agree in writing to
take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property;
or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain as
a substitute therefor an equivalent item or items of Property if the Damaged
Property is personal property, and Real Property if the Damaged Property is
Real Property, but only if such substituted personal property or Real Property
is satisfactory to Buyer, and the Company will be entitled to make all claims
related to the Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the manner contemplated by this
Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property,
and the Purchase Price Adjustment contemplated by Section 3.2(a)(2) will be
made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 Settlements and Cost Studies. The parties agree that, with respect
to all toll revenues, settlements, pools, separations studies, Universal
Service Fund payments or similar activities, Seller shall receive the benefit
or suffer the burden of the results of any such activities that are related to
the conduct of the Business or the ownership or operation of the Company on or
before the Effective Date.
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing Corporation.
The Directory Publishing Agreement dated as of November 15, 1994, by and
between Company and ALLTEL Publishing Corporation (the "Directory Publishing
Agreement") is an Excluded Contract on Schedule 11.22(h), except as hereinafter
provided. Within thirty days after the Execution Date, Buyer shall cause its
existing directory provider to indicate in writing whether it will provide
directory production services to the Company, as of the Effective Date (or as
of such later date as described below) with regard to all of the Exchanges on
the same terms and conditions as it is presently providing such services to
Buyer, and Buyer shall inform Seller within such thirty day period of Buyer's
existing telephone directory provider's written intention. If Buyer's existing
directory provider's indication is that it will not provide directory
publication services for all of the Exchanges on the same terms and conditions
that it is presently providing such services to Buyer, then the Directory
Publishing Agreement shall be deemed to become a Contract for the purposes of
this Agreement. Promptly, thereafter, the Buyer and ALLTEL Publishing
Corporation shall agree to meet in good faith to negotiate any necessary
amendments to the Directory Publishing Agreement, to be effective as of the
Effective Date, to provide for a retention rate equal to or greater than the
higher of (x) 60% or (y) the retention rate provided for in any substantially
similar directory publishing agreement between ALLTEL Publishing Corporation
and a non-Affiliate of ALLTEL Publishing Corporation that was entered into
within 18 months prior to the Effective Date. If Buyer's existing directory
provider indicates that it will provide directory publication for all the
Exchanges, as provided above, the Directory Publishing Agreement shall remain
in effect as to the directory of each of the Exchanges for which (i) the
directory is scheduled to be or is published prior to the Effective Date or
(ii) the canvass for the directory has begun prior to the Effective Date and it
is scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not begin providing
directory publication services for such Exchange until canvass and production
begins for the next succeeding directory related to such Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
provider indicates that it will provide directory publication for all of the
Exchanges, as provided in Section 11.12.1 of this Agreement, Seller and Buyer
agree to cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the Seller
even if in the possession of a third party (the "Directory Records") related to
directories of the Exchanges that are published by Seller or its Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production functions
of any directories related to the Exchanges that are scheduled to begin
canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the other
reasonable access to such documentation, reports and accounting records related
to directory publication as may be necessary to insure a proper transition of
directory production in accordance with the terms of such agreements in effect
on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Company's Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate in
good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any directories
that will be canvassed and published by Buyer's existing directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing, use
their best efforts to allow Buyer to negotiate, on behalf of the Company, a
billing and collection agreement ("B&C Agreement") reasonably satisfactory to
Buyer with each interexchange carrier ("IXC") and each local exchange carrier
("LEC") for which the Company provides, on the Execution Date, billing and
collection services in any Exchange (each such IXC or LEC is hereinafter
referred to as a "Carrier"). Seller and Buyer shall cooperate with each other
and make available to each other all documents and records relevant and
necessary to allow the Company to finalize negotiations of B&C Agreements, as
necessary, and to perform such B&C Agreements after the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (such as Northern Telecom and Stromberg-Carlson;
collectively "Equipment Manufacturers") as Buyer may request, covering such
software license agreements and other agreements as are necessary to enable the
Company after the Effective Date to operate the equipment manufactured and sold
by the Equipment Manufacturers included in the Property in substantially the
same manner as operated by the Company prior to the Effective Date. The
agreements shall contain material terms and conditions (including license and
warranty, but not necessarily including pricing) that are substantially the
same as those provisions in the corresponding agreements between the Company
and the Equipment Manufacturers as of the Effective Date. Buyer understands
and agrees that the price and fee provisions of such agreements will be as
negotiated between Buyer, on behalf of the Company, and the Equipment
Manufacturers. The above obligation of Seller shall be expressly conditioned
upon the acceptance by Buyer, on behalf of the Company, of all material
obligations accepted by Seller in such corresponding agreements. It is the
responsibility of Buyer, on behalf of the Company, to enter into appropriate
agreements with the Equipment Manufacturers in respect of service, support,
training, maintenance, and future development (hardware and software) for the
Property, such agreements to include terms and conditions agreed to between
Buyer, on behalf of the Company, and the Equipment Manufacturers. Seller
agrees to assist Buyer, on behalf of the Company, in obtaining the Equipment
Manufacturers' consent, if necessary, to enable the Company after the Effective
Date to avail itself of all training credits remaining at the Effective Date on
Property furnished by the Equipment Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third parties
relate both to the Property and the Excluded Property. Seller agrees to use
its best efforts to assist Buyer in obtaining, on behalf of the Company,
contractual arrangements with such third parties relating to the Property,
which arrangements will be reasonably satisfactory to Buyer; provided that
neither the Company nor any Affiliate of the Company shall be obligated under
this Section 11.12.5 to make any payment to any such third party unless such
payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company to
retain the Company Books and Records, in either case, until the shorter of the
date that other party consents in writing to their destruction or the seventh
anniversary of the Effective Date. Each party shall provide full and free
access to the Company Books and Records and Retained Books and Records, as the
case may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and Records
are required to be retained. Either party may make copies of any such Books
and Records as it deems desirable, at its own expense. After the Effective
Date, upon reasonable notice, Seller shall provide Buyer and the Company with
reasonable assistance in locating any of the Company's Original Cost Documents
which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver (at
its expense) to Buyer a preliminary title binder (on a standard form reasonably
acceptable to Buyer), issued by Lawyers Title Insurance Company or another
title insurance company reasonably acceptable to Buyer, with respect to all
Real Property included in the Property and in which the Company purports to own
fee title. Such title binders shall be in form, substance and amount
reasonably satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as set forth below) and shall be current as of a
date no earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each policy
shall equal the dollar value set forth on the Company's continuing property
records list as of December 31, 1993 for land and buildings. Such title
binders shall reflect that the Company is vested with good, fee simple,
marketable and insurable title to such Real Property, subject only to (i)
standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v)
Leases, (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby and (vii) standard title plat exceptions to the extent the
matters shown on such title plats do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby (collectively, the "Permitted Exceptions"). If a preliminary
title binder indicates an exception other than a Permitted Exception that would
impair marketability in any material respect, Seller shall, at its expense,
cause such exception to be removed on or before the Effective Date. With
respect to each parcel of Real Property covered by a preliminary title binder,
Seller shall deliver to Buyer (at Seller's expense and on or prior to sixty
(60) days before the Effective Date) a certified current boundary survey
showing (x) access to the property and (y) all improvements on the property and
any encroachments across the property line by any improvements of the Company
or owners of adjacent property and (at Seller's expense and within sixty (60)
days after the Effective Date) owner's title insurance policies for the Real
Property (ALTA Owners Policies where available but based upon boundary surveys
as set forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer to
insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by the
sale. All reasonable costs and expenses related to such insertion and delivery
shall be borne and paid by the Company. Other means of notifying subscribers
may be employed by either party, at the expense of the initiating party, but in
no event shall any notification be initiated without the prior consent of the
other party (which consent shall not be unreasonably withheld) or earlier than
three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as otherwise provided in Section
11.24, Seller shall have a period of ten (10) business days after the Execution
Date (the "Supplemental Schedule Period") to supplement or otherwise modify the
Schedules to this Agreement by delivering to Buyer, within the Supplemental
Schedule Period, a substitute schedule or schedules (collectively, the
"Supplemental Schedules"), bearing the legend "This Schedule _, dated
_______________, is executed and delivered in accordance with Section 11.20 of
the Stock Purchase Agreement, dated as of November 28, 1994 which shall be duly
executed by Seller and submitted to Buyer. Buyer shall have a period of ten
(10) business days after the expiration of the Supplemental Schedule Period to
review the Supplemental Schedules and within such ten (10) business day period
notify Seller in writing (which writing may be transmitted by facsimile) of any
objections thereto. If Buyer's objections are not resolved to the satisfaction
of Buyer within five (5) days of such notification, Buyer may terminate this
Agreement, effective immediately upon written notification of that termination.
In the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of any
changes in the Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or covenants
hereunder, the Supplemental Schedules provided by Seller shall be deemed
Schedules for all purposes.
11.21 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC Licenses, as described in Section 5.4, during
the period from the Execution Date until the Effective Date, neither party
shall file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the Natural Exchange Carrier Association Tariff FCC No. 5; provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall take,
and shall cause the Company to take, all action necessary to effect, on or
prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate Receivables")
shall be netted against all "Advances and Notes-Parent Company" (item 2 -
Liabilities on the Company's Balance Sheet), "Accounts Payable-Affiliates"
(item 5 - Liabilities on the Company's Balance Sheet), "Dividends Accrued -
Affiliates" (item 10 - Liabilities on the Company's Balance Sheet) and
"Interest Accrued - Alltel" (item 12 - Liabilities on the Company's Balance
Sheet) (collectively, "Affiliate Payables"). To the extent there is a net
excess of Affiliate Receivables, a cash payment or payments will be made to the
Company which cash will then be disposed of by the Company, and to the extent
there is a net excess of Affiliate Payables, such Affiliate Payables will be
contributed to the Company as a contribution to the Company's capital, and take
any other action necessary, such that the balances of each of the Affiliate
Receivable and Affiliate Payable accounts, and of any other intercompany
accounts, as of the Effective Date will be zero.
(c) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 - Assets
on the Company's Balance Sheet) and all "Investments in Affiliates" (item 14 -
Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and all "Unamortized Debt Expense" (Item
16 - Assets on the Company's Balance Sheet), except to the extent such
unamortized debt expense relates to debt which is to remain outstanding
immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets on the
Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, (i) all "Other Current Assets" (item 10 - Assets
on the Company's Balance Sheet) to the extent such other current assets
represent cash accounts, and (ii) all "Other Non-Current Assets" (item 19 -
Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's interest
in any business other than the Business, and those other assets, including
agreements and contracts ("Excluded Contracts"), set forth on Schedule
11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial Accounting
Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income (item
8-Liabilities on the Company's Balance Sheet) shall be zero as of the Effective
Date.
(k) The balance in the Company's Notes Payable - Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding (item
4 - Liabilities on the Company's Balance Sheet), Other Current Liabilities
(item 14 - Liabilities on the Company's Balance Sheet) and Dividends Accrued -
Other (item 11 - Liabilities on the Company's Balance Sheet) accounts shall be
zero as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet), and Interest
Accrued - Other (item 13 - Liabilities on the Company's Balance Sheet), to the
extent each of such amounts relate to debt which is not to remain outstanding
immediately after the Effective Date, shall be zero as of the Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section 11.23.1,
Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or governmental
charges imposed by any taxing jurisdiction (but not including Income Taxes, as
hereinafter defined, which shall be paid by Seller), and all recording or
filing fees, notarial fees and other similar costs of Closing with respect to
the transfer of the Shares or otherwise on account of this Agreement or the
transactions contemplated herein (but not including any transactions
contemplated by this Agreement to be effected pursuant to the transactions
contemplated by Section 11.22 or otherwise between Seller and the Company,
which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) for all periods
ending on or before or which include the Effective Date, all items of income,
gain, loss, deduction, and credit or other items (collectively "Tax Items")
attributable to the operations of the Company during such periods or portions
thereof determined by an interim closing of the books as of the Effective Date.
Seller will sign and file timely all such Tax Returns with the appropriate
United States, state and local Governmental Authorities. Buyer will provide or
cause to be provided any consent request to file such Tax Returns on behalf of
the Company. Seller will make all payments shown thereon as owing with respect
to any such Tax Returns.
(c) With respect to any taxable period that would otherwise include
but not end on the Effective Date, to the extent permissible pursuant to
applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income Tax
Returns (other than Tax Returns described in Section 10.5.1(b)) for the Company
required to be filed with the appropriate United States, state, and local
Governmental Authorities for any taxable period that ends on or before the
Effective Date that have not been filed prior to the Effective Date. Seller
will sign and file timely all such Tax Returns with the applicable Governmental
Authority and make all payments shown thereon as owing with respect to such Tax
Returns. If requested by Seller, Buyer will deliver or cause the Company to
deliver to Seller a power of attorney authorizing Seller to sign such Tax
Returns. Notwithstanding the foregoing, if Seller is legally precluded from
filing any such Tax Return, Buyer shall sign such Tax Return. Seller shall
deliver a copy of each such Tax Return to Buyer within 10 days prior to filing
such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed all
Tax Returns for the Company that are required to be filed with the appropriate
United States, state, and local Governmental Authorities for any taxable period
which begins before and ends after the Effective Date. In the case of Income
Taxes, Buyer shall cause such Tax Return to be prepared and shall cause to be
included in such Tax Return all Tax Items required to be included therein.
Buyer shall determine (by an interim closing of the books as of the Effective
Date) the portion, if any, of the Income Tax due with respect to the period
covered by such Tax Return which is attributable to the Company for a Pre-
Effective Date Taxable Period (as hereinafter defined). At least 15 days prior
to the due date (taking into account all extensions of due date) of such Tax
Return, Buyer shall deliver to Seller a copy of such Tax Return and of its
determinations. If the amount reflected as a liability for Income Taxes on the
Tax Schedule less Prior Reimbursements (as hereafter defined) is less than the
amount of Income Tax so determined to be attributable to the Pre-Effective Date
Taxable Period, Seller shall pay to Buyer the amount of such shortfall not less
than 5 days prior to the due date (taking into account all extensions of due
dates) of such Tax Return (or the due date of the applicable estimated Tax
payments, if earlier). If the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period is less than the amount
reflected as a liability for Income Taxes on the Tax Schedule, to the extent
not previously paid to Seller or the applicable Governmental Authority by the
Company and subject to Section 11.23.1(f), Buyer will pay to Seller the amount
of such excess not less than 5 days prior to the due date (taking into account
all extensions of due dates) of such Tax Return (or the due date of the
applicable estimated Tax payments, if earlier). As used in this Agreement,
"Pre-Effective Date Taxable Period" means all or a portion of (i) any taxable
period up to and including the Effective Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company arising on or before, or existing as of, the
Effective Date. As used in this Agreement, "Income Taxes" means all Taxes
measured in whole or in part on or by net income imposed by the United States,
any state of the United States or any political subdivision thereof, and will
include any such Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as a
liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that have
previously been (A) paid by Buyer (or by the Company at the Buyer's direction
or consent) to Seller pursuant to Section 11.23.1(b), Section 11.23.1(d) or
Section 11.23.1(e) or (B) paid by Buyer or the Company to Seller or to the
applicable Governmental Authority with respect to Income Taxes properly
attributable to Pre-Effective Date Taxable Periods that are reflected on Tax
Returns described in Section 11.23.1(b), Section 11.23.1(d) or Section
11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax Returns
that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to such
information and personnel as Seller may require in order to properly prepare
such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable Governmental Authority) received by Buyer after the Effective
Date and attributable to Taxes paid by Seller or the Company (or any
predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of any
Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives or
is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund together
with any interest received from or credited thereon the applicable Governmental
Authority, net of any Taxes imposed upon Seller or any affiliate by reason of
the receipt of such refund, credit or interest (calculated at the maximum
statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of state
or local Law) with respect to the purchase of the Shares hereunder. Both
Seller, as the common parent of the affiliated group of corporations (which
includes the Company) that file a consolidated federal income Tax Return and
Buyer are eligible to and will make a timely and effective election under
Section 338(h)(10) of the IRC (and any comparable provision of state or local
Law) with respect to such purchase (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
Law, the "Section 338(h)(10) Elections"). To facilitate such election, within
thirty (30) days of the Closing, Buyer will deliver to Seller a completed
Internal Revenue Service Form 8023 and the required schedules thereto and any
similar forms under applicable state or local Law (the "Forms") with respect to
Buyer's purchase of the Shares, which Forms shall have been duly executed by an
authorized person for Buyer. Provided that the information on such Forms is,
in the reasonable determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, cause such Forms to be duly executed by
an authorized person for Seller and deliver such Forms to Buyer. If any
changes or supplements are required to the Forms as a result of information
that is first available after the Closing, Seller and Buyer will promptly agree
upon and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates to
take, any action to modify or revoke the elections contained in or the content
of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any Pre-
Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii) joined
in the filing of a combined or unitary Tax Return with the Company on or prior
to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a), any
Taxes attributable to the transactions contemplated by this Agreement; and
(ii) Any breach of any representation, warranty or covenants of
Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a result
of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of the
Company which Taxes are not attributable to any Pre-Effective Date Taxable
Period; and
(ii) Any breach of any representation, warranty or covenant of
Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the indemnification
of a party under this Section 11.23.2 (referred to herein as a "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Section 11.23.2 to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 11.23.2(c)(i) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than 5 days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay the
Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable Law) after the
giving of the notice required by Section 11.23.2(c)(i), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or decree
of a court or other tribunal or a final and binding settlement with an
administrative agency having jurisdiction thereof, the Tax Indemnified Party
shall promptly repay to the Tax Indemnifying Party the amount advanced to the
extent of any refund received by the Tax Indemnified Party with respect to a
claim together with any interest received thereon from the applicable
Governmental Authority and any recovery of legal fees from such Governmental
Authority, net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated at the
maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding, the
representations, warranties, covenants, agreements, rights and obligations of
the parties hereto with respect to any Tax covered by this Agreement shall
survive the Effective Date and shall not terminate until sixty days after the
expiration of the statute of limitations (including extensions) applicable to
such Tax.
11.24 Post-Execution Lease and Contract Review. Buyer shall have a period
of forty-five (45) calendar days after the Execution Date to review the Leases
and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify
Seller in writing (which writing may be transmitted by facsimile) of the
identity of those Leases and Contracts that Buyer reasonably believes are
material to the operation of the Business as a whole or any significant part of
the Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent as a condition to the transfer
of control of the Company to Buyer as a result of Buyer's purchase of the
Shares, before the Effective Date can occur. If Buyer does not notify Seller
in writing within such forty-five (45) calendar day period of the identity of
the material Leases and Contracts requiring consent, then Buyer shall be deemed
to have agreed that none of the Leases and Contracts which are listed on
Schedules 9.1.9 and 9.1.13 require consent, in accordance with Section 7.1.6,
before the Effective Date can occur. If Buyer does notify Seller in writing
within such forty-five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a period of ten
(10) business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile) of any objections thereto.
Thereafter, Buyer and Seller shall negotiate in good faith and agree in writing
as to the identity of those Leases and Contracts which are material to the
operation of the Business as a whole or any significant part of the Property
and which by their terms will require Seller, in accordance with Section 7.1.6,
to obtain a third party consent as a condition to the transfer of control of
the Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in a separate agreement,
entitled Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as to
time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination Date. Any claim for indemnification with respect to any alleged
breach of any representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts relating thereto, which notice is given prior to the Termination Date,
may not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty will be deemed
to have been properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3,
11.6, 11.7, 11.10, 11.12, 11.13, 11.16 and Articles 16 and 17 and in the
Employee Transfer Agreement, will survive the Closing and remain in effect
indefinitely. Covenants regarding Taxes shall survive as set forth in Section
11.23.2(d). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Effective Date and any claim
following the Effective Date for an alleged breach of any such covenant may not
be pursued, and is irrevocably waived, upon the occurrence of the Effective
Date, except that Buyer may make a claim for Seller's breach of the covenants
contained in Section 11.5 at any time within eighteen months after the
Effective Date. The immediately preceding sentence shall not apply to, or
limit to preclude, a party's rights and remedies if the sale contemplated by
this Agreement is not concluded as a result of the other party's breach of this
Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, and
(iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in connection
with any actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expenses, in any such case (x) reduced by the
amount of insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one hand,
and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. Without limiting the foregoing, as a
material inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under the common law
or federal or state securities, trade regulation or other laws, by reason of
the liabilities and obligations, and any breach of the representations,
warranties or covenants, referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and conditions of this
Article 13, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section 9.2.5)
until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds One Hundred Twenty Six
Thousand Fifty Two Dollars ($126,052.00) and then only to the extent of the
excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32 and 9.1.33) and of Buyer under Section 13.3(b)(i)
(except with respect to indemnification for a breach of the representations
contained in Section 9.2.5) will not exceed the sum of Three Million Seven
Hundred Eighty One Thousand Five Hundred Seventy Five Dollars ($3,781,575.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), directors, officers, agents and
representatives from all Indemnifiable Losses relating to, resulting from or
arising out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee Transfer
Agreement, except for any such breach of covenants which was specified on
Seller's Closing Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted, or
sought before or after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business (including
contractual obligations in connection with sales or transfers of assets made by
the Company prior to the Effective Date), or the ownership or operation of the
Business, on or prior to the Effective Date, regardless of whether known or
unknown, asserted or unasserted, on the Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct of
the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect to
the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10; and
(iii) All liabilities, responsibilities and obligations arising out of
or related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation, claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the Company
Date to the extent Buyer receives a Purchase Price adjustment in its favor
pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) any Third Party Claim, filed, asserted, or sought
after the Effective Date, in respect of the operations of the Company or the
conduct of the Business or any part of the Business or the ownership or
operation of the Company or the Business, after the Effective Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23 and
Article 14, respectively, and are not addressed, limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action, proceeding, or investigation by any
entity or person that is not a party to this Agreement or an Affiliate of such
a party (a "Third Party Claim") against such Indemnitee, with respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Article 13 to the extent the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 13.
(c) If after the making of any Indemnification Payment the amount of
the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of
the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
result of the environmental due diligence authorized by this Section 14.1 will
be subject to the terms and conditions of the Confidentiality Agreement, except
as otherwise expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer's environmental consultant(s) and shall treat all such
information in accordance with the procedures of Section 14.1.5(c). Within
thirty (30) days after the Execution Date (the "Environmental Data Delivery
Date"), Seller will provide to Buyer copies of all surveys and reports in
Seller's or the Company's possession concerning the existence or possible
existence of asbestos or materials containing asbestos relating to any of the
Real Property, a list of all underground storage tanks which to Seller's or the
Company's knowledge are located on, or have been removed within the last three
years from, any Real Property owned or real estate leased or operated by the
Company in connection with the Business and any other reports, studies or
documents in Seller's or the Company's possession relating to the Company's
potential liability under any Existing Environmental Requirements. The parties
further agree that, if Seller discloses the existence or suspected existence of
materials containing asbestos with respect to a given parcel of Real Property
and the asbestos does not exceed applicable limits, if Buyer desires to make
renovations or structural changes to the property after the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer in writing of
Seller's objection (which must be for good cause) and substantiate the basis
for that objection. If Seller does not object for good cause and substantiate
that objection within said five (5) business day period, Seller shall be deemed
to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
assessment activities of the Property, including inspecting individual sites,
submitting environmental questionnaires to Seller and the Company and reviewing
existing environmental reports, correspondence, permits and related materials
regarding the Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may be,
but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not limited
to, the taking and analysis of soil, surface water and groundwater samples,
testing of buildings, drilling wells and taking soil borings) after first
conducting a Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the Property, Buyer must notify Seller of its desire at least
five (5) business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding such sampling
or intrusive testing. If Seller does not notify Buyer in writing of Seller's
objection to such proposed sampling or testing within five (5) business days
after receipt of such notice, Seller shall be deemed to have consented to the
proposed sampling or testing. Seller shall not unreasonably object to Buyer's
request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental Data")
within three (3) business days of Buyer's receipt of such data and shall
promptly provide Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during the sampling
or intrusive testing of a particular site; provided, however, that Seller shall
have no obligation to Buyer to take any action whatsoever regarding such
samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Company or the Property
only after first notifying the Seller, and without such notice at any time
after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders, penalties, fines,
costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Property and resulting
from any act or omission of Buyer or its environmental consultant(s) provided
that Buyer shall not be liable for any Environmental Liabilities incurred by
any such party merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property do
not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to the
extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than One Million Eight Thousand Four Hundred Twenty
Dollars ($1,008,420.00) (the "Environmental Liabilities Amount") To be
effective, any such conditional termination of this Agreement must be delivered
in writing to Seller, which writing must specifically acknowledge that the
termination is subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of the
sale contemplated by this Agreement all in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but the
Company fails to perform its obligations thereunder in full on or before the
Closing (subject to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and unconditional unless
the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Property or with respect
to the Company are less than the Environmental Liabilities Amount in the
aggregate, Seller agrees, to cause the Company at the Company's sole cost, to
either (i) make a mutually satisfactory adjustment to the terms and conditions
of the transactions contemplated by this Agreement prior to the Closing in
accordance with Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate those
Environmental Liabilities based upon Existing Environmental Requirements in
accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the
cost of conducting such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under this Section
14.1.7(c) shall be to pay the Environmental Liabilities Amount toward the
completion of such response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the Environmental
Liabilities Amount on such response and remediation action (such expenses to be
verified by Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the Environmental
Liabilities Amount, Buyer shall sign and deliver to Seller at the Closing a
release of Seller from any further liability to Buyer for such remediation and
shall indemnify Seller against any liability for such Environmental Liabilities
or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the Closing
until sufficient response and remediation has been completed so that the
remaining response and remediation is equal to or less than the Environmental
Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
indemnification provided under this Section 14.2 shall be the sole remedy for
allocating responsibility regarding environmental matters related to the sale
contemplated by this Agreement, the Company, the Business and the Property of
which Buyer does not receive notice prior to the Closing (either from Seller in
Schedule 14.3 or pursuant to notice given pursuant to Section 17.1 or in any
written communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by this
Agreement and without further action on the part of such party, shall waive and
release the other party from any and all liability under any other cause of
action at law or in equity concerning the Known Environmental Matters, whether
raised pursuant to (i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation, or (iii) common
law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Environmental Liabilities under Existing Environmental
Requirements arising from acts or omissions occurring with respect to, or from
the use or ownership of, or any condition or circumstance relating to, the
Company or the Property that occurred or arose prior to or on the Effective
Date. The foregoing indemnity in this Section 14.2.2 shall only apply to
matters that do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such indemnification
under this Section 14.2.2 shall be provided only for claims for Unknown
Environmental Matters noticed to the other party pursuant to the procedures of
Section 14.2.3, within eighteen (18) months after the Effective Date. Subject
to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and
hold harmless Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements in
existence now or hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the Property after
the Effective Date, or any condition or circumstance relating to the Company,
the Property or the Business that occurred or arose after the Effective Date on
the Property or in connection with the Company or the operation of the Business
after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including information sufficient
to inform the other party of, and allow such other party to confirm the nature
of, the claim and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2 are required by
Environmental Requirements, as applicable to Buyer, and Existing Environmental
Requirements, as applicable to Seller, and are reasonable and cost-effective.
If the indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree as to
costs or methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent such
damages have been recovered by a third person and are the subject of a Third
Party claim for which indemnification is available under the express terms of
this Article 14. Any indemnifiable claim under this Section 14.2 shall be
reduced to account for any insurance, storage tank fund, or other proceeds
received by the party to be indemnified, as a result of the indemnifiable
losses involved. The parties agree to take all reasonable steps to mitigate
any indemnifiable claim under this Section 14.2, including complying with any
registration and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not exceed
the aggregate amount of One Million Eight Hundred Ninety Thousand Seven Hundred
Eighty Seven Dollars ($1,890,787.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article 14
shall be treated by Buyer and Seller as purchase price adjustments, and Buyer
and Seller shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any adjustment to the basis of any asset
resulting from an adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) if such party shall
not have performed diligently and in good faith the obligations required to be
performed by such party hereunder prior to the date of termination;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8, 17.11,
17.13, 17.14 and Article 16 shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit to
compel compliance with this dispute resolution process, the parties agree to
use the following alternative dispute resolution procedure as their sole remedy
with respect to any controversy or claim arising out of or relating to this
Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party, each
party shall appoint a knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under this Agreement.
The discussions shall be left to the discretion of the representatives. Upon
agreement, the representatives may utilize other alternative dispute resolution
procedures such as mediation to assist in the negotiations. Discussions and
correspondence among the parties' representatives for purposes of these
negotiations shall be treated as confidential information developed for
purposes of settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the arbitration
described below or in any lawsuit. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence
in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
representatives of the parties do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. Either party may demand such
arbitration in accordance with the procedures set out in those rules. The
arbitration hearing shall be commenced within sixty (60) days of the demand for
arbitration and the arbitration shall be held in a mutually agreeable location.
The arbitrator shall control the scheduling (so as to process the matter
expeditiously) and any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this Section
16.3 may be extended upon mutual agreement of the parties or by the arbitrator
upon a showing of good cause. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator determines that
the position taken in the dispute by the non-prevailing party taken as a whole
is unreasonable, the nonprevailing party will bear all such fees and expenses,
and reimburse the prevailing party for all of its reasonable costs and expenses
in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with respect
to the resolution of disputes without litigation shall not apply to any
dispute, controversy or claim arising out of the provisions of Section 11.1, or
the Confidentiality Agreement, or to a party's seeking to proceed under Section
17.14, it being understood and agreed that in the event of a breach by either
party of the provisions of Section 11.1, or the Confidentiality Agreement, or
in the event that a party seeks to proceed under Section 17.14, the non-
defaulting party shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate proceeding, whether
for specific enforcement of any agreement contained in Section 11.1, or the
Confidentiality Agreement or in aid of the exercise of any power granted by
Section 11.1, 17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been given when delivered in person or
dispatched by electronic facsimile transfer (confirmed in writing by certified
mail, concurrently dispatched) or one business day after having been dispatched
for next-day delivery by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or other
forth of release of information concerning this Agreement or the transactions
contemplated hereby that is intended to provide such information to the news
media or the public (a "Press Release"). Neither party shall issue or cause
the publication of any such Press Release without the prior written consent of
the other party; provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such Press Release to the
extent that such action is required by applicable Law or the rules of any
national stock exchange applicable to such party or its Affiliates, in which
case the party wishing to make such disclosure will, if practicable under the
circumstances, notify the other party of the proposed time of issuance of such
Press Release and consult with and allow the other party reasonable time to
comment on such Press Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each party
will pay any expenses (including, without limitation, attorneys' fees) incurred
by it incident to this Agreement and in consummating the transactions provided
for herein. All regulatory filing fees required pursuant to Sections 5.1, 5.4
and 5.5 shall be split equally between the parties. Each party will pay the
appropriate costs and filing fees relating to any other applications required
to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Buyer may not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Seller; provided that
Buyer may assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or indirectly
wholly owned subsidiary of Buyer provided such subsidiary assumes in writing
all of the duties and obligations of Buyer hereunder, but no such assignment
and assumption shall in any way operate to enlarge, alter or change any
obligation of or due to Seller or relieve Buyer of its obligations hereunder
and provided that Buyer agrees to cause such subsidiary to perform each of its
agreements and covenants herein, and shall be jointly and severally liable for
any non-performance thereof. Seller may not assign or delegate any of its
rights or duties hereunder without the prior written consent of the Buyer.
Upon the sale, assignment or transfer by Buyer of the Company, the Business or
the Property to a non-Affiliate of Buyer not in the ordinary course of business
of Buyer, Seller's representations and warranties and indemnification
obligation for breach thereof shall terminate. Any assignment made in
violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean collectively
this document, the Schedules hereto, any agreements expressly incorporated
herein, and the Confidentiality Agreement. This Agreement supersedes and
revokes any prior discussions and representations, other agreements,
commitments, arrangements or understandings of any sort whatsoever, whether
oral or written, that may have been made or entered into by the parties
relating to the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege available to each party at law or in
equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of Delaware
(except that no effect shall be given to any conflicts of law principles of the
State of Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested by one
of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate and make effective the transactions contemplated by
this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or to
this Agreement, (ii) each term defined in this Agreement has the meaning so
assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iii) all
references to the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft of such
provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and remedies
available at law or in equity, any party hereto may pursue, to the fullest
extent available, the remedy of specific performance in order to compel the
other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
ALLTEL CORPORATION:
By: /s/ Max E. Bobitt
-----------------
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS UTILITIES COMPANY:
By: /s/ Leonard Tow
---------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of Mountain State Telephone Company, a West
Virginia corporation (the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, the Shares (as defined below), upon the terms
and conditions set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets on
the Company's Balance Sheet), and (iv) Other Current Assets (item 10-Assets on
the Company's Balance Sheet) to the extent such other current assets do not
represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and which RTB Stock is owned by the
Company immediately after the Effective Date, (ii) Unamortized Debt Expense
(item 16-Assets on the Company's Balance Sheet) to the extent such debt expense
relates to debt which is to remain outstanding immediately after the Effective
Date, and (iii) Deferred Maintenance and Retirements (Item 17 - Assets on the
Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued - Other
(item 9 - Liability on the Company's Balance Sheet), (v) Interest Accrued-Other
(item 13-Liabilities on the Company's Balance Sheet) to the extent such
interest relates to debt which is to remain outstanding immediately after the
Effective Date, and (vi) that portion of Other Deferred Credits (item 25 -
Liabilities on the Company's Balance Sheet) that relates to liabilities that
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing local
exchange and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products associated with
the Exchanges, including without limitation such unregulated activities,
services and products of the Company conducted, offered or serviced by the
Transferred Employees or provided or related to the Company's subscribers or
customers served in or from the Exchanges (such unregulated activities,
services and products (the "Unregulated Business") are considered an integral
part of the Business for all purposes of this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company par value $100.00.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations (including
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive or
treble damages), costs and expenses (including reasonable fees, disbursements
and expenses of counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental Requirements of any
Governmental Authority, or as a consequence of (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Property by any person or party or the conduct of
the Business or any part thereof, that does not comply with Environmental
Requirements, or (c) any claim, demand, notice, cause of action, directive,
order, judgment, fine or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to this
Agreement, to the extent that the condition or circumstance or event giving
rise to the claim, demand, notice, cause of action, directive, order, judgment,
fine or penalty relates to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Exchanges is defined in Section 2.2.
Excluded Books and Records means the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the Excluded Property
or (iii) the Retained Liabilities, (iv) employees of the Company that are not
Transferred Employees, and (v) subject to Section 11.13, all Original Cost
Documents that are not located in the Exchanges.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
the Company's interest in any cellular telephone or personal communications
services business, and, in each case, any applications or licenses granted with
respect thereto, and the assets disposed, transferred or dividended by the
Company pursuant to Section 11.22 and any assets excluded pursuant to Sections
11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice president
of the entity in charge of a principal business unit, division or function.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other Governmental
Authority, as to which: (a) no request for stay of the action by the FCC, the
PUC, or such other Governmental Authority, as the case may be, is pending, no
such stay is in effect, and if any time period for filing any request for such
a stay is provided by statute or regulation, such time period has passed; (b)
no petition, motion or application for rehearing, reconsideration, or review,
of the action is pending before the FCC, the PUC, or such other Governmental
Authority, as the case may be, and the time provided for filing any such
petition, motion or application has passed; (c) the FCC, the PUC, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, the PUC's or
such other Government Authority's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company is
a party, or to which any Affiliate of the Company is a party and which are used
in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's Balance
Sheet as of a date certain comprising the Company's Materials and Supplies
(item 8 - Assets on the Company's Balance Sheet).
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant Under
Construction -- Short Term (item 23 - Assets on the Company's Balance Sheet),
Plant Under Construction -- Long Term (item 24 - Assets on the Company's
Balance Sheet), and Telecommunications Plant -- Other (item 25 - Assets on the
Company's Balance Sheet), less Accumulated Depreciation and Amortization (item
27 - Assets on the Company's Balance Sheet).
Original Cost Documents means all original cost documentation relating to
the Telephone Plant.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Service Commission of West Virginia.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 5,348 shares of the Common Stock owned by Seller.
Tax Returns means a report, return or other information statement required
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance, recording, ad valorem,
gains, value-added, unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social security, estimated,
add-on, minimum, privilege or withholding tax and any interest and penalties
and additions to such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance Sheet),
"Regulatory Liabilities" (Item 24 - Liabilities on the Company's Balance
Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the Company's
Balance Sheet), and "Donations of Telephone Plant" (Item 26 - Liabilities on
the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance Sheet
as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth in
this Article 1.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, the Shares, free and clear of
all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists of
the Telephone Plant, Contracts and Leases (to the extent permitted following
compliance with Section 5.3), Company Books and Records, FCC Licenses, the Non-
FCC Authorizations and other assets in effect or owned by the Company as of the
Effective Date that are associated with (i) the telephone exchanges listed in
Schedule 2.2(a) (the "Exchanges"), and (ii) the Unregulated Business described
on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone Plant"
means the Real Property, machinery, equipment, vehicles and all other assets
and properties used, or held for future use, in connection with the conduct of
the Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, telephone cable (wherever located
and whether in service or under construction), microwave facilities (including
frequency spectrum assignments), telephone line facilities, telephones,
machinery, furniture, fixtures, tools, implements, conduits, stations,
substations, equipment (including, without limitation, central office
equipment, subscribers' station equipment and other equipment in general),
instruments, house-wiring connections and all other equipment of every nature
and kind owned by the Company or in which the Company holds an interest (other
than as a lessee) and used in connection with the Business. For purposes of
this Agreement, "Real Property" means the real property owned by the Company
and used in connection with the Business, including, without limitation, all
land, buildings, structures, easements, rights of way, appurtenances,
improvements or privileges located thereon and relating thereto. Without
limiting the generality of the foregoing, the Telephone Plant includes the
assets that would be properly included in the fixed asset accounts referenced
in Part 32 of the FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate of
the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement, "Company
Books and Records" means all of the Company's customer or subscriber lists and
records, accounts and billing records (including a copy of the detailed general
ledger and the summary trial balances, where available for the past two fiscal
years), detailed continuing property record lists, plans, blueprints,
specifications, designs, drawings, surveys, engineering reports, personnel
records (where applicable), Original Cost Documents (where located in the
Exchanges but excluding Excluded Books and Records) and all other documents,
computer data and records (including records and files on computer disks or
stored electronically) relating to the Business (excluding Excluded Books and
Records), the Property and the Transferred Employees, except for the Excluded
Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
all licenses, certificates, permits or other authorizations, including, without
limitation, Section 214 authorizations where applicable, granted to the Company
by the FCC.
2.2.5 [INTENTIONALLY DELETED]
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses) granted to the Company by Governmental
Authorities (including without limitation those that are listed or required to
be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance with
the other terms and conditions of this Agreement, on the Closing Date, Buyer
will pay to Seller the sum of Seventy Two Million Six Hundred Thirty Four
Thousand Dollars ($72,634,000.00), subject to adjustment as provided in Section
3.2 (the "Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price. Such delivery shall be made by bank wire transfer to an account that
Seller shall designate at least two (2) business days prior to the Effective
Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing Date,
provided that all conditions to Closing set forth in Article 7 have been
satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
shall be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which the sum of Net Telecommunications Plant and Materials and
Supplies as of the Effective Date exceeds or is less than the June 1994 Base
Amount; provided, however, that in determining Net Telecommunications Plant and
Material and Supplies as of the Effective Date, no effect will be given for:
(i) any decrease thereof resulting from damage, loss or destruction of Damaged
Property which is repaired or replaced by Seller or the Company or for which
Seller or the Company makes a substitution, in accordance with Section 11.9(b);
(ii) any increase thereof resulting from expenditures made by Seller or the
Company in connection with any such repair, replacement or substitution of
Damaged Property in accordance with Section 11.9(b); or (iii) any increase
thereof resulting from Seller's expenditures pursuant to its obligations under
Section 14.1.7(b) and (c) except for the cost of purchasing specific items of
new plant (i.e., storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase Price
will be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which, in each case as of the Effective Date: (i) Adjusted Total
Current Assets plus Adjusted Total Non-Current Assets exceeds or is less than
(ii) Adjusted Total Current and Non-Current Liabilities plus Total Long Term
Debt to the extent such Total Long-Term Debt shall remain outstanding
immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment Regarding
Assets and Liabilities in Section 3.2(d)) and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer of
Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for purposes
of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c) and the
Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and in
accordance with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For the
purpose of preparing Buyer's calculations and adjustments, Seller shall give
Buyer access to all books, records, and other information regarding the Company
available to Seller that Buyer may reasonably determine appropriate.) Within
thirty (30) days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments of
the Purchase Price shall be final and binding on Seller and Buyer. (For the
purpose of reviewing Buyer's calculations and adjustments, Buyer shall give
Seller access to all books, records, and other information regarding the
Company available to Buyer that Seller may reasonably determine appropriate.)
If Seller shall object, Seller and Buyer shall work in good faith to agree on
the correct amounts for the final Purchase Price, but if they fail to agree,
either party may exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) if the Final Purchase Price shall exceed the Estimated
Purchase Price, Buyer shall cause to be transferred to such account in the
United States as Seller may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND
NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications to
be filed with the PUC and with respect to Material Regulatory Approvals, the
parties shall file the applications and notices described on Schedule 5.1 in
such form as agreed to by the parties with the PUC and other appropriate
Governmental Authorities, seeking an order permitting the transfer of control
of the Company to Buyer (the "Regulatory Approvals"). Each party agrees to use
its best efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with all Governmental Authorities to obtain
the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and 7.2.4,
and the Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness identified
on Schedule 5.2(a) (the "Long Term Indebtedness"), where required by the
underlying debt instruments, as promptly as practicable following the Execution
Date, but in any event no more than forty-five (45) days thereafter, the
parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consents") to
the transfer of control of the Company on terms acceptable to the parties. The
parties acknowledge that all Long Term Indebtedness for which Debtholder
Consents have been obtained before the Effective Date and all other Long Term
Indebtedness for which Debtholder Consent is not required, shall remain
outstanding immediately after the Effective Date and shall be included as a
Purchase Price adjustment pursuant to Section 3.2(d). Each party shall bear
their own costs and expenses in obtaining such Debtholder Consent. Neither
party, however, shall be required to make any payment to the debtholder to
obtain the Debtholder Consent, except that Seller shall be responsible for any
such payments as are specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in full
(including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall repay
on or prior to the Effective Date, Seller shall take, at Seller's sole cost and
expense, all actions necessary with respect to all persons or entities
(collectively, the "Secured Parties") holding any security interest or lien
against the Property, to obtain the termination or release, as of the Effective
Date, and the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the Property (such
terminations and releases being hereinafter collectively referred to as the
"Indebtedness Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Indebtedness Releases or
Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to the transfer of control of the Company to Buyer as a result of
Buyer's purchase of the Shares. To the extent any of the approvals, consents
or waivers required with respect to any Lease, Contract or Immaterial
Authorization have not been obtained with respect to any Lease, Contract or
Immaterial Authorization as of the Effective Date, Seller shall continue to use
its best efforts to obtain the consent of such other third party that is
required for the transfer of control of such Lease, Contract or Immaterial
Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to the transfer of control of a
Lease, Contract or Immaterial Authorization after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, then Seller and Buyer shall within thirty (30)
days after expiration of such six-month period negotiate in good faith and
agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or Immaterial
Authorization except as otherwise provided in Section 11.12 with respect to the
Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
but no later than forty-five (45) days after the Execution Date, the parties
shall file all applications and requests described on Schedule 5.4 in such form
as agreed to by the parties with the FCC seeking, and shall use their best
efforts to obtain, the FCC's consent to the transfer of control of all FCC
Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC
Consents"). The parties each agree that in connection with taking the
immediately above described actions, they will not file any application or
request for a waiver of Part 36 (study areas), Part 61 (tariffs), and Part 69
(price caps and study areas) of the FCC Rules, and that on the Effective Date
the study areas relating to the Exchanges shall remain in the National Exchange
Carrier Association Tariff F.C.C. No. 5, provided, however, that such study
areas shall remain in the NECA Tariff FCC No. 5 after the Effective Date only
for so long as Buyer, in its sole discretion, shall determine. Each party
agrees to use its best efforts, and the parties agree to cooperate fully with
each other and with the FCC, to obtain the FCC Consents at the earliest
practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
but in no event later than thirty (30) days after the Execution Date, the
parties will make such filings as may be required by the HSR Act with respect
to the sale contemplated by this Agreement. Thereafter, the parties will file
as promptly as practicable any supplemental information that may be requested
by the U.S. Federal Trade Commission or the U.S. Department of Justice pursuant
to the HSR Act. The parties agree to cooperate in seeking early termination of
the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to all
interexchange carriers having business relationships with the Company, to all
customers of the Company, and to all officers, employees and agents of the
Company having knowledge or information concerning the operations of the
Company so as to afford Buyer the opportunity to make such review, examination
and investigation of the Company and the Property as Buyer may desire to make,
to evaluate the competitiveness of the Company and the Business, and to enable
Buyer to assimilate the Company and the Business into Buyer's operations as
soon as practicable after the Effective Date. To the extent it so desires,
Seller shall accompany Buyer on all of Buyer's access to interexchange
carriers, customers and agents of the Company. Buyer will be permitted to make
extracts from or copies of such books and records as may be reasonably
necessary. Buyer will not contact any employee, customer or supplier of the
Company as to this Agreement or the matters involved herein except in
accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall cause
the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including sessions
to train such employees in Buyer's business planning process in order to have
the Company after the Effective Date follow Buyer's business planning process
and procedures);
(ii) The Company's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to participate
in the Company's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish, and cause the Company to furnish, such financial and
operating data and other information pertaining to the Company as Buyer may
reasonably request in order, among other things, to comply with Buyer's
disclosure obligations under the federal securities or other laws as such
obligations relate to Buyer's prospective ownership of the Company, including
any disclosure required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller or the Company to
take actions that would unreasonably disrupt the normal course of the business
of the Company or violate the terms of any applicable Law or any contract to
which the Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or the Company's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with respect
to issuing an auditor's report required by Buyer. Any information or document
provided to Buyer or acquired by Buyer during this investigation shall be
deemed "Evaluation Material" as that term is defined in the Confidentiality
Agreement and shall be subject in all cases to the terms of the Confidentiality
Agreement; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business or
the Company that Buyer, upon consultation with counsel, determines is required
to be disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Company, the Business or the transactions
contemplated by this Agreement; of which in any such case, Seller's
representatives listed on Schedule 6.3(b) become aware on or before the
Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit Buyer
access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing occurs, any
claim with respect to matters so specified shall be waived by Buyer unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material adverse
changes to the Property as a whole or the financial position or results of
operations of the Company as a whole, and, subject to Section 11.9, the Company
shall not have suffered any material loss or damage to the Property, whether or
not insured, that would materially affect or impair the Company's ability to
conduct the Business after the Effective Date. None of the Additional
Financial Statements of the Company delivered pursuant to Section 11.4 shall
reflect a material change in the financial position or results of operations of
the Company from the financial position or results of operations reflected in
the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.24. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions <PAGE>
contemplated hereby which, in the reasonable
judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution Date
or any time thereafter, of the public records regarding liens and judgments
with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Buyer if required by the underlying debt instrument shall have received
the Debtholder Consents and shall have entered into any other necessary
agreements with the holders of such Long-Term Indebtedness evidencing such
Debtholder Consent in form and substance reasonably acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties. There
shall have shall have been no material breach by Buyer of any of its covenants
to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 9.2 shall be true and
correct as of the Effective Date, except for such representations or warranties
made expressly as of some other date, which shall be true and correct as of
such other date (all such representations and warranties to be qualified by any
materiality standards contained therein), and Buyer shall have delivered to
Seller a certificate ("Buyer's Closing Certificate"), dated as of the Effective
Date and signed by one of Buyer's Executive Officers, certifying each of the
foregoing or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct in
which event if the Closing occurs any claim with respect to matters so
specified shall be waived by Seller unless otherwise expressly agreed by Buyer
at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the manner
specified in Section 3.1, the Estimated Purchase Price as adjusted pursuant to
Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions,
or restrictions which Seller determines, in good faith in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Seller of the transactions contemplated by this
Agreement. For purposes of this Section 7.2.4, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Seller, if required by the underlying debt instrument, shall have
received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar month
in which occurs the tenth (10th) business day after the date Seller notifies
Buyer in writing (the "Notice") of its determination that all required Material
Regulatory Approvals and FCC Consents have been obtained and provided that the
other conditions set forth in Article 7 shall have been satisfied, or at such
other place and time as may be agreed upon by Seller and Buyer. The
transactions to be consummated at Closing shall be deemed to have been
consummated as of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the Notice (the
"Effective Date"). If the Effective Date is not a day on which financial
institutions are open and operating, then the Closing Date shall be the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for transfer
or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence satisfactory
to Buyer that all Long-Term Indebtedness (and interest, premiums and penalties
thereon) to be repaid pursuant to Section 5.2(b) has been (or will be at
Closing) repaid in full.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver
to Seller the following items and documents duly executed and acknowledged as
appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement and to fulfill its respective obligations
under this Agreement. The execution and delivery by Seller of this Agreement
and the fulfillment of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and, assuming the due
execution and delivery of this Agreement by Buyer, constitutes a valid and
binding obligation of Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally and subject to the qualification
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of Seller's or the Company's certificate of incorporation or bylaws
or, (ii) except as set forth in Schedule 9.1.13, or subject to obtaining the
approvals and consents reflected in Article 5, conflict with, violate or result
in the breach of, constitute a default under, accelerate the performance
required by, or result in the creation of any encumbrance upon any of the
Property under any provision of any Contract other than any such conflict,
violation or breach that alone or in the aggregate would not have an adverse
effect on the Buyer, the Company, the Business or the Property after the
Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court or governmental agency, authority or instrumentality ("
Governmental Authority") is required to be obtained or made by or with respect
to Seller or the Company or in connection with the execution and delivery of
this Agreement by Seller or the fulfillment by Seller of its obligations under
this Agreement, except (i) the filings and approvals described in Article 5,
(ii) as described in Schedule 9.1.3, and (ii) such other consents, approvals,
orders or authorizations, or registrations, declarations or filings, which if
not obtained or made would not result in a material adverse effect on Buyer,
the Company, the Business or the Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
execution and delivery of this Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any applicable existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect on
the Company, the Business as a whole or on any significant part of Property
after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; it
has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Buyer for any broker's or finder's
fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any of
its obligations or liabilities, or the performance, observance or fulfillment
of any covenant or condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default thereunder or that
would constitute such a material breach or default with the giving of notice or
lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(ii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii) such other imperfections of
title and encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Property to which such
imperfection or encumbrance relates. No condemnation proceeding is pending or,
to the knowledge of Seller or the Company, threatened with respect to any part
of the Property and such Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by the Company included
in the Property. In addition, Schedule 9.1.8-2 sets forth a list of the Real
Property included in the Property in which the Company holds other than a fee
interest (such as easements and rights of way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there is
not any existing material default or existing material breach of a covenant by
the Company under any Lease. The Company enjoys peaceful and undisturbed
possession under all material Leases and, to Seller's and the Company's
knowledge, the lessor under any such Lease is not (with or without notice or
the lapse of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it thereunder,
and has not given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is in
substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation of
such Property. Except as set forth on Schedule 9. 1. 10, the Company has not
received any written notice within the past twelve (12) months of a violation
of any ordinances, regulations or building, zoning and other similar laws with
respect to such assets that would have a material adverse effect on the
Company, the Business as a whole or any significant part of the Property. Each
parcel of Real Property and, to the knowledge of Seller and the Company, of
real estate leased by the Company and material or necessary to the Business as
presently conducted substantially complies with all applicable Laws except
where the failure to so comply individually or in the aggregate, would not have
a material adverse effect on the Company, the Business as a whole or any such
parcel after the Effective Date. Except as set forth on Schedule 9.1.10, other
than the Company, no person or party has actual possession or has a right to
possession of all or any material portion of any parcel of such Real Property
or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PROPERTY INCLUDED IN THE PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
OR STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet, income
statement and related statement of cash flows as of and for the respective
periods ended December 31, 1992, and December 31, 1993, together with the
auditor's report thereon (the "Financial Statements"). The Financial
Statements were prepared based upon the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
as of the appropriate periods and the results of operations for the year then
ended, in each case in conformity with GAAP and to the best of Seller's
knowledge and to the extent required by applicable Law, have been prepared in
all material respects in conformity with the regulations of the FCC and the
PUC. The Financial Statements contain no untrue statements of any material
fact nor omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of the Company; and (ii) will fairly present the financial
condition of the Company and the results of operations of the Company for the
periods indicated, subject, in the case of interim Additional Financial
Statements, to normal year-end adjustments which will not be material in amount
or effect; and (iii) to the best of Seller's knowledge and to the extent
required by applicable Law, will be prepared in all material respects in
conformity with the regulations of the FCC and the PUC; and (iv) will not
contain any untrue statements of any material facts or omit to state any
material facts required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of the Company and
fairly presents the financial condition of the Company as of such date subject
to normal year-end adjustments which will not be material in amount or effect,
and to the best of Seller's knowledge and to the extent required by applicable
Law, was prepared in all material respects in conformity with the regulations
of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities, operations
or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or the
Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance or
agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of the
Property, or any increase or an agreement to increase any indebtedness of the
Company, except in the ordinary course of business;
(d) Any material change in the Company's tariffs or in the manner of
conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation or
other event or condition that materially and adversely affects the business or
prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on the
Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the Company
except as required by GAAP or any change in depreciation or amortization
policies or rates heretofore adopted by the Company except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's knowledge,
any attempt to organize the Transferred Employees for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity other
than loans, advances, capital contributions or investments made in the ordinary
course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or the
Company and any third party) to do or to take any of the actions referred to in
paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith. The
Company is not in material breach or default in connection with any Contracts,
and there is no basis for any claim of breach or default by the Company, or to
Seller's the Company's knowledge, any other party, in any material respect
under any of the Contracts. None of the Contracts, either separately or in the
aggregate, materially and adversely affects the Company, the Business or the
Property. After the Effective Date, all rights and obligations of the Company
under the Contracts shall continue unimpaired in the Company (assuming that if
any Contract requires the consent of the other party thereto, such consent will
have been obtained by the parties hereto prior to the Effective Date). Except
for the instruments specifically listed in Schedule 9.1.13, the Company is not
a party to or subject to: (i) any agreement for the purchase or disposition of
any material, equipment, supplies, inventory or service, except individual
purchase orders and contracts in amounts less than Twenty-Five Thousand Dollars
($25,000.00); (ii) any agreement to which the Company is a party or by which
any of the Property is bound relating to indebtedness for money borrowed
including capital leases, security arrangements relating thereto and any
amendment or waiver thereof; and (iii) any other agreement not of the type
covered by any of the foregoing items of this Section 9.1.13 requiring payments
by the Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required to
be listed thereon, the Contracts which require the consent, approval or waiver
of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a character
usually insured by companies carrying on similar businesses is insured under
insurance policies in such amounts and against such losses or casualties as is
(i) usual in such companies and (ii) required under any of the Contracts or
Leases. The insurance policies referred to in this Section 9.1.14 are (i)
listed on Schedule 9.1.14, and (ii) in full force and effect and the premiums
due thereon have been duly and timely paid. The most current statement of
values (the statement of values of property of an insurable nature that is
submitted to an insurance company to be used as a basis for the calculation of
premiums) relative to the Property as presently insured has been made available
to Buyer by Seller. On the Effective Date, the coverage under the insurance
policies and programs of Seller and its Affiliates applicable to the Company
will be terminated, and Buyer will be responsible for providing all insurance
coverage for the Company. Following the Effective Date, Seller shall be
responsible for and shall pay any additional premiums that might be required by
an insurance company for insurance coverage prior to the Effective Date
relating to the Company and shall be entitled to any refunds or dividends due
from such companies relating to such coverage. Schedule 9.1.14 sets forth a
list of the open material claims affecting the Company complete in all material
respects, and a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be filed
on or prior to the Effective Date (taking into account all extensions of due
dates) by or with respect to the Company and has paid or adequately provided
for all Taxes shown thereon as owing, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, have a material adverse effect on Buyer, the Business, or the Company after
the Effective Date, (ii) all such Tax Returns were or will be correct and
complete in all material respects, (iii) to the knowledge of Seller, all
withholding Tax requirements imposed on or with respect to the Company have
been or will be satisfied in full in all respects, and (iv) all penalties,
interest or other charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have been or will
be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case, with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no material
written claim against the Company for any Taxes, and no material assessment,
deficiency or adjustment has been asserted or, to the knowledge of Seller
proposed with respect to any Tax Return of or with respect to the Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect
to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements includes
adequate provisions for the payment in full of all federal and state income
taxes of the Company for all taxable periods or portions thereof during the
period beginning with respect to each Tax Return statute of limitations and
ending no later than December 31, 1993. The balance sheet included in the
Financial Statements has attached thereto a schedule (the "Tax Schedule") which
sets forth provisions for such federal and state income taxes.
(f) All accrued rights or obligations under any written or unwritten
Tax allocation or sharing agreements or arrangements affecting the Company are
reflected in the intercompany accounts of the Company. All such Tax allocation
or sharing agreements or arrangements have been or will be cancelled on or
prior to the Effective Date. No payments are or will become due by the Company
after the Effective Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the property
of the Company is held in an arrangement for which partnership Tax Returns are
being filed, and the Company does not own any interest in any controlled
foreign corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the property
of the Company or any of its Subsidiaries is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section 168(h) of
the IRC) or "tax-exempt bond financed property" (within the meaning of Section
168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will not
be required to include any amount in income for any taxable period beginning
after December 31, 1993 as a result of a change in accounting method for any
taxable period ending on or before December 31, 1992 or pursuant to any
agreement with any Tax authority with respect to any such taxable period.
(j) The Company has not consented to have the provisions of Section
341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this Agreement,
neither Buyer nor the Company will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the IRC without regard to whether
such payment is reasonable compensation for personal services performed or to
be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the proper
governmental authorities or properly deposited as required by applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that, if
determined adversely to the Company, would reasonably be expected to have a
material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of any
reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the Business
as a whole or the Property. The Company is not in default under any judgment,
order or decree of any Governmental Authority which would reasonably be
expected to have a material adverse effect on the Company, the Business as a
whole or any significant part of the Property after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, the Company is an issuing
carrier in the National Exchange Carrier Association Tariff F.C.C. No. 5 for
the purpose of providing interstate access service. Except as described on
Schedule 9.1.17(a), the state regulatory tariffs applicable to the Company
stand in full force and effect on the date of this Agreement in accordance with
all terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation or termination in connection
therewith, nor is the Company subject to any restrictions or conditions
applicable to its state regulatory tariffs that limit or would limit the
operation of the Business (other than restrictions or conditions generally
applicable to tariffs of that type). Except as described on Schedule
9.1.17(a), each such state tariff has been duly and validly approved by the
appropriate state regulatory agency. Except as otherwise disclosed on Schedule
9.1.17(a), the Company is not in material violation under the terms and
conditions of any such state tariff, and there is no basis for any claim of
material violation by the Company in any material respect under any such state
tariff. Except as described in Schedule 9.1.17(a), there are no applications
by the Company or complaints or petitions by others or proceedings pending or
threatened before the state regulatory authority relating to the Company, the
Business or its operations or the state regulatory tariffs. To the knowledge
of Seller and the Company, there are no material violations by subscribers or
others under any such state tariff that would be material to the Company or the
Business. A true and correct copy of each state tariff applicable to the
Company or the Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension, cancellation or
termination or, to Seller's or the Company's knowledge, any threatened
suspension, cancellation or termination in connection therewith nor are any of
such FCC Licenses subject to any restrictions or conditions that limit the
operation of the Business (other than restrictions or conditions generally
applicable to licenses of that type). The FCC Licenses are free from all
security interests, liens, claims, or encumbrances of any nature whatsoever.
Except as set forth on Schedule 9.1.17(b), there are no applications by the
Company or material complaints or material petitions by others or proceedings
pending or threatened before the FCC relating to the Company or the FCC
Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's and the Company's knowledge, no event has occurred with respect to
any materially necessary Non-FCC Authorization which permits, or after notice
or lapse of time or both would permit, revocation or termination thereof, or
would result in any other material impairment of the rights of the holder of
such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term is
defined in Section 3(1) of ERISA maintained or contributed to by the Company or
any of its Affiliates in respect of any Transferred Employee (as defined below)
(such plans being hereinafter referred to collectively as the "ERISA Plans"),
and each other material retirement, pension, profit-sharing, money purchase,
deferred compensation, incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement maintained or
contributed to by the Company or its Affiliates in respect of or for the
benefit of any Transferred Employee or former employee, excluding any such
plan, program, agreement, or arrangement maintained or contributed to solely in
respect of or for the benefit of Transferred Employees or former employees
employed or formerly employed by the Company outside of the United States, as
of the date hereof (collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Seller has supplied Buyer with a true and
complete copy of each Plan and all amendments thereto. Schedule 9.1.18(a) also
includes a list of each material written employment, severance, termination or
similar-type agreement between the Company or its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except to the extent that
any assets, liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or otherwise) to plan(s)
or agreement(s) maintained or contributed to by Buyer, all such Plans and
Agreements shall remain the liabilities of the Seller or its Affiliates and
Seller shall take any and all steps necessary to ensure that neither Buyer nor
the Company shall be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the performance of this
Agreement by Seller will not directly result now or at any time in the future
in (i) the payment by the Company or its Affiliates to any Transferred Employee
of any severance, termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of the IRC) being
made by the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company could
be subject to any material liability pursuant to Section 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability is
reserved for or otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
IRC), whether or not waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer plan," as that term is defined in Section 3(37) of ERISA
and with respect to any such multiemployer plans (as so defined) listed in
Schedule 9.1.18(d), Seller has not made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA that would result in the incurrence of a material liability
by the Company that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or the
Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is the
Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered by
collective bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller and the Company, during the twelve (12) months
preceding the Execution Date there have not been any union organizational
campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of the Company, together
with the elections made prior to the Effective Date with respect to such
accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on Schedule
9.1.19 copies of schedules (at the level of detail agreed to by the parties but
in any case including details regarding net book value and continuing property
records lists associated therewith) of the Company's Telephone Plant as of
June 30, 1994, including, to the extent available, a schedule specifically
identifying the Telephone Plant that is associated with the Unregulated
Business. The account balances reflected on the schedule of Telephone Plant
correspond, in all material respects, to the associated account balances
reflected on the Company's Continuing Property Records.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially complete list of
all vehicles included in the Property (including trailers, equipment mounted on
trailers and self-propelled equipment) together with the manufacturer, model
and year of each such vehicle, and indicates whether such vehicle is owned or
leased by the Company.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing and
collection revenues of the Company for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, the Company has
no materials and supplies, plant or equipment that has been disallowed from
rate base or excluded from the revenue calculations for any pool (unless due to
the deregulation of the service for which such assets are used) or in the most
recent rate order issued by the PUC or the FCC or any determination by an
administrator of an interstate or intrastate pool, and has not received written
notification that the PUC or the FCC or any pool administrator proposes to
exclude any assets from rate base or revenue calculations for the pools, or any
tariff filed with or approved in the most recent rate order of the PUC or the
FCC, in each case which materials and supplies, plant or equipment, in the
aggregate, would be in excess of one percent (1%) of Net Telecommunications
Plant.
9.1.22 Payments. All material payments of any kind required to be made by
the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically indicate
on Schedule 9.1.23, (i) the Company is in compliance in all material respects
with all Laws applicable to it, the Property and the Business and holds all
governmental permits or licenses required in order to conduct the Business and
to own and operate the Property; (ii) the present uses of the Property in the
conduct of the Business do not violate in any material respect any Law and
(iii) no written notice or warning from any governmental or regulatory
authority with respect to any failure or alleged failure by the Company to
comply with any Law or questioning the validity of any governmental permit or
license, has been issued or given, nor to the knowledge of Seller or the
Company, is any such notice or warning proposed or threatened. Neither Seller
nor the Company is aware of any fact, event or circumstance relating to the
Company that is reasonably likely to cause a regulatory agency to deny or
withhold its approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account books and
other accounting records of the Company are current, correct and complete and
reasonably well organized, in all material respects and to the knowledge of
Seller and the Company, to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC and PUC. The
Company and its Affiliates have retained substantially all Original Cost
Documents regarding the expenditures made by the Company within the immediately
preceding two-year period that relate to the Company's Net Telecommunications
Plant, and such Original Cost Documents are correct and complete in all
material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value
(as reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements of
the Business, will not materially exceed the Company's reserve for obsolete or
excess Materials and Supplies as reflected on the Company's books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by PUC. Except as set forth on
Schedule 9.1.29, there are no changes, modifications, upgrades or enhancements
required by the PUC to be made to the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this Agreement
or as otherwise set forth in Schedule 9.1.30 the Company has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), of a nature required to be
recorded or disclosed in a corporate balance sheet prepared in accordance with
GAAP, except liabilities and obligations which are not materially in excess of
amounts reflected, reserved against or disclosed in the December 31, 1993
Financial Statements or the notes thereto and except for liabilities and
obligations incurred in the ordinary course of business since December 31,
1993. Except as may be reflected in the December 31, 1993 Financial Statements
or the notes thereto or on Schedule 9.1.30, the Company has no obligations
under guarantees, endorsements or indemnities of the obligations of any other
person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons
holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner of
the Shares, which comprise 100% of the outstanding shares of the common stock
of the Company. Seller has legal, valid and marketable title to the Shares,
free and clear of all liens, claims, options, security interests or other
encumbrances of any character whatsoever ("Encumbrances"). The sale and
delivery of the Shares to Buyer pursuant to Article 2 will vest in Buyer legal,
valid and marketable title to the Shares free and clear of all Encumbrances
other than Encumbrances created or suffered by Buyer and restrictions on sales
of the Shares under applicable federal and state securities laws.
9.1.33 Capital Stock. The Common Stock and the Company's 6% preferred
stock, $50.00 par value per share (the "Preferred Stock"), are the only capital
stock authorized to be issued by the Company. The Shares are the only shares
of Common Stock outstanding. As of the Execution Date, there exists a total of
21 shares of Preferred Stock outstanding. The Shares and the 21 shares of
Preferred Stock represent the only shares of capital stock of the Company
outstanding. All of the Shares are duly authorized, validly issued, fully paid
and non-assessable. Except as described in Schedule 9.1.33, there are
outstanding no securities convertible into, exchangeable for, or carrying the
right to acquire, equity securities of the Company nor are there any
subscriptions, warrants, options, rights or other arrangements or commitments
(other than this Agreement) which could obligate Seller or the Company to issue
any shares of capital stock or dispose of any ownership interest therein.
Except as described in Schedule 9.1.33, there are no outstanding obligations of
the Company to issue or deliver, or to repurchase, redeem or otherwise acquire
any capital stock or other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the right
to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of West
Virginia; it has full corporate power and authority to own its properties and
to carry on the Business as it is now being conducted, and to own or hold under
the lease, the Property.
9.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold the assets owned, leased or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement, to own the Shares and to fulfill all
other obligations of Buyer under this Agreement. The execution and delivery by
Buyer of this Agreement and the fulfillment by it of its obligations under this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to purchase, own and
hold the Shares upon the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by Buyer and,
assuming the due execution and delivery of this Agreement by Seller,
constitutes a valid and binding obligation of Buyer, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualifications that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.2.3 No Restrictions Against Purchase of the Shares. The execution and
delivery of this Agreement by Buyer do not, and the fulfillment by Buyer of its
obligations under this Agreement will not, conflict with, violate or result in
the breach of any provision of the certificate of incorporation or bylaws of
Buyer or, subject to obtaining the approvals and consents referred to in
Article 5, conflict with, violate or result in the breach of, constitute
default under, or accelerate the performance required by any Contract to which
Buyer is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the fulfillment by
Buyer of its obligations under this Agreement, except (i) the filings and
approvals described in Article 5, and (ii) the filings and approvals listed on
Schedule 9.2.3.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
and the fulfillment by Buyer of its obligations under this Agreement will not
violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Seller for any broker's or finder's
fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
proceedings pending or, to the knowledge of Buyer, threatened against Buyer or
its properties that would prevent the consummation of the transactions
contemplated by this Agreement.
9.2.7 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC's Licenses, as described in Section 5.4, Buyer
will not file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the National Exchange Carrier Association Tariff FCC No. 5, provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
9.2.8 Investment. Buyer understands that the Shares that it will acquire
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Act"), and cannot be offered for sale, sold or otherwise
transferred unless the Shares subsequently are so registered or qualified for
exemption from registration under the Act. The Shares are being acquired under
this Agreement by Buyer in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Act. The Shares will not be offered for sale, sold or otherwise
transferred by Buyer without either registration or exemption from registration
under the Act and applicable state securities laws. Buyer has such knowledge
and experience in financial and business matters that Buyer is capable of
evaluating the merits and risks of Buyer's investment in the Shares. Buyer
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding the Shares for an indefinite
period of time, inasmuch as the Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
or prior to March 15, 1995, the parties shall, as promptly as practicable but
in any event within 30 days after Buyer's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no later
than the Effective Date, pursuant to which Seller will provide to the Company,
at the Company's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services relating to the
conversion of systems and processes) as may be reasonably requested by Buyer,
which agreement shall be in form and substance as mutually agreed to by both
Buyer and Seller (the "Transition Services Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed
in any patent or patent application), designs (useful or ornamental), and works
subject to copyright that may be embodied in, without exclusion, invention
disclosures, specifications, manuals, drawings, functional or system block
diagrams, flow charts, circuit diagrams, design or user documentation,
engineering notebooks, schematics, test programs, documented procedures,
documented processes, documented flows, devices, software, or firmware, that
relate to the function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus, article of
manufacture, process, method or service. "Intellectual Property" shall also
include patents, patent applications (including continuations, continuations-
in-part, divisions, reissues, reexamined patents and patent applications and
extensions thereof), copyrights (whether common law or statutory, registered or
unregistered), or trade secrets, residing in the subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall be
responsible for any fees associated therewith) in obtaining the consent of any
necessary third party for the use of any Intellectual Property that the Company
has placed in public use on, or prior to, the Effective Date and that is
presently used by the Company, but excluding any Intellectual Property listed
in Schedule 11.22.
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except as
specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in the Company's use of such
Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are set
forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the Intellectual
Property that as of the Effective Date the Company owns or controls or under
which it has the right to grant licenses, Seller shall not assert against
Buyer, or Affiliates of Buyer, or vendees, mediate or immediate, of Buyer or
the Company, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from the Company's activities practiced in
the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by the
Company of any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, the Company, a customer
of Buyer's or the Company's or anyone claiming under Buyer or the Company
constitutes direct or contributory infringement or misuse of any intellectual
property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, the
Company, a customer of Buyer's or the Company's, or anyone claiming under Buyer
or the Company constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the owners
of, and have permitted the Company to use, certain trade names, trade dress,
trademarks, service marks, logos and related intangible property (collectively,
"Marks") used in connection with the Business, including, without limitation,
the items listed on Schedule 11.1.5, and Buyer understands and agrees that the
Marks, or any right or license of the Company to the Marks are not being
transferred pursuant to this Agreement. Buyer acknowledges Seller's exclusive
and proprietary rights in the use of the Marks, and Buyer agrees that it shall
cause the Company not to use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this Section 11.1.5.
After the Effective Date, Buyer shall cause the Company to replace all Marks of
Seller as soon as possible, but in no event later than one hundred eighty (180)
days after the Effective Date for Marks affixed to items with a valid
continuing use in the Company's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats, tools, tool boxes,
kits (safety and others), signs, manual covers and notebooks. After the
Effective Date, Buyer will cause the Company to not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that have no valid
continuing use in the Company's conduct of the Business, including items
affecting customer or employee relations or items that do not reflect the
Company's true identity. Specific items to be destroyed or returned include
items with Marks affixed to them including, without limitation, giveaways;
order, purchase or materials forms; requisitions; invoices; statements; time
sheets/labor reports; bill inserts; stationery; personalized note pads; maps;
organization charts; bulletins/releases; sales/price literature; manuals or
catalogs; report covers/folders; program materials; and materials such as media
contact lists/cards. The one hundred eighty (180) day time period for
replacement of Marks affixed to telephone directories that were already
published or closed for publication as of the Effective Date shall be extended
to the production of replacements for such directories.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as to
reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
with the Marks, and acknowledges that the Marks and all rights therein and the
goodwill pertaining thereto belong exclusively to Seller, and that the Marks
have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company using the Marks shall be provided in
accordance with all applicable federal, state and local laws, and that the same
shall not reflect adversely upon the good name of Seller, and that the conduct
of the Business will be of a standard and skill equivalent to that employed
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's failure to cease use of the Marks as provided
in this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that there is
no adequate remedy at law for such failure to terminate use of the Marks, or
for such improper use of the Marks, and Buyer agrees that in the event of such
failure or improper use, Seller shall be entitled to equitable relief by way of
temporary restraining order or injunction or any other relief available under
this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and agrees
that (i) except for the representations and warranties set forth in this
Agreement and the Schedules (and the Financial Statements, the Additional
Financial Statements, and actuarial reports required pursuant to the Employee
Transfer Agreement), Buyer has not relied and will not rely upon any document
or written or oral information furnished to or discovered by it or its
representatives, (ii) there are no representations or warranties by or on
behalf of Seller or its Affiliates or representatives except for those
expressly set forth in this Agreement and in any other written agreement
entered into with Seller or any of its Affiliates in connection with this
Agreement, and (iii) to the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will be solely as set
forth in this Agreement or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and representatives
will comply with the Confidentiality Agreement, the provisions of which are
expressly incorporated herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company to
conduct the Business in the ordinary course in accordance with prudent business
judgment and consistent with past practice and policy and to (i) preserve the
Business as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same extent as such
were generally available from January 1, 1994 through the Execution Date and
are available on the date hereof, (iii) not take any action that would
jeopardize any material and beneficial contractual relationships with persons
having business dealings with the Business, and (iv) preserve all of the
Business' tariffs, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. Seller will cause
the Company to refrain from entering into any material transaction or contract
other than in the ordinary course of business and to not make any material
change in the general nature of the Business or in its methods of management,
marketing, accounting or operations (including repair and maintenance
functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course of
business, (ii) enter into or terminate, as lessor or lessee, any Lease other
than in the ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or (iv) change in
any material respect or terminate any of the insurance policies referred to in
Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will cause the Company not to
sell, lease, dispose of or otherwise transfer, or make any contract for the
sale, lease, disposition or transfer of any Property other than, with respect
to any individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items (other
than vehicles) the aggregate value of which shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the PUC, Seller will cause the Company not to
(i) institute any proceeding with respect to, or otherwise change, amend or
supplement any tariff or (ii) enter into or agree to any stipulation, order, or
decree of, or settlement with the PUC that, in the case of (i) or (ii) above,
would have a material adverse effect on the revenue, authorized return on
equity or earnings of the Business. Seller will cause the Company not to file
any application, petition, motion, brief, testimony, settlement agreement or
other pleading in any proceeding before the PUC, or before the FCC (except for
filings on behalf of all of Seller's local exchange telephone companies) or
appeals related thereto, unless Seller shall have first provided Buyer with a
copy of the same and provided Buyer with a reasonable opportunity to comment to
Seller with respect thereto. If Buyer determines it should intervene in any
proceeding before the PUC in which Buyer's position is or may be different from
the Seller's or the Company's, Seller will not, and will cause the Company not
to, without waiving any other rights related thereto, oppose Buyer's
intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of the Company or pursuant to any Contract,
Seller will cause the Company not to (i) enter into or amend any employment
agreement with any individual that will become a Transferred Employee, or enter
into or amend any union agreement or commitment (including any new commitment
to pay retirement or other benefits, or amendments to the Company's retirement
plans), (ii) effect any net increase over five percent (5%) since the Execution
Date in the number of employees of the Company who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under any plans
concerning employee benefits or increase the general rates of compensation of
the Transferred Employees, or change the manner by which compensation
(including fringe benefits) is determined and paid to any Transferred Employee.
(f) Seller will cause the Company not to engage in any intercompany
transactions with any Affiliate thereof, except for transactions consistent
with past practice.
(g) Seller shall cause the Company to maintain the Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to take
any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate with
any other person or entity or acquire a material amount of assets of any other
person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital expenditure
plans which Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the parties agree
that when such expenditures have been incurred they will constitute an addition
to a component of Net Telecommunications Plant thereby becoming subject to
Section 3.2(c). Seller agrees to cause the Company to use its best efforts
substantially to complete such plans within the projected time schedules;
provided, that the Company will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the prior
written consent of Buyer. All construction work that is in progress on the
Effective Date will be accounted for by identifying and accruing all associated
time reporting, material invoices or contractor invoices inputted or received
on or before the Effective Date, and all payments therefor shall be the
responsibility of the Company and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the Property,
Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed Three Million Six Hundred Thirty One
Thousand Seven Hundred Dollars ($3,631,700.00), either party may, by written
notice to the other party (the "Casualty Termination Notice") within thirty
(30) days after the date of delivery of the Casualty Notice, terminate this
Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed Three
Million Six Hundred Thirty One Thousand Seven Hundred Dollars ($3,631,700.00),
or the Casualty Termination Notice is not given by either party, then Seller,
within forty-five (45) days after the damage or destruction, shall agree in
writing to take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property;
or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain as
a substitute therefor an equivalent item or items of Property if the Damaged
Property is personal property, and Real Property if the Damaged Property is
Real Property, but only if such substituted personal property or Real Property
is satisfactory to Buyer, and the Company will be entitled to make all claims
related to the Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the manner contemplated by this
Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property,
and the Purchase Price Adjustment contemplated by Section 3.2(a)(2) will be
made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 Settlements and Cost Studies. The parties agree that, with respect
to all toll revenues, settlements, pools, separations studies, Universal
Service Fund payments or similar activities, Seller shall receive the benefit
or suffer the burden of the results of any such activities that are related to
the conduct of the Business or the ownership or operation of the Company on or
before the Effective Date.
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing Corporation.
The Directory Publishing Agreement dated as of November 15, 1994, by and
between Company and ALLTEL Publishing Corporation (the "Directory Publishing
Agreement") is an Excluded Contract on Schedule 11.22(h), except as hereinafter
provided. Within thirty days after the Execution Date, Buyer shall cause its
existing directory provider to indicate in writing whether it will provide
directory production services to the Company, as of the Effective Date (or as
of such later date as described below) with regard to all of the Exchanges on
the same terms and conditions as it is presently providing such services to
Buyer, and Buyer shall inform Seller within such thirty day period of Buyer's
existing telephone directory provider's written intention. If Buyer's existing
directory provider's indication is that it will not provide directory
publication services for all of the Exchanges on the same terms and conditions
that it is presently providing such services to Buyer, then the Directory
Publishing Agreement shall be deemed to become a Contract for the purposes of
this Agreement. Promptly, thereafter, the Buyer and ALLTEL Publishing
Corporation shall agree to meet in good faith to negotiate any necessary
amendments to the Directory Publishing Agreement, to be effective as of the
Effective Date, to provide for a retention rate equal to or greater than the
higher of (x) 60% or (y) the retention rate provided for in any substantially
similar directory publishing agreement between ALLTEL Publishing Corporation
and a non-Affiliate of ALLTEL Publishing Corporation that was entered into
within 18 months prior to the Effective Date. If Buyer's existing directory
provider indicates that it will provide directory publication for all the
Exchanges, as provided above, the Directory Publishing Agreement shall remain
in effect as to the directory of each of the Exchanges for which (i) the
directory is scheduled to be or is published prior to the Effective Date or
(ii) the canvass for the directory has begun prior to the Effective Date and it
is scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not begin providing
directory publication services for such Exchange until canvass and production
begins for the next succeeding directory related to such Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
provider indicates that it will provide directory publication for all of the
Exchanges, as provided in Section 11.12.1 of this Agreement, Seller and Buyer
agree to cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the Seller
even if in the possession of a third party (the "Directory Records") related to
directories of the Exchanges that are published by Seller or its Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production functions
of any directories related to the Exchanges that are scheduled to begin
canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the other
reasonable access to such documentation, reports and accounting records related
to directory production as may be necessary to insure a proper transition of
directory publication in accordance with the terms of such agreements in effect
on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Company's Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate in
good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any directories
that will be canvassed and published by Buyer's existing directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing, use
their best efforts to allow Buyer to negotiate, on behalf of the Company, a
billing and collection agreement ("B&C Agreement") reasonably satisfactory to
Buyer with each interexchange carrier ("IXC") and each local exchange carrier
("LEC") for which the Company provides, on the Execution Date, billing and
collection services in any Exchange (each such IXC or LEC is hereinafter
referred to as a "Carrier"). Seller and Buyer shall cooperate with each other
and make available to each other all documents and records relevant and
necessary to allow the Company to finalize negotiations of B&C Agreements, as
necessary, and to perform such B&C Agreements after the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (such as Northern Telecom and Stromberg-Carlson;
collectively "Equipment Manufacturers") as Buyer may request, covering such
software license agreements and other agreements as are necessary to enable the
Company after the Effective Date to operate the equipment manufactured and sold
by the Equipment Manufacturers included in the Property in substantially the
same manner as operated by the Company prior to the Effective Date. The
agreements shall contain material terms and conditions (including license and
warranty, but not necessarily including pricing) that are substantially the
same as those provisions in the corresponding agreements between the Company
and the Equipment Manufacturers as of the Effective Date. Buyer understands
and agrees that the price and fee provisions of such agreements will be as
negotiated between Buyer, on behalf of the Company, and the Equipment
Manufacturers. The above obligation of Seller shall be expressly conditioned
upon the acceptance by Buyer, on behalf of the Company, of all material
obligations accepted by Seller in such corresponding agreements. It is the
responsibility of Buyer, on behalf of the Company, to enter into appropriate
agreements with the Equipment Manufacturers in respect of service, support,
training, maintenance, and future development (hardware and software) for the
Property, such agreements to include terms and conditions agreed to between
Buyer, on behalf of the Company, and the Equipment Manufacturers. Seller
agrees to assist Buyer, on behalf of the Company, in obtaining the Equipment
Manufacturers' consent, if necessary, to enable the Company after the Effective
Date to avail itself of all training credits remaining at the Effective Date on
Property furnished by the Equipment Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third parties
relate both to the Property and the Excluded Property. Seller agrees to use
its best efforts to assist Buyer in obtaining, on behalf of the Company,
contractual arrangements with such third parties relating to the Property,
which arrangements will be reasonably satisfactory to Buyer; provided that
neither the Company nor any Affiliate of the Company shall be obligated under
this Section 11.12.5 to make any payment to any such third party unless such
payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company to
retain the Company Books and Records, in either case, until the shorter of the
date that other party consents in writing to their destruction or the seventh
anniversary of the Effective Date. Each party shall provide full and free
access to the Company Books and Records and Retained Books and Records, as the
case may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and Records
are required to be retained. Either party may make copies of any such Books
and Records as it deems desirable, at its own expense. After the Effective
Date, upon reasonable notice, Seller shall provide Buyer and the Company with
reasonable assistance in locating any of the Company's Original Cost Documents
which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver (at
its expense) to Buyer a preliminary title binder (on a standard form reasonably
acceptable to Buyer), issued by Lawyers Title Insurance Company or another
title insurance company reasonably acceptable to Buyer, with respect to all
Real Property included in the Property and in which the Company purports to own
fee title. Such title binders shall be in form, substance and amount
reasonably satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as set forth below) and shall be current as of a
date no earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each policy
shall equal the dollar value set forth on the Company's continuing property
records list as of December 31, 1993 for land and buildings. Such title
binders shall reflect that the Company is vested with good, fee simple,
marketable and insurable title to such Real Property, subject only to (i)
standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v)
Leases, (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby and (vii) standard mineral rights exceptions (collectively,
the "Permitted Exceptions"). If a preliminary title binder indicates an
exception other than a Permitted Exception that would impair marketability in
any material respect, Seller shall, at its expense, cause such exception to be
removed on or before the Effective Date. With respect to each parcel of Real
Property covered by a preliminary title binder, Seller shall deliver to Buyer
(at Seller's expense and on or prior to sixty (60) days before the Effective
Date) a certified current boundary survey showing (x) access to the property
and (y) all improvements on the property and any encroachments across the
property line by any improvements of the Company or owners of adjacent property
and (at Seller's expense and within sixty (60) days after the Effective Date)
owner's title insurance policies for the Real Property (ALTA Owners Policies
where available but based upon boundary surveys as set forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer to
insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by the
sale. All reasonable costs and expenses related to such insertion and delivery
shall be borne and paid by the Company. Other means of notifying subscribers
may be employed by either party, at the expense of the initiating party, but in
no event shall any notification be initiated without the prior consent of the
other party (which consent shall not be unreasonably withheld) or earlier than
three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as otherwise provided in Section
11.24, Seller shall have a period of ten (10) business days after the Execution
Date (the "Supplemental Schedule Period") to supplement or otherwise modify the
Schedules to this Agreement by delivering to Buyer, within the Supplemental
Schedule Period, a substitute schedule or schedules (collectively, the
"Supplemental Schedules"), bearing the legend "This Schedule _, dated
_______________, is executed and delivered in accordance with Section 11.20 of
the Stock Purchase Agreement, dated as of November 28, 1994 which shall be duly
executed by Seller and submitted to Buyer. Buyer shall have a period of ten
(10) business days after the expiration of the Supplemental Schedule Period to
review the Supplemental Schedules and within such ten (10) business day period
notify Seller in writing (which writing may be transmitted by facsimile) of any
objections thereto. If Buyer's objections are not resolved to the satisfaction
of Buyer within five (5) days of such notification, Buyer may terminate this
Agreement, effective immediately upon written notification of that termination.
In the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of any
changes in the Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or covenants
hereunder, the Supplemental Schedules provided by Seller shall be deemed
Schedules for all purposes.
11.21 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC Licenses, as described in Section 5.4, during
the period from the Execution Date until the Effective Date, neither party
shall file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the Natural Exchange Carrier Association Tariff FCC No. 5; provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall take,
and shall cause the Company to take, all action necessary to effect, on or
prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate Receivables")
shall be netted against all "Advances and Notes-Parent Company" (item 2 -
Liabilities on the Company's Balance Sheet), "Accounts Payable-Affiliates"
(item 5 - Liabilities on the Company's Balance Sheet), "Dividends Accrued -
Affiliates" (item 10 - Liabilities on the Company's Balance Sheet) and
"Interest Accrued - Alltel" (item 12 - Liabilities on the Company's Balance
Sheet) (collectively, "Affiliate Payables"). To the extent there is a net
excess of Affiliate Receivables, a cash payment or payments will be made to the
Company which cash will then be disposed of by the Company, and to the extent
there is a net excess of Affiliate Payables, such Affiliate Payables will be
contributed to the Company as a contribution to the Company's capital, and take
any other action necessary, such that the balances of each of the Affiliate
Receivable and Affiliate Payable accounts, and of any other intercompany
accounts, as of the Effective Date will be zero.
(c) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 - Assets
on the Company's Balance Sheet) and all "Investments in Affiliates" (item 14 -
Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and all "Unamortized Debt Expense" (Item
16 - Assets on the Company's Balance Sheet), except to the extent such
unamortized debt expense relates to debt which is to remain outstanding
immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets on the
Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, (i) all "Other Current Assets" (item 10 - Assets
on the Company's Balance Sheet) to the extent such other current assets
represent cash accounts, and (ii) all "Other Non-Current Assets" (item 19 -
Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's interest
in any business other than the Business, and those other assets, including
agreements and contracts ("Excluded Contracts"), set forth on Schedule
11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial Accounting
Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income (item
8-Liabilities on the Company's Balance Sheet) shall be zero as of the Effective
Date.
(k) The balance in the Company's Notes Payable - Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding (item
4 - Liabilities on the Company's Balance Sheet), Other Current Liabilities
(item 14 - Liabilities on the Company's Balance Sheet) and Dividends Accrued -
Other (item 11 - Liabilities on the Company's Balance Sheet) accounts shall be
zero as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet) and Interest Accrued
- - Other (item 13 - Liabilities on the Company's Balance Sheet), to the extent
each of such amounts relate to debt which is not to remain outstanding
immediately after the Effective Date, shall be zero as of the Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section 11.23.1,
Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or governmental
charges imposed by any taxing jurisdiction (but not including Income Taxes, as
hereinafter defined, which shall be paid by Seller), and all recording or
filing fees, notarial fees and other similar costs of Closing with respect to
the transfer of the Shares or otherwise on account of this Agreement or the
transactions contemplated herein (but not including any transactions
contemplated by this Agreement to be effected pursuant to the transactions
contemplated by Section 11.22 or otherwise between Seller and the Company,
which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) for all periods
ending on or before or which include the Effective Date, all items of income,
gain, loss, deduction, and credit or other items (collectively "Tax Items")
attributable to the operations of the Company during such periods or portions
thereof determined by an interim closing of the books as of the Effective Date.
Seller will sign and file timely all such Tax Returns with the appropriate
United States, state and local Governmental Authorities. Buyer will provide or
cause to be provided any consent request to file such Tax Returns on behalf of
the Company. Seller will make all payments shown thereon as owing with respect
to any such Tax Returns.
(c) With respect to any taxable period that would otherwise include
but not end on the Effective Date, to the extent permissible pursuant to
applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income Tax
Returns (other than Tax Returns described in Section 10.5.1(b)) for the Company
required to be filed with the appropriate United States, state, and local
Governmental Authorities for any taxable period that ends on or before the
Effective Date that have not been filed prior to the Effective Date. Seller
will sign and file timely all such Tax Returns with the applicable Governmental
Authority and make all payments shown thereon as owing with respect to such Tax
Returns. If requested by Seller, Buyer will deliver or cause the Company to
deliver to Seller a power of attorney authorizing Seller to sign such Tax
Returns. Notwithstanding the foregoing, if Seller is legally precluded from
filing any such Tax Return, Buyer shall sign such Tax Return. Seller shall
deliver a copy of each such Tax Return to Buyer within 10 days prior to filing
such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed all
Tax Returns for the Company that are required to be filed with the appropriate
United States, state, and local Governmental Authorities for any taxable period
which begins before and ends after the Effective Date. In the case of Income
Taxes, Buyer shall cause such Tax Return to be prepared and shall cause to be
included in such Tax Return all Tax Items required to be included therein.
Buyer shall determine (by an interim closing of the books as of the Effective
Date) the portion, if any, of the Income Tax due with respect to the period
covered by such Tax Return which is attributable to the Company for a Pre-
Effective Date Taxable Period (as hereinafter defined). At least 15 days prior
to the due date (taking into account all extensions of due date) of such Tax
Return, Buyer shall deliver to Seller a copy of such Tax Return and of its
determinations. If the amount reflected as a liability for Income Taxes on the
Tax Schedule less Prior Reimbursements (as hereafter defined) is less than the
amount of Income Tax so determined to be attributable to the Pre-Effective Date
Taxable Period, Seller shall pay to Buyer the amount of such shortfall not less
than 5 days prior to the due date (taking into account all extensions of due
dates) of such Tax Return (or the due date of the applicable estimated Tax
payments, if earlier). If the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period is less than the amount
reflected as a liability for Income Taxes on the Tax Schedule, to the extent
not previously paid to Seller or the applicable Governmental Authority by the
Company and subject to Section 11.23.1(f), Buyer will pay to Seller the amount
of such excess not less than 5 days prior to the due date (taking into account
all extensions of due dates) of such Tax Return (or the due date of the
applicable estimated Tax payments, if earlier). As used in this Agreement,
"Pre-Effective Date Taxable Period" means all or a portion of (i) any taxable
period up to and including the Effective Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company arising on or before, or existing as of, the
Effective Date. As used in this Agreement, "Income Taxes" means all Taxes
measured in whole or in part on or by net income imposed by the United States,
any state of the United States or any political subdivision thereof, and will
include any such Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as a
liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that have
previously been (A) paid by Buyer (or by the Company at the Buyer's direction
or consent) to Seller pursuant to Section 11.23.1(b), Section 11.23.1(d) or
Section 11.23.1(e) or (B) paid by Buyer or the Company to Seller or to the
applicable Governmental Authority with respect to Income Taxes properly
attributable to Pre-Effective Date Taxable Periods that are reflected on Tax
Returns described in Section 11.23.1(b), Section 11.23.1(d) or Section
11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax Returns
that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to such
information and personnel as Seller may require in order to properly prepare
such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable Governmental Authority) received by Buyer after the Effective
Date and attributable to Taxes paid by Seller or the Company (or any
predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of any
Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives or
is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund together
with any interest received from or credited thereon the applicable Governmental
Authority, net of any Taxes imposed upon Seller or any affiliate by reason of
the receipt of such refund, credit or interest (calculated at the maximum
statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of state
or local Law) with respect to the purchase of the Shares hereunder. Both
Seller, as the common parent of the affiliated group of corporations (which
includes the Company) that file a consolidated federal income Tax Return and
Buyer are eligible to and will make a timely and effective election under
Section 338(h)(10) of the IRC (and any comparable provision of state or local
Law) with respect to such purchase (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
Law, the "Section 338(h)(10) Elections"). To facilitate such election, within
thirty (30) days of the Closing, Buyer will deliver to Seller a completed
Internal Revenue Service Form 8023 and the required schedules thereto and any
similar forms under applicable state or local Law (the "Forms") with respect to
Buyer's purchase of the Shares, which Forms shall have been duly executed by an
authorized person for Buyer. Provided that the information on such Forms is,
in the reasonable determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, cause such Forms to be duly executed by
an authorized person for Seller and deliver such Forms to Buyer. If any
changes or supplements are required to the Forms as a result of information
that is first available after the Closing, Seller and Buyer will promptly agree
upon and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates to
take, any action to modify or revoke the elections contained in or the content
of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any Pre-
Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii) joined
in the filing of a combined or unitary Tax Return with the Company on or prior
to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a), any
Taxes attributable to the transactions contemplated by this Agreement; and
(ii) Any breach of any representation, warranty or covenants of
Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a result
of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of the
Company which Taxes are not attributable to any Pre-Effective Date Taxable
Period; and
(ii) Any breach of any representation, warranty or covenant of
Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the indemnification
of a party under this Section 11.23.2 (referred to herein as a "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Section 11.23.2 to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 11.23.2(c)(i) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than 5 days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay the
Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable Law) after the
giving of the notice required by Section 11.23.2(c)(i), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or decree
of a court or other tribunal or a final and binding settlement with an
administrative agency having jurisdiction thereof, the Tax Indemnified Party
shall promptly repay to the Tax Indemnifying Party the amount advanced to the
extent of any refund received by the Tax Indemnified Party with respect to a
claim together with any interest received thereon from the applicable
Governmental Authority and any recovery of legal fees from such Governmental
Authority, net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated at the
maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding, the
representations, warranties, covenants, agreements, rights and obligations of
the parties hereto with respect to any Tax covered by this Agreement shall
survive the Effective Date and shall not terminate until sixty days after the
expiration of the statute of limitations (including extensions) applicable to
such Tax.
11.24 Post-Execution Lease and Contract Review. Buyer shall have a period
of forty-five (45) calendar days after the Execution Date to review the Leases
and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify
Seller in writing (which writing may be transmitted by facsimile) of the
identity of those Leases and Contracts that Buyer reasonably believes are
material to the operation of the Business as a whole or any significant part of
the Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent as a condition to the transfer
of control of the Company to Buyer as a result of Buyer's purchase of the
Shares, before the Effective Date can occur. If Buyer does not notify Seller
in writing within such forty-five (45) calendar day period of the identity of
the material Leases and Contracts requiring consent, then Buyer shall be deemed
to have agreed that none of the Leases and Contracts which are listed on
Schedules 9.1.9 and 9.1.13 require consent, in accordance with Section 7.1.6,
before the Effective Date can occur. If Buyer does notify Seller in writing
within such forty-five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a period of ten
(10) business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile) of any objections thereto.
Thereafter, Buyer and Seller shall negotiate in good faith and agree in writing
as to the identity of those Leases and Contracts which are material to the
operation of the Business as a whole or any significant part of the Property
and which by their terms will require Seller, in accordance with Section 7.1.6,
to obtain a third party consent as a condition to the transfer of control of
the Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in a separate agreement,
entitled Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as to
time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination Date. Any claim for indemnification with respect to any alleged
breach of any representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts relating thereto, which notice is given prior to the Termination Date,
may not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty will be deemed
to have been properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3,
11.6, 11.7, 11.10, 11.12, 11.13, 11.16 and Articles 16 and 17 and in the
Employee Transfer Agreement, will survive the Closing and remain in effect
indefinitely. Covenants regarding Taxes shall survive as set forth in Section
11.23.2(d). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Effective Date and any claim
following the Effective Date for an alleged breach of any such covenant may not
be pursued, and is irrevocably waived, upon the occurrence of the Effective
Date, except that Buyer may make a claim for Seller's breach of the covenants
contained in Section 11.5 at any time within eighteen months after the
Effective Date. The immediately preceding sentence shall not apply to, or
limit to preclude, a party's rights and remedies if the sale contemplated by
this Agreement is not concluded as a result of the other party's breach of this
Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, and
(iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in connection
with any actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expenses, in any such case (x) reduced by the
amount of insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one hand,
and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. Without limiting the foregoing, as a
material inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under the common law
or federal or state securities, trade regulation or other laws, by reason of
the liabilities and obligations, and any breach of the representations,
warranties or covenants, referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and conditions of this
Article 13, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section 9.2.5)
until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds One Hundred Eighty One
Thousand Five Hundred Eighty Five Dollars ($181,585.00) and then only to the
extent of the excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32 and 9.1.33) and of Buyer under Section 13.3(b)(i)
(except with respect to indemnification for a breach of the representations
contained in Section 9.2.5) will not exceed the sum of Five Million Four
Hundred Forty Seven Thousand Five Hundred Fifty Dollars ($5,447,550.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), directors, officers, agents and
representatives from all Indemnifiable Losses relating to, resulting from or
arising out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee Transfer
Agreement, except for any such breach of covenants which was specified on
Seller's Closing Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted, or
sought before or after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business (including
contractual obligations in connection with sales or transfers of assets made by
the Company prior to the Effective Date), or the ownership or operation of the
Business, on or prior to the Effective Date, regardless of whether known or
unknown, asserted or unasserted, on the Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct of
the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect to
the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10; and
(iii) All liabilities, responsibilities and obligations arising out of
or related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation, claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the Company
Date to the extent Buyer receives a Purchase Price adjustment in its favor
pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) any Third Party Claim, filed, asserted, or sought
after the Effective Date, in respect of the operations of the Company or the
conduct of the Business or any part of the Business or the ownership or
operation of the Company or the Business, after the Effective Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23 and
Article 14, respectively, and are not addressed, limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action, proceeding, or investigation by any
entity or person that is not a party to this Agreement or an Affiliate of such
a party (a "Third Party Claim") against such Indemnitee, with respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Article 13 to the extent the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 13.
(c) If after the making of any Indemnification Payment the amount of
the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of
the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
result of the environmental due diligence authorized by this Section 14.1 will
be subject to the terms and conditions of the Confidentiality Agreement, except
as otherwise expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer's environmental consultant(s) and shall treat all such
information in accordance with the procedures of Section 14.1.5(c). Within
thirty (30) days after the Execution Date (the "Environmental Data Delivery
Date"), Seller will provide to Buyer copies of all surveys and reports in
Seller's or the Company's possession concerning the existence or possible
existence of asbestos or materials containing asbestos relating to any of the
Real Property, a list of all underground storage tanks which to Seller's or the
Company's knowledge are located on, or have been removed within the last three
years from, any Real Property owned or real estate leased or operated by the
Company in connection with the Business and any other reports, studies or
documents in Seller's or the Company's possession relating to the Company's
potential liability under any Existing Environmental Requirements. The parties
further agree that, if Seller discloses the existence or suspected existence of
materials containing asbestos with respect to a given parcel of Real Property
and the asbestos does not exceed applicable limits, if Buyer desires to make
renovations or structural changes to the property after the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer in writing of
Seller's objection (which must be for good cause) and substantiate the basis
for that objection. If Seller does not object for good cause and substantiate
that objection within said five (5) business day period, Seller shall be deemed
to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
assessment activities of the Property, including inspecting individual sites,
submitting environmental questionnaires to Seller and the Company and reviewing
existing environmental reports, correspondence, permits and related materials
regarding the Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may be,
but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not limited
to, the taking and analysis of soil, surface water and groundwater samples,
testing of buildings, drilling wells and taking soil borings) after first
conducting a Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the Property, Buyer must notify Seller of its desire at least
five (5) business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding such sampling
or intrusive testing. If Seller does not notify Buyer in writing of Seller's
objection to such proposed sampling or testing within five (5) business days
after receipt of such notice, Seller shall be deemed to have consented to the
proposed sampling or testing. Seller shall not unreasonably object to Buyer's
request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental Data")
within three (3) business days of Buyer's receipt of such data and shall
promptly provide Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during the sampling
or intrusive testing of a particular site; provided, however, that Seller shall
have no obligation to Buyer to take any action whatsoever regarding such
samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Company or the Property
only after first notifying the Seller, and without such notice at any time
after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders, penalties, fines,
costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Property and resulting
from any act or omission of Buyer or its environmental consultant(s) provided
that Buyer shall not be liable for any Environmental Liabilities incurred by
any such party merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property do
not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to the
extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than One Million Four Hundred Fifty Two Thousand Six
Hundred Eighty Dollars ($1,452,680.00) (the "Environmental Liabilities Amount")
To be effective, any such conditional termination of this Agreement must be
delivered in writing to Seller, which writing must specifically acknowledge
that the termination is subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of the
sale contemplated by this Agreement all in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but the
Company fails to perform its obligations thereunder in full on or before the
Closing (subject to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and unconditional unless
the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Property or with respect
to the Company are less than the Environmental Liabilities Amount in the
aggregate, Seller agrees, to cause the Company at the Company's sole cost, to
either (i) make a mutually satisfactory adjustment to the terms and conditions
of the transactions contemplated by this Agreement prior to the Closing in
accordance with Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate those
Environmental Liabilities based upon Existing Environmental Requirements in
accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the
cost of conducting such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under this Section
14.1.7(c) shall be to pay the Environmental Liabilities Amount toward the
completion of such response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the Environmental
Liabilities Amount on such response and remediation action (such expenses to be
verified by Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the Environmental
Liabilities Amount, Buyer shall sign and deliver to Seller at the Closing a
release of Seller from any further liability to Buyer for such remediation and
shall indemnify Seller against any liability for such Environmental Liabilities
or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the Closing
until sufficient response and remediation has been completed so that the
remaining response and remediation is equal to or less than the Environmental
Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
indemnification provided under this Section 14.2 shall be the sole remedy for
allocating responsibility regarding environmental matters related to the sale
contemplated by this Agreement, the Company, the Business and the Property of
which Buyer does not receive notice prior to the Closing (either from Seller in
Schedule 14.3 or pursuant to notice given pursuant to Section 17.1 or in any
written communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by this
Agreement and without further action on the part of such party, shall waive and
release the other party from any and all liability under any other cause of
action at law or in equity concerning the Known Environmental Matters, whether
raised pursuant to (i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation, or (iii) common
law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Environmental Liabilities under Existing Environmental
Requirements arising from acts or omissions occurring with respect to, or from
the use or ownership of, or any condition or circumstance relating to, the
Company or the Property that occurred or arose prior to or on the Effective
Date. The foregoing indemnity in this Section 14.2.2 shall only apply to
matters that do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such indemnification
under this Section 14.2.2 shall be provided only for claims for Unknown
Environmental Matters noticed to the other party pursuant to the procedures of
Section 14.2.3, within eighteen (18) months after the Effective Date. Subject
to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and
hold harmless Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements in
existence now or hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the Property after
the Effective Date, or any condition or circumstance relating to the Company,
the Property or the Business that occurred or arose after the Effective Date on
the Property or in connection with the Company or the operation of the Business
after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including information sufficient
to inform the other party of, and allow such other party to confirm the nature
of, the claim and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2 are required by
Environmental Requirements, as applicable to Buyer, and Existing Environmental
Requirements, as applicable to Seller, and are reasonable and cost-effective.
If the indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree as to
costs or methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent such
damages have been recovered by a third person and are the subject of a Third
Party claim for which indemnification is available under the express terms of
this Article 14. Any indemnifiable claim under this Section 14.2 shall be
reduced to account for any insurance, storage tank fund, or other proceeds
received by the party to be indemnified, as a result of the indemnifiable
losses involved. The parties agree to take all reasonable steps to mitigate
any indemnifiable claim under this Section 14.2, including complying with any
registration and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not exceed
the aggregate amount of Two Million Seven Hundred Twenty Three Thousand Seven
Hundred Seventy Five Dollars ($2,723,775.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article 14
shall be treated by Buyer and Seller as purchase price adjustments, and Buyer
and Seller shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any adjustment to the basis of any asset
resulting from an adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) if such party shall
not have performed diligently and in good faith the obligations required to be
performed by such party hereunder prior to the date of termination;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8, 17.11,
17.13, 17.14 and Article 16 shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit to
compel compliance with this dispute resolution process, the parties agree to
use the following alternative dispute resolution procedure as their sole remedy
with respect to any controversy or claim arising out of or relating to this
Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party, each
party shall appoint a knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under this Agreement.
The discussions shall be left to the discretion of the representatives. Upon
agreement, the representatives may utilize other alternative dispute resolution
procedures such as mediation to assist in the negotiations. Discussions and
correspondence among the parties' representatives for purposes of these
negotiations shall be treated as confidential information developed for
purposes of settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the arbitration
described below or in any lawsuit. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence
in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
representatives of the parties do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. Either party may demand such
arbitration in accordance with the procedures set out in those rules. The
arbitration hearing shall be commenced within sixty (60) days of the demand for
arbitration and the arbitration shall be held in a mutually agreeable location.
The arbitrator shall control the scheduling (so as to process the matter
expeditiously) and any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this Section
16.3 may be extended upon mutual agreement of the parties or by the arbitrator
upon a showing of good cause. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator determines that
the position taken in the dispute by the non-prevailing party taken as a whole
is unreasonable, the nonprevailing party will bear all such fees and expenses,
and reimburse the prevailing party for all of its reasonable costs and expenses
in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with respect
to the resolution of disputes without litigation shall not apply to any
dispute, controversy or claim arising out of the provisions of Section 11.1, or
the Confidentiality Agreement, or to a party's seeking to proceed under Section
17.14, it being understood and agreed that in the event of a breach by either
party of the provisions of Section 11.1, or the Confidentiality Agreement, or
in the event that a party seeks to proceed under Section 17.14, the non-
defaulting party shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate proceeding, whether
for specific enforcement of any agreement contained in Section 11.1, or the
Confidentiality Agreement or in aid of the exercise of any power granted by
Section 11.1, 17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been given when delivered in person or
dispatched by electronic facsimile transfer (confirmed in writing by certified
mail, concurrently dispatched) or one business day after having been dispatched
for next-day delivery by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or other
forth of release of information concerning this Agreement or the transactions
contemplated hereby that is intended to provide such information to the news
media or the public (a "Press Release"). Neither party shall issue or cause
the publication of any such Press Release without the prior written consent of
the other party; provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such Press Release to the
extent that such action is required by applicable Law or the rules of any
national stock exchange applicable to such party or its Affiliates, in which
case the party wishing to make such disclosure will, if practicable under the
circumstances, notify the other party of the proposed time of issuance of such
Press Release and consult with and allow the other party reasonable time to
comment on such Press Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each party
will pay any expenses (including, without limitation, attorneys' fees) incurred
by it incident to this Agreement and in consummating the transactions provided
for herein. All regulatory filing fees required pursuant to Sections 5.1, 5.4
and 5.5 shall be split equally between the parties. Each party will pay the
appropriate costs and filing fees relating to any other applications required
to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Buyer may not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Seller; provided that
Buyer may assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or indirectly
wholly owned subsidiary of Buyer provided such subsidiary assumes in writing
all of the duties and obligations of Buyer hereunder, but no such assignment
and assumption shall in any way operate to enlarge, alter or change any
obligation of or due to Seller or relieve Buyer of its obligations hereunder
and provided that Buyer agrees to cause such subsidiary to perform each of its
agreements and covenants herein, and shall be jointly and severally liable for
any non-performance thereof. Seller may not assign or delegate any of its
rights or duties hereunder without the prior written consent of the Buyer.
Upon the sale, assignment or transfer by Buyer of the Company, the Business or
the Property to a non-Affiliate of Buyer not in the ordinary course of business
of Buyer, Seller's representations and warranties and indemnification
obligation for breach thereof shall terminate. Any assignment made in
violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean collectively
this document, the Schedules hereto, any agreements expressly incorporated
herein, and the Confidentiality Agreement. This Agreement supersedes and
revokes any prior discussions and representations, other agreements,
commitments, arrangements or understandings of any sort whatsoever, whether
oral or written, that may have been made or entered into by the parties
relating to the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege available to each party at law or in
equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of Delaware
(except that no effect shall be given to any conflicts of law principles of the
State of Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested by one
of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate and make effective the transactions contemplated by
this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or to
this Agreement, (ii) each term defined in this Agreement has the meaning so
assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iii) all
references to the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft of such
provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and remedies
available at law or in equity, any party hereto may pursue, to the fullest
extent available, the remedy of specific performance in order to compel the
other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
ALLTEL CORPORATION:
By: /s/ Max E. Bobbitt
------------------
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS UTILITIES COMPANY:
By: /s/ Leonard Tow
---------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 28th day of November, 1994 (the "Execution
Date"), by and among Citizens Utilities Company of California, a
California corporation ("Buyer"), and CP National Corporation, a
California corporation ("Seller").
RECITALS
WHEREAS, Seller is in the business of providing regulated
local exchange telephone service in certain areas of the State of
California; and
WHEREAS, Seller desires to sell, convey, assign, transfer and
deliver to Buyer, and Buyer desires to purchase and accept from
Seller, substantially all of its telephone properties and related
assets, upon the terms and conditions set forth in this Agreement;
and
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the
following terms are defined as set out below or in the Section
referenced below:
Additional Financial Statements is defined in Section 11.4.
Advanced Billing Amounts is defined in Section 2.4.
Affiliate has the meaning given to that term in Rule 405 under
the Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
Assumed Liabilities is defined in Section 2.5. 1.
The Business means the business of providing local exchange
and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products
associated with the Purchased Exchanges, including without
limitation such unregulated activities, services and products of
Seller conducted, offered or serviced by the Transferred Employees
or provided or related to Seller's subscribers or customers served
in or from the Purchased Exchanges (such unregulated activities,
services and products are considered an integral part of the
Business for all purposes of this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Confidentiality Agreement means the Confidentiality Agreement
dated September 30, 1994 between ALLTEL Corporation and Citizens
Utilities Company which is attached and incorporated into this
Agreement as Schedule 1-1.
Construction Advances is defined in Section 11.11.
Contracts is defined in Section 2.2.2.
Customer Deposits is defined in Section 11.11.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Earned Accounts Receivable is defined in Section 2.4.
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer
Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations
(including obligations to respond to, investigate and remediate
conditions caused by any Regulated Material), responsibilities,
losses, damages (including punitive or treble damages), costs and
expenses (including reasonable fees, disbursements and expenses of
counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental
Requirements of any Governmental Authority, or as a consequence of
(a) the release or threatened release of a Regulated Material in
amounts that require response or remediation into the outdoor
environment, (b) any circumstance or condition relating to the
ownership or operation of the Purchased Property by any person or
party or the conduct of the Business or any part thereof, that
does not comply with Environmental Requirements, or (c) any claim,
demand, notice, cause of action, directive, order, judgment, fine
or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to
this Agreement, to the extent that the condition or circumstance
or event giving rise to the claim, demand, notice, cause of
action, directive, order, judgment, fine or penalty relates to the
ownership or operation of the Purchased Property by any person or
party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and
local law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
Governmental Authority and all valid and enforceable guidance
documents and policies thereof, relating to (x) the protection,
preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life
or any other natural resource), or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Regulated Material, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of
or exposure to any Regulated Material in each case as now amended
and as now or hereafter in effect. The term Environmental
Requirements includes, without limitation, CERCLA, the Superfund
Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean
Water Act, the federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto),
the federal Solid Waste Disposal Act, the federal Toxic Substances
Control Act and the federal Insecticide, Fungicide and Rodenticide
Act, each as now amended and as now or hereafter in effect.
ERISA means the Employee Retirement Income Security Act of
1974, as amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Prorations is defined in Section 3.3(b).
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Excluded Contracts is defined in Section 2.4(g).
Excluded Property is defined in Section 2.4.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any
vice president of the entity in charge of a principal business
unit, division or function.
Existing Environmental Requirements means those applicable
provisions of any Environmental Requirements that are both in
effect and applicable to Seller, the Business or the Purchased
Property on or prior to the Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other
Governmental Authority, as to which: (a) no request for stay of
the action by the FCC, the PUC, or such other Governmental
Authority, as the case may be, is pending, no such stay is in
effect, and if any time period for filing any request for such a
stay is provided by statute or regulation, such time period has
passed; (b) no petition, motion or application for rehearing,
reconsideration, or review, of the action is pending before the
FCC, the PUC, or such other Governmental Authority, as the case
may be, and the time provided for filing any such petition, motion
or application has passed; (c) the FCC, the PUC, or such other
Governmental Authority, as the case may be, does not have the
action under reconsideration on its own motion and the time in
which such reconsideration is permitted has passed; and (d) no
appeal to a court, of the FCC's, the PUC's or such other
Government Authority's action, as the case may be, is pending or
in effect, and the deadline for filing any such appeal has passed.
Final Prorations is defined in Section 3.4.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount
of Materials and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases is defined in Section 2.3.
Marks is defined in Section 11.1.5.
Materials and Supplies is the amount set forth on Seller's
balance sheet as of a date certain comprising Seller's Materials
and Supplies.
Net Telecommunications Plant is the amount set forth on
Seller's balance sheet as of a date certain comprising the sum of
Seller's Telecommunications Plant In Service, Plant Under
Construction -- Short Term, Plant Under Construction -- Long Term,
and Telecommunications Plant -- Other, less Accumulated
Depreciation and Amortization.
Original Cost Documents means all original cost documentation
relating to the Telephone Plant.
Other Assets is defined in Section 2.2.5.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
Parent means ALLTEL Corporation, a Delaware corporation.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Utilities Commission of California.
Purchase Price is defined in Section 3. 1.
Purchased Exchanges is defined in Section 2.2.
Purchased Property is defined in Section 2.2.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as
defined in CERCLA, (ii) any petroleum or petroleum substance, and
(iii) any other pollutant, waste, contaminant, or other substance
regulated under Environmental Requirements or, as applicable,
Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Books and Records is defined in Section 2.4(e).
Retained Liabilities is defined in Section 2.5.2.
Secured Indebtedness is defined in Section 5.2.
Secured Parties is defined in Section 5.2.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Tax Returns means a report, return or other information
statement required to be supplied to a federal, state or local
taxing Governmental Authority with respect to Taxes, including,
where permitted or required, combined or consolidated returns for
any group of entities that includes Seller.
Tax(es) means any foreign, federal, state, provincial, county
or local income, sales, use, transfer, excise, franchise, stamp
duty, custom duty, real and personal property, gross receipt,
capital stock, production, business and occupation, disability,
employment, payroll, severance, recording, ad valorem, gains,
value-added, unemployment compensation, general corporate,
profits, registration, unincorporated business, alternative,
social security, estimated, add-on, minimum, privilege or
withholding tax and any interest and penalties and additions to
such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Transferred Employee is defined in Article II.A of the
Employee Transfer Agreement.
Transferred Books and Records is defined in Section 2.2.3.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business
set forth in this Article 1.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, Seller agrees to sell, convey,
transfer, assign and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, all of Seller's
right, title and interest in and to the Purchased Property, free
and clear of all security interests, liens, or encumbrances,
except for Permitted Exceptions.
2.2 Purchased Property. For purposes of this Agreement, the
"Purchased Property" consists of the Telephone Plant, Contracts
and Leases (to the extent permitted following compliance with
Section 5.3), Transferred Books and Records, FCC Licenses, Non-FCC
Authorizations and Other Assets in effect or owned by Seller as of
the Effective Date that are associated with (i) the telephone
exchanges listed in Schedule 2.2(a) (the "Purchased Exchanges"),
and (ii) the Unregulated Business described on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement,
"Telephone Plant" means the Real Property, machinery, equipment,
vehicles and all other assets and properties used, or held for
future use, in connection with the conduct of the Business,
including, without limitation, all improvements, plants, systems,
structures, construction work in progress, telephone cable
(wherever located and whether in service or under construction),
microwave facilities (including frequency spectrum assignments),
telephone line facilities, telephones, machinery, furniture,
fixtures, tools, implements, conduits, stations, substations,
equipment (including, without limitation, central office
equipment, subscribers' station equipment and other equipment in
general), instruments, house-wiring connections and all other
equipment of every nature and kind owned by Seller or in which
Seller holds an interest (other than as a lessee) and used in
connection with the Business. For purposes of this Agreement,
"Real Property" means the real property owned by Seller and used
in connection with the Business, including, without limitation,
all land, buildings, structures, easements, rights of way,
appurtenances, improvements or privileges located thereon and
relating thereto. Without limiting the generality of the
foregoing, the Telephone Plant includes the assets that would be
properly included in the fixed asset accounts referenced in Part
32 of the FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts"
means all agreements that relate to the Business between Seller or
any Affiliate of Seller and (i) Seller's subscribers or customers,
or (ii) other entities or persons who are not Affiliates of Seller
and have business relationships with Seller relating to the
Business, except for the Excluded Contracts (some of which are
specifically governed by other Sections in this Agreement or the
Employee Transfer Agreement).
2.2.3 Transferred Books and Records. For purposes of this
Agreement, "Transferred Books and Records" means all of Seller's
customer or subscriber lists and records, accounts and billing
records (including a copy of the detailed general ledger and the
summary trial balances, where available for the past two fiscal
years), detailed continuing property record list, plans,
blueprints, specifications, designs, drawings, surveys,
engineering reports, personnel records (where applicable),
Original Cost Documents (where located in the Purchased Exchanges
but excluding Retained Books and Records) and all other documents,
computer data and records (including records and files on computer
disks or stored electronically) relating to the Business
(excluding Retained Books and Records), the Purchased Property,
the Transferred Employees and/or the Assumed Liabilities, except
for the Retained Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC
Licenses" means all licenses, certificates, permits or other
authorizations, including, without limitation, Section 214
authorizations where applicable granted to Seller by the FCC that
are used in the conduct of the Business.
2.2.5 Other Assets. For purposes of this Agreement, Other
Assets means all Non-FCC Authorizations to the extent
transferable; all telephone numbers to the extent transferable,
listings, telephone directories and telephone directory
advertisements within such telephone directories, used in the
operation of the Business; all prepaid expenses relating to the
Business; all non-operating plant relating to the Business; all
warranties relating to the Purchased Property, to the extent
transferable and all materials and supplies relating to the
Business.
2.2.6 Non-FCC Authorizations. For purposes of this
Agreement, "Non-FCC Authorizations" means all licenses,
certificates, permits, franchises, or other authorizations (other
than FCC Licenses) granted to Seller by Governmental Authorities
that are used in or relate to the conduct of the Business
(including without limitation those that are listed or required to
be listed on Schedule 9.1.17(c)).
2.3 Leased Assets. Subject to the provisions of Sections
2.5.2(i) and 5.3, as of the Effective Date, Seller shall assign to
Buyer all of its interests, rights, benefits and obligations as
lessee with respect to all real and personal property leases that
are necessary or useful in connection with Seller's conduct of the
Business (the "Leases").
2.4 Excluded Property. The sale contemplated by this
Agreement shall not include the Excluded Property. For purposes
of this Agreement, "Excluded Property" means the following,
subject to the provisions set forth in Article 4 and Sections
11.8, 11.9, 11.11, 11.12.3, 11.12.4, 11.12.5 and 11.13:
(a) Cash, cash equivalent and investments.
(b) All accounts receivable, trade or otherwise
(excluding those related to interexchange carriers), of Seller
outstanding as of the Effective Date relating to the Business (the
"Accounts Receivable"), including, without limitation, (i) any
accounts receivable from any Affiliate of Seller; and (ii) all
amounts that have been earned by Seller in connection with the
conduct of the Business whether billed or unbilled as of the
Effective Date (the "Earned Accounts Receivable") which are
addressed under Article 4; excluding, however, all amounts that
have been billed as of the Effective Date by Seller in connection
with the conduct of the Business but are unearned as of the
Effective Date, relating to service after the Effective Date (the
"Advanced Billing Amounts").
(c) All accounts receivable of Seller from
interexchange carriers whether billed or unbilled, relating to the
Business which are outstanding as of the Effective Date.
(d) Seller's interest in any business other than the
Business, including without limitation the cellular telephone
business or personal communication services business, and, in all
cases, any applications or licenses granted with respect thereto.
(e) Subject to Section 2.2.3, the general ledger and
all books and records relating to (i) tax returns and tax records,
(ii) the other assets and properties of Seller which are included
in the Excluded Property, (iii) the Retained Liabilities,
(iv) employees of the Company who are not Transferred Employees
or (v) subject to Section 11.13, all Original Cost Documents that
are not located in the Purchased Exchanges (collectively, the
"Retained Books and Records").
(f) All trademarks, trade names, trade dress, logos and
any other intangible assets that use or incorporate the word
"ALLTEL" and any other Marks listed on Schedule 11.1.5.
(g) The contracts, leases and agreements listed or
identified on Schedule 2.4(g) (the "Excluded Contracts"), such
other assets of Seller which do not relate to the Business and
which were not included in Net Telecommunications Plant as of
June 30, 1994, such other assets, if any, as Seller lists and
identifies on Schedule 2.4(g), and such other assets, if any, as
may be excluded in accordance with the provisions of Sections 11.9
or 14.1.7.
(h) Any prepaid taxes or tax refunds relating to the
Purchased Property and the Business for periods on or prior to the
Effective Date.
2.5 Assumption of Liabilities.
2.5.1 Assumed Liabilities. Buyer hereby agrees to assume as
of the Effective Date, and to timely perform and discharge after
the Effective Date, and to indemnity Seller against the specific
liabilities, responsibilities and obligations set forth below with
respect to the Purchased Property (the "Assumed Liabilities"):
(a) Conduct of Business after the Effective Date. All
liabilities, responsibilities and obligations relating to, arising
out of, or in connection with, or resulting from the use or
ownership of the Purchased Property after the Effective Date or
the conduct of the Business by Buyer after the Effective Date,
including, without limitation, any liabilities, responsibilities
and obligations for Taxes relating to the conduct of the Business
after the Effective Date or the ownership, use or operation of the
Purchased Property after the Effective Date.
(b) Employment Matters. All liabilities,
responsibilities and obligations that are to be assumed by Buyer
(or which Buyer may otherwise be liable for pursuant to applicable
law and which are not otherwise expressly assumed or retained by
Seller pursuant to this Agreement) under the Employee Transfer
Agreement.
(c) Environmental Matters. All liabilities,
responsibilities and obligations that are to be assumed by Buyer
under Article 14 (or which Buyer may otherwise be liable for
pursuant to applicable law and which are not otherwise expressly
assumed or retained by Seller pursuant to this Agreement) with
respect to Environmental Liabilities.
(d) Contracts, Leases. All liabilities,
responsibilities and obligations that arise after the Effective
Date in connection with or relating to the performance or
nonperformance of the Contracts and the Leases after the Effective
Date.
(e) Joint Construction Projects. All liabilities,
responsibilities and obligations to third parties that arise or
relate to the period after the Effective Date and that relate to
arrangements and commitments permitted hereunder between Seller
and a third party for the construction of mutual transmission
facilities between various switching points (the "Joint
Construction Projects"), which Joint Construction Projects are
listed on Schedule 2.5.l(e).
(f) Construction in Progress. All liabilities,
responsibilities and obligations to third parties that arise or
relate to the period or are incurred after the Effective Date, and
relate to engineering and construction services or similar
services which are required to complete the construction and other
capital expenditure projects referred to in and permitted by
Section 11.5.
(g) Customer Deposits and Construction Advances. All
liabilities, responsibilities and obligations relating to Customer
Deposits and Construction Advances.
(h) Advanced Billing Amounts. All liabilities,
responsibilities and obligations relating to Advanced Billing
Amounts.
(i) Assumed Long Term Debt. All liabilities,
obligations and responsibilities relating to long term debt
assumed by Buyer, if any, pursuant to Section 5.2(a) including,
without limitation, indebtedness to Secured Parties.
2.5.2 Retained Liabilities. Seller shall retain and have
full responsibility and obligation with respect to, shall timely
perform and discharge, and shall indemnify Buyer against, all
liabilities, responsibilities and obligations of Seller relating
to, arising out of, or in connection with, or resulting from the
use or ownership of the Purchased Property on or before the
Effective Date or the conduct of the Business by Seller on or
before the Effective Date, including any liability, obligation or
debt, known or unknown, fixed, contingent or otherwise, not
specifically assumed by Buyer pursuant to Section 2.5.1 or any
other provision of this Agreement, and excluding those
liabilities, responsibilities and obligations that are
specifically assumed by Buyer pursuant to Section 2.5.1 or any
other express provision of this Agreement (the "Retained
Liabilities"). Without limiting the generality of the foregoing,
but subject to liabilities that are specifically assumed by Buyer
pursuant to Section 2.5.1 or any other express provision of this
Agreement, the Retained Liabilities shall include the following
liabilities, responsibilities and obligations of Seller:
(a) All liabilities, responsibilities and obligations
relating to the use or ownership of the Purchased Property on or
before the Effective Date or to the conduct of the Business on or
before the Effective Date.
(b) All current liabilities of Seller as of the
Effective Date, including, without limitation, trade, interest and
other payables.
(c) All long-term debt of Seller not assumed by Buyer
pursuant to Section 5.2(a), including, without limitation,
indebtedness to the Secured Parties.
(d) Subject to Sections 11.8 and 11.17, all Taxes of
Seller or its consolidated or combined group relating to the
conduct of the Business on or before the Effective Date or the
use, ownership or operation of the Purchased Property on or before
the Effective Date.
(e) Except as otherwise provided in the Employee
Transfer Agreement, all liabilities and obligations arising on or
before the Effective Date with respect to the Transferred
Employees, and any such liabilities or obligations that arise
after the
Effective Date to the extent that such liabilities and obligations
relate to facts, circumstances or conditions arising or occurring
on or before the Effective Date.
(f) All liabilities, responsibilities and obligations
arising out of or related to the litigation, claims and other
matters set forth on Schedule 9.1.16 and any other litigation
claims, actions, lawsuits or legal proceedings based on facts,
circumstances or conditions arising, existing or occurring on or
before the Effective Date, regardless of whether known or unknown,
asserted or unasserted, as of the Effective Date.
(g) All liabilities, responsibilities and obligations
arising on or before the Effective Date relating to collective
bargaining or other union contracts.
(h) All liabilities, responsibilities and obligations
with respect to the Excluded Property and the Excluded Contracts.
(i) All liabilities and obligations arising on or
before the Effective Date with respect to the Contracts and the
Leases.
(j) All liabilities and obligations for prior period
adjustments of revenues from the Business and for any customer
overbillings and prospective refunds of overcharges (including
rates collected under bond but excluding prospective rate
reductions) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues,
settlements, pools, separations studies or similar activities for
which Seller is responsible pursuant to Section 11.10, but
excluding any amounts which relate to Advanced Billing Amounts.
Notwithstanding the foregoing, Buyer's and Seller's
responsibility for Environmental Liabilities shall be governed by
the provisions of Article 14.
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Purchased
Property and the other undertakings of Seller in this Agreement,
and subject to and in accordance with the other terms and
conditions of this Agreement, on the Closing Date, Buyer will pay
to Seller the sum of Thirty Nine Million Twenty Four Thousand
Dollars ($39,024,000.00), subject to adjustment as provided in
Section 3.2 (the "Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall
deliver to Seller, in immediately available funds in U.S. Dollars,
the Estimated Purchase Price, plus or minus, as the case may be,
the Estimated Prorations. Such delivery shall be made by bank
wire transfer to an account that Seller shall designate at least
two (2) business days prior to the Effective Date.
(ii) Buyer will use its best efforts to make the wire
transfer of the Estimated Purchase Price, plus or minus, as the
case may be, the Estimated Prorations, by 12:00 noon (Eastern
Time) on the Closing Date, provided that all conditions to Closing
set forth in Article 7 have been satisfied, or waived by the
appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are
applicable, the Purchase Price will be decreased by the reasonable
estimate of the cost to repair or replace the Damaged Property, as
determined by the mutual agreement of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are
applicable, the Purchase Price will be decreased by the reasonable
estimate of the cost to replace the Damaged Property, as
determined by the mutual agreement of Buyer and Seller.
(b) Adjustment Regarding Customer Deposits and
Construction Advances. The Purchase Price shall be decreased in
an amount equal to the dollar amount of Customer Deposits and
Construction Advances outstanding as of the Effective Date.
(c) Adjustment Regarding June 1994 Base Amount. The
Purchase Price shall be adjusted, plus or minus, as the case may
be, in an amount equal to the amount by which the sum of Net
Telecommunications Plant and Materials and Supplies as of the
Effective Date exceeds or is less than the June 1994 Base Amount;
provided, however, that in determining Net Telecommunications
Plant and Material and Supplies as of the Effective Date no effect
will be given for: (i) any decrease thereof resulting from
damage, loss or destruction of Damaged Property which is repaired
or replaced by Seller or for which Seller makes a substitution, in
accordance with Section 11.9(b); (ii) any increase thereof
resulting from expenditures made by Seller in connection with any
such repair, replacement or substitution of Damaged Property in
accordance with Section 11.9(b); or (iii) any increase thereof
resulting from Seller's expenditures pursuant to its obligations
under Sections 14.1.7(b) and (c) except for the cost of purchasing
specific items of new plant (i.e., storage tanks).
(d) Adjustment Regarding FAS 106. The Purchase Price
shall be reduced by the amount included as "Other Current
Liabilities" of Seller (item 14-Liabilities of Seller's balance
sheet) as of the Effective Date which are associated with the
requirements of Financial Accounting Standard 106 attributable to
the active Transferred Employees.
(e) Adjustment Regarding Long Term Debt. The Purchase
Price shall be reduced by the amount of long term indebtedness of
Seller that is assumed by Buyer pursuant to Section 5.2(a).
3.3 Estimate of Purchase Price and Prorations. At least
five (5) days prior to the date scheduled for Closing, Seller
shall deliver to Buyer:
(a) An estimate of the Purchase Price based on Seller's
good faith estimate of the amount of each adjustment described in
Section 3.2 (the "Estimated Purchase Price") on the same basis and
in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the
Additional Financial Statements, if applicable, taking into
account all adjustments required in Section 3.2 (using Net
Telecommunications Plant and Materials and Supplies as of the end
of the month immediately preceding the month in which the
Effective Date is scheduled to occur for purposes of the
Adjustment Regarding June 1994 Base Amount) and accompanied by a
reasonably detailed statement, certified by the chief financial or
accounting officer of Seller, describing how each such adjustment
was determined; and
(b) An estimate of the prorations made by Seller in
good faith in the manner provided in Section 11.8 (the "Estimated
Prorations").
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective
Date, Buyer shall deliver to Seller final calculations of the
Purchase Price, as adjusted pursuant to Section 3.2 (prepared on
the same basis (but using Net Telecommunications Plant and
Materials and Supplies as of the Effective Date) and in accordance
with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied
by a reasonably detailed statement certified by the chief
financial or accounting officer of Buyer describing how each such
adjustment was determined, and final adjustments of the prorations
referred to in Section 11.8. (For the purpose of preparing Buyer's
calculations and adjustments, Seller shall give Buyer access to
all books, records, and other information available to Seller that
Buyer may reasonably determine appropriate.) Within thirty (30)
days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in
reasonable detail the reasons therefor; otherwise, such
calculations and adjustments of the Purchase Price and the
prorations shall be final and binding on Seller and Buyer. (For
the purpose of reviewing Buyer's calculations and adjustments,
Buyer shall give Seller access to all books, records, and other
information available to Buyer that Seller may reasonably
determine appropriate.) If Seller shall object, Seller and Buyer
shall work in good faith to agree on the correct amounts for the
final Purchase Price and the final Prorations, but if they fail to
agree, either party may exercise its rights pursuant to Article
16.
(b) Within three (3) business days following the day on
which the Purchase Price and the prorations shall become final,
whether by expiration of time or agreement of Seller and Buyer,
(respectively, the "Final Purchase Price" and the "Final
Prorations"):
(i) if the Final Purchase Price (plus or minus, as
applicable, the Final Prorations) shall exceed the Estimated
Purchase Price (plus or minus, as applicable, the Estimated
Prorations), Buyer shall cause to be transferred to such account
in the United States as Seller may specify, immediately available
funds, in U.S. Dollars, in an amount equal to such excess,
together with interest thereon at a rate of seven percent (7%) per
annum from the Effective Date through the date of such transfer,
or
(ii) if the Estimated Purchase Price (plus or
minus, as applicable, the Estimated Prorations) shall exceed the
Final Purchase Price (plus or minus, as applicable, the Final
Prorations), Seller shall cause to be transferred to such account
in the United States as Buyer may specify, immediately available
funds, in U.S. Dollars, in an amount equal to such excess,
together with interest thereon at a rate of seven percent (7%) per
annum from the Effective Date through the date of such transfer.
It is the intent of the parties that all Purchase Price
adjustments that are not disputed shall be paid by the appropriate
party as soon as reasonably practicable, and any disputed amounts
will not delay payments with respect to amounts not in dispute.
ARTICLE 4. BILLING AND COLLECTION PROCEDURES
4.1 Determination of Earned Accounts Receivable. The
parties acknowledge that Seller's accounts receivable as of the
Effective Date will include both Earned Accounts Receivable and
Advanced Billing Amounts (collectively, the "Total Accounts
Receivable"). Within thirty (30) days after the Effective Date,
Buyer and Seller shall agree on a statement setting forth, with
respect to the Total Accounts Receivable as of the Effective Date,
the portions that are Earned Accounts Receivable and the portions
that are Advanced Billing Amounts; the methodology used to prepare
such statement shall be consistent with that used to prepare, and
described on, the sample statement set forth on Schedule 4.1
describing the portions of Seller's June 30, 1994 Earned Accounts
Receivable and June 30, 1994 Advance Billing Amounts, which the
parties agree is a proper methodology for allocation of the Total
Accounts Receivable. In preparing such statement each party shall
cooperate with the other and provide the other with reasonable
access to its applicable books and records. If the parties fail
to agree within the thirty (30) day period, Buyer and Seller will
continue to negotiate in good faith to resolve such differences,
but if they fail to so resolve such difference, either party may
exercise its rights pursuant to Article 16.
4.2 Purchase of Accounts Receivable.
As of the Effective Date, Buyer shall purchase from Seller the
Earned Accounts Receivable outstanding as of the Effective Date,
with payment for such Earned Accounts Receivable being payable in
the monthly installments set forth below. Buyer shall be entitled
to receive all cash collections with respect to such Earned
Accounts Receivable and, as payment for such Earned Accounts
Receivable, shall pay Seller on the final business day of the
first three calendar months following the Effective Date an amount
equal to a percentage (as set forth below) of such Earned Accounts
Receivable net of the Uncollectible Amount. The "Uncollectible
Amount" shall be computed by multiplying such Earned Accounts
Receivable by Seller's uncollectible factor based upon Seller's
actual uncollectible net write-offs as a percentage of current
billings for the calendar year immediately preceding the year in
which the Closing occurs, which amount shall be agreed to by the
parties at least thirty (30) days prior to the Effective Date.
Payment for the Earned Accounts Receivable, net of the
Uncollectible Amount purchased by Buyer as of the Effective Date,
shall be made in three installments, as follows:
Final business day of first month after Closing: 80%
Final business day of second month after Closing: 15%
Final business day of third month after Closing: 5%
Buyer shall have the right to review Seller's calculations of
the Earned Accounts Receivable and the Uncollectible Amount and
Seller shall cooperate with Buyer and provide Buyer and its
representatives with reasonable access to Seller's books and
records in the course of such review. If such review results in
amounts different from Seller's calculations, Buyer and Seller
will negotiate in good faith to resolve such differences.
The parties agree that notwithstanding any disagreement
between them with respect to the calculation of the Earned
Accounts Receivable or Advance Billing Amounts, Buyer shall pay
Seller, in accordance with the above schedule, all agreed to
Earned Accounts Receivable amounts net of the Uncollectible
Amount. When the disagreement concerning any such unagreed to
item has been resolved, the appropriate party shall promptly pay
the other the amount of such resolved item plus interest from the
regularly scheduled payment date at a rate of 7% per annum.
4.3 Carrier Access Billing. Seller shall render its own
final carrier access bills to its interexchange carriers for
minutes, messages and other applicable charges up to and including
the Effective Date which bills shall contain no charges for
services to be rendered after the Effective Date. Seller shall be
responsible for collecting and settling any disputes associated
with its bills to the interexchange carriers.
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided
in Section 5.4, as promptly as practicable after the Execution
Date with respect to applications to be filed with the PUC, but no
later than forty-five (45) days after the Execution Date, the
parties shall file the applications and notices described on
Schedule 5.1 in such form as agreed to by the parties with the PUC
and other appropriate Governmental Authorities, seeking an order
permitting the transfer of service in the Purchased Exchanges, and
the transfer or assignment of the Non-FCC Authorizations, to Buyer
(the "Regulatory Approvals"). Buyer will be responsible for
establishing the tariff for its post-Effective Date operations in
the state in which the Purchased Property is located, by
requesting adoption of tariffs which are the same or substantially
the same as Seller's pre-Effective Date tariffs. To the extent
assignable, Seller will assign the Non-FCC Authorizations to
Buyer. Each party agrees to use its best efforts to obtain the
Regulatory Approvals and the parties agree to cooperate fully with
each other and with all Governmental Authorities to obtain the
Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals
containing asterisks on Schedule 5.1 constitute material
Regulatory Approvals (the "Material Regulatory Approvals") which
are subject to Sections 7.1.3 and 7.2.4, and the Regulatory
Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial
Regulatory Approvals") which are subject to Section 5.3, but not
Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Assumption, Releases
or Terminations. (a) With respect to Seller's long-term
indebtedness identified on Schedule 5.2(a), as promptly as
practicable following the Execution Date, but in any event no more
than forty-five (45) days thereafter, the parties shall contact
the holders of such indebtedness to request, and use their best
efforts to obtain, such holders' consent ("Debtholder Consent") to
Buyer's assumption of, and Sellers' release from, such
indebtedness on terms acceptable to the parties. Each party shall
bear their own costs and expenses in obtaining such Debtholder
Consent. Neither party, however, shall be required to make any
payment to the debtholder to obtain the Debtholder Consent, except
that Seller shall be responsible for any such payments as are
specified in the relevant debt agreement. The parties acknowledge
that all indebtedness with respect to which Debtholder Consents
are obtained and which is assumed by Buyer shall constitute an
Assumed Liability pursuant to Section 2.5.1(i), and all
indebtedness which is not so assumed by Buyer shall constitute a
Retained Liability.
(b) If within thirty (30) days prior to the Closing Date,
the parties have been unable to obtain the Debtholder Consent with
respect to any indebtedness, Seller shall have the right to repay
such indebtedness owed to such non-consenting debtholder.
(c) Except with respect to indebtedness assumed by Buyer
pursuant to Section 5.2(a), Seller shall take, at Seller's sole
cost and expense, all actions necessary with respect to all
persons or entities (collectively, the "Secured Parties") holding
a security interest or lien against the Purchased Property to
obtain the termination or release, as of the Effective Date, and
the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the
Purchased Property (such terminations and releases being
hereinafter collectively referred to as the "Secured Indebtedness
Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Secured Indebtedness
Releases or Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution
Date, the parties hereto shall mutually seek the consent, approval
or waiver of the other party to any Lease or Contract that
requires consent, approval or waiver as a condition to an
assignment of such Lease or Contract. To the extent any of the
approvals, consents or waivers required to assign any Lease,
Contract or Immaterial Authorization have not been obtained with
respect to any Lease, Contract or Immaterial Authorization as of
the Effective Date, Seller shall continue to use its best efforts
to obtain the consent of such other third party that is required
for the transfer or assignment of such Lease, Contract or
Immaterial Authorization after the Effective Date. Refusal by
such other third party to release Seller from a Lease or Contract
shall not excuse Seller from entering into an assignment of such
Lease or Contract. From the Effective Date until the earlier of
(i) the time such approval, consent or waiver is obtained, and
(ii) six months after the Effective Date, Seller shall hold such
Leases, Contracts and Immaterial Authorizations or ancillary
rights as agent for Buyer, and preserve the benefit of and enforce
the same as agent for Buyer to the fullest extent permissible
under the applicable Lease, Contract or Immaterial Authorization.
Buyer and Seller agree that upon request by either party, at
Closing, they will enter into an agency agreement in form and
substance mutually satisfactory to each party specifying the terms
and conditions upon which Seller will so act as Buyer's agent,
which terms and conditions shall include a six month term.
(b) If a third party refuses to consent to a Lease or
Contract assignment, and if the applicable Lease or Contract
permits a sublease or subcontract without the consent of the third
party, the parties hereto, as of the Effective Date, shall enter
into a sublease or subcontract upon terms and conditions as
similar and comparable to an assignment of the Lease or Contract
as is reasonably feasible so as to enable Buyer to retain the
ultimate benefits of such Lease or Contract after the Effective
Date.
(c) Notwithstanding anything to the contrary contained
herein, if a third party refuses or has failed to consent to a
Lease, Contract or Immaterial Authorization assignment after the
Seller has used its best efforts for a period of six months after
the Effective Date to obtain such consent, waiver or approval, and
if the applicable Lease or Contract does not permit a sublease or
subcontract without the consent of the third party, then Seller
and Buyer shall within thirty (30) days after expiration of such
six-month period negotiate in good faith and agree upon, and
Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain
such consent, waiver or approval. Following such payment, Seller
shall have no further obligation to Buyer with respect to such
Lease, Contract or Immaterial Authorization except as otherwise
provided in Section 11.12 with respect to the Contracts and
Excluded Contracts addressed in Section 11.12.
(d) Seller shall bear all reasonable costs and expenses
in obtaining such consents, approvals or waivers to the extent
such costs or expenses are specified in the relevant Lease,
Contract or Immaterial Authorization, or under applicable Law, and
shall reimburse Buyer to the extent Buyer makes any transfer
payments which are specified in amount and required under any
Lease or Contract to the lessor or other party thereto, provided
that seven (7) business days before Buyer makes any transfer
payments, Buyer will notify Seller of its intent to do so and
after making such transfer payment, Buyer will provide evidence
satisfactory to Seller that such transfer payment was made. Buyer
and Seller will negotiate in good faith to determine the extent to
which each will bear any other costs and expenses arising in
connection with obtaining such consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the
Execution Date, but no later than forty-five (45) days after the
Execution Date, the parties shall file all applications and
requests described on Schedule 5.4 in such form as agreed to by
the parties with the FCC seeking, and shall use their best efforts
to obtain, the FCC's consent to assign all FCC Licenses (as listed
in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC Consents").
The parties each agree that in connection with taking the
immediately above described actions, they will not file any
application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the
FCC Rules, and that on the Effective Date the study areas relating
to the Purchased Exchanges shall remain in the National Exchange
Carrier Association Tariff F.C.C. No. 5, provided, however, that
such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole
discretion, shall determine. Each party agrees to use its best
efforts, and the parties agree to cooperate fully with each other
and with the FCC, to obtain the FCC Consents at the earliest
practicable date.
5.5 HSR Act Review. As promptly as practicable after the
Execution Date but in no event later than thirty (30) days after
the Execution Date, the parties will make such filings as may be
required by the HSR Act with respect to the sale contemplated by
this Agreement. Thereafter, the parties will file as promptly as
practicable any supplemental information that may be requested by
the U.S. Federal Trade Commission or the U.S. Department of
Justice pursuant to the HSR Act. The parties agree to cooperate
in seeking early termination of the waiting periods under the HSR
Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from
Buyer to Seller given in accordance with this Agreement, Seller
will afford to the authorized representatives of Buyer reasonable
access during normal business hours to the books and records
relating to the Purchased Property (including, without limitation,
relevant tax information) and to the personal property and Real
Property comprising the Purchased Property. Buyer and Seller will
cooperate with each other to schedule such access. With the
consent of Seller (which consent will not be unreasonably
withheld), Buyer and its representatives shall have access to all
interexchange carriers having business relationships with the
Business, to all customers of the Business, and to all officers,
employees and agents of Seller having knowledge or information
concerning the operations of the Business so as to afford Buyer
the opportunity to make such review, examination and investigation
of the Business and the Purchased Property as Buyer may desire to
make, to evaluate the competitiveness of the Business, and to
enable Buyer to assimilate the Business into Buyer's operations
as soon as practicable after the Effective Date. To the extent it
so desires, Seller shall accompany Buyer on all of Buyer's access
to interexchange carriers, customers and agents of Seller. Buyer
will be permitted to make extracts from or copies of such books
and records as may be reasonably necessary. Buyer will not
contact any employee, customer or supplier of Seller as to this
Agreement or the matters involved herein except in accordance with
this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request
and Seller's consent (which consent will not be unreasonably
withheld), Seller shall permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of Seller
selected by Buyer to attend workshops and training sessions of
Buyer (including sessions to train such employees in Buyer's
business planning process in order to have the Business after the
Effective Date follow Buyer's business planning process and
procedures);
(ii) Seller's management to work with Buyer during
Buyer's planning process between the Execution Date and the
Effective Date;
(iii) Buyer to confer with Seller about, and to
participate in Seller's planning for, any material reduction in
work force or other arrangements regarding employees required or
implemented pursuant to the Employee Transfer Agreement.
(c) As promptly as reasonably practicable after
Buyer's request, Seller will furnish such financial and
operating data and other information pertaining to the Business as
Buyer may reasonably request in order, among other things, to
comply with Buyer's disclosure obligations under the federal
securities or other laws as such obligations relate to Buyer's
prospective ownership of the Business, including any disclosure
required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller to
take actions that would unreasonably disrupt the normal course of
the business of Seller or violate the terms of any applicable Law
or any contract to which Seller is a party or to which any of its
assets is subject in providing such information, or to incur any
costs with respect to Buyer's external auditors (or Seller's
external auditors in the event a report by such auditors is
requested by Buyer) providing accounting services with respect to
issuing an auditor's report required by Buyer. Any information or
document provided to Buyer or acquired by Buyer during this
investigation shall be deemed "Evaluation Material" as that term
is defined in the Confidentiality Agreement and shall be subject
in all cases to the terms of the Confidentiality Agreement;
provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the
Business of Seller that Buyer, upon consultation with counsel,
determines is required to be disclosed under federal securities
laws.
(d) Prior to Closing, upon reasonable notice from Buyer
to Seller given in accordance with this Agreement, Seller will
afford the authorized representatives of Buyer access to the
Purchased Properties in order to conduct the environmental audit
contemplated by Section 14.1.
(e) In connection with the continuing operation of the
Business between the Execution Date and the Effective Date, Seller
shall confer in good faith with Buyer, as reasonably requested by
Buyer from time to time, to report on material operational
matters, material reductions in work force and other material
employee matters, and the general status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or
the Confidentiality Agreement, from and after the Execution Date,
upon the prior consent of Seller (which consent will not be
unreasonably withheld), Buyer may disclose Evaluation Material (as
defined in the Confidentiality Agreement) to representatives of
rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved
in any of Buyer's offering of securities or other financings and
to fixed income and equity analysts to the extent such parties
reasonably have a need to know any such information; provided,
that such parties shall (y) be advised of the confidential nature
of any Evaluation Material they receive, and (z) agree in writing
to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the
generality or effect of any provision of Article 7, the parties
will use their best efforts to satisfy promptly all conditions
required to be satisfied prior to the Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any
information that would cause any representation or warranty of
Buyer contained in this Agreement not to be true and correct as of
the date on which it was made or as of the Effective Date, and
(ii) any material governmental complaints, investigations, or
hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of
significant litigation, involving the transactions contemplated by
this Agreement; of which in any such case, Buyer's representatives
listed on Schedule 6.3(a) become aware on or before the Effective
Date. Buyer shall use reasonable best efforts to keep Seller
informed of the events described in this Section 6.3(a) and shall
permit Seller access to all materials prepared by Buyer in
connection therewith.
(b) The Seller will promptly notify Buyer of (i) any
information that would cause any representation or warranty of
Seller contained in this Agreement not to be true and correct as
of the date on which it was made or as of the Effective Date, and
(ii) any material governmental complaints, investigations, or
hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of
significant litigation, involving the Business or the transactions
contemplated by this Agreement; of which in any such case,
Seller's representatives listed on Schedule 6.3(b) become aware on
or before the Effective Date. Seller shall use reasonable best
efforts to keep Buyer informed of the events described in this
Section 6.3(b) and shall permit Buyer access to all materials
prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, any one
or more of which may be waived at the option of Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Seller of
any of its covenants to be performed in whole or in part prior to
the Closing and the representations and warranties of Seller in
Section 9.1 (after giving effect to any material adverse effect
qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date,
except for such representations or warranties that are made
expressly as of some other date, which shall be true and correct
(after giving effect to any material adverse effect qualification
(or any other materiality qualification) contained therein) as of
such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1
("Seller's Closing Certificate"), dated as of the Effective Date
and signed by one of Seller's Executive Officers, certifying each
of the foregoing, or specifying those respects in which such
covenants have been materially breached or such representations
and warranties (after giving effect to any material adverse effect
qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing
occurs, any claim with respect to matters so specified shall be
waived by Buyer unless otherwise expressly agreed by Seller at
Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all
documents required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods
under the HSR Act shall have expired or been terminated and each
of the required Material Regulatory Approvals as set forth on
Schedule 5.1 and FCC Consents as set forth on Schedule 5.4 shall
have been obtained free of any special terms, conditions or
restrictions which Buyer determines, in good faith and in its
reasonable discretion, will materially and adversely affect the
anticipated operational and financial benefits to Buyer of the
transactions contemplated by this Agreement. For purposes of this
Section 7.1.3, all such approvals and consents shall be deemed to
have been obtained upon the grant thereof becoming a Final Order.
In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no
material adverse changes to the Purchased Property as a whole or
the financial position or results of operations of the Business as
a whole, and, subject to Section 11.9, Seller shall not have
suffered any material loss or damage to the Purchased Property,
whether or not insured, that would materially affect or impair
Buyer's ability to conduct the Business after the Effective Date.
None of the Additional Financial Statements of Seller delivered
pursuant to Section 11.4 shall reflect a material change in the
financial position or results of operations of the Business from
the financial position or results of operations reflected in the
Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with
Section 11.16 with respect to its Real Property to be transferred
to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall
have delivered to Buyer all consents, approvals or waivers of
lessors or other third parties to the Material Agreements as so
identified by an asterisk on Schedules 9.1.9 and 9.1.13, as such
Schedules may be amended pursuant to Section 11.22. All of such
delivered consents, approvals or waivers shall be in effect as of
the Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other
proceeding pending or to the best of Buyer's knowledge threatened
to restrain or invalidate any of the transactions contemplated
hereby which, in the reasonable judgment of Buyer, would involve
material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings
required to be taken by Seller in connection with the transactions
contemplated by this Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer
reasonably comprehensive searches, dated as of a date within 30
days of the Execution Date or any time thereafter, of the public
records regarding liens and judgments with respect to the Business
and the Purchased Property.
7.1.11. Debtholder Consents. With respect to any long-term
indebtedness to be assumed by Buyer pursuant to Section 5.2(a),
Buyer shall have received the Debtholder Consents and shall have
entered into an assignment and assumption agreement with the
Debtholder in form and substance reasonably acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, any one
or more of which may be waived at the option of Seller:
7.2.1 No Misrepresentations or Breach of Covenants and
Warranties. There shall have shall have been no material breach
by Buyer of any of its covenants to be performed in whole or in
part prior to the Closing, and the representations and warranties
of Buyer in Section 9.2 shall be true and correct as of the
Effective Date, except for such representations or warranties made
expressly as of some other date, which shall be true and correct
as of such other date (all such representations and warranties to
be qualified by any materiality standards contained therein), and
Buyer shall have delivered to Seller a certificate ("Buyer's
Closing Certificate"), dated as of the Effective Date and signed
by one of Buyer's Executive Officers, certifying each of the
foregoing or specifying those respects in which such covenants
have not been performed or such representations and warranties are
not true and correct in which event if the Closing occurs any
claim with respect to matters so specified shall be waived by
Seller unless otherwise expressly agreed by Buyer at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all
documents required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller,
in the manner specified in Section 3.1, the Estimated Purchase
Price as adjusted pursuant to Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods
under the HSR Act shall have expired or been terminated and each
of the required Material Regulatory Approvals as set forth on
Schedule 5.1 and FCC Consents as set forth on Schedule 5.4 shall
have been obtained free of any special terms, conditions, or
restrictions which Seller determines, in good faith in its
reasonable discretion, will materially and adversely affect the
anticipated operational and financial benefits to Seller of the
transactions contemplated by this Agreement. For purposes of this
Section 7.2.4, all such approvals and consents shall be deemed to
have been obtained upon the grant thereof becoming a Final Order.
In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings
required to be taken by Buyer in connection with the transactions
contemplated by this Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other
proceeding pending or to the best of Seller's knowledge threatened
to restrain or invalidate any of the transactions contemplated
hereby which, in the reasonable judgment of Seller would involve a
material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Releases. With respect to any long-term
indebtedness to be assumed by Buyer pursuant to Section 5.2(a),
Seller shall have received Debtholder Consents and release of debt
(and, if applicable, lien) documentation reasonably acceptable to
Seller.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at a place mutually agreed
upon by the parties at 9:00 a.m., local time, on the last calendar
day (the "Closing Date") of the calendar month in which occurs the
tenth (10th) business day after the date Seller notifies Buyer in
writing (the "Notice") of its determination that all required
Material Regulatory Approvals and FCC Consents have been obtained
and provided that the other conditions set forth in Article 7
shall have been satisfied, or at such other place and time as may
be agreed upon by Seller and Buyer. The transactions to be
consummated at Closing shall be deemed to have been consummated as
of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the
Notice (the "Effective Date"). If the Effective Date is not a day
on which financial institutions are open and operating, then the
Closing Date shall be the immediately following business day on
which financial institutions are open and operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller
shall deliver to Buyer the following documents duly executed and
acknowledged, as appropriate:
(a) Bills of sale, special warranty deeds, assignments
and other good and sufficient instruments of transfer (including,
without limitation, vehicle titles) to transfer title in the
Purchased Property to Buyer, in form and substance mutually
satisfactory to Buyer and Seller.
(b) Seller's Closing Certificate.
(c) Instruments of assignment or, to the extent
required by Section 5.3, subleases or subcontracts for the Leases
and the Contracts, in each case in form and substance mutually
satisfactory to Buyer and Seller.
(d) Secured Indebtedness Releases and Terminations.
(e) All of the documents and papers required of Seller
as conditions to Closing, including without limitation, the
Regulatory Approvals, FCC Consents and the documents required to
be delivered by Seller pursuant to Section 11.16.
(f) The Transition Services Agreement, if requested
by Buyer pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required
pursuant to Section 14.1.7(d).
(h) All documents required of Seller under the Employee
Transfer Agreement.
(i) Certificate of the Secretary or Assistant Secretary
of Seller certifying as to Articles of Incorporation, Bylaws,
Board of Director approval and incumbency.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer
shall deliver to Seller the following items and documents duly
executed and acknowledged as appropriate:
(a) The Estimated Purchase Price (as adjusted under
Section 3.2), in the manner specified in Section 3. 1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer
as conditions to Closing, including, without limitation, the
Regulatory Approval and FCC Consents.
(d) The Transition Services Agreement, if requested by
Buyer pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required
pursuant to Section 14.17(d).
(f) All documents required of Buyer under the Employee
Transfer Agreement.
(g) Instruments of assignment and assumption or, to the
extent required by Section 5.3, subleases or subcontracts for the
Leases and the Contracts, in each case in form and substance
mutually satisfactory to Seller and Buyer.
(h) Special warranty deeds (to the extent required to
be executed by Buyer) and other instruments of assignment and
assumption (including, without limitation, vehicle title and
Assumed Liabilities) to transfer title to the Purchased Property
and assumed obligations thereunder to Buyer, in form and substance
mutually satisfactory to Buyer and Seller.
(i) Certificate of the Secretary or Assistant Secretary
of the Buyer certifying as to Articles of Incorporation, Bylaws,
Board of Director approval and incumbency.
<PAGE>
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as
to the environmental matters which are exclusively addressed in
Article 14 of this Agreement, Seller represents and warrants
to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the
requisite corporate power and authority under its Certificate of
Incorporation and Bylaws to execute and deliver this Agreement and
to fulfill its respective obligations under this Agreement. The
execution and delivery by Seller of this Agreement and the
fulfillment of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of
Seller. This Agreement has been duly executed and delivered by
Seller and, assuming the due execution and delivery of this
Agreement by Buyer, constitutes a valid and binding obligation of
Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to
or affecting the enforcement of creditors' rights generally and
subject to the qualification that general equitable principles may
limit the enforcement of certain remedies, including the remedy of
specific performance.
9.1.2 No Restrictions Against Sale of the Purchased Property.
The execution and delivery of this Agreement by Seller does not,
and the fulfillment by Seller of its obligations under this
Agreement will not, (i) conflict with or violate any provision of
its certificate of incorporation or bylaws or, (ii) except as set
forth in Schedule 9.1.13, or subject to obtaining the approvals
and consents reflected in Article 5, conflict with, violate or
result in the breach of, constitute a default under, accelerate
the performance required by, or result in the creation of any
encumbrance upon any of the Purchased Property under any provision
of any Contract other than any such conflict, violation or breach
that alone or in the aggregate would not have an adverse effect on
the Buyer, the Business or the Purchased Property after the
Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any court or governmental agency,
authority or instrumentality (" Governmental Authority") is
required to be obtained or made by or with respect to Seller or in
connection with the execution and delivery of this Agreement by
Seller or the fulfillment by Seller of its obligations under this
Agreement, except (i) the filings and approvals described in
Article 5 (ii) real estate deeds and other documents filed in
connection with the transfer of the Real Property included in the
Purchased Property, (iii) certificates of title for the motor
vehicles included in the Purchased Property, and (iv) such other
consents, approvals, orders or authorizations, or registrations,
declarations or filings, which if not obtained or made would not
result in a material adverse effect on Buyer, the Business or the
Purchased Property.
9.1.4 No Violation of Law. Except as indicated in Schedule
9.1.4, the execution and delivery of this Agreement and the
fulfillment by Seller of its obligations under this Agreement will
not violate any applicable existing statute, ordinance, rule,
regulation or common law obligation (collectively, "Law"), except
where such violation would not have a material adverse effect on
the Business as a whole or on any significant part of Purchased
Property after the Effective Date.
9.1.5 Corporate Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
California; it has full corporate power and authority to own its
properties and to carry on the Business as it is now being
conducted and to own, or hold under lease the Purchased Property.
9.1.6 Brokers. Seller has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions
contemplated by this Agreement in such a manner as to give rise to
a claim against Buyer for any broker's or finder's fees or similar
fees or expenses.
9.1.7 Assumed Liabilities. Seller is not in default with
respect to any of its obligations or liabilities that will become
Buyer's Assumed Liabilities at the Effective Date or the
performance, observance or fulfillment of any covenant or
condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default
thereunder or that would constitute such a material breach or
default with the giving of notice or lapse of time, or both.
9.1.8 Title to Purchased Property. Seller has good, valid,
undivided, marketable and defensible title to all owned Purchased
Property, free and clear of all restrictions, charges, liens, or
encumbrances of any kind, except for (i) the Assumed Liabilities
(ii) the liens, encumbrances and restrictions shown and disclosed
on Schedule 9.1.8-1, (iii) current real and personal property
taxes and other statutory liens covering amounts not yet due and
payable, and (iv) such other imperfections of title and
encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Purchased
Property to which such imperfection or encumbrance relates. No
condemnation proceeding is pending or, to the knowledge of Seller,
threatened with respect to any part of the Purchased Property and
such Purchased Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the
address and a general description of each item of Real Property
owned by Seller included in the Purchased Property. In addition,
Schedule 9.1.8-2 sets forth a list of the Real Property included
in the Purchased Property in which Seller holds other than a fee
interest (such as easements and rights of way). Except to the
extent indicated in Schedules 9.1.8-1 and 9.1.8-2, Seller has the
unqualified right to transfer and convey to Buyer Seller's
interest in such Real Property.
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list
of all the Leases. Each of the Leases is valid, binding and
enforceable in accordance with its terms, and except as otherwise
disclosed in Schedule 9.1.9, there is not any existing material
default or existing material breach of a covenant by Seller under
any Lease. Seller enjoys peaceful and undisturbed possession
under all material Leases and, to Seller's knowledge, the lessor
under any such Lease is not (with or without notice or the lapse
of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it
thereunder, and has not given notice of such lessor's intent to
terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible
Purchased Property is in substantially good operating
condition and repair, normal wear and tear excepted, well
maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state
and local ordinances, regulations and statutes relating to the
ownership and operation of such property. Except as set forth on
Schedule 9. 1. 10, Seller has not received any written notice
within the past twelve (12) months of a violation of any
ordinances, regulations or building, zoning and other similar laws
with respect to such assets that would have a material adverse
effect on the Business as a whole or any significant part of the
Purchased Property. Each parcel of Real Property and, to the
knowledge of Seller, of real estate leased by Seller and material
or necessary to the Business as presently conducted substantially
complies with all applicable Laws except where the failure to so
comply individually or in the aggregate, would not have a material
adverse effect on the Business as a whole or any such parcel after
the Effective Date. Except as set forth on Schedule 9.1.10, other
than Seller, no person or party has actual possession or has a
right to possession of all or any material portion of any parcel
of such Real Property or such leased real estate. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 9.1.10, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED OR
STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PURCHASED PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED OR
STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF
TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct
copy of its audited financial statements, consisting of a balance
sheet, income statement and related statement of cash flows as of
and for the respective periods ended December 31, 1992, and
December 31, 1993, together with the auditor's report thereon (the
"Financial Statements"). The Financial Statements were prepared
based upon the books and records of Seller, and fairly present in
all material respects the financial condition of Seller as of the
appropriate periods and the results of operations for the year
then ended, in each case in conformity with GAAP and to the best
of Seller's knowledge and to the extent required by applicable
law, have been prepared in all material respects in conformity
with the regulations of the FCC and the PUC. The Financial
Statements contain no untrue statements of any material fact nor
omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Additional Financial Statements to be delivered
to Buyer pursuant to Section 11.4 hereof (i) will be prepared in
each case in accordance with GAAP (except for the omission of
notes thereto with respect to interim Additional Financial
Statements), consistent with past practices, from the books and
records of Seller; and (ii) will fairly present the financial
condition of Seller and the results of operations of Seller for
the periods indicated, subject, in the case of interim Additional
Financial Statements, to normal year-end adjustments which will
not be material in amount or effect; and (iii) to the best of
Seller's knowledge and to the extent required by applicable Law,
will be prepared in all material respects in conformity with the
regulations of the FCC and the PUC; and (iv) will not contain any
untrue statements of any material facts or omit to state any
material facts required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(c) The unaudited balance sheet of Seller as of
June 30, 1994 was prepared in accordance with GAAP except for the
omission of notes thereto, consistent with past practices, from
the books and records of Seller and fairly presents the financial
condition of Seller as of such date subject to normal year-end
adjustments which will not be material in amount or effect, and to
the best of Seller's knowledge and to the extent required by
applicable Law, was prepared in all material respects in
conformity with the regulations of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may
disclose in Schedule 9.1.12, since December 31, 1993, there has
not been:
(a) Any material change in the financial condition,
results of operations, assets, liabilities, operations or future
business prospects of the Business;
(b) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
Purchased Property or the Business;
(c) Any disposition (including, without limitation, the
grant of a license, franchise, option or other right of any nature
whatsoever to sell or distribute) or encumbrance or agreement to
dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest
in, any of the Purchased Property, or any increase or an agreement
to increase any indebtedness of Seller related to the Business or
the Purchased Property, except in the ordinary course of business;
(d) Any material change in Seller's tariffs or in the
manner of conducting the Business;
(e) Any dispute, litigation or other event or condition
that materially and adversely affects the business or prospects of
the Business or the Purchased Property;
(f) Any waiver or release of any material rights or
settlement of any material dispute involving the Business or the
Purchased Property;
(g) Any granting of a material salary increase or other
material benefits payable to any Employee, except for ordinary and
routine salary increases or bonuses authorized or granted in the
ordinary course of business and consistent with past practices;
(h) Any transaction entered into by Seller that would
have a material adverse effect on the Business as a whole or the
Purchased Property as a whole;
(i) Any change in the accounting methods or practices
of Seller with respect to the Purchased Property or the Business
except as required by GAAP or any change in depreciation or
amortization policies or rates heretofore adopted by Seller with
respect to the Purchased Property or the Business except as
required by GAAP;
(j) Any material labor dispute or threat thereof which
affects generally the Transferred Employees of the Business or, to
Seller's knowledge, any attempt to organize the Transferred
Employees of the Business for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under
Section 11.5 if Section 11.5 had been in effect since December 31,
1993; or
(l) Any agreement or commitment by Seller (or any
understanding between Seller and any third party) to do or to take
any of the actions referred to in paragraphs (a) through (k) of
this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and
effect as of the date of this Agreement in accordance with its
terms, and there is no outstanding notice of cancellation or
termination in connection therewith. Seller is not in material
breach or default in connection with any Contracts, and there is
no basis for any claim of breach or default by Seller, or to
Seller's knowledge, any other party, in any material respect under
any of the Contracts. None of the Contracts, either separately or
in the aggregate, materially and adversely affects the Business or
the Purchased Property. After the Effective Date, all rights and
obligations of Seller under the Contracts shall continue
unimpaired in Buyer (assuming that if any Contract requires the
consent of the other party thereto, such consent will have been
obtained by the parties hereto prior to the Effective Date).
Except for the instruments specifically listed in Schedule 9.1.13,
Seller is not a party to or subject to: (i) any agreement for the
purchase or disposition of any material, equipment, supplies,
inventory or service, except individual purchase orders and
contracts in amounts less than Twenty-Five Thousand Dollars
($25,000.00); (ii) any agreement to which Seller is a party or by
which any of the Purchased Property is bound relating to
indebtedness for money borrowed including capital leases, security
arrangements relating thereto and any amendment or waiver thereof;
and (iii) any other agreement not of the type covered by any of
the foregoing items of this Section 9.1.13 requiring payments by
Seller in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract relating to the
Business or the Purchased Property between Seller and any
Affiliate of Seller, and (b) each material Contract relating to
the Business or the Purchased Property between Seller or an
Affiliate of Seller and any third party. Seller has made
available to Buyer true and correct copies of all agreements and
instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are
required to be listed thereon, the Contracts which require the
consent, approval or waiver of the other party thereto for the
assignment thereof.
9.1.14 Insurance. The Purchased Property of an insurable
nature and of a character usually insured by companies carrying on
similar businesses is insured under insurance policies in such
amounts and against such losses or casualties as is (i) usual in
such companies and (ii) required under any of the Contracts or
Leases. The insurance policies referred to in this Section 9.1.14
are (i) listed on Schedule 9.1.14, and (ii) in full force and
effect and the premiums due thereon have been duly and timely
paid. The most current statement of values (the statement of
values of property of an insurable nature that is submitted to an
insurance company to be used as a basis for the calculation of
premiums) relative to the Purchased Property as presently insured
has been made available to Buyer by Seller. On the Effective
Date, the coverage under the insurance policies and programs
applicable to the Purchased Property will be terminated, and Buyer
will be responsible for providing all insurance coverage for the
Purchased Property. Following the Effective Date, Seller shall be
responsible for and shall pay any additional premiums that might
be required by an insurance company for insurance coverage prior
to the Effective Date relating to the Purchased Property and shall
be entitled to any refunds or dividends due from such companies
relating to such coverage. All claims that relate to the
operation of the Purchased Property prior to the Effective Date
shall remain the sole responsibility of Seller. Schedule 9.1.14
sets forth a list of the open material claims affecting the
Purchased Property, complete in all material respects, and a
description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as disclosed on Schedule 9.1.15, (i) all
Tax Returns required to be filed by Seller on or before the
Effective Date with respect to the Business or the Purchased
Property have or will have been filed, and all taxes shown as due
and payable on such Tax Returns have been or will be paid by
Seller when required by law; (ii) all penalties, interest or other
charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have
been or will be timely paid in full, (iii) no deficiencies for any
taxes, assessments or other governmental charges have been
asserted in writing or assessed against Seller with respect to the
Business that remain unpaid and that individually or in the
aggregate are material to the Business; (iv) Seller has withheld
all required federal, state and local payroll taxes and other
similar taxes with respect to creditors and third party vendors,
and has remitted all amounts required to be remitted to the
appropriate taxing authorities; (v) there are no tax liens upon
any of the Purchased Property except for statutory liens covering
taxes not yet due and payable; (vi) none of the Purchased Property
is tax-exempt use property within the meaning of Section 168(h) of
the IRC and none of the Purchased Property is property that is or
will be required to be treated as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986; and (vii) Seller
is not a "foreign person" within the meaning of Section 1445(b)(2)
of the IRC and shall provide an appropriate affidavit for purposes
of Section 1445(b)(2) of the IRC.
(b) Seller has been subject to normal and routine
audits, examinations and adjustments of Taxes from time to time,
but there are no material, current audits or material audits for
which notification has been received (in either case, with respect
to the Business) other than those set forth on Schedule 9.1.15.
9.1.16 No Material Claims. Except as disclosed in Schedule
9.1.16 or with respect to Taxes, there are no claims, actions,
lawsuits or legal or administrative proceedings pending, or, to
the knowledge of Seller, threatened against or affecting Seller or
its properties that, if determined adversely to Seller, would
reasonably be expected to have a material adverse effect on the
Business as a whole or any significant part of the Purchased
Property. Seller does not know of any reasonable basis for any
such action, claim, lawsuit or proceeding or any governmental or
regulatory investigation relative to the Business or the Purchased
Property. Seller is not in default under any judgment, order or
decree of any Governmental Authority applicable to the Business or
any significant part of the Purchased Property which would
reasonably be expected to have a material adverse effect on the
Business as a whole or any significant part of the Purchased
Property after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, Seller is an
issuing carrier in the National Exchange Carrier Association
Tariff F.C.C. No. 5 for the purpose of providing interstate access
service. Except as described on Schedule 9.1.17(a), the state
regulatory tariffs applicable to the Business stand in full force
and effect on the date of this Agreement in accordance with all
terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's knowledge,
any threatened suspension, cancellation or termination in
connection therewith, nor is the Seller subject to any
restrictions or conditions applicable to its state regulatory
tariffs that limit or would limit the operation of the Business
(other than restrictions or conditions generally applicable to
tariffs of that type). Except as described on Schedule 9.1.17(a),
each such state tariff has been duly and validly approved by the
appropriate state regulatory agency. Except as otherwise
disclosed on Schedule 9.1.17(a), Seller is not in material
violation under the terms and conditions of any such state tariff,
and there is no basis for any claim of material violation by
Seller in any material respect under any such state tariff.
Except as described in Schedule 9.1.17(a), there are no
applications by Seller or complaints or petitions by others or
proceedings pending or threatened before the state regulatory
authority relating to the Business or its operations or the state
regulatory tariffs. To the knowledge of Seller, there are no
material violations by subscribers or others under any such state
tariff that would be material to the Business. A true and correct
copy of each state tariff applicable to the Business has been
delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses
held by Seller and used in the operation of the Business. Each
such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension,
cancellation or termination or, to Seller's knowledge, any
threatened suspension, cancellation or termination in connection
therewith nor are any of such FCC Licenses subject to any
restrictions or conditions that limit the operation of the
Business (other than restrictions or conditions generally
applicable to licenses of that type). Subject to the
Communications Act of 1934, as amended, and the regulations
thereunder, the FCC Licenses are free from all security interests,
liens, claims, or encumbrances of any nature whatsoever. Except
as set forth on Schedule 9.1.17(b), there are no applications by
Seller or material complaints or material petitions by others or
proceedings pending or threatened before the FCC relating to the
Business or the FCC Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC
Authorizations materially necessary for the conduct of the
Business which would include, without limitation, all FAA radio
tower ownership authorizations. Each such Non-FCC Authorization
is in full force and effect in accordance with its terms. To
Seller's knowledge, no event has occurred with respect to any
materially necessary Non-FCC Authorization which permits, or after
notice or lapse of time or both would permit, revocation or
termination thereof, or would result in any other material
impairment of the rights of the holder of such materially
necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the
sponsor of) each material "employee pension benefit plan, " as
that term is defined in Section 3(2) of ERISA, each material "
employee welfare benefit plan," as that term is defined in Section
3(1) of ERISA maintained or contributed to by Seller or any of its
Affiliates in respect of any Transferred Employee (as defined
below) (such plans being hereinafter referred to collectively as
the "ERISA Plans"), and each other material retirement, pension,
profit-sharing, money purchase, deferred compensation, incentive
compensation, bonus, stock option, stock purchase, severance pay,
unemployment benefit, vacation pay, savings, medical, dental,
post-retirement medical, accident, disability, weekly income,
salary continuation, health, life or other insurance, fringe
benefit, or other employee benefit plan, program, agreement, or
arrangement maintained or contributed to by Seller or its
Affiliates in respect of or for the benefit of any Transferred
Employee or former employee, excluding any such plan, program,
agreement, or arrangement maintained or contributed to solely in
respect of or for the benefit of Transferred Employees or former
employees employed or formerly employed by Seller outside of the
United States, as of the date hereof (collectively, together with
the ERISA Plans, referred to hereinafter as the "Plans").
Schedule 9.1.18(a) also includes a list of each material written
employment, severance, termination or similar-type agreement
between Seller or its Affiliates and any Transferred Employee (the
"Employment Agreements"). Except to the extent that any assets,
liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or
otherwise) to plan(s) or agreement(s) maintained or contributed to
by Buyer, all such Plans and Agreements shall remain the
liabilities of the Seller or its Affiliates and Seller shall take
any and all steps necessary to ensure that Buyer shall not be a
sponsor of any such Plan or Agreement subsequent to the Effective
Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the
performance of this Agreement by Seller will not directly result
now or at any time in the future in (i) the payment by Seller or
its Affiliates to any Transferred Employee of any severance,
termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of
the IRC) being made by Seller or its Affiliates to any Transferred
Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither Seller nor any of its Affiliates, any
of the ERISA Plans, any trust created thereunder, or any trustee
or administrator thereof, has engaged in any transaction as a
result of which Seller could be subject to any material liability
pursuant to Section 409 of ERISA or to either a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed
pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material
liability under Title IV of ERISA with respect to the ERISA Plans
has been incurred or is reasonably expected to be incurred by
Seller or any of its Affiliates (other than liability for premiums
due to the PBGC), unless such liability is reserved for or
otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be,
satisfied in full.
(iii) There is no contract or Employment Agreement
covering any Transferred Employee or former employee of the Seller
that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to the terms
of Section 280G of the IRC.
(iv) Neither the Seller nor any of its Affiliates
has engaged in, or is a successor or parent corporation to a
person that has engaged in, a transaction described in Section
4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with
respect to the ERISA Plans other than those ERISA Plans identified
on Schedule 9.1.18(a) as "multi-employer plans":
(i) the PBGC has not instituted proceedings to
terminate any Plan that is subject to Title IV of ERISA (the
"Retirement Plans") and no condition exists or has existed which
could constitute grounds for any termination by PBGC;
(ii) no filing has been made by the Seller, or any
of its Affiliates with the PBGC to terminate any Retirement Plan
identified on Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the IRC), whether or not waived, as of
the last day of the most recent fiscal year of each of the ERISA
Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and
administered in all material respects in accordance with its
provisions and with all applicable laws;
(v) each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the IRC and,
to the extent applicable, Section 401(k) of the IRC, has been
determined by the IRS to be so qualified, and nothing has occurred
since the date of the most recent such determination (other than
the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would
adversely affect the qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims
or lawsuits which have been asserted or instituted against any of
the ERISA Plans, the assets of any of the trusts under such Plan,
the plan sponsor, the plan administrator, trustee or any other
fiduciary of such Plans with respect to any aspect of such ERISA
Plans (except for routine benefit claims or routine expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the
ERISA Plans is a "multi-employer plan," as that term is defined in
Section 3(37) of ERISA and with respect to any such multiemployer
plans (as so defined) listed in Schedule 9.1.18(d), Seller has not
made or incurred a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections
4203 and 4205 of ERISA that would result in the incurrence of a
material liability by Seller that is not reserved for or otherwise
reflected on the Financial Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-
retirement medical and life insurance benefit obligations exist
with respect to any Transferred Employees or former employees of
Seller.
(f) No Plan identified on Schedule 9.1.18(a) has any
restrictions against termination or modification, either by its
terms or, to Seller's knowledge, due to any written or oral
communications by any representative of the Seller nor any of its
Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none
of the Transferred Employees are represented by a labor union or
labor organization and (ii) neither Seller nor any of its
Affiliates is a party to nor is Seller subject to, any collective
bargaining agreement covering any Transferred Employee. There are
currently no strikes, slowdowns, work stoppages or lockouts by or
with respect to any Transferred Employee covered by collective
bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller, during the twelve (12) months
preceding the Execution Date there have not been any union
organizational campaigns by or directed at the employees of Seller.
Except as set forth on Schedule 9.1.18(g), no condition has
existed or exists that has caused or could be expected to result
in the imposition of any lien or encumbrance under ERISA or the
IRC on any part of the Purchased Property.
(h) Seller will make available to Buyer, prior to the
Closing Date, a list of those Transferred Employees that Seller
believes to have participated in the health or dependent care
reimbursement accounts of Seller, together with the elections made
prior to the Effective Date with respect to such accounts through
the Effective Date.
9.1.19 Schedules of the Telephone Plant. Seller has set
forth on Schedule 9.1.19 copies of schedules (at the level of
detail agreed to by the parties but in any case including details
regarding net book value and continuing property records lists
associated therewith) of its Telephone Plant as of June 30, 1994,
including, to the extent available, a schedule specifically
identifying the Telephone Plant that is associated with the
Unregulated Business. The account balances reflected on the
schedule of Telephone Plant correspond, in all material respects,
to the associated account balances reflected on the Continuing
Property Records.
9.1.20. Accuracy of Certain Information. Seller hereby
represents and warrants to Buyer as follows:
(a) The information regarding type of central office
switch and number of access lines in service for each exchange set
forth on Schedule 9.1.20 (a) is true and complete in all material
respects as of the respective dates set forth thereon.
(b) The information set forth only with respect to the
1993 column of the "Capital Budget-Network Modernization Forecast"
attached as Schedule 9.1.20 (b) is true and complete as of
December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially
complete list of all vehicles included in the Purchased Property
(including trailers, equipment mounted on trailers and self-
propelled equipment) together with the manufacturer, model and
year of each such vehicle, and indicates whether such vehicle is
owned or leased by Seller.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete
list of the interstate billing and collection revenues and
intrastate interlata billing and collection revenues of Seller
from the Business for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21,
Seller has no materials and supplies, plant or equipment used in
the Business that has been disallowed from rate base or excluded
from the revenue calculations for any pool (unless due to the
deregulation of the service for which such assets are used) or in
the most recent rate order issued by the PUC or the FCC or any
determination by an administrator of an interstate or intrastate
pool, and has not received written notification that the PUC or
the FCC or any pool administrator proposes to exclude any assets
from rate base or revenue calculations for the pools, or any
tariff filed with or approved in the most recent rate order of the
PUC or the FCC, in each case which materials and supplies, plant
or equipment, in the aggregate, would be in excess of one percent
(1%) of Net Telecommunications Plant.
9.1.22 Payments. All material payments of any kind required
to be made by Seller to third parties under any Contract and
maturing prior to the Effective Date have been, or will be as of
the Effective Date, properly and timely paid or provided for,
unless otherwise subject to a bona fide dispute disclosed in
Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall
specifically indicate on Schedule 9.1.23, (i) Seller is in
compliance in all material respects with all Laws applicable to
the Purchased Property and the Business and holds all governmental
permits or licenses required in order to conduct the Business and
to own and operate the Purchased Property; (ii) the present uses
of the Purchased Property in the conduct of the Business do not
violate in any material respect any Law and (iii) no written
notice or warning from any governmental or regulatory authority
with respect to any failure or alleged failure by Seller to comply
with any Law or questioning the validity of any governmental
permit or license, with respect to the Business or the Purchased
Property has been issued or given, nor to the knowledge of Seller,
is any such notice or warning proposed or threatened. Seller is
not aware of any fact, event or circumstance relating to Seller
that is reasonably likely to cause a regulatory agency to deny or
withhold its approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers,
account books and other accounting records of Seller relating to
the Business are current, correct and complete and reasonably well
organized, in all material respects and to the best of Seller's
knowledge and to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC
and PUC. Seller and its Affiliates have retained substantially
all Original Cost Documents regarding the expenditures made by
Seller within the immediately preceding two-year period that
relate to Seller's Net Telecommunications Plant, and such Original
Cost Documents are correct and complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the
value (as reflected on Seller's books) of Seller's materials and
supplies relating to the Business which are obsolete or in excess
of the requirements of the Business, will not materially exceed
Seller's reserve for obsolete or excess Materials and Supplies as
reflected on Seller's books.
9.1.26 Assets Necessary to the Business. The Purchased
Property includes all of the assets and properties (including all
licenses and agreements) currently being used or which are
reasonably necessary to carry on the Business as currently
conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate
summary description of the Unregulated Business, in detail
reasonably acceptable to Buyer.
9.1.29. Capital Improvements Required by PUC. Except as set
forth on Schedule 9.1.29, there are no changes, modifications,
upgrades or enhancements required by the PUC to be made to the
Purchased Property or the operation thereof.
9.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of California and has the requisite corporate power and
authority to own, lease or otherwise hold the assets owned, leased
or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the
requisite corporate power and authority under its Certificate of
Incorporation and Bylaws to execute and deliver this Agreement, to
carry on the Business as presently conducted and to fulfill all
other obligations of Buyer under this Agreement. The execution
and delivery by Buyer of this Agreement and the fulfillment by it
of its obligations under this Agreement have been duly authorized
by all necessary corporate action on the part of Buyer. Buyer has
the requisite legal capacity to purchase, own and hold the
Purchased Properties upon the consummation of the transactions
contemplated by this Agreement. This Agreement has been duly
executed and delivered by Buyer and, assuming the due execution
and delivery of this Agreement by Seller, constitutes a valid and
binding obligation of Buyer, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the enforcement of
creditors' rights generally and subject to the qualifications that
general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.2.3 No Restrictions Against Purchase of the Purchased
Properties. The execution and delivery of this Agreement by Buyer
do not, and the fulfillment by Buyer of its obligations under this
Agreement will not, conflict with, violate or result in the breach
of any provision of the certificate of incorporation or bylaws of
Buyer or, subject to obtaining the approvals and consents referred
to in Article 5, conflict with, violate or result in the breach
of, constitute default under, or accelerate the performance
required by any Contract to which Buyer is a party. No consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Authority is required to be
obtained or made by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the
fulfillment by Buyer of its obligations under this Agreement,
except (i) the filings and approvals described in Article 5,
(ii) real estate deeds and other documents filed in connection
with the transfer of the Real Property included in the Purchased
Property, and (iii) certificates of title for the motor vehicles
included in the Purchased Property.
9.2.4 No Violation of Law. The execution and delivery of
this Agreement and the fulfillment by Buyer of its obligations
under this Agreement will not violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay
any fee or commission to any broker, finder, investment banker or
other intermediary in connection with the transactions
contemplated by this Agreement in such a manner as to give rise to
a claim against Seller for any broker's or finder's fees or
similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions,
lawsuits or legal proceedings pending or, to the knowledge of
Buyer, threatened against Buyer or its properties that would
prevent the consummation of the transactions contemplated by this
Agreement.
9.2.7 FCC Tariffs. In connection with obtaining assignment
to Seller's FCC's Licenses, as described in Section 5.4, Buyer
will not file any application or request for a waiver of Part 36
(study areas), Part 61 (tariffs), and Part 69 (price caps and
study areas) of the FCC Rules, and that on the Effective Date the
study areas relating to the Purchased Exchanges shall remain in
the National Exchange Carrier Association Tariff FCC No. 5,
provided, however, that such study areas shall remain in the NECA
Tariff FCC No. 5 after the Effective Date only for so long as
Buyer, in its sole discretion, shall determine.
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing
by Buyer on or prior to March 15, 1995, the parties shall, as
promptly as practicable but in any event within 30 days after
Buyer's written request, negotiate in good faith and enter into a
Transition Services Agreement, to be effective no later than the
Effective Date, pursuant to which Seller will provide to Buyer, at
Buyer's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services
relating to the conversion of systems and processes) as may be
reasonably requested by Buyer, which agreement shall be in form
and substance as mutually agreed to by both Buyer and Seller (the
"Transition Services Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all
inventions (whether patentable or not and whether or not such
inventions are described or claimed in any patent or patent
application), designs (useful or ornamental), and works subject to
copyright that may be embodied in, without exclusion, invention
disclosures, specifications, manuals, drawings, functional or
system block diagrams, flow charts, circuit diagrams, design or
user documentation, engineering notebooks, schematics, test
programs, documented procedures, documented processes, documented
flows, devices, software, or firmware, that relate to the
function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus,
article of manufacture, process, method or service. "Intellectual
Property" shall also include patents, patent applications
(including continuations, continuations-in-part, divisions,
reissues, reexamined patents and patent applications and
extensions thereof), copyrights (whether common law or statutory,
registered or unregistered), or trade secrets, residing in the
subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this
Agreement, effective on the Effective Date, Seller shall grant to
Buyer, and Buyer shall accept, a nonexclusive, fully paid,
royalty-free, perpetual license for the Intellectual Property
that, on the Effective Date, Seller owns or controls or with
respect to which Seller has an unrestricted right to grant such
license without permission from, or any consideration to, any
third party, and if Seller has a restricted right to grant such
license, Seller will use its best efforts to assist Buyer
(provided that Buyer shall be responsible for any fees associated
therewith) in obtaining the consent for the use of any such
license, provided that the above grant and any assistance required
by Seller shall be effective with respect to only such
Intellectual Property that Seller has placed in public use on, or
prior to, the Effective Date and that is presently used by Seller,
in the ordinary and normal course of the Business, and shall
exclude any Intellectual Property listed in Schedule 2.4(g). The
above license shall include the right of Buyer to grant
sublicenses after the Effective Date to vendors and customers of
Buyer and to other third parties, as is necessary in the ordinary
and normal course of the Business with respect to the Purchased
Property.
(b) The grant set forth in Section 11.1.2(a) is made
subject to preexisting agreements; however, Seller represents that
it is aware of no other agreement that precludes the grant made
herein.
(c) The above Sections 11.1.2(a) and (b) set forth
Seller's entire obligation with respect to the license of
Intellectual Property to Buyer. Except as specifically provided
otherwise in this Agreement or any other agreement between Buyer
and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in Buyer's use of
such Intellectual Property.
(d) Buyer agrees and understands that Seller or its
Affiliates shall retain ownership of all Intellectual Property
owned by Seller or its Affiliates as of the Effective Date. Buyer
further agrees and understands that the retained ownership shall
include the right of Seller to grant licenses to vendors and
customers of Seller, and to other third parties.
(e) Additional agreements, if any, between Buyer and
Seller regarding possession and use by Buyer of computer software
that is owned by Seller, or that is licensed by an Affiliate of
Seller to Seller, are set forth in Schedule 11.1.2.
11.1.3 Nonassertion. In addition to granting to Buyer the
license set forth in Section 11.1.2, Seller agrees that, with
respect to the Intellectual Property that as of the Effective Date
Seller owns or controls or under which it has the right to grant
licenses, Seller shall not assert against Buyer, or Affiliates of
Buyer, or vendees, mediate or immediate, of Buyer, a claim of
infringement, misappropriation or misuse of such Intellectual
Property right arising from Buyer's activities practiced in the
ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this
Agreement and subject to the representation in Section 11.1.3,
Buyer understands that Seller has not made or given, and does not
make or give, any warranty as to the value, enforceability, or
validity of any Intellectual Property or that the use by Buyer of
any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this
Agreement.
(b) Nothing contained in this Agreement shall be
construed as an agreement by, or obligation of, Seller to bring or
prosecute actions or suits against third parties for infringement
or violation of any Intellectual Property licensed hereunder.
(c) Seller shall have no obligation to defend,
indemnity or hold harmless Buyer from any damages, costs or
expenses resulting from any obligation, proceeding or suit based
upon any claim that any activity, subsequent to the Effective
Date, engaged in by Buyer, a customer of Buyer's or anyone
claiming under Buyer constitutes direct or contributory
infringement or misuse of any intellectual property rights not
licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and
its Affiliates harmless from and against any and all Indemnifiable
Losses resulting from any obligation, proceeding or suit based
upon any claim that any activity conducted or engaged in,
subsequent to the Effective Date, by Buyer, a customer of Buyer's,
or anyone claiming under Buyer constitutes direct or contributory
infringement, or misuse, or misappropriation of any intellectual
property right of any third party.
11.1.5 Trademark Phaseout. Buyer acknowledges that Seller or
its Affiliates are the owners of certain trade names, trade dress,
trademarks, service marks, logos and related intangible property
(collectively, "Marks") used in connection with the Business,
including, without limitation, the items listed on Schedule
11.1.5, and Buyer understands and agrees that the Marks, or any
right or license to the Marks are not being transferred pursuant
to this Agreement. Buyer acknowledges Seller's exclusive and
proprietary rights in the use of the Marks, and Buyer agrees that
it shall not use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this
Section 11.1.5. After the Effective Date, all Marks of Seller
shall be replaced by Buyer as soon as possible, but in no event
later than one hundred eighty (180) days after the Effective Date
for Marks affixed to items with a valid continuing use in Buyer's
conduct of the Business, including, without limitation, buildings,
vehicles, heavy equipment, hard hats, tools, tool boxes, kits
(safety and others), signs, manual covers and notebooks. After
the Effective Date, Buyer will not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that
have no valid continuing use in Buyer's conduct of the Business,
including items affecting customer or employee relations or items
that do not reflect Buyer's true identity. Specific items to be
destroyed or returned include items with Marks affixed to them
including, without limitation, giveaways; order, purchase or
materials forms; requisitions; invoices; statements; time
sheets/labor reports; bill inserts; stationery; personalized note
pads; maps; organization charts; bulletins/releases; sales/price
literature; manuals or catalogs; report covers/folders; program
materials; and materials such as media contact lists/cards. The
one hundred eighty (180) day time period for replacement of Marks
affixed to telephone directories that were already published or
closed for publication as of the Effective Date shall be extended
to the production of replacements for such directories.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill
associated with the Marks, and acknowledges that the Marks and all
rights therein and the goodwill pertaining thereto belong
exclusively to Seller, and that the Marks have a secondary meaning
in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of
the Business after the Effective Date by Buyer using the Marks
shall be provided in accordance with all applicable federal, state
and local laws, and that the same shall not reflect adversely upon
the good name of Seller, and that the conduct of the Business will
be of a standard and skill equivalent to that employed by Seller
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks.
Buyer acknowledges that its failure to cease use of the Marks as
provided in this Agreement, or its improper use of the Marks, will
result in immediate and irreparable damage to Seller. Buyer
acknowledges and admits that there is no adequate remedy at law
for such failure to terminate use of the Marks, or for such
improper use of the Marks, and Buyer agrees that in the event of
such failure or improper use, Seller shall be entitled to
equitable relief by way of temporary restraining order or
injunction or any other relief available under this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer
represents that it is a sophisticated entity that was advised by
knowledgeable counsel and, to the extent it deemed necessary,
other advisors in connection with this Agreement and by the
Effective Date will have conducted its own independent review and
evaluation of the Purchased Property. Accordingly, Buyer
covenants and agrees that (i) except for the representations and
warranties set forth in this Agreement and the Schedules (and the
Financial Statements, the Additional Financial Statements, and
actuarial reports required pursuant to the Employee Transfer
Agreement), Buyer has not relied and will not rely upon any
document or written or oral information furnished to or discovered
by it or its representatives, (ii) there are no representations or
warranties by or on behalf of Seller or its Affiliates or
representatives except for those expressly set forth in this
Agreement and in any other written agreement entered into with
Seller or any of its Affiliates in connection with this Agreement,
and (iii) to the fullest extent permitted by law, Buyer's rights
and obligations with respect to all of the foregoing matters will
be solely as set forth in this Agreement or in such other written
agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the
parties hereto and their respective officers, directors, employees
and representatives will comply with the Confidentiality
Agreement, the provisions of which are expressly incorporated
herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial
statements of Seller (collectively, the "Additional Financial
Statements") within the time periods set forth below:
(a) Within forty-five (45) days after the Execution
Date for the month of October, 1994, and within forty-five (45)
days after the close of each month beginning with November, 1994,
and continuing up to and including the month next preceding the
month in which the Closing occurs, a balance sheet and income
statement as of and for such month, and as of and for the year-to-
date period then ended; and
(b) By April 30, 1995, a balance sheet for the year
ended December 31, 1994, and an income statement and statement of
cash flows for 1994, together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the
Effective Date, Seller shall conduct the Business in the ordinary
course in accordance with prudent business judgment and consistent
with past practice and policy and shall (i) preserve the Business
as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same
extent as such were generally available from January 1, 1994
through the Execution Date and are available on the date hereof,
(iii) not take any action that would jeopardize any material and
beneficial contractual relationships with persons having business
dealings with the Business, and (iv) preserve all of the Business'
tariffs, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except with the
prior written consent of Buyer, which the Buyer shall not
unreasonably withhold:
(a) The Business will be conducted in substantially the
same manner as it is presently being conducted on the Execution
Date. With respect to the Business, Seller will refrain from
entering into any material transaction or contract other than in
the ordinary course of business and will not make any material
change in the general nature of the Business or in its methods of
management, marketing, accounting or operations (including repair
and maintenance functions).
(b) Seller will not, with respect to the Business, (i)
create or incur any indebtedness for borrowed money or otherwise,
except in the ordinary course of business, (ii) enter into or
terminate, as lessor or lessee, any Lease other than in the
ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or
(iv) change in any material respect or terminate any of the
insurance policies referred to in Section 9.1.14, unless
equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c),
and except for dispositions of salvaged property that has been
replaced in accordance with the plans attached in Schedule
11.5(c), Seller will not sell, lease, dispose of or otherwise
transfer, or make any contract for the sale, lease, disposition or
transfer of any Purchased Property other than, with respect to any
individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all
items (other than vehicles) the aggregate value of which shall not
exceed Two Hundred Fifty Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or
unless otherwise expressly directed by the PUC, Seller will not
(i) institute any proceeding with respect to, or otherwise change,
amend or supplement any tariff or (ii) enter into or agree to any
stipulation, order, or decree of, or settlement with the PUC that,
in case of (i) or (ii) above, would have a material adverse effect
on the revenue, authorized return on equity or earnings of the
Business. Seller will not file any application, petition, motion,
brief, testimony, settlement agreement or other pleading in any
proceeding before the PUC, or before the FCC (except for filings
on behalf of all of Parent's local exchange telephone companies)
or appeals related thereto, unless Seller shall have first
provided Buyer with a copy of the same and provided Buyer a
reasonable opportunity to comment to Seller with respect thereto.
If Buyer determines it should intervene in any proceeding before
the PUC in which Buyer's position is or may be different from
Seller's, Seller, without waiving any other rights related
thereto, will not oppose Buyer's intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required
by law or in the ordinary course of business of Seller or pursuant
to any Contract, not (i) enter into or amend any employment
agreement with any individual that will become a Transferred
Employee, or enter into or amend any union agreement or commitment
(including any new commitment to pay retirement or other benefits,
or amendments to the Seller's retirement plans), (ii) effect any
net increase over five percent (5%) since the Execution Date in
the number of employees of the Seller who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under
any plans concerning employee benefits or increase the general
rates of compensation of the Transferred Employees, or change the
manner by which compensation (including fringe benefits) is
determined and paid to any Transferred Employee.
(f) Seller will not engage in any intercompany
transactions with any Affiliate of Seller, except for transactions
consistent with past practices.
(g) Seller shall maintain the Purchased Property in
good repair, order and condition, reasonable wear and use
excepted, and shall maintain the Transferred Books and Records and
Retained Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will not make any commitment to take any
actions prohibited by the provisions of this Section 11.5.
11.6 Construction Projects and Capital Budget. By
December 31, 1994, Buyer and Seller shall have met and reviewed
Seller's construction and other capital expenditure plans for the
calendar years 1994 and 1995 (or such later date agreed to by the
parties). The construction and capital expenditure plans which
Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the
parties agree that when such expenditures have been incurred they
will constitute an addition to a component of Seller's Net
Telecommunications Plant thereby becoming subject to Section
3.2(c). Seller agrees to use its best efforts substantially to
complete such plans within the projected time schedules; provided,
that Seller will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the
prior written consent of Buyer. All construction work that is in
progress on the Effective Date will be accounted for by
identifying and accruing all associated time reporting, material
invoices or contractor invoices inputted or received on or before
the Effective Date, and all payments therefor shall be the
responsibility of Seller and will constitute an addition to a
component of Seller's Net Telecommunications Plant thereby
becoming subject to Section 3.2(c).
11.7 Further Assurances. After the Closing, Seller will
furnish to Buyer such other instruments and information as Buyer
may reasonably request in order to convey to Buyer title to the
Purchased Property, to be delivered from time to time upon Buyer's
reasonable request.
<PAGE>
11.8 Prorations.
(i) The following liabilities shall be prorated
between Seller and Buyer: (a) utility charges (which shall
include, without limitation, water, sewer, electricity, gas and
other utility charges) with respect to the Real Property, the
property subject to the Leases and customer owned equipment, (b)
rental charges (which shall include, without limitation, rental
charges and other lease payments under the Leases), (c) real and
personal property taxes and (d) regulatory and telephone relay
service fees, with respect to measurement periods during which the
Effective Date occurs (all such periods of time being hereinafter
called "Proration Periods"), the liabilities described in clauses
(a) and (b) of the preceding sentence shall be apportioned between
Seller and Buyer as of the Effective Date, with Buyer bearing only
the expense thereof in the proportion that the number of days in
the applicable Proration Period after the Effective Date bears to
the total number of days covered by such Proration Period. Real
and personal property taxes shall be prorated between Buyer and
Seller based on the period the Purchased Property was owned by
each respective party during the fiscal period for which such
taxes were unposed by the taxing jurisdiction (as such fiscal
period is reflected on the bill rendered by such taxing
jurisdiction). Buyer and Seller shall pay or be reimbursed for
real and personal property taxes (including instances in which
such property taxes have been paid before the Effective Date)
prorated on this basis. Unless otherwise handled as an adjustment
to the Purchase Price and then, only to such extent, if a payment
on a prorated bill is due after the Effective Date, the party that
is legally or contractually required to make such payment shall
make such payment and promptly forward an invoice to the other
party for its pro rata share, if any. If the other party does not
pay the invoice within thirty (30) calendar days of receipt, the
amount of such payment shall bear interest at the rate of seven
percent (7%) per annum beginning from the date thirty (30)
calendar days after receipt until time of payment.
(ii) All prepayments made by Seller with respect to
service or maintenance agreements with third parties shall be
prorated between Seller and Buyer to the extent Buyer shall
receive the benefits of such prepayments after the Effective Date.
(iii) All Universal Service Fund payments by NECA or
its state equivalent received by either of the parties with
respect to a Proration Period concerning the Purchased Exchange
shall be apportioned between Seller and Buyer as of the Effective
Date, with Buyer receiving and being allowed to retain only that
portion of the payment that the number of days in the applicable
Proration Period after the Effective Date bears to the total
number of days covered by such Proration Period.
11.9 Risk of Loss Prior to the Effective Date. If any
material damage, loss or destruction of any sort (including,
without limitation, by theft, unauthorized use, fire, act of God
or condemnation) occurs prior to the Effective Date to any of the
tangible properties that constitute the Purchased Property, Seller
shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement,
reasonably estimate that the cost to repair or replace such
damaged, lost or destroyed Purchased Properties (the "Damaged
Property") will exceed One Million Nine Hundred Fifty One Thousand
Two Hundred Dollars ($1,951,200.00), either party may, by written
notice to the other party (the "Casualty Termination Notice")
within thirty (30) days after the date of delivery of the Casualty
Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement,
reasonably estimate that the cost to repair or replace the Damaged
Property will not exceed One Million Nine Hundred Fifty One
Thousand Two Hundred Dollars ($1,951,200.00), or the Casualty
Termination Notice is not given by either party, then Seller,
within forty-five (45) days after the damage or destruction, shall
agree in writing,
(i) to repair or replace, prior to the Effective
Date or at some later date as may be mutually agreed to by the
parties, at Seller's sole cost and expense, the Damaged Property,
and Seller will be entitled to make all claims related to the
Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property; or
(ii) subject to the other terms and conditions of
this Agreement, the parties will proceed to Closing in the manner
contemplated by this Agreement, the Damaged Property will be
excluded from the Purchased Property and will become an Excluded
Asset, Seller will substitute therefor an equivalent item or items
of Purchased Property if the Damaged Property is personal property
and if the Damaged Property is Real Property substitute Real
Property therefor but only if such substituted personal property
or Real Property is satisfactory to Buyer, and Seller will be
entitled to make all claims related to the Damaged Property and to
receive and retain all proceeds of insurance payable with respect
to the Damaged Property.
(c) if Seller fails to make an election pursuant to
Section 11.9(b)(i) or (ii), the Buyer shall have the option,
within thirty (30) days after the initial forty-five (45) day
period, to elect one of the following options:
(i) subject to the other terms and conditions of
this Agreement, the parties will proceed to Closing in the Manner
contemplated by this Agreement, the Damaged Property will remain
part of the Purchased Property, the adjustment to the Purchase
Price contemplated by Section 3.2(a)(1) will be made, and Seller
shall be entitled to make all claims <PAGE>
related to the Damaged Property and to
receive and retain any proceeds of insurance received by Seller with respect
to the Damaged Property; or
(ii) subject to the other terms and conditions of
this Agreement, the parties will proceed to Closing in the manner
contemplated by this Agreement, the Damaged Property will be
excluded from the Purchased Property and will become Excluded
Assets, Seller will be entitled to make all claims related to the
Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property, and the
Purchase Price Adjustment contemplated by Section 3.2(a)(2) will
be made.
(d) Notwithstanding the other provisions of this
Section 11.9, if the time periods pursuant to this Section 11.9
continue beyond the Effective Date or if Seller has not fully
performed its obligations pursuant to Section 11.9(b)(i) or
11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party
hereto may elect to postpone the Closing and the Effective Date,
until the expiration of any such periods or the full performance
of such obligations, which election shall be binding upon all
parties hereto.
11.10 Settlements and Cost Studies. Seller agrees that, with
respect to all toll revenues, settlements, pools, separations
studies, Universal Service Fund payments or similar activities,
Seller shall be responsible for (and shall receive the benefit or
suffer the burden of) the results of any such activities that are
related to the conduct of the Business or the ownership or
operation of the Purchased Property on or before the Effective
Date.
11.11 Construction Advances and Customer Deposits. Seller
agrees to transfer to Buyer as of the Effective Date all of
Seller's rights to hold and control the construction deposits of
the Business (and interest thereon, if any) held by Seller as of
the Effective Date (the "Construction Advances") and the customer
deposits, advances and interest of the Business held by Seller as
of the Effective Date (the "Customer Deposits"), and Buyer agrees
to hold, disburse and retain such Construction Advances and
Customer Deposits in accordance with the tariffs, laws and
Contracts related thereto. The parties acknowledge that the
Purchase Price adjustment pursuant to Section 3.2(b) is intended
to compensate Buyer for the liability associated with the
Construction Advances and Customer Deposits.
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing
Corporation. The Directory Publishing Agreement dated as of
November 15, 1994, by and between Seller and ALLTEL Publishing
Corporation (the "Directory Publishing Agreement") is an Excluded
Contract on Schedule 2.4(g), except as hereinafter provided.
Within thirty (30) days after the Execution Date, Buyer shall
cause its existing directory provider to indicate in writing
whether it will provide directory publication services to Buyer,
as of the Effective Date (or as of such later date as described
below) with regard to all of the Purchased Exchanges on the same
terms and conditions as it is presently providing such services to
Buyer, and Buyer shall inform Seller within such thirty (30) day
period of Buyer's existing telephone directory provider's written
intention. If Buyer's existing directory provider's indication is
that it will not provide directory publication services for all of
the Purchased Exchanges on the same terms and conditions that it
is presently providing such services to Buyer, then the Directory
Publishing Agreement shall be deemed to become a Contact for the
purposes of this Agreement. Promptly, thereafter, the Buyer and
ALLTEL Publishing Corporation shall agree to meet in good faith to
negotiate any necessary amendments to the Directory Publishing
Agreement, to be effective as of the Effective Date, to provide
for a retention rate equal to or greater than the higher of (x)
60% or (y) the retention rate provided for in any substantially
similar directory publishing agreement between ALLTEL Publishing
Corporation and a non-Affiliate of ALLTEL Publishing Corporation
that was entered into within 18 months prior to the Effective
Date. If Buyer's existing directory provider indicates that it
will provide directory publication for all the Purchased
Exchanges, as provided above, the Directory Publishing Agreement
shall remain in effect as to the directory of each of the
Purchased Exchanges for which (i) the directory is scheduled to be
or is published prior to the Effective Date, or (ii) the canvass
for the directory has begun prior to the Effective Date and it is
scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not
begin providing directory publication services for such exchange
until canvass and production begins for the next succeeding
directory related to such Purchased Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing
directory provider indicates that it will provide directory
publication for all of the Purchased Exchanges, as provided in
Section 11.12.1 of this Agreement, Seller and Buyer agree to
cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually
agreeable to Buyer and Seller, copies of all records, documents,
and materials of the Seller even if in the possession of a third
party (the "Directory Records") related to directories of the
Purchased Exchange that are published by Seller or its Affiliate.
(b) Except as otherwise agreed between the parties,
Seller and its Affiliate shall have no responsibility for the
canvass and production functions of any directories related to the
Purchased Exchanges that are scheduled to begin canvassing and
publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall
provide the other reasonable access to such documentation,
reports and accounting records related to directory production as
may be necessary to insure a proper transition of directory
production in accordance with the terms of such agreements in
effect on the Effective Date.
(d) As promptly as practicable after receipt by Seller
of Buyer's existing directory provider's indication that it will
provide directory publication services for all of the Purchased
Exchanges, Seller or its Affiliate (ALLTEL Publishing
Corporation), and Buyer will meet to negotiate in good faith to
agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the
compensation that the Buyer will pay for such services and work,
related to any directories that will be canvassed and published by
Buyer's existing directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the
Closing, use their best efforts to allow Buyer to negotiate a
billing and collection agreement ("B&C Agreement") reasonably
satisfactory to Buyer with each interexchange carrier ("IXC") and
each local exchange carrier ("LEC") for which Seller provides, on
the Execution Date, billing and collection services in any
Purchased Exchange (each such IXC or LEC is hereinafter referred
to as a "Carrier"). Seller and Buyer shall cooperate with each
other and make available to each other all documents and records
relevant and necessary to allow Buyer to finalize negotiations of
B&C Agreements, as necessary, and to perform such B&C Agreements
after the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best
efforts to assist Buyer in obtaining a written agreement with such
equipment manufacturers (such as Northern Telecom and Stromberg-
Carlson; collectively "Equipment Manufacturers") as Buyer may
request, covering such software license agreements and other
agreements as are necessary to enable Buyer to operate the
equipment manufactured and sold by the Equipment Manufacturers
included in the Purchased Property in substantially the same
manner as operated by Seller prior to the Effective Date. The
agreements shall contain material terms and conditions (including
license and warranty, but not necessarily including pricing) that
are substantially the same as those provisions in the
corresponding agreements between Seller and the Equipment
Manufacturers. Buyer understands and agrees that the price and
fee provisions of such agreements will be as negotiated between
Buyer and the Equipment Manufacturers. The above obligation of
Seller shall be expressly conditioned upon the acceptance by Buyer
of all material obligations accepted by Seller in such
corresponding agreements. It is the responsibility of Buyer to
enter into appropriate agreements with the Equipment Manufacturers
in respect of service, support, training, maintenance, and future
development (hardware and software) for the Purchased Property,
such agreements to include terms and conditions agreed to between
Buyer and the Equipment Manufacturers. To the extent assignable,
Seller agrees to assign, and to the extent non-assignable, Seller
agrees to assist Buyer in obtaining the Equipment Manufacturers'
consent to the assignment of training credits remaining at the
Effective Date on Purchased Property furnished by the Equipment
Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge
that certain agreements between Seller (or Affiliates of Seller)
and third parties relate both to the Purchased Property and the
Excluded Property. Seller agrees to use its best efforts to
assist Buyer in obtaining contractual arrangements with such third
parties relating to the Purchased Property, which arrangements
will be reasonably satisfactory to Buyer; provided that neither
Seller nor any of its Affiliates shall be obligated under this
Section 11.12.5 to make any payment to any such third party unless
such payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Closing, the
parties shall retain the Retained Books and Records or the
Transferred Books and Records, as applicable, until the shorter of
the date that other party consents in writing to their destruction
or the seventh anniversary of the Effective Date. Each party
shall provide full and free access to the Transferred Books and
Records and Retained Books and Records, as the case may be, to
duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books
and Records are required to be retained. Either party may make
copies of any such Books and Records as it deems desirable, at its
own expense. After the Effective Date, upon reasonable notice,
Seller shall provide Buyer with reasonable assistance in locating
any of Seller's Original Cost Documents which Buyer may reasonably
request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 Purchase Price Allocation. Prior to the Effective Date
Buyer and Seller shall agree to the allocation (the "Allocation")
of the Purchase Price and the Assumed Liabilities to the
individual assets or classes of assets (within the meaning of
Section 1060 of the IRC). Buyer, Seller, and their respective
Affiliates, shall file all Tax Returns and schedules thereto
(including, without limitation, those returns and forms required
by Section 1060 of the IRC) consistent with the Allocation unless
otherwise required by applicable Law.
11.16 Real Property Transfers. Within sixty (60) days after
the Execution Date, Seller shall deliver to Buyer copies of all
existing title insurance policies and surveys covering the Real
Property. Thereafter, no later than sixty (60) days before the
Effective Date, Seller shall deliver (at its expense) to Buyer a
preliminary title binder (on a standard form reasonably acceptable
to Buyer), issued by Lawyers Title Insurance Corporation or
another title insurance company reasonably acceptable to Buyer,
with respect to all Real Property included in the Purchased
Property and in which Seller purports to own fee title. Such
title binders shall be in form, substance and amount reasonably
satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as described below) and shall be
current as of a date no earlier than ninety (90) days prior to the
Effective Date. The parties agree that the dollar amount of title
insurance to be inserted on each policy shall equal the dollar
value set forth on Seller's continuing property records list as of
December 31, 1993 for land and buildings. Such title binders
shall reflect that, upon consummation of the sale contemplated by
this Agreement, Buyer will be vested with good, fee simple,
marketable and insurable title to such Real Property, subject only
to (i) standard printed exceptions; (ii) inchoate liens for
current taxes and assessments not yet delinquent, (iii) standard
utility and roadway easements, covenants and restrictions, whether
or not of record, that do not individually or in the aggregate
materially detract from the value, or impair the use of the Real
Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the
Business, (v) Leases and (vi) survey exceptions that do not
individually or in the aggregate materially detract from the value
or impair the use of the Real Property affected thereby
(collectively, the "Permitted Exceptions"). If a preliminary
title binder indicates an exception other than a Permitted
Exception that would impair marketability in any material respect,
Seller shall, at its expense, cause such exception to be removed
on or before the Effective Date. With respect to each parcel of
Real Property covered by a preliminary title binder, Seller shall
deliver to Buyer (at Seller's expense and on or prior to sixty
(60) days before the Effective Date) a certified current boundary
survey showing (x) access to the property, and (y) all
improvements on the property and any encroachments across the
property line by any improvements of Seller or owners of adjacent
property and (at Seller's expense and within sixty (60) days after
the Effective Date) owner's title insurance policies for the Real
Property (ALTA Owners Policies where available but based upon
boundary surveys as set forth above).
<PAGE>
11.17 Transfer Taxes and Sales Taxes.
(a) Seller and Buyer shall take all reasonable measures to
provide that the sale contemplated by this Agreement qualifies for
any available exclusion from sales and use taxes for occasional,
casual or isolated sales.
(b) Buyer and Seller each shall bear and be responsible for
paying one-half of any sales, use, transfer, gross receipts, or
similar taxes (including related penalties and interest) imposed
by state or local tax authorities with respect to the transfer of
Purchased Property to Buyer (including, without limitation, the
Real Property), regardless of whether the tax authority seeks to
collect the tax from the transferor or the recipient. Seller
shall be responsible for filing the applicable return in a timely
manner and administering the payment of such sales, use, transfer,
gross receipts or similar tax, and Buyer and Seller shall be
responsible for defending or pursuing any proceedings related
thereto, provided that any expenses related thereto shall be
shared equally between Buyer and Seller. Twenty (20) days prior
to filing of any such returns, Seller shall deliver to the Buyer
those returns for review. Ten (10) business days prior to filing
of any such returns, Buyer shall approve the information contained
therein and the filing of such returns.
(c) Buyer and Seller shall give prompt written notice to
the other party of any proposed adjustment or assessment of a
sales, use, transfer, gross receipts or similar tax on the sale
contemplated hereby, or of any examination of the sale in a sales,
use, transfer or similar tax audit. In any proceedings, whether
formal or informal, Buyer and Seller shall permit the other party
to participate and defend such proceeding, and shall take all
actions and execute all documents required to allow such
participation. Neither Buyer nor Seller shall negotiate a
settlement or compromise of any sales, use, transfer, gross
receipts or similar tax on the sale of the Purchased Property
without the written consent of the other party, which consent
shall not be unreasonably withheld. Seller shall be responsible
for the income or franchise taxes imposed with respect to its
transfer of the Purchased Property.
11.18 Bulk Sales Laws. Seller and Buyer waive compliance with
applicable laws under any version of Article 6 of the Uniform
Commercial Code adopted by any state or any similar law relating
to the sale of inventory, equipment or other assets in bulk in
connection with the sale of the Purchased Property.
11.19 Customer Notification. For a period of at least two
(2) months prior to the Effective Date, Seller will permit Buyer
to insert preprinted single-page subscriber education materials
into billing documentation to be delivered during such period to
subscribers affected by the sale. All reasonable costs and
expenses related to such insertion and delivery shall be borne and
paid by Seller. Other means of notifying subscribers may be
employed by either party, at the expense of the initiating party,
but in no event shall any notification be initiated without the
prior consent of the other party (which consent shall not be
unreasonably withheld) or earlier than three (3) months prior to
the Effective Date.
11.20 Delivery of Schedules. Except as otherwise provided in
Section 11.22, Seller shall have a period of ten (10) business
days after the Execution Date (the "Supplemental Schedule Period")
to supplement or otherwise modify the Schedules to this Agreement
by delivering to Buyer, within the Supplemental Schedule Period, a
substitute schedule or schedules (collectively, the "Supplemental
Schedules"), bearing the legend "This Schedule _, dated
_______________, is executed and delivered in accordance with
Section 11.20 of the Asset Purchase Agreement, dated as of
November 28, 1994 which shall be duly executed by Seller and
submitted to Buyer. Buyer shall have a period of ten (10)
business days after the expiration of the Supplemental Schedule
Period to review the Supplemental Schedules and within such ten
(10) business day period notify Seller in writing (which writing
may be transmitted by facsimile) of any objections thereto. If
Buyer's objections are not resolved to the satisfaction of Buyer
within five (5) days of such notification, Buyer may terminate
this Agreement, effective immediately upon written notification of
that termination. In the event that Buyer does not terminate this
Agreement, then Buyer waives all rights to a claim of
indemnification based upon or as the result of any changes in the
Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or
covenants hereunder, the Supplemental Schedules provided by Seller
shall be deemed Schedules for all purposes.
11.21 FCC Tariffs. In connection with obtaining assignment
to Seller's FCC Licenses, as described in Section 5.4, during the
period from the Execution Date until the Effective Date, neither
party shall file any application or request for a waiver of
Part 36 (study areas), Part 61 (tariffs), and Part 69 (price caps
and study areas) of the FCC Rules, and that on the Effective Date
the study areas relating to the Purchased Exchanges shall remain
in the Natural Exchange Carrier Association Tariff FCC No. 5;
provided, however, that such study areas shall remain in the NECA
Tariff FCC No. 5 after the Effective Date only for so long as
Buyer, in its sole discretion, shall determine.
11.22 Post-Execution Lease and Contract Review. Buyer shall
have a period of forty-five (45) calendar days after the Execution
Date to review the Leases and Contracts listed on Schedules 9.1.9
and 9.1.13 respectively, and to notify Seller in writing (which
writing may be transmitted by facsimile) of the identity of those
Leases and Contracts that Buyer reasonably believes are material
to the operation of the Business as a whole or any significant
part of the Purchased Property and which their terms will require
Seller, in accordance with Section 7.1.6, to obtain a third party
consent to their assignment before the Effective Date can occur.
If Buyer does not notify Seller in writing within such forty-five
(45) calendar day period of the identity of the material Leases
and Contracts requiring consent, then Buyer shall be deemed to
have agreed that none of the Leases and Contracts which are listed
on Schedules 9.1.9 and 9.1.13 require consent to their assignment,
in accordance with Section 7.1.6, before the Effective Date can
occur. If Buyer does notify Seller in writing within such forty-
five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a
period of ten (10) business days upon receipt of such notification
to notify Buyer in writing (which writing may be transmitted by
facsimile) of any objections thereto. Thereafter, Buyer and
Seller shall negotiate in good faith and agree in writing as to
the identity of those Leases and Contracts which are material to
the operation of the Business as a whole or any significant part
of the Purchased Property and which by their terms will require
Seller, in accordance with Section 7.1.6, to obtain a consent to
their assignment before the Effective Date can occur (the
"Material Leases and Contracts"). The parties shall reflect their
written agreement as to the identity of the Material Leases and
Contracts by placing an asterisk next to the appropriate Lease or
Contract on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9
or 9.1.13 shall be deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have
addressed the transfer of employees and employee benefits matters
in a separate agreement, entitled Employee Transfer Agreement, the
terms and provisions of which are incorporated into this Agreement
as if fully set forth herein and a copy of which is attached
hereto as Schedule 12.1 (the "Employee Transfer Agreement").
<PAGE>
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made
pursuant to this Agreement shall survive the Closing for the
following periods after the Effective Date:
(i) The representations and warranties set forth in
Sections 9.1.6, 9.1.8, and 9.2.5 shall survive without limitation
as to time.
(ii) The representations and warranties set forth
in Section 9.1.15 shall survive until sixty (60) days after the
expiration of the applicable statute of limitations (including all
extensions).
(iii) All other representations and warranties
shall survive for eighteen (18) months.
The date of expiration of any representation or warranty shall
be referred to herein as the "Termination Date." Representations
and warranties under this Agreement shall be of no further force
or effect after the applicable Termination Date. Any claim for
indemnification with respect to any alleged breach of any
representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the
underlying facts relating thereto, which notice is given prior to
the Termination Date, may not be pursued and is irrevocably waived
and released after such time. Without limiting the generality or
effect of the foregoing, no claim for indemnification with respect
to any representation or warranty will be deemed to have been
properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in
this Agreement (in which event such specified period will
control), the covenants contained in Section 2.5.1 (except for
Section 2.5.1(a) with respect to Taxes), Section 2.5.2 (except for
Section 2.5.2(d)), Section 4.3, Section 5.2, Section 5.3, this
Article 13, and in Sections 11.1, 11.2, 11.3, 11.6, 11.7, 11.10,
11.12, 11.13, 11.15, 11.16 and 11.18, Articles 16 and 17 and in
the Employee Transfer Agreement, will survive the Closing and
remain in effect indefinitely, or in the case of Sections 2.5.1(a)
(with respect to Taxes), 2.5.2(d), 11.17, and the property tax
proration provisions set forth in Section 11.8, will survive until
sixty (60) days after expiration of the applicable statute of
limitations. All other covenants contained in this Agreement will
terminate, without further action, upon the occurrence of the
Effective Date and any claim following the Effective Date for an
alleged breach of any such covenant may not be pursued, and is
irrevocably waived, upon the occurrence of the Effective Date,
except that Buyer may make a claim for Seller's breach of the
covenants contained in Section 11.5 at any time within eighteen
months after the Effective Date. The immediately preceding
sentence shall not apply to, or limit to preclude, a party's
rights and remedies if the sale contemplated by this Agreement is
not concluded as a result of the other party's breach of this
Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i)
"Indemnification Payment" means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement, (ii) "Indemnitee"
means any person or entity entitled to indemnification under this
Agreement, (iii) "Indemnifying Party" means any person or entity
required to provide indemnification under this Agreement, and (iv)
"Indemnifiable Losses" means any losses, liabilities, costs,
fines, penalties, damages (actual, punitive or other), and
expenses and any claims, demands or suits by any person or entity,
including, without limitation, any Governmental Authority, and
costs and expenses actually incurred in connection with any
actions, suits, demands, assessments, judgments and settlements
and reasonable attorneys' fees and expenses, in any such case (x)
reduced by the amount of insurance proceeds recovered from any
person or entity as a result of the Indemnifiable Losses involved
and (y) provided that the underlying liability or obligation is
not solely the result of any action taken or omitted to be taken
by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on
the one hand, and Buyer and any Affiliate of Buyer, on the other
hand, the rights and obligations set forth in this Article 13 will
be the exclusive rights and obligations with respect to the
liabilities and obligations referred to in Section 13.3, and any
breach of the representations, warranties or covenants referred to
in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not
otherwise implied or imputed, by a party to this Agreement.
Without limiting the foregoing, as a material inducement to
entering into this Agreement, to the fullest extent permitted by
law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under
the common law or federal or state securities, trade regulation or
other laws, by reason of the liabilities and obligations, and any
breach of the representations, warranties or covenants, referred
to in Section 13.3, except for claims or causes of action brought
under and subject to the terms and conditions of this Article 13,
and except for claims or causes of action arising due to the
actual fraud under the common law, not otherwise implied or
imputed.
(c) Notwithstanding any other provision of this
Agreement or of any applicable law, no Indemnitee will be entitled
to make a claim against an Indemnifying Party under Sections
13.3(a)(i) (except with respect to indemnification for a breach of
the representations contained in Sections 9.1.6 and 9.1.8) or
13.3(b)(i) (except with respect to indemnification for a breach of
the representations contained in Section 9.2.5) until the
aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds Ninety
Seven Thousand Five Hundred Sixty Dollars ($97,560.00) and then
only to the extent of the excess.
(d) Notwithstanding any other provision of this
Agreement, the indemnification obligations of Seller under Section
13.3(a)(i) (except with respect to indemnification for a breach of
the representations contained in Sections 9.1.6 and 9.1.8) and of
Buyer under Section 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in
Section 9.2.5) will not exceed the sum of Two Million Nine Hundred
Twenty Six Thousand Eight Hundred Dollars ($2,926,800.00).
(e) Notwithstanding anything to the contrary contained
herein, no Indemnifying Party shall be liable to or obligated to
indemnity any Indemnitee hereunder for any consequential, special,
multiple, punitive or exemplary damages including, but not limited
to, damages arising from loss or interruption of business,
profits, business opportunities or goodwill, loss of use of
facilities, loss of capital, claims of customers, or any cost or
expense related thereto, except to the extent such damages have
been recovered by a third person and are the subject of a Third
Party Claim for which indemnification is available under the
express terms of this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13,
Seller will indemnity, defend and hold harmless Buyer and its
Affiliates, directors, officers, agents and representatives from
all Indemnifiable Losses relating to, resulting from or arising
out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's
Closing Certificate all of which are waived upon Closing, (ii) a
breach by Seller of any covenant of Seller contained in this
Agreement or in the Employee Transfer Agreement, except for any
such breach of covenants which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed,
asserted, or sought before or after the Effective Date, in respect
of the conduct of the Business or any part of the Business
(including contractual obligations in connection with sales or
transfers of assets made by Seller prior to the Effective Date),
or the ownership or operation of the Business, on or prior to the
Effective Date, regardless of whether known or unknown, asserted
or unasserted, on the Effective Date. Notwithstanding anything to
the contrary contained herein except for Section 11.17, Seller
shall not be liable for and shall not be required to indemnify
Buyer for any Taxes arising with respect to the post-Effective
Date period, regardless of whether the claim is based on breach of
a representation, warranty, covenant or otherwise.
(b) Subject to the other sections of this Article 13,
Buyer will indemnity, defend and hold harmless Seller and its
Affiliates, and their directors, officers, agents and
representatives from all Indemnifiable Losses relating to,
resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except
for any such breach which was specified on Buyer's Closing
Certificate all of which are waived upon Closing, (ii) a breach by
Buyer of any covenant of Buyer contained in this Agreement or in
the Employee Transfer Agreement, except for any such breach which
was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) the Assumed Liabilities, (iv) any Third
Party Claim, filed, asserted, or sought after the Effective Date,
in respect of the conduct of the Business or any part of the
Business or the ownership or operation of the Business, after the
Effective Date.
(c) All environmental matters or issues, including
without limitation, the indemnification obligations contained in
Article 14 with respect to Environmental Liabilities, are to be
governed by Article 14 and are not addressed, limited or governed
by the provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be
treated by Buyer and Seller as purchase price adjustments and
Buyer and Seller shall file all Tax Returns consistent with such
treatment. Notwithstanding anything to the contrary contained
herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment
to the purchase price or any additional or reduced taxes resulting
from any such basis adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion
of any claim or of the commencement of any action, proceeding, or
investigation by any entity or person that is not a party to this
Agreement or an Affiliate of such a party (a "Third Party Claim")
against such Indemnitee, with respect to which an Indemnifying
Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not
later than thirty (30) calendar days after receipt of actual
notice of such Third Party Claim; provided, however, that the
failure of the Indemnitee to notify the Indemnifying Party during
the required notification period shall only relieve the
Indemnifying Party from its obligation to indemnity the Indemnitee
pursuant to this Article 13 to the extent that Indemnifying Party
is materially prejudiced by such failure (whether as a result of
the forfeiture of substantive rights or defenses or otherwise);
and provided, however, that the Indemnitee must, in any event,
notify the Indemnifying Party prior to the Termination Date as
required pursuant to Section 13.1(a) in order for such party to be
indemnified. Indemnifying Party shall be entitled, upon written
notice to the Indemnitee, to assume the investigation and defense
thereof with counsel reasonably satisfactory to the Indemnitee.
Whether or not the Indemnifying Party elects to assume the
investigation and defense of any Third Party Claim, the Indemnitee
shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that
the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (i) the employment of such separate
counsel has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable
time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee or (iii) the named parties to the
proceeding in which such claim, demand, action or cause of action
has been asserted include both the Indemnifying Party and such
Indemnitee and, in the reasonable judgment of counsel to such
Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those
available to the Indemnifying Party. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable for the fees
and disbursements of more than one counsel for all Indemnified
Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or
circumstances. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any
settlement of any Third Party Claim that would lead to liability
or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional
term thereof the release of the Indemnitee from all liability in
respect of such Third Party Claim.
(b) Any claim by an Indemnitee on account of an
Indemnifiable Loss that does not result from a Third Party Claim
(a "Direct Claim") will be asserted by giving the Indemnifying
Party reasonably prompt written notice thereof, but in any event
not later than thirty (30) calendar days after the Indemnitee
actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days
within which to respond in writing to such Direct Claim; provided,
however, that the failure of the Indemnitee to notify the
Indemnifying Party shall only relieve the indemnifying Party from
its obligation to indemnify the Indemnitee pursuant to this
Article 13 to the extent the Indemnifying Party is materially
prejudiced by such failure (whether as a result of the forfeiture
of substantive rights or defenses or otherwise); and provided,
however, that the Indemnitee must, in any event, notify the
Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be
indemnified. If the Indemnifying Party does not so respond within
such thirty (30) calendar day period, the Indemnifying Party will
be deemed to have rejected such claim, in which event the
Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the
provisions of this Article 13.
(c) If after the making of any Indemnification Payment
the amount of the Indemnifiable Loss to which such payment relates
is reduced by recovery, settlement or otherwise under any
insurance coverage, or pursuant to any claim, recovery, settlement
or payment by or against any other entity, the amount of such
reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to
the Indemnifying Party. Upon making any Indemnification Payment,
the Indemnifying Party will, to the extent of such Indemnification
Payment, be subrogated to all rights of the Indemnitee against any
third party that is not an Affiliate of the Indemnitee in respect
of the Indemnifiable Loss to which the Indemnification Payment
relates; provided that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers
full payment of its Indemnifiable Loss, all claims of the
Indemnifying Party against any such third party on account of said
Indemnification Payment will be subrogated and subordinated in
right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other
provision of this Article 13, each such Indemnitee and
Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the
opportunity to conduct environmental due diligence regarding the
Purchased Property in accordance with this Section 14.1, for a
period not to exceed 120 days after the Environmental Data
Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and
generated as a result of the environmental due diligence
authorized by this Section 14.1 will be subject to the terms and
conditions of the Confidentiality Agreement, except as otherwise
expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information
composed or compiled by Buyer's environmental consultant(s) and
shall treat all such information in accordance with the procedures
of Section 14.1.5(c). Within thirty (30) days after the Execution
Date (the "Environmental Data Delivery Date"), Seller will provide
to Buyer copies of all surveys and reports in Seller's possession
concerning the existence or possible existence of asbestos or
materials containing asbestos relating to any of the Real
Property, a list of all underground storage tanks which to
Seller's knowledge are located on, or have been removed within the
last three years from, any Real Property owned or real estate
leased or operated by Seller in connection with the Business and
any other reports, studies or documents in Seller's possession
relating to Seller's potential liability under any Existing
Environmental Requirements. The parties further agree that, if
Seller discloses the existence or suspected existence of materials
containing asbestos with respect to a given parcel of Real
Property and the asbestos does not exceed applicable limits, if
Buyer desires to make renovations or structural changes to the
property after the Effective Date (which changes require the
removal of asbestos), the removal will be at the expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or
more outside environmental consultants to assist in its
environmental due diligence concerning the Purchased Property and
shall notify Seller of the environmental consultant or consultants
Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer
in writing of Seller's objection (which must be for good cause)
and substantiate the basis for that objection. If Seller does not
object for good cause and substantiate that objection within said
five (5) business day period, Seller shall be deemed to have
consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I
environmental assessment activities of the Purchased Property,
including inspecting individual sites, submitting environmental
questionnaires to Seller and reviewing existing environmental
reports, correspondence, permits and related materials regarding
the Purchased Property. Phase I environmental assessment
activities shall not include any sampling or intrusive testing
other than tank tightness testing and hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business
days' notice
prior to any entry onto the Purchased Property.
(b) If Buyer enters the Purchased Property, a
representative of Seller may be, but is not required to be,
present during such entry on the Purchased Property.
(c) All activities of Buyer regarding environmental due
diligence shall be conducted to minimize any inconvenience or
interruption of the normal use and enjoyment of Seller's Business
and the Purchased Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase
II environmental assessment activities of the Purchased Property
(including, but not limited to, the taking and analysis of soil,
surface water and groundwater samples, testing of buildings,
drilling wells and taking soil borings) after first conducting a
Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this
Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive
testing at a site included in the Purchased Property, Buyer must
notify Seller of its desire at least five (5) business days in
advance of the proposed date of such sampling or testing and
provide a description of the scope of work regarding such sampling
or intrusive testing. If Seller does not notify Buyer in writing
of Seller's objection to such proposed sampling or testing within
five (5) business days after receipt of such notice, Seller shall
be deemed to have consented to the proposed sampling or testing.
Seller shall not unreasonably object to Buyer's request to perform
sampling or testing.
(b) Buyer shall provide Seller with copies of field
data, field reports, laboratory analyses, logs, laboratory reports
and other material or information regarding the sampling or
intrusive testing ("Environmental Data") within three (3) business
days of Buyer's receipt of such data and shall promptly provide
Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during
the sampling or intrusive testing of a particular site; provided,
however, that Seller shall have no obligation to Buyer to take any
action whatsoever regarding such samples.
(c) It is understood and agreed that neither Buyer nor
its environmental consultant(s) shall disclose or release any
Environmental Data without the prior written consent of Seller and
that all such information shall be kept strictly confidential.
The Environmental Data shall be prepared at the request of counsel
to Buyer and, to the fullest extent permitted by law, shall be the
work product of such counsel and constitute confidential
attorney/client communications. The Environmental Data shall be
transferred among Buyer and its consultant(s) in a manner that
will preserve, to the greatest extent possible, such privileges.
Buyer expressly agrees that until the Closing, it will not
distribute the Environmental Data to any third party without
Seller's written consent. After the Closing, Buyer agrees that it
will not distribute the Environmental Data to any third party
without Seller's written consent, except as required by law or by
express provisions of Buyer's corporate compliance program if
Seller is provided written notice at least ten (10) business days
prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute
the Environmental Data to any potential purchaser of the Purchased
Property only after first notifying the Seller, and without such
notice at any time after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby
agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their
respective officers, directors, employees, agents, successors and
assigns from and against any and all claims, liabilities, damages,
losses, orders, penalties, fines, costs, charges and expenses
(including reasonable attorneys' fees and disbursements, and
reasonable costs of experts and expert witnesses) with respect to
persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Purchased
Property and resulting from any act or omission of Buyer or its
environmental consultant(s) provided that Buyer shall not be
liable for any Environmental Liabilities incurred by any such
party merely discovered by the environmental due diligence
performed by Buyer or its environmental consultants. In addition,
in the event the transactions contemplated herein with regard to
any portion of the Purchased Property do not close, Buyer agrees
to restore such portion of the Purchased Property to the condition
which existed prior to Buyer's inspections and testing thereof to
the extent such portion of the Purchased Property was damaged by
such inspections and testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer
conditionally may terminate this Agreement by written notice to
Seller at any time during the period set forth in Section 14.1.1
if:
(i) the results of Buyer's environmental due
diligence investigation, conducted in accordance with this Section
14. 1, indicate Environmental Liabilities based upon Existing
Environmental Requirements with respect to one or more items of
the Purchased Property; and
(ii) Buyer reasonably determines (on the basis of
its environmental due diligence) that responding to and
remediating the foregoing Environmental Liabilities based upon
Existing Environmental Requirements cannot be completed for less
than Seven Hundred Eighty Thousand Four Hundred Eighty Dollars
($780,480.00) (the "Environmental Liabilities Amount") To be
effective, any such conditional termination of this Agreement must
be delivered in writing to Seller, which writing must specifically
acknowledge that the termination is subject to the provisions of
paragraph (b) below.
(b) In the case of a conditional termination of this
Agreement by Buyer in accordance with Section 14.1.7(a) above,
Seller may nullify the termination by agreeing to:
(i) respond to and fully remediate the Environmental
Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller,
remove from the Purchased Property the item or items of Purchased
Property that have occasioned the Environmental Liabilities based
upon Existing Environmental Requirements and either substitute
therefor an equivalent item or items of Purchased Property
satisfactory to Buyer, or make other adjustments to the terms and
conditions of the sale contemplated by this Agreement all in such
manner and on such terms and conditions as are mutually
satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination
by selecting one of the above options shall be, in each case,
specified in a writing mutually satisfactory to the parties, and
thereafter on or before the Closing (subject to Section
14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing
specifying Seller's obligations within thirty (30) days following
Buyer's conditional termination (or such longer period acceptable
to Buyer) or sign that writing but Seller fails to perform its
obligations thereunder in full on or before the Closing (subject
to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and
unconditional unless the parties agree otherwise.
(c) If the results of Buyer's environmental due
diligence conducted in accordance with this Section 14.1 indicate
that the costs of responding to and remediating Environmental
Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Purchased Property are less
than the Environmental Liabilities Amount in the aggregate, Seller
agrees, at its sole cost, to either (i) remove from the Purchase
Property the item or items of Purchased Property that have
occasioned the Environmental Liabilities based upon Existing
Environmental Requirements and either make a substitution or other
adjustment therefor prior to the Closing in accordance with
Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate
those Environmental Liabilities based upon Existing Environmental
Requirements in accordance with Section 14.1.7(b)(i) or Section
14.1.7(b)(ii) above, unless the cost of such substitution or the
conduct of such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under
this Section 14.1.7(c) shall be to pay the Environmental
Liabilities Amount toward the completion of such substitution or
response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the
Environmental Liabilities Amount on such substituted property or
response and remediation action (such expenses to be verified by
Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the
Environmental Liabilities Amount, Buyer shall sign and deliver to
Seller at the Closing a release of Seller from any further
liability to Buyer for such remediation and shall indemnify Seller
against any liability for such Environmental Liabilities or
Environmental Requirements.
(d) If Seller elects to respond to and fully remediate
Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such
response and remediation has not been completed by the date
scheduled for Closing, the parties on or prior to Closing shall
enter into an Environmental Remediation Agreement in form and
substance reasonably satisfactory to the parties and proceed to
Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to
postpone the Closing until sufficient response and remediation has
been completed so that the remaining response and remediation is
equal to or less than the Environmental Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the
parties that the indemnification provided under this Section 14.2
shall be the sole remedy for allocating responsibility regarding
environmental matters related to the sale contemplated by this
Agreement, the Business and the Purchased Property of which Buyer
does not receive notice prior to the Closing (either from Seller
in Schedule 14.3 or pursuant to notice given pursuant to Section
17.1 or in any written communication made to Buyer from Buyer's
environmental consultants (collectively the "Known Environmental
Matters")). Except as expressly provided in this Section 14.2, at
Closing each party, for itself and its successors and assigns, by
virtue of consummating the sale contemplated by this Agreement and
without further action on the part of such party, shall waive and
release the other party from any and all liability under any other
cause of action at law or in equity concerning the Known
Environmental Matters, whether raised pursuant to (i)
Environmental Requirements, (ii) any other applicable federal,
state or local statute, ordinance, rule or regulation, or (iii)
common law.
14.2.2 Indemnification. Subject to the provisions of
Sections 14.2.3, 14.2.4 and 14.2.5, Seller agrees to indemnify and
hold harmless Buyer, its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and
against any and all Environmental Liabilities under Existing
Environmental Requirements arising from acts or omissions
occurring, or from the use or ownership of, or any condition or
circumstance, relating to, the Purchased Property or the Business
that occurred or arose prior to or on the Effective Date on the
Purchased Property or in connection with the operation of the
Business prior to or on the Effective Date. The foregoing
indemnity in this Section 14.2.2 shall only apply to matters that
do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such
indemnification under this Section 14.2.2 shall be provided only
for claims for Unknown Environmental Matters noticed to the other
party pursuant to the procedures of Section 14.2.3, within
eighteen (18) months after the Effective Date. Subject to the
provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to
indemnify and hold harmless Seller, its Affiliates and their
respective officers, directors, employees, agents, successors and
assigns from and against any and all Environmental Liabilities,
with respect to any Environmental Requirements in existence now or
hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the
Purchased Property after the Effective Date, or any condition or
circumstance relating to the Purchased Property or the Business
that occurred or arose after the Effective Date on the Purchased
Property or in connection with the operation of the Business after
the Effective Date.
14.2.3 Notice. A party seeking indemnification under this
Section 14.2 must give written notice to the other party,
including information sufficient to inform the other party of, and
allow such other party to confirm the nature of, the claim and any
activities required to address the claim, in sufficient detail for
the indemnifying party to confirm that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2
are required by Environmental Requirements, as applicable to
Buyer, and Existing Environmental Requirements, as applicable to
Seller, and are reasonable and cost-effective. If the
indemnifying party disagrees with the party to be indemnified as
to the necessity of costs or the reasonableness or cost-
effectiveness of the remediation method selected, the parties
shall negotiate in good faith to achieve at a mutually
satisfactory solution. If the parties cannot agree as to costs or
methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this
Section 14.2 shall not include incidental or consequential damages
except to the extent such damages have been recovered by a third
person and are the subject of a Third Party claim for which
indemnification is available under the express terms of this
Article 14. Any indemnifiable claim under this Section 14.2 shall
be reduced to account for any insurance, storage tank fund, or
other proceeds received by the party to be indemnified, as a
result of the indemnifiable losses involved. The parties agree to
take all reasonable steps to mitigate any indemnifiable claim
under this Section 14.2, including complying with any registration
and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any
other provision of this Agreement, this Article 14, or any
applicable law, the indemnification obligations of Seller under
this Section 14.2 shall not exceed the aggregate amount of One
Million Four Hundred Sixty Three Thousand Four Hundred Dollars
($1,463,400.00).
14.2.6 Adjustments to Purchase Price. Payments made under
this Article 14 shall be treated by Buyer and Seller as purchase
price adjustments, and Buyer and Seller shall file all Tax Returns
consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or
reimbursed for any adjustment to the basis of any asset resulting
from an adjustment to the purchase price or any additional or
reduced taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at
any time prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a
material
breach on the part of the other party of its respective
representations, warranties or covenants set forth in this
Agreement; provided, however, that a party shall not be entitled
to exercise its right of termination under this subsection (b) if
the breach is capable of being cured to the non-breaching party's
reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of
Schedules);
(d) by Buyer and Seller, as the result of Section
14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have
occurred by December 31, 1995 due to no fault or delay
attributable to the party seeking termination; provided, however,
that a party shall not be entitled to exercise any right of
termination pursuant to this subsection (f) if such party shall
not have performed diligently and in good faith the obligations
required to be performed by such party hereunder prior to the date
of termination;
(g) by Buyer if a Governmental Authority, the approval
of which is a condition to Buyer's obligations under Section 7.1,
has provided written notice that it shall not consent to or
approve the transactions contemplated hereby; or
(h) by Seller, if a Governmental Authority, the
approval of which is a condition to Seller's obligations under
Section 7.2, has provided written notice that it shall not consent
to or approve the transactions contemplated hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section
15. 1 (a), (c), (d), (e), (f), (g) or (h), this Agreement shall be
of no further force and effect and there shall be no further
liability hereunder on the part of either party or its Affiliates,
directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination
under Section 15.1(b) shall not constitute a waiver of its rights
to recover damages, whether pursuant to breach of contract or in
tort, or other remedies available at law or in equity, from the
other party as a result of the other party's breach of this
Agreement.
(c) Notwithstanding anything to the contrary contained
herein, the provisions of this Section 15.2 and of Sections 17.1,
17.2, 17.3, 17.8, 17.11, 17.13, 17.14 and Article 16 shall survive
any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties
agree to resolve disputes arising out of this Agreement without
litigation. Accordingly, except as provided in Section 16.5, or
in the case of a suit to compel compliance with this dispute
resolution process, the parties agree to use the following
alternative dispute resolution procedure as their sole remedy with
respect to any controversy or claim arising out of or relating to
this Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a
party, each party shall appoint a knowledgeable, responsible
representative to meet and negotiate in good faith to resolve any
dispute arising under this Agreement. The discussions shall be
left to the discretion of the representatives. Upon agreement,
the representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be
treated as confidential information developed for purposes of
settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the
arbitration described below or in any lawsuit. Documents
identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and
may, if otherwise admissible, be admitted in evidence in the
arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations
between the representatives of the parties do not resolve the
dispute within sixty (60) days of the initial written request, the
dispute shall be submitted to binding arbitration by a single
arbitrator pursuant to the Commercial Arbitration Rules of the
American Arbitration Association. Either party may demand such
arbitration in accordance with the procedures set out in those
rules. The arbitration hearing shall be commenced within sixty
(60) days of the demand for arbitration and the arbitration shall
be held in a mutually agreeable location. The arbitrator shall
control the scheduling (so as to process the matter expeditiously)
and any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion
within thirty (30) days after the close of hearings. The times
specified in this Section 16.3 may be extended upon mutual
agreement of the parties or by the arbitrator upon a showing of
good cause. Judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own
costs and expenses in submitting and presenting its position with
respect to any such dispute to the arbitrator, and the fees and
expenses of such arbitration procedures, including the fees of the
arbitrator will be shared equally by Buyer and Seller, except that
a party seeking discovery shall reimburse the responding party the
cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator
determines that the position taken in the dispute by the non-
prevailing party taken as a whole is unreasonable, the non-
prevailing party will bear all such fees and expenses, and
reimburse the prevailing party for all of its reasonable costs and
expenses in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16
with respect to the resolution of disputes without litigation
shall not apply to any dispute, controversy or claim arising out
of the provisions of Section 11.1, or the Confidentiality
Agreement, or to a party's seeking to proceed under Section 17.14,
it being understood and agreed that in the event of a breach by
either party of the provisions of Section 11.1, or the
Confidentiality Agreement, or in the event that a party seeks to
proceed under Section 17.14, the non-defaulting party shall be
entitled to proceed to protect and enforce its rights by an action
at law, a suit in equity or other appropriate proceeding, whether
for specific enforcement of any agreement contained in Section
11.1, or the Confidentiality Agreement or in aid of the exercise
of any power granted by Section 11.1, 17.14 or the Confidentiality
Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications
required or permitted hereunder shall be in writing and, unless
otherwise provided in this Agreement, will be deemed to have been
given when delivered in person or dispatched by electronic
facsimile transfer (confirmed in writing by certified mail,
concurrently dispatched) or one business day after having been
dispatched for next-day delivery by a nationally recognized
overnight courier service to the appropriate party at the address
specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
<PAGE>
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party
may from time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each
other in preparing any press release, public announcement, news
media response or other forth of release of information concerning
this Agreement or the transactions contemplated hereby that is
intended to provide such information to the news media or the
public (a "Press Release"). Neither party shall issue or cause
the publication of any such Press Release without the prior
written consent of the other party; provided, however, that
nothing herein will prohibit either party from issuing or causing
publication of any such Press Release to the extent that such
action is required by applicable Law or the rules of any national
stock exchange applicable to such party or its Affiliates, in
which case the party wishing to make such disclosure wig, if
practicable under the circumstances, notify the other party of the
proposed time of issuance of such Press Release and consult with
and allow the other party reasonable tune to comment on such Press
Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided
herein, each party will pay any expenses (including, without
limitation, attorneys' fees) incurred by it incident to this
Agreement and in consummating the transactions provided for
herein. All regulatory filing fees required pursuant to Sections
5.1, 5.4 and 5.5 shall be split equally between the parties. Each
party will pay the appropriate costs and filing fees relating to
any other applications required to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Buyer may not assign
or delegate any of its rights or duties hereunder without the
prior written consent of the Seller; provided that Buyer may
assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or
indirectly wholly owned subsidiary of Buyer provided such
subsidiary assumes in writing all of the duties and obligations of
Buyer hereunder, but no such assignment and assumption shall in
any way operate to enlarge, alter or change any obligation of or
due to Seller or relieve Buyer of its obligations hereunder and
provided that Buyer agrees to cause such subsidiary to perform
each of its agreements and covenants herein, and shall be jointly
and severally liable for any non-performance thereof. Seller may
not assign or delegate any of its rights or duties hereunder
without the prior written consent of the Buyer. Upon the sale,
assignment or transfer by Buyer of the Business or the Purchased
Property to a non-Affiliate of Buyer not in the ordinary course of
business of Buyer, Seller's representations and warranties and
indemnification obligation for breach thereof shall terminate.
Any assignment made in violation of the foregoing provisions shall
be void.
17.5 Amendments. This Agreement may be amended or modified
only by a subsequent writing signed by authorized representatives
of both parties.
17.6 Captions. The captions set forth in this Agreement
are for convenience only and shall not be considered as part of
this Agreement, nor as in any way limiting or amplifying the terms
and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean
collectively this document, the Schedules hereto, any agreements
expressly incorporated herein, and the Confidentiality Agreement.
This Agreement supersedes and revokes any prior discussions and
representations, other agreements, commitments, arrangements or
understandings of any sort whatsoever, whether oral or written,
that may have been made or entered into by the parties relating to
the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no
representations, warranties, agreements, commitments, arrangements
or understandings except as expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any
party to exercise any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any such right, power or privilege preclude
any other or further exercise thereof, or the exercise of any
other right, power or privilege available to each party at law or
in equity.
17.9 Third Parties. Except as expressly provided herein,
nothing contained in this Agreement is intended to confer upon any
person, other than the parties and their successors and permitted
assigns, any rights or remedies under or by reason of this
Agreement.
17.10 Counterparts. This Agreement may be executed in two or
more counterparts, any or all of which shall constitute one and
the same instrument.
17.11 Governing Law. This Agreement shall in all respects
be governed by and construed in accordance with the internal laws
of the State of Delaware (except that no effect shall be given to
any conflicts of law principles of the State of Delaware that
would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the
Delaware Code Annotated, the parties agree to the jurisdiction of
the courts of Delaware and to be served with legal process from
any of such courts.
17.12 Further Assurances. From time to time, as and when
requested by one of the parties, the other party will execute and
deliver, or cause to be executed and delivered, all such documents
and instruments as may be reasonably necessary to consummate and
make effective the transactions contemplated by this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references
to Sections, Articles or Schedules are to Sections, Articles or
Schedules of or to this Agreement, (ii) each term defined in this
Agreement has the meaning so assigned to it, (iii) each accounting
term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with GAAP, (iii) all references to
the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best
efforts" and references of like import will be deemed to refer to
the best efforts of such party in accordance with reasonable
commercial practice and without the incurrence of unreasonable
expense.
(b) No provision of this Agreement will be interpreted in
favor of, or against, either of the parties by reason of the
extent to which any such party or its counsel participated in the
drafting thereof or by reason of the extent to which any such
provision is inconsistent with any prior draft of such provision
or of this Agreement.
17.14 Specific Performance. In addition to all other rights
and remedies available at law or in equity, any party hereto may
pursue, to the fullest extent available, the remedy of specific
performance in order to compel the other party to close pursuant
to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly
authorized agents, have caused this Agreement to be duly executed
and delivered as of the date first above written.
CP NATIONAL CORPORATION:
By: /s/ Charles R. Galloway
-----------------------
Name: Charles R. Galloway
Title: Senior Vice President -
Accounting & Finance
CITIZENS UTILITIES COMPANY OF
CALIFORNIA:
By: /s/ Leonard Tow
---------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Telecommunications Company of Oregon, a Delaware corporation
("Buyer"), and ALLTEL Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of ALLTEL Oregon, Inc., an Oregon
corporation (the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, the Shares (as defined below), upon the terms
and conditions set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets on
the Company's Balance Sheet), and (iv) Other Current Assets (item 10-Assets on
the Company's Balance Sheet) to the extent such other current assets do not
represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and which RTB Stock is owned by the
Company immediately after the Effective Date, (ii) Unamortized Debt Expense
(item 16-Assets on the Company's Balance Sheet) to the extent such debt expense
relates to debt which is to remain outstanding immediately after the Effective
Date, and (iii) Deferred Maintenance and Retirements (Item 17 - Assets on the
Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued - Other
(item 9 - Liability on the Company's Balance Sheet), (v) Interest Accrued-Other
(item 13-Liabilities on the Company's Balance Sheet) to the extent such
interest relates to debt which is to remain outstanding immediately after the
Effective Date, and (vi) that portion of Other Deferred Credits (item 25 -
Liabilities on the Company's Balance Sheet) that relates to liabilities that
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing local
exchange and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products associated with
the Exchanges, including without limitation such unregulated activities,
services and products of the Company conducted, offered or serviced by the
Transferred Employees or provided or related to the Company's subscribers or
customers served in or from the Exchanges (such unregulated activities,
services and products (the "Unregulated Business") are considered an integral
part of the Business for all purposes of this Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company par value $1.00.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations (including
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive or
treble damages), costs and expenses (including reasonable fees, disbursements
and expenses of counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental Requirements of any
Governmental Authority, or as a consequence of (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Property by any person or party or the conduct of
the Business or any part thereof, that does not comply with Environmental
Requirements, or (c) any claim, demand, notice, cause of action, directive,
order, judgment, fine or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to this
Agreement, to the extent that the condition or circumstance or event giving
rise to the claim, demand, notice, cause of action, directive, order, judgment,
fine or penalty relates to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Exchanges is defined in Section 2.2.
Excluded Books and Records means the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the Excluded Property
or (iii) the Retained Liabilities, (iv) employees of the Company that are not
Transferred Employees, and (v) subject to Section 11.13, all Original Cost
Documents that are not located in the Exchanges.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
the Company's interest in any cellular telephone or personal communications
services business, and, in each case, any applications or licenses granted with
respect thereto, and the assets disposed, transferred or dividended by the
Company pursuant to Section 11.22 and any assets excluded pursuant to Sections
11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice president
of the entity in charge of a principal business unit, division or function.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other Governmental
Authority, as to which: (a) no request for stay of the action by the FCC, the
PUC, or such other Governmental Authority, as the case may be, is pending, no
such stay is in effect, and if any time period for filing any request for such
a stay is provided by statute or regulation, such time period has passed; (b)
no petition, motion or application for rehearing, reconsideration, or review,
of the action is pending before the FCC, the PUC, or such other Governmental
Authority, as the case may be, and the time provided for filing any such
petition, motion or application has passed; (c) the FCC, the PUC, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, the PUC's or
such other Government Authority's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company is
a party, or to which any Affiliate of the Company is a party and which are used
in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's Balance
Sheet as of a date certain comprising the Company's Materials and Supplies
(item 8 - Assets on the Company's Balance Sheet).
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant Under
Construction -- Short Term (item 23 - Assets on the Company's Balance Sheet),
Plant Under Construction -- Long Term (item 24 - Assets on the Company's
Balance Sheet), and Telecommunications Plant -- Other (item 25 - Assets on the
Company's Balance Sheet), less Accumulated Depreciation and Amortization (item
27 - Assets on the Company's Balance Sheet).
Original Cost Documents means all original cost documentation relating to
the Telephone Plant.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Utility Commission of Oregon.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 1,000 shares of the Common Stock owned by Seller.
Tax Returns means a report, return or other information statement required
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance, recording, ad valorem,
gains, value-added, unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social security, estimated,
add-on, minimum, privilege or withholding tax and any interest and penalties
and additions to such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance Sheet),
"Regulatory Liabilities" (Item 24 - Liabilities on the Company's Balance
Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the Company's
Balance Sheet), and "Donations of Telephone Plant" (Item 26 - Liabilities on
the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance Sheet
as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth in
this Article 1.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, the Shares, free and clear of
all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists of
the Telephone Plant, Contracts and Leases (to the extent permitted following
compliance with Section 5.3), Company Books and Records, FCC Licenses, the Non-
FCC Authorizations and other assets in effect or owned by the Company as of the
Effective Date that are associated with (i) the telephone exchanges listed in
Schedule 2.2(a) (the "Exchanges"), and (ii) the Unregulated Business described
on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone Plant"
means the Real Property, machinery, equipment, vehicles and all other assets
and properties used, or held for future use, in connection with the conduct of
the Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, telephone cable (wherever located
and whether in service or under construction), microwave facilities (including
frequency spectrum assignments), telephone line facilities, telephones,
machinery, furniture, fixtures, tools, implements, conduits, stations,
substations, equipment (including, without limitation, central office
equipment, subscribers' station equipment and other equipment in general),
instruments, house-wiring connections and all other equipment of every nature
and kind owned by the Company or in which the Company holds an interest (other
than as a lessee) and used in connection with the Business. For purposes of
this Agreement, "Real Property" means the real property owned by the Company
and used in connection with the Business, including, without limitation, all
land, buildings, structures, easements, rights of way, appurtenances,
improvements or privileges located thereon and relating thereto. Without
limiting the generality of the foregoing, the Telephone Plant includes the
assets that would be properly included in the fixed asset accounts referenced
in Part 32 of the FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.19.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate of
the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement, "Company
Books and Records" means all of the Company's customer or subscriber lists and
records, accounts and billing records (including a copy of the detailed general
ledger and the summary trial balances, where available for the past two fiscal
years), detailed continuing property record lists, plans, blueprints,
specifications, designs, drawings, surveys, engineering reports, personnel
records (where applicable), Original Cost Documents (where located in the
Exchanges but excluding Excluded Books and Records) and all other documents,
computer data and records (including records and files on computer disks or
stored electronically) relating to the Business (excluding Excluded Books and
Records), the Property and the Transferred Employees, except for the Excluded
Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
all licenses, certificates, permits or other authorizations, including, without
limitation, Section 214 authorizations where applicable, granted to the Company
by the FCC.
2.2.5 [INTENTIONALLY DELETED]
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses) granted to the Company by Governmental
Authorities (including without limitation those that are listed or required to
be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance with
the other terms and conditions of this Agreement, on the Closing Date, Buyer
will pay to Seller the sum of Thirty Two Million One Hundred Eleven Thousand
Dollars ($32,111,000.00), subject to adjustment as provided in Section 3.2 (the
"Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price. Such delivery shall be made by bank wire transfer to an account that
Seller shall designate at least two (2) business days prior to the Effective
Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing Date,
provided that all conditions to Closing set forth in Article 7 have been
satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
shall be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which the sum of Net Telecommunications Plant and Materials and
Supplies as of the Effective Date exceeds or is less than the June 1994 Base
Amount; provided, however, that in determining Net Telecommunications Plant and
Material and Supplies as of the Effective Date, no effect will be given for:
(i) any decrease thereof resulting from damage, loss or destruction of Damaged
Property which is repaired or replaced by Seller or the Company or for which
Seller or the Company makes a substitution, in accordance with Section 11.9(b);
(ii) any increase thereof resulting from expenditures made by Seller or the
Company in connection with any such repair, replacement or substitution of
Damaged Property in accordance with Section 11.9(b); or (iii) any increase
thereof resulting from Seller's expenditures pursuant to its obligations under
Section 14.1.7(b) and (c) except for the cost of purchasing specific items of
new plant (i.e., storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase Price
will be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which, in each case as of the Effective Date: (i) Adjusted Total
Current Assets plus Adjusted Total Non-Current Assets exceeds or is less than
(ii) Adjusted Total Current and Non-Current Liabilities plus Total Long Term
Debt to the extent such Total Long-Term Debt shall remain outstanding
immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment Regarding
Assets and Liabilities in Section 3.2(d)) and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer of
Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for purposes
of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c) and the
Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and in
accordance with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For the
purpose of preparing Buyer's calculations and adjustments, Seller shall give
Buyer access to all books, records, and other information regarding the Company
available to Seller that Buyer may reasonably determine appropriate.) Within
thirty (30) days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments of
the Purchase Price shall be final and binding on Seller and Buyer. (For the
purpose of reviewing Buyer's calculations and adjustments, Buyer shall give
Seller access to all books, records, and other information regarding the
Company available to Buyer that Seller may reasonably determine appropriate.)
If Seller shall object, Seller and Buyer shall work in good faith to agree on
the correct amounts for the final Purchase Price, but if they fail to agree,
either party may exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) if the Final Purchase Price shall exceed the Estimated
Purchase Price, Buyer shall cause to be transferred to such account in the
United States as Seller may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND
NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications to
be filed with the PUC and with respect to Material Regulatory Approvals, the
parties shall file the applications and notices described on Schedule 5.1 in
such form as agreed to by the parties with the PUC and other appropriate
Governmental Authorities, seeking an order permitting the transfer of control
of the Company to Buyer (the "Regulatory Approvals"). Each party agrees to use
its best efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with all Governmental Authorities to obtain
the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and 7.2.4,
and the Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness identified
on Schedule 5.2(a) (the "Long Term Indebtedness"), where required by the
underlying debt instruments, as promptly as practicable following the Execution
Date, but in any event no more than forty-five (45) days thereafter, the
parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consents") to
the transfer of control of the Company on terms acceptable to the parties. The
parties acknowledge that all Long Term Indebtedness for which Debtholder
Consents have been obtained before the Effective Date and all other Long Term
Indebtedness for which Debtholder Consent is not required, shall remain
outstanding immediately after the Effective Date and shall be included as a
Purchase Price adjustment pursuant to Section 3.2(d). Each party shall bear
their own costs and expenses in obtaining such Debtholder Consent. Neither
party, however, shall be required to make any payment to the debtholder to
obtain the Debtholder Consent, except that Seller shall be responsible for any
such payments as are specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in full
(including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall repay
on or prior to the Effective Date, Seller shall take, at Seller's sole cost and
expense, all actions necessary with respect to all persons or entities
(collectively, the "Secured Parties") holding any security interest or lien
against the Property, to obtain the termination or release, as of the Effective
Date, and the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the Property (such
terminations and releases being hereinafter collectively referred to as the
"Indebtedness Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Indebtedness Releases or
Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to the transfer of control of the Company to Buyer as a result of
Buyer's purchase of the Shares. To the extent any of the approvals, consents
or waivers required with respect to any Lease, Contract or Immaterial
Authorization have not been obtained with respect to any Lease, Contract or
Immaterial Authorization as of the Effective Date, Seller shall continue to use
its best efforts to obtain the consent of such other third party that is
required for the transfer of control of such Lease, Contract or Immaterial
Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to the transfer of control of a
Lease, Contract or Immaterial Authorization after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, then Seller and Buyer shall within thirty (30)
days after expiration of such six-month period negotiate in good faith and
agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or Immaterial
Authorization except as otherwise provided in Section 11.12 with respect to the
Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
but no later than forty-five (45) days after the Execution Date, the parties
shall file all applications and requests described on Schedule 5.4 in such form
as agreed to by the parties with the FCC seeking, and shall use their best
efforts to obtain, the FCC's consent to the transfer of control of all FCC
Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC
Consents"). The parties each agree that in connection with taking the
immediately above described actions, they will not file any application or
request for a waiver of Part 36 (study areas), Part 61 (tariffs), and Part 69
(price caps and study areas) of the FCC Rules, and that on the Effective Date
the study areas relating to the Exchanges shall remain in the National Exchange
Carrier Association Tariff F.C.C. No. 5, provided, however, that such study
areas shall remain in the NECA Tariff FCC No. 5 after the Effective Date only
for so long as Buyer, in its sole discretion, shall determine. Each party
agrees to use its best efforts, and the parties agree to cooperate fully with
each other and with the FCC, to obtain the FCC Consents at the earliest
practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
but in no event later than thirty (30) days after the Execution Date, the
parties will make such filings as may be required by the HSR Act with respect
to the sale contemplated by this Agreement. Thereafter, the parties will file
as promptly as practicable any supplemental information that may be requested
by the U.S. Federal Trade Commission or the U.S. Department of Justice pursuant
to the HSR Act. The parties agree to cooperate in seeking early termination of
the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to all
interexchange carriers having business relationships with the Company, to all
customers of the Company, and to all officers, employees and agents of the
Company having knowledge or information concerning the operations of the
Company so as to afford Buyer the opportunity to make such review, examination
and investigation of the Company and the Property as Buyer may desire to make,
to evaluate the competitiveness of the Company and the Business, and to enable
Buyer to assimilate the Company and the Business into Buyer's operations as
soon as practicable after the Effective Date. To the extent it so desires,
Seller shall accompany Buyer on all of Buyer's access to interexchange
carriers, customers and agents of the Company. Buyer will be permitted to make
extracts from or copies of such books and records as may be reasonably
necessary. Buyer will not contact any employee, customer or supplier of the
Company as to this Agreement or the matters involved herein except in
accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall cause
the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including sessions
to train such employees in Buyer's business planning process in order to have
the Company after the Effective Date follow Buyer's business planning process
and procedures);
(ii) The Company's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to participate
in the Company's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish, and cause the Company to furnish, such financial and
operating data and other information pertaining to the Company as Buyer may
reasonably request in order, among other things, to comply with Buyer's
disclosure obligations under the federal securities or other laws as such
obligations relate to Buyer's prospective ownership of the Company, including
any disclosure required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller or the Company to
take actions that would unreasonably disrupt the normal course of the business
of the Company or violate the terms of any applicable Law or any contract to
which the Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or the Company's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with respect
to issuing an auditor's report required by Buyer. Any information or document
provided to Buyer or acquired by Buyer during this investigation shall be
deemed "Evaluation Material" as that term is defined in the Confidentiality
Agreement and shall be subject in all cases to the terms of the Confidentiality
Agreement; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business or
the Company that Buyer, upon consultation with counsel, determines is required
to be disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Company, the Business or the transactions
contemplated by this Agreement; of which in any such case, Seller's
representatives listed on Schedule 6.3(b) become aware on or before the
Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit Buyer
access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE
CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing occurs, any
claim with respect to matters so specified shall be waived by Buyer unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material adverse
changes to the Property as a whole or the financial position or results of
operations of the Company as a whole, and, subject to Section 11.9, the Company
shall not have suffered any material loss or damage to the Property, whether or
not insured, that would materially affect or impair the Company's ability to
conduct the Business after the Effective Date. None of the Additional
Financial Statements of the Company delivered pursuant to Section 11.4 shall
reflect a material change in the financial position or results of operations of
the Company from the financial position or results of operations reflected in
the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.24. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution Date
or any time thereafter, of the public records regarding liens and judgments
with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Buyer if required by the underlying debt instrument shall have received
the Debtholder Consents and shall have entered into any other necessary
agreements with the holders of such Long-Term Indebtedness evidencing such
Debtholder Consent in form and substance reasonably acceptable to Buyer.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties. There
shall have shall have been no material breach by Buyer of any of its covenants
to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 9.2 shall be true and
correct as of the Effective Date, except for such representations or warranties
made expressly as of some other date, which shall be true and correct as of
such other date (all such representations and warranties to be qualified by any
materiality standards contained therein), and Buyer shall have delivered to
Seller a certificate ("Buyer's Closing Certificate"), dated as of the Effective
Date and signed by one of Buyer's Executive Officers, certifying each of the
foregoing or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct in
which event if the Closing occurs any claim with respect to matters so
specified shall be waived by Seller unless otherwise expressly agreed by Buyer
at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the manner
specified in Section 3.1, the Estimated Purchase Price as adjusted pursuant to
Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions,
or restrictions which Seller determines, in good faith in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Seller of the transactions contemplated by this
Agreement. For purposes of this Section 7.2.4, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Seller, if required by the underlying debt instrument, shall have
received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar month
in which occurs the tenth (10th) business day after the date Seller notifies
Buyer in writing (the "Notice") of its determination that all required Material
Regulatory Approvals and FCC Consents have been obtained and provided that the
other conditions set forth in Article 7 shall have been satisfied, or at such
other place and time as may be agreed upon by Seller and Buyer. The
transactions to be consummated at Closing shall be deemed to have been
consummated as of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the Notice (the
"Effective Date"). If the Effective Date is not a day on which financial
institutions are open and operating, then the Closing Date shall be the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for transfer
or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence satisfactory
to Buyer that all Long-Term Indebtedness (and interest, premiums and penalties
thereon) to be repaid pursuant to Section 5.2(b) has been (or will be at
Closing) repaid in full.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver
to Seller the following items and documents duly executed and acknowledged as
appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement and to fulfill its respective obligations
under this Agreement. The execution and delivery by Seller of this Agreement
and the fulfillment of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and, assuming the due
execution and delivery of this Agreement by Buyer, constitutes a valid and
binding obligation of Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally and subject to the qualification
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of Seller's or the Company's certificate of incorporation or bylaws
or, (ii) except as set forth in Schedule 9.1.13, or subject to obtaining the
approvals and consents reflected in Article 5, conflict with, violate or result
in the breach of, constitute a default under, accelerate the performance
required by, or result in the creation of any encumbrance upon any of the
Property under any provision of any Contract other than any such conflict,
violation or breach that alone or in the aggregate would not have an adverse
effect on the Buyer, the Company, the Business or the Property after the
Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court or governmental agency, authority or instrumentality ("
Governmental Authority") is required to be obtained or made by or with respect
to Seller or the Company or in connection with the execution and delivery of
this Agreement by Seller or the fulfillment by Seller of its obligations under
this Agreement, except (i) the filings and approvals described in Article 5,
(ii) as described in Schedule 9.1.3, and (ii) such other consents, approvals,
orders or authorizations, or registrations, declarations or filings, which if
not obtained or made would not result in a material adverse effect on Buyer,
the Company, the Business or the Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
execution and delivery of this Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any applicable existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect on
the Company, the Business as a whole or on any significant part of Property
after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; it
has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Buyer for any broker's or finder's
fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any of
its obligations or liabilities, or the performance, observance or fulfillment
of any covenant or condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default thereunder or that
would constitute such a material breach or default with the giving of notice or
lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(ii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii) such other imperfections of
title and encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Property to which such
imperfection or encumbrance relates. No condemnation proceeding is pending or,
to the knowledge of Seller or the Company, threatened with respect to any part
of the Property and such Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by the Company included
in the Property. In addition, Schedule 9.1.8-2 sets forth a list of the Real
Property included in the Property in which the Company holds other than a fee
interest (such as easements and rights of way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there is
not any existing material default or existing material breach of a covenant by
the Company under any Lease. The Company enjoys peaceful and undisturbed
possession under all material Leases and, to Seller's and the Company's
knowledge, the lessor under any such Lease is not (with or without notice or
the lapse of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it thereunder,
and has not given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is in
substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation of
such Property. Except as set forth on Schedule 9. 1. 10, the Company has not
received any written notice within the past twelve (12) months of a violation
of any ordinances, regulations or building, zoning and other similar laws with
respect to such assets that would have a material adverse effect on the
Company, the Business as a whole or any significant part of the Property. Each
parcel of Real Property and, to the knowledge of Seller and the Company, of
real estate leased by the Company and material or necessary to the Business as
presently conducted substantially complies with all applicable Laws except
where the failure to so comply individually or in the aggregate, would not have
a material adverse effect on the Company, the Business as a whole or any such
parcel after the Effective Date. Except as set forth on Schedule 9.1.10, other
than the Company, no person or party has actual possession or has a right to
possession of all or any material portion of any parcel of such Real Property
or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PROPERTY INCLUDED IN THE PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
OR STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet, income
statement and related statement of cash flows as of and for the respective
periods ended December 31, 1992, and December 31, 1993, together with the
auditor's report thereon (the "Financial Statements"). The Financial
Statements were prepared based upon the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
as of the appropriate periods and the results of operations for the year then
ended, in each case in conformity with GAAP and to the best of Seller's
knowledge and to the extent required by applicable Law, have been prepared in
all material respects in conformity with the regulations of the FCC and the
PUC. The Financial Statements contain no untrue statements of any material
fact nor omit to state any material facts required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of the Company; and (ii) will fairly present the financial
condition of the Company and the results of operations of the Company for the
periods indicated, subject, in the case of interim Additional Financial
Statements, to normal year-end adjustments which will not be material in amount
or effect; and (iii) to the best of Seller's knowledge and to the extent
required by applicable Law, will be prepared in all material respects in
conformity with the regulations of the FCC and the PUC; and (iv) will not
contain any untrue statements of any material facts or omit to state any
material facts required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of the Company and
fairly presents the financial condition of the Company as of such date subject
to normal year-end adjustments which will not be material in amount or effect,
and to the best of Seller's knowledge and to the extent required by applicable
Law, was prepared in all material respects in conformity with the regulations
of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities, operations
or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or the
Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance or
agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of the
Property, or any increase or an agreement to increase any indebtedness of the
Company, except in the ordinary course of business;
(d) Any material change in the Company's tariffs or in the manner of
conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation or
other event or condition that materially and adversely affects the business or
prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on the
Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the Company
except as required by GAAP or any change in depreciation or amortization
policies or rates heretofore adopted by the Company except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's knowledge,
any attempt to organize the Transferred Employees for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity other
than loans, advances, capital contributions or investments made in the ordinary
course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or the
Company and any third party) to do or to take any of the actions referred to in
paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith. The
Company is not in material breach or default in connection with any Contracts,
and there is no basis for any claim of breach or default by the Company, or to
Seller's the Company's knowledge, any other party, in any material respect
under any of the Contracts. None of the Contracts, either separately or in the
aggregate, materially and adversely affects the Company, the Business or the
Property. After the Effective Date, all rights and obligations of the Company
under the Contracts shall continue unimpaired in the Company (assuming that if
any Contract requires the consent of the other party thereto, such consent will
have been obtained by the parties hereto prior to the Effective Date). Except
for the instruments specifically listed in Schedule 9.1.13, the Company is not
a party to or subject to: (i) any agreement for the purchase or disposition of
any material, equipment, supplies, inventory or service, except individual
purchase orders and contracts in amounts less than Twenty-Five Thousand Dollars
($25,000.00); (ii) any agreement to which the Company is a party or by which
any of the Property is bound relating to indebtedness for money borrowed
including capital leases, security arrangements relating thereto and any
amendment or waiver thereof; and (iii) any other agreement not of the type
covered by any of the foregoing items of this Section 9.1.13 requiring payments
by the Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required to
be listed thereon, the Contracts which require the consent, approval or waiver
of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a character
usually insured by companies carrying on similar businesses is insured under
insurance policies in such amounts and against such losses or casualties as is
(i) usual in such companies and (ii) required under any of the Contracts or
Leases. The insurance policies referred to in this Section 9.1.14 are (i)
listed on Schedule 9.1.14, and (ii) in full force and effect and the premiums
due thereon have been duly and timely paid. The most current statement of
values (the statement of values of property of an insurable nature that is
submitted to an insurance company to be used as a basis for the calculation of
premiums) relative to the Property as presently insured has been made available
to Buyer by Seller. On the Effective Date, the coverage under the insurance
policies and programs of Seller and its Affiliates applicable to the Company
will be terminated, and Buyer will be responsible for providing all insurance
coverage for the Company. Following the Effective Date, Seller shall be
responsible for and shall pay any additional premiums that might be required by
an insurance company for insurance coverage prior to the Effective Date
relating to the Company and shall be entitled to any refunds or dividends due
from such companies relating to such coverage. Schedule 9.1.14 sets forth a
list of the open material claims affecting the Company complete in all material
respects, and a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be filed
on or prior to the Effective Date (taking into account all extensions of due
dates) by or with respect to the Company and has paid or adequately provided
for all Taxes shown thereon as owing, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, have a material adverse effect on Buyer, the Business, or the Company after
the Effective Date, (ii) all such Tax Returns were or will be correct and
complete in all material respects, (iii) to the knowledge of Seller, all
withholding Tax requirements imposed on or with respect to the Company have
been or will be satisfied in full in all respects, and (iv) all penalties,
interest or other charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have been or will
be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case, with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no material
written claim against the Company for any Taxes, and no material assessment,
deficiency or adjustment has been asserted or, to the knowledge of Seller
proposed with respect to any Tax Return of or with respect to the Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect
to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements includes
adequate provisions for the payment in full of all federal and state income
taxes of the Company for all taxable periods or portions thereof during the
period beginning with respect to each Tax Return statute of limitations and
ending no later than December 31, 1993. The balance sheet included in the
Financial Statements has attached thereto a schedule (the "Tax Schedule") which
sets forth provisions for such federal and state income taxes.
(f) All accrued rights or obligations under any written or unwritten
Tax allocation or sharing agreements or arrangements affecting the Company are
reflected in the intercompany accounts of the Company. All such Tax allocation
or sharing agreements or arrangements have been or will be cancelled on or
prior to the Effective Date. No payments are or will become due by the Company
after the Effective Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the property
of the Company is held in an arrangement for which partnership Tax Returns are
being filed, and the Company does not own any interest in any controlled
foreign corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the property
of the Company or any of its Subsidiaries is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section 168(h) of
the IRC) or "tax-exempt bond financed property" (within the meaning of Section
168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will not
be required to include any amount in income for any taxable period beginning
after December 31, 1993 as a result of a change in accounting method for any
taxable period ending on or before December 31, 1992 or pursuant to any
agreement with any Tax authority with respect to any such taxable period.
(j) The Company has not consented to have the provisions of Section
341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this Agreement,
neither Buyer nor the Company will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the IRC without regard to whether
such payment is reasonable compensation for personal services performed or to
be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the proper
governmental authorities or properly deposited as required by applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that, if
determined adversely to the Company, would reasonably be expected to have a
material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of any
reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the Business
as a whole or the Property. The Company is not in default under any judgment,
order or decree of any Governmental Authority which would reasonably be
expected to have a material adverse effect on the Company, the Business as a
whole or any significant part of the Property after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, the Company is an issuing
carrier in the National Exchange Carrier Association Tariff F.C.C. No. 5 for
the purpose of providing interstate access service. Except as described on
Schedule 9.1.17(a), the state regulatory tariffs applicable to the Company
stand in full force and effect on the date of this Agreement in accordance with
all terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation or termination in connection
therewith, nor is the Company subject to any restrictions or conditions
applicable to its state regulatory tariffs that limit or would limit the
operation of the Business (other than restrictions or conditions generally
applicable to tariffs of that type). Except as described on Schedule
9.1.17(a), each such state tariff has been duly and validly approved by the
appropriate state regulatory agency. Except as otherwise disclosed on Schedule
9.1.17(a), the Company is not in material violation under the terms and
conditions of any such state tariff, and there is no basis for any claim of
material violation by the Company in any material respect under any such state
tariff. Except as described in Schedule 9.1.17(a), there are no applications
by the Company or complaints or petitions by others or proceedings pending or
threatened before the state regulatory authority relating to the Company, the
Business or its operations or the state regulatory tariffs. To the knowledge
of Seller and the Company, there are no material violations by subscribers or
others under any such state tariff that would be material to the Company or the
Business. A true and correct copy of each state tariff applicable to the
Company or the Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension, cancellation or
termination or, to Seller's or the Company's knowledge, any threatened
suspension, cancellation or termination in connection therewith nor are any of
such FCC Licenses subject to any restrictions or conditions that limit the
operation of the Business (other than restrictions or conditions generally
applicable to licenses of that type). The FCC Licenses are free from all
security interests, liens, claims, or encumbrances of any nature whatsoever.
Except as set forth on Schedule 9.1.17(b), there are no applications by the
Company or material complaints or material petitions by others or proceedings
pending or threatened before the FCC relating to the Company or the FCC
Licenses.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's and the Company's knowledge, no event has occurred with respect to
any materially necessary Non-FCC Authorization which permits, or after notice
or lapse of time or both would permit, revocation or termination thereof, or
would result in any other material impairment of the rights of the holder of
such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term is
defined in Section 3(1) of ERISA maintained or contributed to by the Company or
any of its Affiliates in respect of any Transferred Employee (as defined below)
(such plans being hereinafter referred to collectively as the "ERISA Plans"),
and each other material retirement, pension, profit-sharing, money purchase,
deferred compensation, incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement maintained or
contributed to by the Company or its Affiliates in respect of or for the
benefit of any Transferred Employee or former employee, excluding any such
plan, program, agreement, or arrangement maintained or contributed to solely in
respect of or for the benefit of Transferred Employees or former employees
employed or formerly employed by the Company outside of the United States, as
of the date hereof (collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Seller has supplied Buyer with a true and
complete copy of each Plan and all amendments thereto. Schedule 9.1.18(a) also
includes a list of each material written employment, severance, termination or
similar-type agreement between the Company or its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except to the extent that
any assets, liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or otherwise) to plan(s)
or agreement(s) maintained or contributed to by Buyer, all such Plans and
Agreements shall remain the liabilities of the Seller or its Affiliates and
Seller shall take any and all steps necessary to ensure that neither Buyer nor
the Company shall be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the performance of this
Agreement by Seller will not directly result now or at any time in the future
in (i) the payment by the Company or its Affiliates to any Transferred Employee
of any severance, termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of the IRC) being
made by the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company could
be subject to any material liability pursuant to Section 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability is
reserved for or otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
IRC), whether or not waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer plan," as that term is defined in Section 3(37) of ERISA
and with respect to any such multiemployer plans (as so defined) listed in
Schedule 9.1.18(d), Seller has not made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA that would result in the incurrence of a material liability
by the Company that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or the
Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is the
Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered by
collective bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller and the Company, during the twelve (12) months
preceding the Execution Date there have not been any union organizational
campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of the Company, together
with the elections made prior to the Effective Date with respect to such
accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on Schedule
9.1.19 copies of schedules (at the level of detail agreed to by the parties but
in any case including details regarding net book value and continuing property
records lists associated therewith) of the Company's Telephone Plant as of
June 30, 1994, including, to the extent available, a schedule specifically
identifying the Telephone Plant that is associated with the Unregulated
Business. The account balances reflected on the schedule of Telephone Plant
correspond, in all material respects, to the associated account balances
reflected on the Company's Continuing Property Records.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) sets forth a substantially complete list of
all vehicles included in the Property (including trailers, equipment mounted on
trailers and self-propelled equipment) together with the manufacturer, model
and year of each such vehicle, and indicates whether such vehicle is owned or
leased by the Company.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing and
collection revenues of the Company for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, the Company has
no materials and supplies, plant or equipment that has been disallowed from
rate base or excluded from the revenue calculations for any pool (unless due to
the deregulation of the service for which such assets are used) or in the most
recent rate order issued by the PUC or the FCC or any determination by an
administrator of an interstate or intrastate pool, and has not received written
notification that the PUC or the FCC or any pool administrator proposes to
exclude any assets from rate base or revenue calculations for the pools, or any
tariff filed with or approved in the most recent rate order of the PUC or the
FCC, in each case which materials and supplies, plant or equipment, in the
aggregate, would be in excess of one percent (1%) of Net Telecommunications
Plant.
9.1.22 Payments. All material payments of any kind required to be made by
the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically indicate
on Schedule 9.1.23, (i) the Company is in compliance in all material respects
with all Laws applicable to it, the Property and the Business and holds all
governmental permits or licenses required in order to conduct the Business and
to own and operate the Property; (ii) the present uses of the Property in the
conduct of the Business do not violate in any material respect any Law and
(iii) no written notice or warning from any governmental or regulatory
authority with respect to any failure or alleged failure by the Company to
comply with any Law or questioning the validity of any governmental permit or
license, has been issued or given, nor to the knowledge of Seller or the
Company, is any such notice or warning proposed or threatened. Neither Seller
nor the Company is aware of any fact, event or circumstance relating to the
Company that is reasonably likely to cause a regulatory agency to deny or
withhold its approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account books and
other accounting records of the Company are current, correct and complete and
reasonably well organized, in all material respects and to the knowledge of
Seller and the Company, to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC and PUC. The
Company and its Affiliates have retained substantially all Original Cost
Documents regarding the expenditures made by the Company within the immediately
preceding two-year period that relate to the Company's Net Telecommunications
Plant, and such Original Cost Documents are correct and complete in all
material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value
(as reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements of
the Business, will not materially exceed the Company's reserve for obsolete or
excess Materials and Supplies as reflected on the Company's books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by PUC. Except as set forth on
Schedule 9.1.29, there are no changes, modifications, upgrades or enhancements
required by the PUC to be made to the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this Agreement
or as otherwise set forth in Schedule 9.1.30 the Company has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), of a nature required to be
recorded or disclosed in a corporate balance sheet prepared in accordance with
GAAP, except liabilities and obligations which are not materially in excess of
amounts reflected, reserved against or disclosed in the December 31, 1993
Financial Statements or the notes thereto and except for liabilities and
obligations incurred in the ordinary course of business since December 31,
1993. Except as may be reflected in the December 31, 1993 Financial Statements
or the notes thereto or on Schedule 9.1.30, the Company has no obligations
under guarantees, endorsements or indemnities of the obligations of any other
person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons
holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner of
the Shares, which comprise 100% of the outstanding shares of all classes of
capital stock of the Company. Seller has legal, valid and marketable title to
the Shares, free and clear of all liens, claims, options, security interests or
other encumbrances of any character whatsoever ("Encumbrances"). The sale and
delivery of the Shares to Buyer pursuant to Article 2 will vest in Buyer legal,
valid and marketable title to the Shares free and clear of all Encumbrances
other than Encumbrances created or suffered by Buyer and restrictions on sales
of the Shares under applicable federal and state securities laws.
9.1.33 Capital Stock. The Common Stock is the only capital stock
authorized to be issued by the Company. The Shares are the only shares of
Common Stock outstanding. All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments (other than this Agreement) which
could obligate Seller or the Company to issue any shares of capital stock or
dispose of any ownership interest therein. There are no outstanding
obligations of the Company to issue or deliver, or to repurchase, redeem or
otherwise acquire any capital stock or other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the right
to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Oregon;
it has full corporate power and authority to own its properties and to carry on
the Business as it is now being conducted, and to own or hold under the lease,
the Property.
9.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold the assets owned, leased or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement, to own the Shares and to fulfill all
other obligations of Buyer under this Agreement. The execution and delivery by
Buyer of this Agreement and the fulfillment by it of its obligations under this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to purchase, own and
hold the Shares upon the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by Buyer and,
assuming the due execution and delivery of this Agreement by Seller,
constitutes a valid and binding obligation of Buyer, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualifications that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.2.3 No Restrictions Against Purchase of the Shares. The execution and
delivery of this Agreement by Buyer do not, and the fulfillment by Buyer of its
obligations under this Agreement will not, conflict with, violate or result in
the breach of any provision of the certificate of incorporation or bylaws of
Buyer or, subject to obtaining the approvals and consents referred to in
Article 5, conflict with, violate or result in the breach of, constitute
default under, or accelerate the performance required by any Contract to which
Buyer is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the fulfillment by
Buyer of its obligations under this Agreement, except (i) the filings and
approvals described in Article 5, and (ii) the filings and approvals listed on
Schedule 9.2.3.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
and the fulfillment by Buyer of its obligations under this Agreement will not
violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Seller for any broker's or finder's
fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
proceedings pending or, to the knowledge of Buyer, threatened against Buyer or
its properties that would prevent the consummation of the transactions
contemplated by this Agreement.
9.2.7 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC's Licenses, as described in Section 5.4, Buyer
will not file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the National Exchange Carrier Association Tariff FCC No. 5, provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
9.2.8 Investment. Buyer understands that the Shares that it will acquire
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Act"), and cannot be offered for sale, sold or otherwise
transferred unless the Shares subsequently are so registered or qualified for
exemption from registration under the Act. The Shares are being acquired under
this Agreement by Buyer in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Act. The Shares will not be offered for sale, sold or otherwise
transferred by Buyer without either registration or exemption from registration
under the Act and applicable state securities laws. Buyer has such knowledge
and experience in financial and business matters that Buyer is capable of
evaluating the merits and risks of Buyer's investment in the Shares. Buyer
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding the Shares for an indefinite
period of time, inasmuch as the Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS
RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
or prior to March 15, 1995, the parties shall, as promptly as practicable but
in any event within 30 days after Buyer's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no later
than the Effective Date, pursuant to which Seller will provide to the Company,
at the Company's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services relating to the
conversion of systems and processes) as may be reasonably requested by Buyer,
which agreement shall be in form and substance as mutually agreed to by both
Buyer and Seller (the "Transition Services Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE
PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed
in any patent or patent application), designs (useful or ornamental), and works
subject to copyright that may be embodied in, without exclusion, invention
disclosures, specifications, manuals, drawings, functional or system block
diagrams, flow charts, circuit diagrams, design or user documentation,
engineering notebooks, schematics, test programs, documented procedures,
documented processes, documented flows, devices, software, or firmware, that
relate to the function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus, article of
manufacture, process, method or service. "Intellectual Property" shall also
include patents, patent applications (including continuations, continuations-
in-part, divisions, reissues, reexamined patents and patent applications and
extensions thereof), copyrights (whether common law or statutory, registered or
unregistered), or trade secrets, residing in the subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall be
responsible for any fees associated therewith) in obtaining the consent of any
necessary third party for the use of any Intellectual Property that the Company
has placed in public use on, or prior to, the Effective Date and that is
presently used by the Company, but excluding any Intellectual Property listed
in Schedule 11.22.
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except as
specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in the Company's use of such
Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are set
forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the Intellectual
Property that as of the Effective Date the Company owns or controls or under
which it has the right to grant licenses, Seller shall not assert against
Buyer, or Affiliates of Buyer, or vendees, mediate or immediate, of Buyer or
the Company, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from the Company's activities practiced in
the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by the
Company of any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, the Company, a customer
of Buyer's or the Company's or anyone claiming under Buyer or the Company
constitutes direct or contributory infringement or misuse of any intellectual
property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, the
Company, a customer of Buyer's or the Company's, or anyone claiming under Buyer
or the Company constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the owners
of, and have permitted the Company to use, certain trade names, trade dress,
trademarks, service marks, logos and related intangible property (collectively,
"Marks") used in connection with the Business, including, without limitation,
the items listed on Schedule 11.1.5, and Buyer understands and agrees that the
Marks, or any right or license of the Company to the Marks are not being
transferred pursuant to this Agreement. Buyer acknowledges Seller's exclusive
and proprietary rights in the use of the Marks, and Buyer agrees that it shall
cause the Company not to use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this Section 11.1.5.
After the Effective Date, Buyer shall cause the Company to replace all Marks of
Seller as soon as possible, but in no event later than one hundred eighty (180)
days after the Effective Date for Marks affixed to items with a valid
continuing use in the Company's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats, tools, tool boxes,
kits (safety and others), signs, manual covers and notebooks. After the
Effective Date, Buyer will cause the Company to not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that have no valid
continuing use in the Company's conduct of the Business, including items
affecting customer or employee relations or items that do not reflect the
Company's true identity. Specific items to be destroyed or returned include
items with Marks affixed to them including, without limitation, giveaways;
order, purchase or materials forms; requisitions; invoices; statements; time
sheets/labor reports; bill inserts; stationery; personalized note pads; maps;
organization charts; bulletins/releases; sales/price literature; manuals or
catalogs; report covers/folders; program materials; and materials such as media
contact lists/cards. The one hundred eighty (180) day time period for
replacement of Marks affixed to telephone directories that were already
published or closed for publication as of the Effective Date shall be extended
to the production of replacements for such directories.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as to
reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
with the Marks, and acknowledges that the Marks and all rights therein and the
goodwill pertaining thereto belong exclusively to Seller, and that the Marks
have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company using the Marks shall be provided in
accordance with all applicable federal, state and local laws, and that the same
shall not reflect adversely upon the good name of Seller, and that the conduct
of the Business will be of a standard and skill equivalent to that employed
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's failure to cease use of the Marks as provided
in this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that there is
no adequate remedy at law for such failure to terminate use of the Marks, or
for such improper use of the Marks, and Buyer agrees that in the event of such
failure or improper use, Seller shall be entitled to equitable relief by way of
temporary restraining order or injunction or any other relief available under
this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and agrees
that (i) except for the representations and warranties set forth in this
Agreement and the Schedules (and the Financial Statements, the Additional
Financial Statements, and actuarial reports required pursuant to the Employee
Transfer Agreement), Buyer has not relied and will not rely upon any document
or written or oral information furnished to or discovered by it or its
representatives, (ii) there are no representations or warranties by or on
behalf of Seller or its Affiliates or representatives except for those
expressly set forth in this Agreement and in any other written agreement
entered into with Seller or any of its Affiliates in connection with this
Agreement, and (iii) to the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will be solely as set
forth in this Agreement or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and representatives
will comply with the Confidentiality Agreement, the provisions of which are
expressly incorporated herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company to
conduct the Business in the ordinary course in accordance with prudent business
judgment and consistent with past practice and policy and to (i) preserve the
Business as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same extent as such
were generally available from January 1, 1994 through the Execution Date and
are available on the date hereof, (iii) not take any action that would
jeopardize any material and beneficial contractual relationships with persons
having business dealings with the Business, and (iv) preserve all of the
Business' tariffs, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. Seller will cause
the Company to refrain from entering into any material transaction or contract
other than in the ordinary course of business and to not make any material
change in the general nature of the Business or in its methods of management,
marketing, accounting or operations (including repair and maintenance
functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course of
business, (ii) enter into or terminate, as lessor or lessee, any Lease other
than in the ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or (iv) change in
any material respect or terminate any of the insurance policies referred to in
Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will cause the Company not to
sell, lease, dispose of or otherwise transfer, or make any contract for the
sale, lease, disposition or transfer of any Property other than, with respect
to any individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items (other
than vehicles) the aggregate value of which shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the PUC, Seller will cause the Company not to
(i) institute any proceeding with respect to, or otherwise change, amend or
supplement any tariff or (ii) enter into or agree to any stipulation, order, or
decree of, or settlement with the PUC that, in the case of (i) or (ii) above,
would have a material adverse effect on the revenue, authorized return on
equity or earnings of the Business. Seller will cause the Company not to file
any application, petition, motion, brief, testimony, settlement agreement or
other pleading in any proceeding before the PUC, or before the FCC (except for
filings on behalf of all of Seller's local exchange telephone companies) or
appeals related thereto, unless Seller shall have first provided Buyer with a
copy of the same and provided Buyer with a reasonable opportunity to comment to
Seller with respect thereto. If Buyer determines it should intervene in any
proceeding before the PUC in which Buyer's position is or may be different from
the Seller's or the Company's, Seller will not, and will cause the Company not
to, without waiving any other rights related thereto, oppose Buyer's
intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of the Company or pursuant to any Contract,
Seller will cause the Company not to (i) enter into or amend any employment
agreement with any individual that will become a Transferred Employee, or enter
into or amend any union agreement or commitment (including any new commitment
to pay retirement or other benefits, or amendments to the Company's retirement
plans), (ii) effect any net increase over five percent (5%) since the Execution
Date in the number of employees of the Company who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under any plans
concerning employee benefits or increase the general rates of compensation of
the Transferred Employees, or change the manner by which compensation
(including fringe benefits) is determined and paid to any Transferred Employee.
(f) Seller will cause the Company not to engage in any intercompany
transactions with any Affiliate thereof, except for transactions consistent
with past practice.
(g) Seller shall cause the Company to maintain the Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to take
any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate with
any other person or entity or acquire a material amount of assets of any other
person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital expenditure
plans which Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the parties agree
that when such expenditures have been incurred they will constitute an addition
to a component of Net Telecommunications Plant thereby becoming subject to
Section 3.2(c). Seller agrees to cause the Company to use its best efforts
substantially to complete such plans within the projected time schedules;
provided, that the Company will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the prior
written consent of Buyer. All construction work that is in progress on the
Effective Date will be accounted for by identifying and accruing all associated
time reporting, material invoices or contractor invoices inputted or received
on or before the Effective Date, and all payments therefor shall be the
responsibility of the Company and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the Property,
Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed One Million Six Hundred Five Thousand Five
Hundred Fifty Dollars ($1,605,550.00), either party may, by written notice to
the other party (the "Casualty Termination Notice") within thirty (30) days
after the date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed One
Million Six Hundred Five Thousand Five Hundred Fifty Dollars ($1,605,550.00),
or the Casualty Termination Notice is not given by either party, then Seller,
within forty-five (45) days after the damage or destruction, shall agree in
writing to take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property;
or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain as
a substitute therefor an equivalent item or items of Property if the Damaged
Property is personal property, and Real Property if the Damaged Property is
Real Property, but only if such substituted personal property or Real Property
is satisfactory to Buyer, and the Company will be entitled to make all claims
related to the Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the manner contemplated by this
Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property,
and the Purchase Price Adjustment contemplated by Section 3.2(a)(2) will be
made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 Settlements and Cost Studies. The parties agree that, with respect
to all toll revenues, settlements, pools, separations studies, Universal
Service Fund payments or similar activities, Seller shall receive the benefit
or suffer the burden of the results of any such activities that are related to
the conduct of the Business or the ownership or operation of the Company on or
before the Effective Date.
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing Corporation.
The Directory Publishing Agreement dated as of November 15, 1994, by and
between Company and ALLTEL Publishing Corporation (the "Directory Publishing
Agreement") is an Excluded Contract on Schedule 11.22(h), except as hereinafter
provided. Within thirty days after the Execution Date, Buyer shall cause its
existing directory provider to indicate in writing whether it will provide
directory production services to the Company, as of the Effective Date (or as
of such later date as described below) with regard to all of the Exchanges on
the same terms and conditions as it is presently providing such services to
Buyer, and Buyer shall inform Seller within such thirty day period of Buyer's
existing telephone directory provider's written intention. If Buyer's existing
directory provider's indication is that it will not provide directory
publication services for all of the Exchanges on the same terms and conditions
that it is presently providing such services to Buyer, then the Directory
Publishing Agreement shall be deemed to become a Contract for the purposes of
this Agreement. Promptly, thereafter, the Buyer and ALLTEL Publishing
Corporation shall agree to meet in good faith to negotiate any necessary
amendments to the Directory Publishing Agreement, to be effective as of the
Effective Date, to provide for a retention rate equal to or greater than the
higher of (x) 60% or (y) the retention rate provided for in any substantially
similar directory publishing agreement between ALLTEL Publishing Corporation
and a non-Affiliate of ALLTEL Publishing Corporation that was entered into
within 18 months prior to the Effective Date. If Buyer's existing directory
provider indicates that it will provide directory publication for all the
Exchanges, as provided above, the Directory Publishing Agreement shall remain
in effect as to the directory of each of the Exchanges for which (i) the
directory is scheduled to be or is published prior to the Effective Date or
(ii) the canvass for the directory has begun prior to the Effective Date and it
is scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not begin providing
directory publication services for such Exchange until canvass and production
begins for the next succeeding directory related to such Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
provider indicates that it will provide directory publication for all of the
Exchanges, as provided in Section 11.12.1 of this Agreement, Seller and Buyer
agree to cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the Seller
even if in the possession of a third party (the "Directory Records") related to
directories of the Exchanges that are published by Seller or its Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production functions
of any directories related to the Exchanges that are scheduled to begin
canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the other
reasonable access to such documentation, reports and accounting records related
to directory publication as may be necessary to insure a proper transition of
directory publication in accordance with the terms of such agreements in effect
on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Company's Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate in
good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any directories
that will be canvassed and published by Buyer's existing directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing, use
their best efforts to allow Buyer to negotiate, on behalf of the Company, a
billing and collection agreement ("B&C Agreement") reasonably satisfactory to
Buyer with each interexchange carrier ("IXC") and each local exchange carrier
("LEC") for which the Company provides, on the Execution Date, billing and
collection services in any Exchange (each such IXC or LEC is hereinafter
referred to as a "Carrier"). Seller and Buyer shall cooperate with each other
and make available to each other all documents and records relevant and
necessary to allow the Company to finalize negotiations of B&C Agreements, as
necessary, and to perform such B&C Agreements after the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (such as Northern Telecom and Stromberg-Carlson;
collectively "Equipment Manufacturers") as Buyer may request, covering such
software license agreements and other agreements as are necessary to enable the
Company after the Effective Date to operate the equipment manufactured and sold
by the Equipment Manufacturers included in the Property in substantially the
same manner as operated by the Company prior to the Effective Date. The
agreements shall contain material terms and conditions (including license and
warranty, but not necessarily including pricing) that are substantially the
same as those provisions in the corresponding agreements between the Company
and the Equipment Manufacturers as of the Effective Date. Buyer understands
and agrees that the price and fee provisions of such agreements will be as
negotiated between Buyer, on behalf of the Company, and the Equipment
Manufacturers. The above obligation of Seller shall be expressly conditioned
upon the acceptance by Buyer, on behalf of the Company, of all material
obligations accepted by Seller in such corresponding agreements. It is the
responsibility of Buyer, on behalf of the Company, to enter into appropriate
agreements with the Equipment Manufacturers in respect of service, support,
training, maintenance, and future development (hardware and software) for the
Property, such agreements to include terms and conditions agreed to between
Buyer, on behalf of the Company, and the Equipment Manufacturers. Seller
agrees to assist Buyer, on behalf of the Company, in obtaining the Equipment
Manufacturers' consent, if necessary, to enable the Company after the Effective
Date to avail itself of all training credits remaining at the Effective Date on
Property furnished by the Equipment Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third parties
relate both to the Property and the Excluded Property. Seller agrees to use
its best efforts to assist Buyer in obtaining, on behalf of the Company,
contractual arrangements with such third parties relating to the Property,
which arrangements will be reasonably satisfactory to Buyer; provided that
neither the Company nor any Affiliate of the Company shall be obligated under
this Section 11.12.5 to make any payment to any such third party unless such
payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company to
retain the Company Books and Records, in either case, until the shorter of the
date that other party consents in writing to their destruction or the seventh
anniversary of the Effective Date. Each party shall provide full and free
access to the Company Books and Records and Retained Books and Records, as the
case may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and Records
are required to be retained. Either party may make copies of any such Books
and Records as it deems desirable, at its own expense. After the Effective
Date, upon reasonable notice, Seller shall provide Buyer and the Company with
reasonable assistance in locating any of the Company's Original Cost Documents
which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver (at
its expense) to Buyer a preliminary title binder (on a standard form reasonably
acceptable to Buyer), issued by Lawyers Title Insurance Company or another
title insurance company reasonably acceptable to Buyer, with respect to all
Real Property included in the Property and in which the Company purports to own
fee title. Such title binders shall be in form, substance and amount
reasonably satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as set forth below) and shall be current as of a
date no earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each policy
shall equal the dollar value set forth on the Company's continuing property
records list as of December 31, 1993 for land and buildings. Such title
binders shall reflect that the Company is vested with good, fee simple,
marketable and insurable title to such Real Property, subject only to (i)
standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v) Leases
and (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby (collectively, the "Permitted Exceptions"). If a preliminary
title binder indicates an exception other than a Permitted Exception that would
impair marketability in any material respect, Seller shall, at its expense,
cause such exception to be removed on or before the Effective Date. With
respect to each parcel of Real Property covered by a preliminary title binder,
Seller shall deliver to Buyer (at Seller's expense and on or prior to sixty
(60) days before the Effective Date) a certified current boundary survey
showing (x) access to the property and (y) all improvements on the property and
any encroachments across the property line by any improvements of the Company
or owners of adjacent property and (at Seller's expense and within sixty (60)
days after the Effective Date) owner's title insurance policies for the Real
Property (ALTA Owners Policies where available but based upon boundary surveys
as set forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer to
insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by the
sale. All reasonable costs and expenses related to such insertion and delivery
shall be borne and paid by the Company. Other means of notifying subscribers
may be employed by either party, at the expense of the initiating party, but in
no event shall any notification be initiated without the prior consent of the
other party (which consent shall not be unreasonably withheld) or earlier than
three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as otherwise provided in Section
11.24, Seller shall have a period of ten (10) business days after the Execution
Date (the "Supplemental Schedule Period") to supplement or otherwise modify the
Schedules to this Agreement by delivering to Buyer, within the Supplemental
Schedule Period, a substitute schedule or schedules (collectively, the
"Supplemental Schedules"), bearing the legend "This Schedule _, dated
_______________, is executed and delivered in accordance with Section 11.20 of
the Stock Purchase Agreement, dated as of November 28, 1994 which shall be duly
executed by Seller and submitted to Buyer. Buyer shall have a period of ten
(10) business days after the expiration of the Supplemental Schedule Period to
review the Supplemental Schedules and within such ten (10) business day period
notify Seller in writing (which writing may be transmitted by facsimile) of any
objections thereto. If Buyer's objections are not resolved to the satisfaction
of Buyer within five (5) days of such notification, Buyer may terminate this
Agreement, effective immediately upon written notification of that termination.
In the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of any
changes in the Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or covenants
hereunder, the Supplemental Schedules provided by Seller shall be deemed
Schedules for all purposes.
11.21 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC Licenses, as described in Section 5.4, during
the period from the Execution Date until the Effective Date, neither party
shall file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges shall
remain in the Natural Exchange Carrier Association Tariff FCC No. 5; provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5 after
the Effective Date only for so long as Buyer, in its sole discretion, shall
determine.
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall take,
and shall cause the Company to take, all action necessary to effect, on or
prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate Receivables")
shall be netted against all "Advances and Notes-Parent Company" (item 2 -
Liabilities on the Company's Balance Sheet), "Accounts Payable-Affiliates"
(item 5 - Liabilities on the Company's Balance Sheet), "Dividends Accrued -
Affiliates" (item 10 - Liabilities on the Company's Balance Sheet) and
"Interest Accrued - Alltel" (item 12 - Liabilities on the Company's Balance
Sheet) (collectively, "Affiliate Payables"). To the extent there is a net
excess of Affiliate Receivables, a cash payment or payments will be made to the
Company which cash will then be disposed of by the Company, and to the extent
there is a net excess of Affiliate Payables, such Affiliate Payables will be
contributed to the Company as a contribution to the Company's capital, and take
any other action necessary, such that the balances of each of the Affiliate
Receivable and Affiliate Payable accounts, and of any other intercompany
accounts, as of the Effective Date will be zero.
(c) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 - Assets
on the Company's Balance Sheet) and all "Investments in Affiliates" (item 14 -
Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and all "Unamortized Debt Expense" (Item
16 - Assets on the Company's Balance Sheet), except to the extent such
unamortized debt expense relates to debt which is to remain outstanding
immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets on the
Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, (i) all "Other Current Assets" (item 10 - Assets
on the Company's Balance Sheet) to the extent such other current assets
represent cash accounts, and (ii) all "Other Non-Current Assets" (item 19 -
Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's interest
in any business other than the Business, and those other assets, including
agreements and contracts ("Excluded Contracts"), set forth on Schedule
11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial Accounting
Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income (item
8-Liabilities on the Company's Balance Sheet) shall be zero as of the Effective
Date.
(k) The balance in the Company's Notes Payable - Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding (item
4 - Liabilities on the Company's Balance Sheet), Other Current Liabilities
(item 14 - Liabilities on the Company's Balance Sheet) and Dividends Accrued -
Other (item 11 - Liabilities on the Company's Balance Sheet) accounts shall be
zero as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet), and Interest
Accrued - Other (item 13 - Liabilities on the Company's Balance Sheet), to the
extent each of such amounts relate to debt which is not to remain outstanding
immediately after the Effective Date, shall be zero as of the Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section 11.23.1,
Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or governmental
charges imposed by any taxing jurisdiction (but not including Income Taxes, as
hereinafter defined, which shall be paid by Seller), and all recording or
filing fees, notarial fees and other similar costs of Closing with respect to
the transfer of the Shares or otherwise on account of this Agreement or the
transactions contemplated herein (but not including any transactions
contemplated by this Agreement to be effected pursuant to the transactions
contemplated by Section 11.22 or otherwise between Seller and the Company,
which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) for all periods
ending on or before or which include the Effective Date, all items of income,
gain, loss, deduction, and credit or other items (collectively "Tax Items")
attributable to the operations of the Company during such periods or portions
thereof determined by an interim closing of the books as of the Effective Date.
Seller will sign and file timely all such Tax Returns with the appropriate
United States, state and local Governmental Authorities. Buyer will provide or
cause to be provided any consent request to file such Tax Returns on behalf of
the Company. Seller will make all payments shown thereon as owing with respect
to any such Tax Returns.
(c) With respect to any taxable period that would otherwise include
but not end on the Effective Date, to the extent permissible pursuant to
applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income Tax
Returns (other than Tax Returns described in Section 10.5.1(b)) for the Company
required to be filed with the appropriate United States, state, and local
Governmental Authorities for any taxable period that ends on or before the
Effective Date that have not been filed prior to the Effective Date. Seller
will sign and file timely all such Tax Returns with the applicable Governmental
Authority and make all payments shown thereon as owing with respect to such Tax
Returns. If requested by Seller, Buyer will deliver or cause the Company to
deliver to Seller a power of attorney authorizing Seller to sign such Tax
Returns. Notwithstanding the foregoing, if Seller is legally precluded from
filing any such Tax Return, Buyer shall sign such Tax Return. Seller shall
deliver a copy of each such Tax Return to Buyer within 10 days prior to filing
such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed all
Tax Returns for the Company that are required to be filed with the appropriate
United States, state, and local Governmental Authorities for any taxable period
which begins before and ends after the Effective Date. In the case of Income
Taxes, Buyer shall cause such Tax Return to be prepared and shall cause to be
included in such Tax Return all Tax Items required to be included therein.
Buyer shall determine (by an interim closing of the books as of the Effective
Date) the portion, if any, of the Income Tax due with respect to the period
covered by such Tax Return which is attributable to the Company for a Pre-
Effective Date Taxable Period (as hereinafter defined). At least 15 days prior
to the due date (taking into account all extensions of due date) of such Tax
Return, Buyer shall deliver to Seller a copy of such Tax Return and of its
determinations. If the amount reflected as a liability for Income Taxes on the
Tax Schedule less Prior Reimbursements (as hereafter defined) is less than the
amount of Income Tax so determined to be attributable to the Pre-Effective Date
Taxable Period, Seller shall pay to Buyer the amount of such shortfall not less
than 5 days prior to the due date (taking into account all extensions of due
dates) of such Tax Return (or the due date of the applicable estimated Tax
payments, if earlier). If the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period is less than the amount
reflected as a liability for Income Taxes on the Tax Schedule, to the extent
not previously paid to Seller or the applicable Governmental Authority by the
Company and subject to Section 11.23.1(f), Buyer will pay to Seller the amount
of such excess not less than 5 days prior to the due date (taking into account
all extensions of due dates) of such Tax Return (or the due date of the
applicable estimated Tax payments, if earlier). As used in this Agreement,
"Pre-Effective Date Taxable Period" means all or a portion of (i) any taxable
period up to and including the Effective Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company arising on or before, or existing as of, the
Effective Date. As used in this Agreement, "Income Taxes" means all Taxes
measured in whole or in part on or by net income imposed by the United States,
any state of the United States or any political subdivision thereof, and will
include any such Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as a
liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that have
previously been (A) paid by Buyer (or by the Company at the Buyer's direction
or consent) to Seller pursuant to Section 11.23.1(b), Section 11.23.1(d) or
Section 11.23.1(e) or (B) paid by Buyer or the Company to Seller or to the
applicable Governmental Authority with respect to Income Taxes properly
attributable to Pre-Effective Date Taxable Periods that are reflected on Tax
Returns described in Section 11.23.1(b), Section 11.23.1(d) or Section
11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax Returns
that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to such
information and personnel as Seller may require in order to properly prepare
such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable Governmental Authority) received by Buyer after the Effective
Date and attributable to Taxes paid by Seller or the Company (or any
predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of any
Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives or
is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund together
with any interest received from or credited thereon the applicable Governmental
Authority, net of any Taxes imposed upon Seller or any affiliate by reason of
the receipt of such refund, credit or interest (calculated at the maximum
statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of state
or local Law) with respect to the purchase of the Shares hereunder. Both
Seller, as the common parent of the affiliated group of corporations (which
includes the Company) that file a consolidated federal income Tax Return and
Buyer are eligible to and will make a timely and effective election under
Section 338(h)(10) of the IRC (and any comparable provision of state or local
Law) with respect to such purchase (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
Law, the "Section 338(h)(10) Elections"). To facilitate such election, within
thirty (30) days of the Closing, Buyer will deliver to Seller a completed
Internal Revenue Service Form 8023 and the required schedules thereto and any
similar forms under applicable state or local Law (the "Forms") with respect to
Buyer's purchase of the Shares, which Forms shall have been duly executed by an
authorized person for Buyer. Provided that the information on such Forms is,
in the reasonable determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, cause such Forms to be duly executed by
an authorized person for Seller and deliver such Forms to Buyer. If any
changes or supplements are required to the Forms as a result of information
that is first available after the Closing, Seller and Buyer will promptly agree
upon and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates to
take, any action to modify or revoke the elections contained in or the content
of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any Pre-
Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii) joined
in the filing of a combined or unitary Tax Return with the Company on or prior
to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a), any
Taxes attributable to the transactions contemplated by this Agreement; and
(ii) Any breach of any representation, warranty or covenants of
Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a result
of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of the
Company which Taxes are not attributable to any Pre-Effective Date Taxable
Period; and
(ii) Any breach of any representation, warranty or covenant of
Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the indemnification
of a party under this Section 11.23.2 (referred to herein as a "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Section 11.23.2 to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 11.23.2(c)(i) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than 5 days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay the
Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable Law) after the
giving of the notice required by Section 11.23.2(c)(i), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or decree
of a court or other tribunal or a final and binding settlement with an
administrative agency having jurisdiction thereof, the Tax Indemnified Party
shall promptly repay to the Tax Indemnifying Party the amount advanced to the
extent of any refund received by the Tax Indemnified Party with respect to a
claim together with any interest received thereon from the applicable
Governmental Authority and any recovery of legal fees from such Governmental
Authority, net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated at the
maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding, the
representations, warranties, covenants, agreements, rights and obligations of
the parties hereto with respect to any Tax covered by this Agreement shall
survive the Effective Date and shall not terminate until sixty days after the
expiration of the statute of limitations (including extensions) applicable to
such Tax.
11.24 Post-Execution Lease and Contract Review. Buyer shall have a period
of forty-five (45) calendar days after the Execution Date to review the Leases
and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify
Seller in writing (which writing may be transmitted by facsimile) of the
identity of those Leases and Contracts that Buyer reasonably believes are
material to the operation of the Business as a whole or any significant part of
the Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent as a condition to the transfer
of control of the Company to Buyer as a result of Buyer's purchase of the
Shares, before the Effective Date can occur. If Buyer does not notify Seller
in writing within such forty-five (45) calendar day period of the identity of
the material Leases and Contracts requiring consent, then Buyer shall be deemed
to have agreed that none of the Leases and Contracts which are listed on
Schedules 9.1.9 and 9.1.13 require consent, in accordance with Section 7.1.6,
before the Effective Date can occur. If Buyer does notify Seller in writing
within such forty-five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a period of ten
(10) business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile) of any objections thereto.
Thereafter, Buyer and Seller shall negotiate in good faith and agree in writing
as to the identity of those Leases and Contracts which are material to the
operation of the Business as a whole or any significant part of the Property
and which by their terms will require Seller, in accordance with Section 7.1.6,
to obtain a third party consent as a condition to the transfer of control of
the Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in a separate agreement,
entitled Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as to
time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination Date. Any claim for indemnification with respect to any alleged
breach of any representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts relating thereto, which notice is given prior to the Termination Date,
may not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty will be deemed
to have been properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3,
11.6, 11.7, 11.10, 11.12, 11.13, 11.16 and Articles 16 and 17 and in the
Employee Transfer Agreement, will survive the Closing and remain in effect
indefinitely. Covenants regarding Taxes shall survive as set forth in Section
11.23.2(d). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Effective Date and any claim
following the Effective Date for an alleged breach of any such covenant may not
be pursued, and is irrevocably waived, upon the occurrence of the Effective
Date, except that Buyer may make a claim for Seller's breach of the covenants
contained in Section 11.5 at any time within eighteen months after the
Effective Date. The immediately preceding sentence shall not apply to, or
limit to preclude, a party's rights and remedies if the sale contemplated by
this Agreement is not concluded as a result of the other party's breach of this
Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, and
(iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in connection
with any actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expenses, in any such case (x) reduced by the
amount of insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one hand,
and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. Without limiting the foregoing, as a
material inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under the common law
or federal or state securities, trade regulation or other laws, by reason of
the liabilities and obligations, and any breach of the representations,
warranties or covenants, referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and conditions of this
Article 13, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section 9.2.5)
until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds Eighty Thousand Two
Hundred Seventy Seven Dollars ($80,277.00) and then only to the extent of the
excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32 and 9.1.33) and of Buyer under Section 13.3(b)(i)
(except with respect to indemnification for a breach of the representations
contained in Section 9.2.5) will not exceed the sum of Two Million Four Hundred
Eight Thousand Three Hundred Twenty Five Dollars ($2,408,325.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), directors, officers, agents and
representatives from all Indemnifiable Losses relating to, resulting from or
arising out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee Transfer
Agreement, except for any such breach of covenants which was specified on
Seller's Closing Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted, or
sought before or after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business (including
contractual obligations in connection with sales or transfers of assets made by
the Company prior to the Effective Date), or the ownership or operation of the
Business, on or prior to the Effective Date, regardless of whether known or
unknown, asserted or unasserted, on the Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct of
the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect to
the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10; and
(iii) All liabilities, responsibilities and obligations arising out of
or related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation, claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the Company
Date to the extent Buyer receives a Purchase Price adjustment in its favor
pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) any Third Party Claim, filed, asserted, or sought
after the Effective Date, in respect of the operations of the Company or the
conduct of the Business or any part of the Business or the ownership or
operation of the Company or the Business, after the Effective Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23 and
Article 14, respectively, and are not addressed, limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action, proceeding, or investigation by any
entity or person that is not a party to this Agreement or an Affiliate of such
a party (a "Third Party Claim") against such Indemnitee, with respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Article 13 to the extent the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 13.
(c) If after the making of any Indemnification Payment the amount of
the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of
the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
result of the environmental due diligence authorized by this Section 14.1 will
be subject to the terms and conditions of the Confidentiality Agreement, except
as otherwise expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer's environmental consultant(s) and shall treat all such
information in accordance with the procedures of Section 14.1.5(c). Within
thirty (30) days after the Execution Date (the "Environmental Data Delivery
Date"), Seller will provide to Buyer copies of all surveys and reports in
Seller's or the Company's possession concerning the existence or possible
existence of asbestos or materials containing asbestos relating to any of the
Real Property, a list of all underground storage tanks which to Seller's or the
Company's knowledge are located on, or have been removed within the last three
years from, any Real Property owned or real estate leased or operated by the
Company in connection with the Business and any other reports, studies or
documents in Seller's or the Company's possession relating to the Company's
potential liability under any Existing Environmental Requirements. The parties
further agree that, if Seller discloses the existence or suspected existence of
materials containing asbestos with respect to a given parcel of Real Property
and the asbestos does not exceed applicable limits, if Buyer desires to make
renovations or structural changes to the property after the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer in writing of
Seller's objection (which must be for good cause) and substantiate the basis
for that objection. If Seller does not object for good cause and substantiate
that objection within said five (5) business day period, Seller shall be deemed
to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
assessment activities of the Property, including inspecting individual sites,
submitting environmental questionnaires to Seller and the Company and reviewing
existing environmental reports, correspondence, permits and related materials
regarding the Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may be,
but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not limited
to, the taking and analysis of soil, surface water and groundwater samples,
testing of buildings, drilling wells and taking soil borings) after first
conducting a Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the Property, Buyer must notify Seller of its desire at least
five (5) business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding such sampling
or intrusive testing. If Seller does not notify Buyer in writing of Seller's
objection to such proposed sampling or testing within five (5) business days
after receipt of such notice, Seller shall be deemed to have consented to the
proposed sampling or testing. Seller shall not unreasonably object to Buyer's
request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental Data")
within three (3) business days of Buyer's receipt of such data and shall
promptly provide Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during the sampling
or intrusive testing of a particular site; provided, however, that Seller shall
have no obligation to Buyer to take any action whatsoever regarding such
samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Company or the Property
only after first notifying the Seller, and without such notice at any time
after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders, penalties, fines,
costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Property and resulting
from any act or omission of Buyer or its environmental consultant(s) provided
that Buyer shall not be liable for any Environmental Liabilities incurred by
any such party merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property do
not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to the
extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than Six Hundred Forty Two Thousand Two Hundred Twenty
Dollars ($642,220.00) (the "Environmental Liabilities Amount") To be
effective, any such conditional termination of this Agreement must be delivered
in writing to Seller, which writing must specifically acknowledge that the
termination is subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of the
sale contemplated by this Agreement all in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but the
Company fails to perform its obligations thereunder in full on or before the
Closing (subject to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and unconditional unless
the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Property or with respect
to the Company are less than the Environmental Liabilities Amount in the
aggregate, Seller agrees, to cause the Company at the Company's sole cost, to
either (i) make a mutually satisfactory adjustment to the terms and conditions
of the transactions contemplated by this Agreement prior to the Closing in
accordance with Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate those
Environmental Liabilities based upon Existing Environmental Requirements in
accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the
cost of conducting such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under this Section
14.1.7(c) shall be to pay the Environmental Liabilities Amount toward the
completion of such response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the Environmental
Liabilities Amount on such response and remediation action (such expenses to be
verified by Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the Environmental
Liabilities Amount, Buyer shall sign and deliver to Seller at the Closing a
release of Seller from any further liability to Buyer for such remediation and
shall indemnify Seller against any liability for such Environmental Liabilities
or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the Closing
until sufficient response and remediation has been completed so that the
remaining response and remediation is equal to or less than the Environmental
Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
indemnification provided under this Section 14.2 shall be the sole remedy for
allocating responsibility regarding environmental matters related to the sale
contemplated by this Agreement, the Company, the Business and the Property of
which Buyer does not receive notice prior to the Closing (either from Seller in
Schedule 14.3 or pursuant to notice given pursuant to Section 17.1 or in any
written communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by this
Agreement and without further action on the part of such party, shall waive and
release the other party from any and all liability under any other cause of
action at law or in equity concerning the Known Environmental Matters, whether
raised pursuant to (i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation, or (iii) common
law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Environmental Liabilities under Existing Environmental
Requirements arising from acts or omissions occurring with respect to, or from
the use or ownership of, or any condition or circumstance relating to, the
Company or the Property that occurred or arose prior to or on the Effective
Date. The foregoing indemnity in this Section 14.2.2 shall only apply to
matters that do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such indemnification
under this Section 14.2.2 shall be provided only for claims for Unknown
Environmental Matters noticed to the other party pursuant to the procedures of
Section 14.2.3, within eighteen (18) months after the Effective Date. Subject
to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and
hold harmless Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements in
existence now or hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the Property after
the Effective Date, or any condition or circumstance relating to the Company,
the Property or the Business that occurred or arose after the Effective Date on
the Property or in connection with the Company or the operation of the Business
after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including information sufficient
to inform the other party of, and allow such other party to confirm the nature
of, the claim and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2 are required by
Environmental Requirements, as applicable to Buyer, and Existing Environmental
Requirements, as applicable to Seller, and are reasonable and cost-effective.
If the indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree as to
costs or methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent such
damages have been recovered by a third person and are the subject of a Third
Party claim for which indemnification is available under the express terms of
this Article 14. Any indemnifiable claim under this Section 14.2 shall be
reduced to account for any insurance, storage tank fund, or other proceeds
received by the party to be indemnified, as a result of the indemnifiable
losses involved. The parties agree to take all reasonable steps to mitigate
any indemnifiable claim under this Section 14.2, including complying with any
registration and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not exceed
the aggregate amount of One Million Two Hundred Four Thousand One Hundred Sixty
Two Dollars ($1,204,162.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article 14
shall be treated by Buyer and Seller as purchase price adjustments, and Buyer
and Seller shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any adjustment to the basis of any asset
resulting from an adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) if such party shall
not have performed diligently and in good faith the obligations required to be
performed by such party hereunder prior to the date of termination;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8, 17.11,
17.13, 17.14 and Article 16 shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit to
compel compliance with this dispute resolution process, the parties agree to
use the following alternative dispute resolution procedure as their sole remedy
with respect to any controversy or claim arising out of or relating to this
Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party, each
party shall appoint a knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under this Agreement.
The discussions shall be left to the discretion of the representatives. Upon
agreement, the representatives may utilize other alternative dispute resolution
procedures such as mediation to assist in the negotiations. Discussions and
correspondence among the parties' representatives for purposes of these
negotiations shall be treated as confidential information developed for
purposes of settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the arbitration
described below or in any lawsuit. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence
in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
representatives of the parties do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. Either party may demand such
arbitration in accordance with the procedures set out in those rules. The
arbitration hearing shall be commenced within sixty (60) days of the demand for
arbitration and the arbitration shall be held in a mutually agreeable location.
The arbitrator shall control the scheduling (so as to process the matter
expeditiously) and any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this Section
16.3 may be extended upon mutual agreement of the parties or by the arbitrator
upon a showing of good cause. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator determines that
the position taken in the dispute by the non-prevailing party taken as a whole
is unreasonable, the nonprevailing party will bear all such fees and expenses,
and reimburse the prevailing party for all of its reasonable costs and expenses
in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with respect
to the resolution of disputes without litigation shall not apply to any
dispute, controversy or claim arising out of the provisions of Section 11.1, or
the Confidentiality Agreement, or to a party's seeking to proceed under Section
17.14, it being understood and agreed that in the event of a breach by either
party of the provisions of Section 11.1, or the Confidentiality Agreement, or
in the event that a party seeks to proceed under Section 17.14, the non-
defaulting party shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate proceeding, whether
for specific enforcement of any agreement contained in Section 11.1, or the
Confidentiality Agreement or in aid of the exercise of any power granted by
Section 11.1, 17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been given when delivered in person or
dispatched by electronic facsimile transfer (confirmed in writing by certified
mail, concurrently dispatched) or one business day after having been dispatched
for next-day delivery by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or other
forth of release of information concerning this Agreement or the transactions
contemplated hereby that is intended to provide such information to the news
media or the public (a "Press Release"). Neither party shall issue or cause
the publication of any such Press Release without the prior written consent of
the other party; provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such Press Release to the
extent that such action is required by applicable Law or the rules of any
national stock exchange applicable to such party or its Affiliates, in which
case the party wishing to make such disclosure will, if practicable under the
circumstances, notify the other party of the proposed time of issuance of such
Press Release and consult with and allow the other party reasonable time to
comment on such Press Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each party
will pay any expenses (including, without limitation, attorneys' fees) incurred
by it incident to this Agreement and in consummating the transactions provided
for herein. All regulatory filing fees required pursuant to Sections 5.1, 5.4
and 5.5 shall be split equally between the parties. Each party will pay the
appropriate costs and filing fees relating to any other applications required
to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Buyer may not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Seller; provided that
Buyer may assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or indirectly
wholly owned subsidiary of Buyer provided such subsidiary assumes in writing
all of the duties and obligations of Buyer hereunder, but no such assignment
and assumption shall in any way operate to enlarge, alter or change any
obligation of or due to Seller or relieve Buyer of its obligations hereunder
and provided that Buyer agrees to cause such subsidiary to perform each of its
agreements and covenants herein, and shall be jointly and severally liable for
any non-performance thereof. Seller may not assign or delegate any of its
rights or duties hereunder without the prior written consent of the Buyer.
Upon the sale, assignment or transfer by Buyer of the Company, the Business or
the Property to a non-Affiliate of Buyer not in the ordinary course of business
of Buyer, Seller's representations and warranties and indemnification
obligation for breach thereof shall terminate. Any assignment made in
violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean collectively
this document, the Schedules hereto, any agreements expressly incorporated
herein, and the Confidentiality Agreement. This Agreement supersedes and
revokes any prior discussions and representations, other agreements,
commitments, arrangements or understandings of any sort whatsoever, whether
oral or written, that may have been made or entered into by the parties
relating to the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege available to each party at law or in
equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of Delaware
(except that no effect shall be given to any conflicts of law principles of the
State of Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested by one
of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate and make effective the transactions contemplated by
this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or to
this Agreement, (ii) each term defined in this Agreement has the meaning so
assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iii) all
references to the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft of such
provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and remedies
available at law or in equity, any party hereto may pursue, to the fullest
extent available, the remedy of specific performance in order to compel the
other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
ALLTEL CORPORATION:
By: /s/ Max E. Bobbitt
______________________
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS TELECOMMUNICATIONS
COMPANY OF OREGON:
By: /s/ Leonard Tow
Name: Leonard Tow
Title: Chairman of the Board
and Chief Executive Officer
EXHIBIT 10.20
EXECUTION COPY
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "Agreement") is made and entered
into as of the 28th day of November, 1994 (the "Execution Date"), by and
among Citizens Utilities Company of Pennsylvania, a Pennsylvania
corporation ("Citizens"), and Tuolumne Telephone Company, a California
corporation ("Tuolumne").
RECITALS
WHEREAS, Citizens is in the business of providing regulated local
exchange telephone service in certain areas of the State of Pennsylvania;
and
WHEREAS, Tuolumne is in the business of providing regulated local
exchange telephone service in certain areas of the State of California;
and
WHEREAS, Citizens and Tuolumne desire that Citizens exchange its
telephone properties and related assets for Tuolumne's telephone
properties and related assets, upon the terms and conditions set forth in
this Agreement; and
WHEREAS, it is the intent and desire of the parties that the exchange
transaction contemplated by this Agreement constitute a "like-kind"
exchange under Section 1031 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Advanced Billing Amounts is defined in Section 2.4.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
Assumed Liabilities is defined in Section 2.5. 1.
Business means the Citizens Business or the Tuolumne Business, as the
context requires.
Buyer means Citizens in its capacity as transferee of the Tuolumne
Purchased Property from Tuolumne, and Tuolumne in its capacity as
transferee of the Citizens Purchased Property (and the Cash Consideration)
from Citizens, as the context requires.
Citizens Business means the business of providing local exchange and
exchange access telecommunications services and other related regulated
and non-regulated activities, services and products associated with the
Citizens Purchased Exchanges, including without limitation such
unregulated activities, services and products of Citizens conducted,
offered or serviced by the Citizens Transferred Employees or provided or
related to Citizens' subscribers or customers served in or from the
Citizens Purchased Exchanges (such unregulated activities, services and
products are considered an integral part of the Citizens Business for all
purposes of this Agreement).
Citizens Closing Certificate is defined in Section 7.2.1.
Citizens Excluded Contracts is defined in Section 2.4(g).
Citizens Materials and Supplies is the amount set forth on Citizens'
balance sheet as of a date set forth on Citizens' balance sheet as of a
date certain comprising Citizens' Materials and Supplies. Citizens Net
Fixed Assets is the amount set forth on Citizens' balance sheet as of a
date certain comprising Citizens' Net Fixed Assets.
Citizens Net Plant Adjustment means the amount by which the sum of
Citizens Net Fixed Assets and Citizens Materials and Supplies as of the
Effective Date differs from the Citizens June 1994 Base Amount.
Citizens June 1994 Base Amount means the sum of (i) the amount of
Citizens Net Fixed Assets as of June 30, 1994 and (ii) the amount of
Citizens Materials and Supplies as of June 30, 1994.
Citizens Purchased Exchanges is defined in Section 2.2.
Citizens Purchased Property is defined in Section 2.2.
Citizens Real Property is defined in Section 2.2.1.
Citizens Schedules means the schedules prepared by Citizens and
attached to this Agreement.
CERCLA means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities
Company which is attached and incorporated into this Agreement as Schedule
1-1.
Construction Advances is defined in Section 11.11.
Contracts is defined in Section 2.2.2.
Customer Deposits is defined in Section 11.11.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Earned Accounts Receivable is defined in Section 2.4.
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations
(including obligations to respond to, investigate and remediate conditions
caused by any Regulated Material), responsibilities, losses, damages
(including punitive or treble damages), costs and expenses (including
reasonable fees, disbursements and expenses of counsel, experts,
consultants and expert witnesses), fines, penalties, interest or bonds,
based upon any Environmental Requirements of any Governmental Authority,
or as a consequence of (a) the release or threatened release of a
Regulated Material in amounts that require response or remediation into
the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Purchased Property by any person or party or
the conduct of the Business or any part thereof, that does not comply with
Environmental Requirements, or (c) any claim, demand, notice, cause of
action, directive, order, judgment, fine or penalty asserted or sought
under or pursuant to any Environmental Requirements by an entity or person
not a party to this Agreement, to the extent that the condition or
circumstance or event giving rise to the claim, demand, notice, cause of
action, directive, order, judgment, fine or penalty relates to the
ownership or operation of the Purchased Property by any person or party or
the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any Governmental Authority and
all valid and enforceable guidance documents and policies thereof,
relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Regulated Material, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such
as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of or exposure to any Regulated Material in each
case as now amended and as now or hereafter in effect. The term
Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water
Act, the federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the federal Solid Waste
Disposal Act, the federal Toxic Substances Control Act and the federal
Insecticide, Fungicide and Rodenticide Act, each as now amended and as now
or hereafter in effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Net Prorations is defined in Section 3.3(b).
Estimated Cash Consideration is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Excluded Contracts means the Citizens Excluded Contracts or the
Tuolumne Excluded Contracts, as the context requires.
Excluded Property is defined in Section 2.4.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice
president of the entity in charge of a principal business unit, division
or function.
Existing Environmental Requirements means those applicable provisions
of any Environmental Requirements that are both in effect and applicable
to Seller, the Business or the Purchased Property on or prior to the
Effective Date.
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, the PUC, or any other
Governmental Authority, as to which: (a) no request for stay of the action
by the FCC, the PUC, or such other Governmental Authority, as the case may
be, is pending, no such stay is in effect, and if any time period for
filing any request for such a stay is provided by statute or regulation,
such time period has passed; (b) no petition, motion or application for
rehearing, reconsideration, or review, of the action is pending before the
FCC, the PUC, or such other Governmental Authority, as the case may be,
and the time provided for filing any such petition, motion or application
has passed; (c) the FCC, the PUC, or such other Governmental Authority, as
the case may be, does not have the action under reconsideration on its own
motion and the time in which such reconsideration is permitted has passed;
and (d) no appeal to a court, of the FCC's, the PUC's or such other
Government Authority's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal has passed.
Final Net Prorations is defined in Section 3.4.
Final Cash Consideration is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
Law is defined in Section 9.1.4.
Leases is defined in Section 2.3.
Marks is defined in Section 11.1.5.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
Original Cost Documents means all original cost documentation relating
to the Telephone Plant.
Other Assets is defined in Section 2.2.5.
Parent means ALLTEL Corporation or Citizens Utilities Company, as the
context requires.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the California Public Utilities Commission (the "California
PUC") or the Pennsylvania Public Utility Commission (the "Pennsylvania
PUC"), as the context requires.
Purchased Exchanges means the Citizens Purchased Exchanges or the
Tuolumne Purchased Exchanges, as the context requires.
Purchased Property means the Citizens Purchased Property or the
Tuolumne Purchased Property, as the context requires.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under
Environmental Requirements or, as applicable, Existing Environmental
Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Books and Records is defined in Section 2.4(e).
Retained Liabilities is defined in Section 2.5.2.
Secured Indebtedness is defined in Section 5.2.
Secured Parties is defined in Section 5.2.
Seller means Citizens in its capacity as transferor of the Citizens
Purchased Property (and the Cash Consideration) to Tuolumne, and Tuolumne
in its capacity as transferor of the Tuolumne Purchased Property to
Citizens, as the context requires. Seller's Purchased Property, Seller's
Business and similar terms shall refer to the Citizens Purchased Property
or Citizens Business, or the Tuolumne Purchased Property or Tuolumne
Business, as the context requires.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Tax Returns means a report, return or other information statement
required to be supplied to a federal, state or local taxing Governmental
Authority with respect to Taxes, including, where permitted or required,
combined or consolidated returns for any group of entities that includes
Seller.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty,
real and personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll, severance,
recording, ad valorem, gains, value-added, unemployment compensation,
general corporate, profits, registration, unincorporated business,
alternative, social security, estimated, add-on, minimum, privilege or
withholding tax and any interest and penalties and additions to such taxes
(civil or criminal) related thereto or to the nonpayment thereof.
Telephone Plant is defined in Section 2.2. 1.
Third Party Claim is defined in Section 13.4(a).
Transferred Employee is defined in Article II.A of the Employee
Transfer Agreement.
Transferred Books and Records is defined in Section 2.2.3.
Transition Services Agreement is defined in Section 10.1.
Tuolumne June 1994 Base Amount means the sum of (i) the amount of
Tuolumne Net Telecommunications Plant as of June 30, 1994 and (ii) the
amount of Tuolumne Materials and Supplies as of June 30, 1994
Tuolumne Business means the business of providing local exchange and
exchange access telecommunications services and other related regulated
and non-regulated activities, services and products associated with the
Tuolumne Purchased Exchanges, including without limitation such
unregulated activities, services and products of Tuolumne conducted,
offered or serviced by the Tuolumne Transferred Employees or provided or
related to Tuolumne's subscribers or customers served in or from the
Tuolumne Purchased Exchanges (such unregulated activities, services and
products are considered an integral part of the Tuolumne Business for all
purposes of this Agreement).
Tuolumne Closing Certificate is defined in Section 7.2.1.
Tuolumne Excluded Contracts is defined in Section 2.4(g).
Tuolumne Materials and Supplies is the amount set forth on Tuolumne's
balance sheet as of a date certain comprising Tuolumne's Materials and
Supplies.
Tuolumne Net Telecommunications Plant is the amount set forth on
Tuolumne's balance sheet as of a date certain comprising the sum of
Tuolumne's Telecommunications Plant In Service, Plant Under Construction -
- - Short Term, Plant Under Construction -- Long Term, and
Telecommunications Plant -- Other, less Accumulated Depreciation and
Amortization.
Tuolumne Net Plant Adjustment means the amount by which the sum of
Tuolumne Net Telecommunications Plant and Tuolumne Materials and Supplies
as of the Effective Date differs from the Tuolumne June 1994 Base Amount.
Tuolumne Purchased Exchanges is defined in Section 2.2.
Tuolumne Purchased Property is defined in Section 2.2.
Tuolumne Real Property is defined in Section 2.2. 1.
Tuolumne Schedules means the Schedules prepared by Tuolumne and
attached to this Agreement.
Unregulated Business is defined in the definition of Business set
forth in this Article 1.
ARTICLE 2. EXCHANGE OF ASSETS
2.1 Exchange of Assets Subject to the terms and conditions of this
Agreement, on the Closing Date, Tuolumne shall exchange, transfer, assign
and deliver to Citizens, as of the Effective Date, all of Tuolumne's
right, title and interest in and to the Tuolumne Purchased Property, and
in exchange therefor, Citizens shall, on the Closing Date (a) exchange,
transfer, assign and deliver to Tuolumne, as of the Effective Date, all of
Citizens' right, title and interest in the Citizens Purchased Property, in
each case, free and clear of all security interests, liens, or
encumbrances (except for Permitted Exceptions), and (b) pay Tuolumne the
Cash Consideration as set forth in Section 3.1. It is the intent and
desire of the parties that the foregoing transaction constitute a "like-
kind" exchange under Section 1031 of the IRC and the parties agree to
treat this transaction as a "like-kind" exchange under Section 1031 of the
IRC on their respective Tax Returns.
2.2 Purchased Property. For purposes of this Agreement, the
"Citizens Purchased Property" and the "Tuolumne Purchased Property", as
the case may be, shall consist of the Telephone Plant, Contracts and
Leases (to the extent permitted following compliance with Section 5.3),
Transferred Books and Records, FCC Licenses, Non-FCC Authorizations and
Other Assets in effect or owned by Citizens or Tuolumne, as appropriate,
as of the Effective Date that are associated with (i) the telephone
exchanges listed in Citizens Schedule 2.2(a) (the "Citizens Purchased
Exchanges"), in the case of Citizens Purchased Property, and the telephone
exchanges listed in the Tuolumne Schedule 2.2(a) (the "Tuolumne Purchased
Exchanges") in the case of the Tuolumne Purchased Property and (ii) the
Unregulated Business described on Citizens Schedule 2.2(b) with respect to
the Citizens Purchased Property and Tuolumne Schedule 2.2(b) with respect
to the Tuolumne Purchased Property.
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone
Plant" means the Real Property, machinery, equipment, vehicles and all
other assets and properties used, or held for future use, in connection
with the conduct of Seller's Business, including, without limitation, all
improvements, plants, systems, structures, construction work in progress,
telephone cable (wherever located and whether in service or under
construction), microwave facilities (including frequency spectrum
assignments), telephone line facilities, telephones, machinery, furniture,
fixtures, tools, implements, conduits, stations, substations, equipment
(including, without limitation, central office equipment, subscribers'
station equipment and other equipment in general), instruments, house-
wiring connections and all other equipment of every nature and kind owned
by Seller or in which Seller holds an interest (other than as a lessee)
and used in connection with Seller's Business. For purposes of this
Agreement, "Real Property" means the real property owned by Seller and
used in connection with Seller's Business, including, without limitation,
all land, buildings, structures, easements, rights of way, appurtenances,
improvements or privileges located thereon and relating thereto. Without
limiting the generality of the foregoing, the Telephone Plant includes the
assets that would be properly included in the fixed asset accounts
referenced in Part 32 of the FCC's Rules and Regulations (47 C.F.R. Part
32), as such accounts are reflected in Citizens' Schedule 9.1.19 with
respect to Citizen's Telephone Plant and Tuolumne Schedule 9.1.19 with
respect to Tuolumne's Telephone Plant.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means
all agreements that relate to Seller's Business between Seller or any
Affiliate of Seller and (i) Seller's subscribers or customers, or (ii)
other entities or persons who are not Affiliates of Seller and have
business relationships with Seller relating to Seller's Business, except
for the Excluded Contracts (some of which are specifically governed by
other Sections in this Agreement or the Employee Transfer Agreement).
2.2.3 Transferred Books and Records. For purposes of this Agreement,
"Transferred Books and Records" means all of Seller's customer or
subscriber lists and records, accounts and billing records (including a
copy of the detailed general ledger and the summary trial balances, where
available for the past two fiscal years), detailed continuing property
record list, plans, blueprints, specifications, designs, drawings,
surveys, engineering reports, personnel records (where applicable),
Seller's Original Cost Documents (where located in Seller's Purchased
Exchanges but excluding Seller's Retained Books and Records) and all other
documents, computer data and records (including records and files on
computer disks or stored electronically) relating to Seller's Business
(excluding Seller's Retained Books and Records), Seller's Purchased
Property, Seller's Transferred Employees and/or Seller's Assumed
Liabilities except for Seller's Retained Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses"
means all licenses, certificates, permits or other authorizations,
including, without limitation, Section 214 authorizations, where
applicable, granted to Seller by the FCC that are used in the conduct of
Seller's Business.
2.2.5 Other Assets. For purposes of this Agreement, Other Assets
means all of Seller's Non-FCC Authorizations to the extent transferable;
all of Seller's telephone numbers to the extent transferable, Seller's
listings, Seller's telephone directories and Seller's telephone directory
advertisements within such telephone directories, used in the operation of
Seller's Business; all Seller's prepaid expenses relating to such
Business; all of Seller's non-operating plant relating to such Business;
all warranties relating to Seller's Purchased Property, to the extent
transferable and all of Seller's materials and supplies relating to such
Business.
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-
FCC Authorizations" means all licenses, certificates, permits, franchises,
or other authorizations (other than FCC Licenses) granted to Seller by
Governmental Authorities that are used in or relate to the conduct of
Seller's Business (including without limitation those that are listed or
required to be listed on Citizens Schedule 9.1.17(c) with respect to
Citizens and Tuolumne Schedule 9.1.7(c) with respect to Tuolumne).
2.3 Leased Assets. Subject to the provisions of Sections 2.5.2(i)
and 5.3, as of the Effective Date, each Seller shall assign to Buyer all
of its interests, rights, benefits and obligations as lessee with respect
to all real and personal property leases that are necessary or useful in
connection with such Seller's conduct of its Business (the "Leases").
2.4 Excluded Property. The exchange contemplated by this Agreement
shall not include the Excluded Property of either Seller. For purposes of
this Agreement, "Excluded Property" means the following, subject to the
provisions set forth in Article 4 and Sections 11.8, 11.9, 11.11, 11.12.3,
11.12.4, 11.12.5 and 11.13:
(a) Cash, cash equivalents and investments.
(b) All accounts receivable, trade or otherwise (excluding
those related to interexchange carriers), of Seller outstanding as of the
Effective Date relating to Seller's Business (the "Accounts Receivable"),
including, without limitation, (i) any accounts receivable from any
Affiliate of Seller; and (ii) all amounts that have been earned by Seller
in connection with the conduct of Seller's Business whether billed or
unbilled as of the Effective Date (the "Earned Accounts Receivable") which
are addressed under Article 4; excluding, however, all amounts that have
been billed as of the Effective Date by Seller in connection with the
conduct of Seller's Business but are unearned as of the Effective Date,
relating to service after the Effective Date (the "Advanced Billing
Amounts").
(c) All accounts receivable of Seller from interexchange
carriers whether billed or unbilled, relating to Seller's Business which
are outstanding as of the Effective Date.
(d) Seller's interest in any business other than Seller's
Business, including without limitation the cellular telephone business or
personal communication services business, and, in all cases, any
applications or licenses granted with respect thereto.
(e) Subject to Section 2.2.3, the general ledger and all books
and records of Seller relating to (i) Seller's tax returns and tax
records, (ii) the other assets and properties of Seller which are included
in the Excluded Property, (iii) Seller's Retained Liabilities,
(iv) employees of Seller who are not Transferred Employees or (v) subject
to Section 11.13, all of Seller's Original Cost Documents that are not
located in Seller's Purchased Exchanges (collectively, the "Retained Books
and Records").
(f) All trademarks, trade names, trade dress, logos and any
other intangible assets that use or incorporate the word "ALLTEL" or
"CITIZENS" and any other Marks listed on Tuolumne Schedule 11.1.5 or
Citizens Schedule 11.1.5.
(g) The contracts, leases and agreements listed or identified
on Citizens Schedule 2.4(g) (the "Citizens Excluded Contracts"), such
other assets of Citizens which do not relate to the Citizens Business and
which were not included in Citizens Net Fixed Assets as of June 30, 1994,
such other assets, if any, as Citizens lists and identifies on Citizens
Schedule 2.4(g), and such other assets, if any, as may be excluded from
Citizens' Purchased Property in accordance with the provisions of Sections
11.9 or 14.1.7, the contracts, leases and agreements listed or identified
on Tuolumne Schedule 2.4(g) (the "Tuolumne Excluded Contracts"), such
other assets of Tuolumne which do not relate to the Tuolumne Business and
which were not included in Tuolumne Net Telecommunications Plant as of
June 30, 1994, such other assets, if any, as Tuolumne lists and identifies
on Tuolumne Schedule 2.4(g), and such other assets, if any, as may be
excluded from Tuolumne's Purchased Property in accordance with the
provisions of Sections 11.9 or 14.1.7.
(h) Any prepaid taxes or tax refunds relating to Seller's
Purchased Property and Seller's Business for periods on or prior to the
Effective Date.
2.5 Assumption of Liabilities.
2.5.1 Assumed Liabilities. Each Buyer hereby agrees to assume as of
the Effective Date, and to timely perform and discharge after the
Effective Date, and to indemnity Seller against the specific liabilities,
responsibilities and obligations set forth below with respect to Seller's
Purchased Property (the "Assumed Liabilities"):
(a) Conduct of Business after the Effective Date. All
liabilities, responsibilities and obligations relating to, arising out of,
or in connection with, or resulting from the use or ownership of Seller's
Purchased Property after the Effective Date or the conduct of Seller's
Business by Buyer after the Effective Date, including, without limitation,
any liabilities, responsibilities and obligations for Taxes relating to
the conduct of such Business after the Effective Date or the ownership,
use or operation of such Purchased Property after the Effective Date.
(b) Employment Matters. All liabilities, responsibilities and
obligations that are to be assumed by Buyer (or which Buyer may otherwise
be liable for pursuant to applicable law and which are not otherwise
expressly assumed or retained by Seller pursuant to this Agreement) under
the Employee Transfer Agreement.
(c) Environmental Matters. All liabilities, responsibilities
and obligations that are to be assumed by Buyer under Article 14 (or which
Buyer may otherwise be liable for pursuant to applicable law and which are
not otherwise expressly assumed or retained by Seller pursuant to this
Agreement) with respect to Environmental Liabilities.
(d) Contracts, Leases. All liabilities, responsibilities and
obligations that arise after the Effective Date in connection with or
relating to the performance or nonperformance of the Contracts and the
Leases, after the Effective Date.
(e) Joint Construction Projects. All liabilities,
responsibilities and obligations to third parties that arise or relate to
the period after the Effective Date and that relate to arrangements and
commitments permitted hereunder between Seller and a third party for the
construction of mutual transmission facilities between various switching
points (the "Joint Construction Projects"), which Joint Construction
Projects are listed on Citizens Schedule 2.5.l(e) with respect to the
Citizens Business and Tuolumne Schedule 2.5.1(e) with respect to the
Tuolumne Business.
(f) Construction in Progress. All liabilities,
responsibilities and obligations to third parties that arise or relate to
the period or are incurred after the Effective Date that relate to
Seller's Purchased Property and Seller's Business, and relate to Seller's
engineering and construction services or similar services which are
required to complete the construction and other capital expenditure
projects referred to in and permitted by Section 11.5.
(g) Customer Deposits and Construction Advances. All
liabilities, responsibilities and obligations relating to Customer
Deposits and Construction Advances that relate to Seller's Purchased
Property and Seller's Business.
(h) Advanced Billing Amounts. All liabilities,
responsibilities and obligations relating to Advanced Billing Amounts that
relate to Seller's Purchased Property and Seller's Business.
(i) Assumed Long Term Debt. With respect to Citizens only, all
liabilities, obligations and responsibilities relating to long term debt
assumed by Citizens, if any, pursuant to Section 5.2(a) including, without
limitation, indebtedness to Secured Parties.
2.5.2 Retained Liabilities. Each Seller shall retain and have full
responsibility and obligation with respect to, shall timely perform and
discharge, and shall indemnify Buyer against, all liabilities,
responsibilities and obligations of Seller relating to, arising out of, or
in connection with, or resulting from the use or ownership of Seller's
Purchased Property on or before the Effective Date or the conduct of
Seller's Business by Seller on or before the Effective Date, including any
liability, obligation or debt, known or unknown, fixed, contingent or
otherwise, not specifically assumed by Buyer pursuant to Section 2.5.1 or
any other provision of this Agreement, and excluding those liabilities,
responsibilities and obligations that are specifically assumed by Buyer
pursuant to Section 2.5.1 or any other express provision of this Agreement
(the "Retained Liabilities"). Without limiting the generality of the
foregoing, but subject to liabilities that are specifically assumed by
Buyer pursuant to Section 2.5.1 or any other express provision of this
Agreement, the Retained Liabilities shall include the following
liabilities, responsibilities and obligations of Seller:
(a) All liabilities, responsibilities and obligations relating
to the use or ownership of Seller's Purchased Property on or before the
Effective Date or to the conduct of Seller's Business on or before the
Effective Date.
(b) All current liabilities of Seller as of the Effective Date,
including, without limitation, trade, interest and other payables.
(c) All long-term debt of Seller not assumed by Buyer pursuant
to Section 5.2(a), including, without limitation, indebtedness to the
Secured Parties.
(d) Subject to Sections 11.8 and 11.17, all Taxes of Seller or
its consolidated or combined group relating to the conduct of Seller's
Business on or before the Effective Date or the use, ownership or
operation of Seller's Purchased Property on or before the Effective Date.
(e) Except as otherwise provided in the Employee Transfer
Agreement, all liabilities and obligations arising on or before the
Effective Date with respect to Seller's Transferred Employees, and any
such liabilities or obligations that arise after the
Effective Date to the extent that such liabilities and obligations relate
to facts, circumstances or conditions arising or occurring on or before
the Effective Date.
(f) All liabilities, responsibilities and obligations arising
out of or related to the litigation, claims and other matters set forth in
Seller's Schedule 9.1.16 and any other litigation claims, actions,
lawsuits or legal proceedings based on facts, circumstances or conditions
arising, existing or occurring on or before the Effective Date, regardless
of whether known or unknown, asserted or unasserted, as of the Effective
Date.
(g) All liabilities, responsibilities and obligations arising
on or before the Effective Date relating to collective bargaining or other
union contracts with respect to Seller's Business.
(h) All liabilities, responsibilities and obligations with
respect to Seller's Excluded Property and Seller's Excluded Contracts.
(i) All liabilities and obligations arising on or before the
Effective Date with respect to Seller's Contracts and Seller's Leases.
(j) All liabilities and obligations for prior period
adjustments of revenues from Seller's Business and for any customer
overbillings and prospective refunds of overcharges (including rates
collected under bond but excluding prospective rate reductions) occurring
or relating to the period prior to the Effective Date, including without
limitation all of Seller's toll revenues, settlements, pools, separations
studies or similar activities for which Seller is responsible pursuant to
Section 11.10, but excluding any amounts which relate to Advanced Billing
Amounts.
Notwithstanding the foregoing, Buyer's and Seller's responsibility for
Environmental Liabilities shall be governed by the provisions of Article
14.
ARTICLE 3. CASH CONSIDERATION
3.1 Cash Consideration.
(a) In consideration of the exchange of the Purchased Property
as described in Section 2.1 and the other undertakings of Tuolumne in this
Agreement, and subject to and in accordance with the other terms and
conditions of this Agreement, on the Closing Date, Citizens shall pay to
Tuolumne the sum of Five Million Two Hundred Thirty-Six Thousand Dollars
($5,236,000.00), subject to adjustment as provided in Section 3.2 (the
"Cash Consideration").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Tuolumne, in immediately available funds in U.S. Dollars, the Estimated
Cash Consideration, plus or minus, as the case may be, the Estimated Net
Prorations. Such delivery shall be made by bank wire transfer to an
account that Tuolumne shall designate at least two (2) business days prior
to the Effective Date.
(ii) Citizens will use its best efforts to make the wire
transfer of the Estimated Cash Consideration, plus or minus, as the case
may be, the Estimated Net Prorations, by 12:00 noon (Eastern Time) on the
Closing Date, provided that all conditions to Closing set forth in
Article 7 have been satisfied, or waived by the appropriate party, before
such time.
3.2 Adjustments to Cash Consideration.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable,
the Cash Consideration will be adjusted, plus or minus, as the case may
be, by the reasonable estimate of the cost to repair or replace the
Damaged Property, as determined by the mutual agreement of Citizens and
Tuolumne.
(2) If the provisions of Section 11.9(c)(ii) are
applicable, the Cash Consideration will be adjusted, plus or minus, as the
case may be, by the reasonable estimate of the cost to replace the Damaged
Property, as determined by the mutual agreement of Citizens and Tuolumne
(b) Adjustment Regarding Customer Deposits and Construction
Advances.
(1) If the amount of Customer Deposits and Construction
Advances as of the Effective Date with respect to the Citizens Business
exceeds the amount of Customer Deposits and Construction Advances as of
the Effective Date with respect to the Tuolumne Business, the Cash
Consideration will be increased by the amount of such excess.
(2) If the amount of Customer Deposits and Construction
Advances as of the Effective Date with respect to the Tuolumne Business
exceeds the amount of Customer Deposits and Construction Advances as of
the Effective Date with respect to the Citizens Business, the Cash
Consideration will be decreased by the amount of such excess.
(c) Adjustment Regarding June 1994 Base Amount.
(1) If the amount of the Tuolumne Net Plant Adjustment
exceeds the amount of the Citizens Net Plant Adjustment, the Cash
Consideration will be increased by the amount of such excess.
(2) If the amount of the Citizens Net Plant Adjustment
exceeds the amount of the Tuolumne Net Plant Adjustment, the Cash
Consideration will be decreased by the amount of such excess.
(3) In determining Tuolumne Net Telecommunications Plant and
Tuolumne Material and Supplies, and Citizens Net Fixed Assets and Citizens
Materials and Supplies, as of the Effective Date for purposes of
determining the Tuolumne Net Plant Adjustment and the Citizens Net Plant
Adjustment, no effect will be given for: (i) any decrease thereof
resulting from damage, loss or destruction of Damaged Property which is
repaired or replaced by a Seller or for which such Seller makes a
substitution, in accordance with Section 11.9(b); (ii) any increase
thereof resulting from expenditures made by a Seller in connection with
any such repair, replacement or substitution of Damaged Property in
accordance with Section 11.9(b); or (iii) any increase thereof resulting
from a Seller's expenditures pursuant to its obligations under Sections
14.1.7(b) and (c) except for the cost of purchasing specific items of new
plant (i.e., storage tanks).
(d) Adjustment Regarding FAS 106. The Cash Consideration shall
be reduced by the amount included as "Other Current Liabilities" of
Tuolumne (item 14-Liabilities of Tuolumne's balance sheet) as of the
Effective Date which are associated with the requirements of Financial
Accounting Standard 106 attributable to the active Tuolumne Transferred
Employees, and shall be increased by the amount of liabilities included on
the balance sheet of Citizens or Citizens Utilities Company as of the
Effective Date which are associated with the requirements of Financial
Accounting Standard 106 attributable to the active Citizens Transferred
Employees.
(e) Adjustment Regarding Long Term Debt. The Cash
Consideration shall be reduced by the amount of long term indebtedness of
Tuolumne that is assumed by Citizens pursuant to Section 5.2(a). Under no
circumstances, shall Tuolumne assume or be deemed to have assumed any long
term indebtedness of Citizens.
3.3 Estimate of Cash Consideration and Prorations.
(a) At least ten (10) business days prior to the date scheduled
for Closing, Citizens will deliver to Tuolumne Citizens' good faith
estimate of (i) the amount of Citizens Net Fixed Assets and Citizens
Materials and Supplies (determined in each case in accordance with Section
3.2(c)(3) and using Citizens Net Fixed Assets and Citizens Materials and
Supplies as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur), (ii) the amount of
Customer Deposits and Construction Advances relating to the Citizens
Business estimated as of the Effective Date, and (iii) the amount of the
prorations with respect to the Citizens Business determined in the manner
provided in Section 11.8, as well as the amount of the other adjustments
described in Section 3.2(d) and (e), in each case, estimated as of the
Effective Date. Citizens shall calculate the above amounts on the same
basis and in accordance with the same accounting principles, methods and
practices applied in preparing its Financial Statements and Additional
Financial Statements, if applicable, and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer
of Citizens, describing how each such amount was determined.
(b) At least five (5) business days prior to the date scheduled
for Closing, Tuolumne shall deliver to Citizens:
(1) An estimate of the Cash Consideration based on
Tuolumne's good faith estimate of the amount of each adjustment described
in Section 3.2 (the "Estimated Cash Consideration") on the same basis and
in accordance with the same accounting principles, methods and practices
applied in preparing its Financial Statements and Additional Financial
Statements, if applicable, taking into account all adjustments required in
Section 3.2 (using (i) Net Telecommunications Plant and Materials and
Supplies as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the
Tuolumne Net Plant Adjustment and (ii) the information supplied by
Citizens pursuant to Section 3.3(a) for purposes of the adjustments
provided for in Sections 3.2(b), (c), (d), and (e)) and accompanied by a
reasonably detailed statement, certified by the chief financial or
accounting officer of Tuolumne, describing how each such adjustment was
determined; and
(2) An estimate of the net prorations made by Tuolumne in
good faith in the manner provided in Section 11.8, using its own
information with respect to the Tuolumne prorations as of the Effective
Date and the information supplied by Citizens pursuant to Section 3.3(a)
with respect to the Citizens prorations as of the Effective Date (the
"Estimated Net Prorations").
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date,
Citizens shall deliver to Tuolumne final calculations of the adjustments
made pursuant to Section 3.2 to the Cash Consideration to the extent such
adjustments relate to the Tuolumne Business (prepared on the same basis
(but using Tuolumne Net Telecommunications Plant and Tuolumne Materials
and Supplies, as of the Effective Date) and in accordance with the same
accounting principles, methods and practices used to prepare the Estimated
Cash Consideration for the Tuolumne Business) which shall be accompanied
by a reasonably detailed statement certified by the chief financial or
accounting officer of Citizens describing how each such adjustment was
determined, and final adjustments of the prorations for the Tuolumne
Business referred to in Section 11.8. (For the purpose of preparing
Citizens' calculations and adjustments, Tuolumne shall give Citizens
access to all books, records, and other information available to Tuolumne
that Citizens may reasonably determine appropriate.)
(b) Within sixty (60) days following the Effective Date,
Tuolumne shall deliver to Citizens final calculations of the adjustments
made pursuant to Section 3.2 to the Cash Consideration to the extent such
adjustments relate to the Citizens Business (prepared on the same basis
(but using Citizens Net Fixed Assets and Citizens Materials and Supplies,
as of the Effective Date) and in accordance with the same accounting
principles, methods and practices used to prepare the Estimated Cash
Consideration for the Citizens Business) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or
accounting officer of Tuolumne describing how each such adjustment was
determined, and the final adjustments of the prorations for the Citizens
Business referred to in Section 11.8. (For the purpose of preparing
Tuolumne's calculations and adjustments, Citizens shall give Tuolumne
access to all books, records, and other information available to Citizens
that Tuolumne may reasonably determine appropriate.)
(c) Within thirty (30) days following the delivery of such
calculations and adjustments, Tuolumne shall notify Citizens with respect
to Citizens' calculations regarding the Tuolumne Business, and Citizens
shall notify Tuolumne with respect to Tuolumne's calculations regarding
the Citizens Business of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments
of the Cash Consideration and the prorations shall be final and binding on
Citizens and Tuolumne. (For the purpose of reviewing Citizens' and
Tuolumne's calculations and adjustments, each party shall give the other
party access to all of its books, records, and other information available
to that party that the other party may reasonably determine appropriate.)
If either Citizens or Tuolumne shall object to the other's calculations,
Tuolumne and Citizens shall work in good faith to agree on the correct
amounts for the final Cash Consideration and the final net Prorations, but
if they fail to agree, either party may exercise its rights pursuant to
Article 16.
(b) Within three (3) business days following the day on which
the Cash Consideration and the net prorations shall become final, whether
by expiration of time or agreement of the parties, (respectively, the
"Final Cash Consideration" and the "Final Net Prorations"):
(i) if the Final Cash Consideration (plus or minus, as
applicable, the Final Net Prorations) shall exceed the Estimated Cash
Consideration (plus or minus, as applicable, the Estimated Net
Prorations), Citizens shall cause to be transferred to such account in the
United States as Tuolumne may specify, immediately available funds, in
U.S. Dollars, in an amount equal to such excess, together with interest
thereon at a rate of seven percent (7%) per annum from the Effective Date
through the date of such transfer, or
(ii) if the Estimated Cash Consideration (plus or minus, as
applicable, the Estimated Net Prorations) shall exceed the Final Cash
Consideration (plus or minus, as applicable, the Final Net Prorations),
Tuolumne shall cause to be transferred to such account in the United
States as Citizens may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon
at a rate of seven percent (7%) per annum from the Effective Date through
the date of such transfer.
It is the intent of the parties that all adjustments of the Cash
Consideration that are not disputed shall be paid by the appropriate party
as soon as reasonably practicable, and any disputed amounts will not delay
payments with respect to amounts not in dispute.
ARTICLE 4. BILLING AND COLLECTION PROCEDURES
4.1 Determination of Earned Accounts Receivable. The parties
acknowledge that each Seller's accounts receivable as of the Effective
Date will include both Earned Accounts Receivable and Advanced Billing
Amounts (collectively, the "Total Accounts Receivable"). Within thirty
(30) days after the Effective Date, Citizens and Tuolumne shall agree on a
statement setting forth, with respect to each Seller's Total Accounts
Receivable as of the Effective Date, the portions that are Earned Accounts
Receivable and the portions that are Advanced Billing Amounts; the
methodology used to prepare the portion of such statement relating to the
Tuolumne Business shall be consistent with that used to prepare, and
described on, the sample statement set forth on Tuolumne Schedule 4.1
describing the portions of Tuolumne's June 30, 1994 Earned Accounts
Receivable and June 30, 1994 Advance Billing Amounts, which the parties
agree is a proper methodology for allocation of the Total Accounts
Receivable with respect to the Tuolumne Business. In preparing such
statement each party shall cooperate with the other and provide the other
with reasonable access to its applicable books and records. If the
parties fail to agree within the thirty (30) day period, Citizens and
Tuolumne will continue to negotiate in good faith to resolve such
differences, but if they fail to so resolve such difference, either party
may exercise its rights pursuant to Article 16.
4.2 Purchase of Accounts Receivable.
As of the Effective Date, Buyer shall purchase from Seller, Seller's
Earned Accounts Receivable outstanding as of the Effective Date, with
payment for such Earned Accounts Receivable being payable in the monthly
installments set forth below. Buyer shall be entitled to receive all cash
collections with respect to such Earned Accounts Receivable and, as
payment for such Earned Accounts Receivable, shall pay Seller on the final
business day of the first three calendar months following the Effective
Date an amount equal to a percentage (as set forth below) of such Earned
Accounts Receivable net of the Uncollectible Amount. The "Uncollectible
Amount" shall be computed by multiplying such Earned Accounts Receivable
by Seller's uncollectible factor based upon Seller's actual uncollectible
net write-offs as a percentage of current billings for the calendar year
immediately preceding the year in which the Closing occurs, which amount
shall be agreed to by the parties at least thirty (30) days prior to the
Effective Date. Payment for the Earned Accounts Receivable, net of the
Uncollectible Amount purchased by each Buyer as of the Effective Date,
shall be made in three installments, as follows:
Final business day of first month after Closing: 80%
Final business day of second month after Closing: 15%
Final business day of third month after Closing: 5%
Buyer shall have the right to review Seller's calculations of Seller's
Earned Accounts Receivable and the Uncollectible Amount and Seller shall
cooperate with Buyer and provide Buyer and its representatives with
reasonable access to Seller's books and records in the course of such
review. If such review results in amounts different from Seller's
calculations, Buyer and Seller will negotiate in good faith to resolve
such differences.
The parties agree that notwithstanding any disagreement between them
with respect to the calculation of the Earned Accounts Receivable or
Advance Billing Amounts, Buyer shall pay Seller, in accordance with the
above schedule, all agreed to Earned Accounts Receivable amounts net of
the Uncollectible Amount. When the disagreement concerning any such
unagreed to item has been resolved, the appropriate party shall promptly
pay the other the amount of such resolved item plus interest from the
regularly scheduled payment date at a rate of 7% per annum.
4.3 Carrier Access Billing. Each Seller shall render its own final
carrier access bills to its interexchange carriers for minutes, messages
and other applicable charges up to and including the Effective Date which
bills shall contain no charges for services to be rendered after the
Effective Date. Each Seller shall be responsible for collecting and
settling any disputes associated with its bills to the interexchange
carriers.
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND
NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in
Section 5.4, as promptly as practicable after the Execution Date with
respect to applications to be filed with the California PUC and the
Pennsylvania PUC and with respect to all Material Regulatory Approvals,
but no later than forty-five (45) days after the Execution Date, the
parties shall file the applications and notices described on Schedule 5.1
in such form as agreed to by the parties with the California PUC and
Pennsylvania PUC and other appropriate Governmental Authorities, seeking
an order permitting the transfer of service in the Purchased Exchanges,
and the transfer or assignment of the Non-FCC Authorizations, to each
Buyer (the "Regulatory Approvals"). Each Buyer will be responsible for
establishing the tariff for its post-Effective Date operations in the
state in which the Purchased Property acquired by it is located, by
requesting adoption of tariffs which are the same or substantially the
same as Seller's pre-Effective Date tariffs. To the extent assignable,
each Seller will assign the Non-FCC Authorizations to Buyer. Each party
agrees to use its best efforts to obtain the Regulatory Approvals and the
parties agree to cooperate fully with each other and with all Governmental
Authorities to obtain the Regulatory Approvals as described on Schedule
5.1 at the earliest practicable date. The parties agree that the
Regulatory Approvals containing asterisks on each parties' Schedule 5.1
constitute material Regulatory Approvals (the "Material Regulatory
Approvals") which are subject to Sections 7.1.3 and 7.2.4, and the
Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and
7.2.4.
5.2 Debtholder Consents; Indebtedness Assumption, Releases or
Terminations.
(a) With respect to Tuolumne's long-term indebtedness
identified on Schedule 5.2(a), as promptly as practicable following the
Execution Date, but in any event no more than forty-five (45) days
thereafter, the parties shall contact the holders of such indebtedness to
request, and use their best efforts to obtain, such holders' consent
("Debtholder Consent") to Citizens' assumption of, and Tuolumne's release
from, such indebtedness on terms acceptable to the parties. Each party
shall bear their own costs and expenses in obtaining such Debtholder
Consent. Neither party, however, shall be required to make any payment to
the debtholder to obtain the Debtholder Consent, except that Tuolumne
shall be responsible for any such payments as are specified in the
relevant debt agreement. The parties acknowledge that all indebtedness of
Tuolumne with respect to which Debtholder Consents are obtained and which
is assumed by Citizens shall constitute an Assumed Liability of Citizens
pursuant to Section 2.5.1(i), and all indebtedness of Tuolumne which is
not so assumed by Citizens shall constitute a Retained Liability of
Tuolumne.
(b) If within thirty (30) days prior to the Closing Date, the
parties have been unable to obtain the Debtholder Consent with respect to
any indebtedness, Tuolumne shall have the right to repay such indebtedness
owed to such non-consenting debtholder.
(c) Except with respect to indebtedness assumed by Citizens
pursuant to Section 5.2(a), each Seller shall take, at such Seller's sole
cost and expense, all actions necessary with respect to all persons or
entities (collectively, the "Secured Parties") holding a security interest
or lien against Seller's Purchased Property to obtain the termination or
release, as of the Effective Date, and the prompt removal after the
Effective Date, of all security agreements, mortgages and financing
statements relating to such Purchased Property (such terminations and
releases being hereinafter collectively referred to as the "Secured
Indebtedness Releases or Terminations"). Buyer agrees to cooperate in
good faith with Seller in obtaining the required Secured Indebtedness
Releases or Terminations.
(d) Citizens represents and warrants to Tuolumne that it has no
long-term indebtedness as of the Execution Date and covenants that it will
incur no long-term indebtedness during the period from the Execution Date
to and including the Effective Date.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the
parties hereto shall mutually seek the consent, approval or waiver of the
other party to any Lease or Contract that requires consent, approval or
waiver as a condition to an assignment of such Lease or Contract. To the
extent any of the approvals, consents or waivers required to assign any
Lease, Contract or Immaterial Authorization have not been obtained with
respect to any Lease, Contract or Immaterial Authorization as of the
Effective Date, the Seller to whose Business such Lease, contract or
Immaterial Authorization relates shall continue to use its best efforts to
obtain the consent of such other third party that is required for the
transfer or assignment of such Lease, Contract or Immaterial Authorization
after the Effective Date. Refusal by such other third party to release
Seller from a Lease or Contract shall not excuse Seller from entering into
an assignment of such Lease or Contract. From the Effective Date until
the earlier of (i) the time such approval, consent or waiver is obtained,
and (ii) six months after the Effective Date, Seller shall hold such
Leases, Contracts and Immaterial Authorizations or ancillary rights as
agent for Buyer, and preserve the benefit of and enforce the same as agent
for Buyer to the fullest extent permissible under the applicable Lease,
Contract or Immaterial Authorization. The parties agree that upon request
by either party, at Closing, they will enter into an agency agreement in
form and substance mutually satisfactory to each party specifying the
terms and conditions upon which Seller will so act as Buyer's agent, which
terms and conditions shall include a six month term.
(b) If a third party refuses to consent to a Lease or Contract
assignment, and if the applicable Lease or Contract permits a sublease or
subcontract without the consent of the third party, the parties hereto, as
of the Effective Date, shall enter into a sublease or subcontract upon
terms and conditions as similar and comparable to an assignment of the
Lease or Contract as is reasonably feasible so as to enable Buyer to
retain the ultimate benefits of such Lease or Contract after the Effective
Date.
(c) Notwithstanding anything to the contrary contained herein,
if a third party refuses or has failed to consent to a Lease, Contract or
Immaterial Authorization assignment after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, and if the applicable Lease or Contract does
not permit a sublease or subcontract without the consent of the third
party, then the parties shall within thirty (30) days after expiration of
such six-month period negotiate in good faith and agree upon, and Seller
shall pay to Buyer, an amount representing fair compensation to Buyer for
the harm caused by the failure to obtain such consent, waiver or approval.
Following such payment, Seller shall have no further obligation to Buyer
with respect to such Lease, Contract or Immaterial Authorization except as
otherwise provided in Section 11.12 with respect to the Contracts and
Excluded Contracts addressed in Section 11.12.
(d) Seller shall bear all reasonable costs and expenses in
obtaining such consents, approvals or waivers to the extent such costs or
expenses are specified in the relevant Lease, Contract or Immaterial
Authorization, or under applicable Law, and shall reimburse Buyer to the
extent Buyer makes any transfer payments which are specified in amount and
required under any Lease or Contract to the lessor or other party thereto,
provided that seven (7) business days before Buyer makes any transfer
payments, Buyer will notify Seller of its intent to do so and after making
such transfer payment, Buyer will provide evidence satisfactory to Seller
that such transfer payment was made. Buyer and Seller will negotiate in
good faith to determine the extent to which each will bear any other costs
and expenses arising in connection with obtaining such consents, approvals
and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution
Date, but no later than forty-five (45) days after the Execution Date, the
parties shall file all applications and requests described on Schedule 5.4
in such form as agreed to by the parties with the FCC seeking, and shall
use their best efforts to obtain, the FCC's consent to assign all FCC
Licenses (as listed in Schedule 9.1.17(b)) from Seller to Buyer (the "FCC
Consents"). Citizens agrees that in connection with taking the
immediately above described actions with respect to acquiring Tuolumne's
FCC Licenses, it will not file any application or request for a waiver of
Part 36 (study areas), Part 61 (tariffs), and Part 69 (price caps and
study areas) of the FCC Rules, and that on the Effective Date the study
areas relating to the Tuolumne Purchased Exchanges shall remain in the
National Exchange Carrier Association Tariff F.C.C. No. 5, provided,
however, that such study areas shall remain in the NECA Tariff FCC No. 5
after the Effective Date only for so long as Citizens with respect to such
study areas, in its sole discretion, shall determine. Tuolumne agrees
that in connection with taking the actions described in the first sentence
of this Section 5.4 with respect to acquiring Citizens' FCC Licenses, it
will not file any application or request for a waiver of Part 36 (study
areas), Part 61 (tariffs), and Part 69 (price caps and study areas) of the
FCC Rules, and that on the Effective Date the study areas relating to the
Citizens Purchased Exchanges shall remain in the National Exchange Carrier
Association Tariff F.C.C. No. 5, provided, however, that such study areas
shall remain in the NECA Tariff FCC No. 5 after the Effective Date only
for so long as Tuolumne, with respect to such study areas, in its sole
discretion, shall determine. Each party agrees to use its best efforts,
and the parties agree to cooperate fully with each other and with the FCC,
to obtain the FCC Consents at the earliest practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution
Date but in no event later than thirty (30) days after the Execution Date,
the parties will make such filings as may be required by the HSR Act with
respect to the exchange contemplated by this Agreement. Thereafter, the
parties will file as promptly as practicable any supplemental information
that may be requested by the U.S. Federal Trade Commission or the U.S.
Department of Justice pursuant to the HSR Act. The parties agree to
cooperate in seeking early termination of the waiting periods under the
HSR Act.
<PAGE>
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal
business hours to the books and records relating to Seller's Purchased
Property (including, without limitation, relevant tax information) and to
the personal property and Real Property comprising such Seller's Purchased
Property. The parties will cooperate with each other to schedule such
access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to
all interexchange carriers having business relationships with Seller's
Business, to all customers of Seller's Business, and to all officers,
employees and agents of Seller having knowledge or information concerning
the operations of Seller's Business so as to afford Buyer the opportunity
to make such review, examination and investigation of Seller's Business
and Seller's Purchased Property as Buyer may desire to make, to evaluate
the competitiveness of Seller's Business, and to enable Buyer to
assimilate Seller's Business into Buyer's operations as soon as
practicable after the Effective Date. To the extent it so desires, Seller
shall accompany Buyer on all of Buyer's access to interexchange carriers,
customers and agents of Seller. Buyer will be permitted to make extracts
from or copies of Seller's books and records as may be reasonably
necessary. Buyer will not contact any employee, customer or supplier of
Seller as to this Agreement or the matters involved herein except in
accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and
Seller's consent (which consent will not be unreasonably withheld), Seller
shall permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of Seller selected
by Buyer to attend workshops and training sessions of Buyer (including
sessions to train such employees in Buyer's business planning process in
order to have Seller's Business after the Effective Date follow Buyer's
business planning process and procedures);
(ii) Seller's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with Seller about, and to participate in
Seller's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's
request, Seller will furnish such financial and operating data and other
information pertaining to Seller's Business as Buyer may reasonably
request in order, among other things, to comply with Buyer's disclosure
obligations under the federal securities or other laws as such obligations
relate to Buyer's prospective ownership of Seller's Business, including
any disclosure required in connection with the sale of any securities by
Buyer; provided, however, that nothing herein will obligate Seller to take
actions that would unreasonably disrupt the normal course of the business
of Seller or violate the terms of any applicable Law or any contract to
which Seller is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or Seller's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with
respect to issuing an auditor's report required by Buyer. Any information
or document provided to Buyer or acquired by Buyer during this
investigation shall be deemed "Evaluation Material" as that term is
defined in the Confidentiality Agreement and shall be subject in all cases
to the terms of the Confidentiality Agreement; provided, however, that
following consultation with Seller, Buyer may disseminate financial or
other information with respect to the Business of Seller that Buyer, upon
consultation with counsel, determines is required to be disclosed under
federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford the
authorized representatives of Buyer access to Seller's Purchased
Properties in order to conduct the environmental audit contemplated by
Section 14.1.
(e) In connection with the continuing operation of Seller's
Business between the Execution Date and the Effective Date, Seller shall
confer in good faith with Buyer, as reasonably requested by Buyer from
time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the
general status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the
prior consent of Seller (which consent will not be unreasonably withheld),
Buyer may disclose Evaluation Material (as defined in the Confidentiality
Agreement) to representatives of rating agencies, underwriters,
underwriters' counsel, public accountants, prospective lenders and other
third parties involved in any of Buyer's offering of securities or other
financings and to fixed income and equity analysts to the extent such
parties reasonably have a need to know any such information; provided,
that such parties shall (i) be advised of the confidential nature of any
Evaluation Material they receive, and (ii) agree in writing to be bound to
the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best
efforts to satisfy promptly all conditions required to be satisfied prior
to the Closing.
<PAGE>
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any
information that would cause any representation or warranty of Buyer
contained in this Agreement not to be true and correct as of the date on
which it was made or as of the Effective Date, and (ii) any material
governmental complaints, investigations, or hearings (or communications
indicating that the same may be contemplated), or the institution or overt
threat or settlement of significant litigation, involving the transactions
contemplated by this Agreement; of which in any such case, Buyer's
representatives listed on Schedule 6.3(a) become aware on or before the
Effective Date. Buyer shall use reasonable best efforts to keep Seller
informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any
information that would cause any representation or warranty of Seller
contained in this Agreement not to be true and correct as of the date on
which it was made or as of the Effective Date, and (ii) any material
governmental complaints, investigations, or hearings (or communications
indicating that the same may be contemplated), or the institution or overt
threat or settlement of significant litigation, involving Seller's
Business or the transactions contemplated by this Agreement; of which in
any such case, Seller's representatives listed on Schedule 6.3(b) become
aware on or before the Effective Date. Seller shall use reasonable best
efforts to keep Buyer informed of the events described in this Section
6.3(b) and shall permit Buyer access to all materials prepared by Seller
in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE
CLOSING
7.1 Conditions Precedent to Obligations of Citizens. The
obligations of Citizens to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, any one or more of which may
be waived at the option of Citizens:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Tuolumne of any of its
covenants to be performed in whole or in part prior to the Closing and the
representations and warranties of Tuolumne in Article 9 (after giving
effect to any material adverse effect qualification (or any other
materiality qualification) contained therein) shall be true and correct as
of the Effective Date, except for such representations or warranties that
are made expressly as of some other date, which shall be true and correct
(after giving effect to any material adverse effect qualification (or any
other materiality qualification) contained therein) as of such other date,
and Tuolumne shall have delivered to Buyer a certificate in the form
attached hereto as Schedule 7.1.1 ("Tuolumne's Closing Certificate"),
dated as of the Effective Date and signed by one of Tuolumne's Executive
Officers, certifying each of the foregoing, or specifying those respects
in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material
adverse effect qualification (or any other materiality qualification)
contained therein) are not true and correct in which event, if the Closing
occurs, any claim with respect to matters so specified shall be waived by
Citizens unless otherwise expressly agreed by Tuolumne at Closing.
7.1.2 Documents. Tuolumne shall have delivered to Citizens all
documents required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the
HSR Act shall have expired or been terminated and each of the required
Material Regulatory Approvals as set forth on Tuolumne's and Citizens'
Schedule 5.1 and FCC Consents as set forth on Tuolumne's and Citizens'
Schedule 5.4 shall have been obtained free of any special terms,
conditions or restrictions which Citizens determines, in good faith and in
its reasonable discretion, will materially and adversely affect the
anticipated operational and financial benefits to Citizens of the
transactions contemplated by this Agreement. For purposes of this Section
7.1.3, all such approvals and consents shall be deemed to have been
obtained upon the grant thereof becoming a Final Order. In addition,
there shall not have been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or administrative order or
decree in any jurisdiction, the effect of which prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material
adverse changes to the Tuolumne Purchased Property as a whole or the
financial position or results of operations of the Tuolumne Business as a
whole, and, subject to Section 11.9, Tuolumne shall not have suffered any
material loss or damage to the Tuolumne Purchased Property, whether or not
insured, that would materially affect or impair Citizens' ability to
conduct the Tuolumne Business after the Effective Date. None of the
Additional Financial Statements of Tuolumne delivered pursuant to Section
11.4 shall reflect a material change in the financial position or results
of operations of the Tuolumne Business from the financial position or
results of operations reflected in the Financial Statements of Tuolumne.
7.1.5 Real Estate Transfers. Tuolumne shall have complied with
Section 11.16 with respect to its Real Property to be transferred to
Citizens.
7.1.6 Lessor and Other Third Party Consents. Tuolumne shall have
delivered to Citizens all consents, approvals or waivers of lessors or
other third parties to the Material Agreements as so identified by an
asterisk on Tuolumne Schedules 9.1.9 and 9.1.13, as such Schedules may be
amended pursuant to Section 11.22. All of such delivered consents,
approvals or waivers shall be in effect as of the Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other
proceeding pending or, to the best of Citizens' knowledge, threatened, to
restrain or invalidate any of the transactions contemplated hereby which,
in the reasonable judgment of Citizens, would involve material expense to
Citizens.
7.1.9. Corporate Proceedings. All corporate proceedings required to
be taken by Tuolumne in connection with the transactions contemplated by
this Agreement shall have been taken.
7.1.10 Lien Searches. Tuolumne shall have delivered to Citizens
reasonably comprehensive searches, dated as of a date within 30 days of
the Execution Date or any time thereafter, of the public records regarding
liens and judgments with respect to the Tuolumne Business and the Tuolumne
Purchased Property.
7.1.11. Debtholder Consents. With respect to any long-term
indebtedness to be assumed by Citizens pursuant to Section 5.2(a),
Citizens shall have received the Debtholder Consents and shall have
entered into an assignment and assumption agreement with the Debtholder in
form and substance reasonably acceptable to Citizens.
7.2 Conditions Precedent to Obligations of Tuolumne. The obligations
of Tuolumne to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, any one or more of which may be waived at the
option of Tuolumne.
7.2.1 No Misrepresentations or Breach of Covenants and Warranties.
There shall have been no material breach by Citizens of any of its
covenants to be performed in whole or in part prior to the Closing, and
the representations and warranties of Citizens in Article 9 shall be true
and correct as of the Effective Date, except for such representations or
warranties that are made expressly as of some other date, which shall be
true and correct (after giving effect to any material adverse effect
qualification (or other materiality qualification) contained therein) as
of such other date, and Citizens shall have delivered to Tuolumne a
certificate in the form attached hereto as Schedule 7.2.1 ("Citizens'
Closing Certificate"), dated as of the Effective Date and signed by one of
Citizens' Executive Officers, certifying each of the foregoing, or
specifying those respects in which such covenants have been materially
breached or such representations and warranties (after giving effect to
any material adverse effect qualification (or other materiality
qualification) contained therein) are not true and correct in which event,
if the Closing occurs, any claim with respect to matters so specified
shall be waived by Tuolumne unless otherwise expressly agreed by Citizens
at Closing.
7.2.2 Documents. Citizens shall have delivered to Tuolumne all
documents required by Section 8.3.
7.2.3 Cash Consideration. Citizens shall have delivered to Tuolumne,
in the manner specified in Section 3.1, the Estimated Cash Consideration
as adjusted pursuant to Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the
HSR Act shall have expired or been terminated and each of the required
Material Regulatory Approvals as set forth on Citizens' and Tuolumne's
Schedule 5.1 and FCC Consents as set forth on Citizens' and Tuolumne's
Schedule 5.4 shall have been obtained free of any special terms,
conditions, or restrictions which Tuolumne determines, in good faith in
its reasonable discretion, will materially and adversely affect the
anticipated operational and financial benefits to Tuolumne of the
transactions contemplated by this Agreement. For purposes of this Section
7.2.4, all such approvals and consents shall be deemed to have been
obtained upon the grant thereof becoming a Final Order. In addition,
there shall not have been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or administrative order or
decree in any jurisdiction, the effect of which prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to
be taken by Citizens in connection with the transactions contemplated by
this Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other
proceeding pending or, to the best of Tuolumne's knowledge, threatened, to
restrain or invalidate any of the transactions contemplated hereby which,
in the reasonable judgment of Tuolumne would involve a material expense to
Tuolumne.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Releases. With respect to any long-term
indebtedness to be assumed by Citizens pursuant to Section 5.2(a),
Tuolumne shall have received Debtholder Consents and release of debt (and,
if applicable, lien) documentation reasonably acceptable to Tuolumne.
7.2.9 Material Adverse Changes. There shall have been no material
adverse changes to the Citizens Purchased Property as a whole of the
financial position or results of operations of the Citizens Business as a
whole, and, subject to Section 11.9, Citizens shall not have suffered any
material loss or damage to the Citizens Purchased Property, whether or not
insured, that would materially affect or impair Tuolumne's ability to
conduct the Citizens Business after the Effective Date. None of the
Additional Financial Statements of Citizens delivered pursuant to Section
11.4 shall reflect a material change in the financial position or results
of operations of the Citizens Business from the financial position or
results of operations reflected in the Financial Statements of Citizens.
7.2.10 Real Estate Transfers. Citizens shall have complied with
Section 11.16 with respect to its Real Property to be transferred to
Tuolumne.
7.2.11 Lessor and Other Third Party Consents. Citizens shall have
delivered to Tuolumne all consents, approvals or waivers of lessors or
other third parties to the Material Agreements as so identified by an
asterisk on Citizens Schedules 9.1.9 and 9.1.13 as such Schedules may be
amended pursuant to Section 11.22. All of such delivered consents.
approvals or waivers shall be in effect as of the Effective Date.
7.2.12 Lien Searches. Citizens shall have delivered to Tuolumne
reasonably comprehensive searches, dated as of a date within 30 days of
the Execution Date or any time thereafter, of the public records regarding
liens and judgments with respect to the Citizens Business and the Citizens
Purchased Property.
ARTICLE 8. THE CLOSING
8.1 The Closing.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date, Citizens and Tuolumne shall effect the exchange
contemplated hereby as follows:
(i) Citizens shall convey, assign and transfer the Citizens
Purchased Property to Tuolumne (or its assignee pursuant to Section 17.4)
free and clear of all liens and encumbrances except as otherwise
contemplated herein and pay Tuolumne the Estimated Cash Consideration; and
(ii) Tuolumne shall convey, assign and transfer the
Tuolumne Purchased Property to Citizens (or its assignee pursuant to
Section 17.4) free and clear of all liens and encumbrances except as
otherwise contemplated herein.
(b) Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar
month in which occurs the tenth (10th) business day after the date on
which the parties agree that all required Material Regulatory Approvals
and FCC Consents have been obtained and provided that the other conditions
set forth in Article 7 shall have been satisfied, or at such other place
and time as may be agreed upon by the parties. The transactions to be
consummated at Closing shall be deemed to have been consummated as of
11:59 p.m. on the last calendar day of the calendar month in which occurs
the tenth (10th) business day after the date on which the parties agree
that all such Material Regulatory Approvals and FCC Consents have been
obtained (the "Effective Date"). If the Effective Date is not a day on
which financial institutions are open and operating, then the Closing Date
shall be the immediately following business day on which financial
institutions are open and operating.
8.2 Tuolumne's Obligations at Closing. At the Closing, Tuolumne
shall deliver to Citizens the following documents duly executed and
acknowledged, as appropriate:
(a) Bills of sale, special warranty deeds, assignment and
assumption agreements and other good and sufficient instruments of
transfer and assumption (including, without limitation, vehicle titles) to
effect and consummate the transactions contemplated by this Agreement, in
form and substance mutually satisfactory to the parties.
(b) Tuolumne's Closing Certificate.
(c) Instruments of assignment and assumption or, to the extent
required by Section 5.3, subleases or subcontracts for the Leases and the
Contracts, in each case in form and substance mutually satisfactory to the
parties.
(d) Secured Indebtedness Releases and Terminations with respect
to the Tuolumne Purchased Property.
(e) All of the documents and papers required of Tuolumne as
conditions to Closing, including without limitation, the Regulatory
Approvals, FCC Consents and the documents required to be delivered by
Tuolumne pursuant to Section 11.16.
(f) The Transition Services Agreement, if requested by
Citizens with respect to the Tuolumne Business pursuant to Section
10.1.
(g) The Environmental Remediation Agreement if required
pursuant to Section 14.1.7(d).
(h) All documents required of Tuolumne under the Employee
Transfer Agreement.
(i) Certificate of the Secretary or Assistant Secretary of
Tuolumne certifying as to Articles of Incorporation, Bylaws, Board of
Director approval and incumbency.
8.3 Citizens Obligations at Closing. At the Closing, Citizens
shall deliver to Tuolumne the following items and documents duly executed
and acknowledged as appropriate:
(a) The Estimated Cash Consideration (as adjusted under Section
3.2), in the manner specified in Section 3. 1;
(b) Citizens Closing Certificate
(c) All of the documents and papers required of Citizens as
conditions to Closing, including, without limitation, the Regulatory
Approval and FCC Consents and the documents required to be delivered by
Citizens pursuant to Section 11.16.
(d) The Transition Services Agreement, if requested by Tuolumne
with respect to the Citizens Business pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required
pursuant to Section 14.17(d).
(f) All documents required of Citizens under the Employee
Transfer Agreement.
(g) Instruments of assignment and assumption or, to the extent
required by Section 5.3, subleases or subcontracts for the Leases and the
Contracts, in each case in form and substance mutually satisfactory
to the parties.
(h) Secured Indebtedness Releases and Terminations with respect
to the Citizens Purchased Property.
(i) Certificate of the Secretary or Assistant Secretary of
Citizens certifying as to Articles of Incorporation, Bylaws, Board of
Director approval and incumbency.
(j) Bills of sale, special warranty deeds, assignment and
assumption agreements and other good and sufficient instruments of
transfer and assumption (including, without limitation, vehicle titles) to
effect and consummate the transactions contemplated by this Agreement, in
form and substance mutually satisfactory to the parties.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of the Parties. Except as to
the environmental matters which are exclusively addressed in Article 14
of this Agreement, Tuolumne represents and warrants to Citizens, and
Citizens represents and warrants to Tuolumne (each party making such
representations and warranties only with respect to its own status, assets
and Business, and being referred to in this Section 9.1 with respect to
such representations and warranties as a "Seller"):
9.1.1 Authorization and Effect of Agreement. Each Party has the
requisite corporate power and authority under its Certificate of
Incorporation and Bylaws to execute and deliver this Agreement and to
fulfill its respective obligations under this Agreement. The execution
and delivery by each party of this Agreement and the fulfillment of its
obligations under this Agreement have been duly authorized by all
necessary corporate action on the part of each party. This Agreement has
been duly executed and delivered by each party and, assuming the due
execution and delivery of this Agreement by the other party hereto,
constitutes a valid and binding obligation of each party, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting the enforcement of creditors'
rights generally and subject to the qualification that general equitable
principles may limit the enforcement of certain remedies, including the
remedy of specific performance.
9.1.2 No Restrictions Against Exchange of the Purchased Property.
The execution and delivery of this Agreement by each party does not, and
the fulfillment by each party of its obligations under this Agreement will
not, (i) conflict with or violate any provision of its certificate of
incorporation or bylaws or, (ii) except as set forth in each party's
Schedule 9.1.13, or subject to obtaining the approvals and consents
reflected in Article 5, conflict with, violate or result in the breach of,
constitute a default under, accelerate the performance required by, or
result in the creation of any encumbrance upon any of each party's
Purchased Property under any provision of any of its Contracts other than
any such conflict, violation or breach that alone or in the aggregate
would not have an adverse effect on the other party hereto, or each
party's Business or its Purchased Property after the Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any court or governmental agency, authority or
instrumentality (" Governmental Authority") is required to be obtained or
made by or with respect to Seller or in connection with the execution and
delivery of this Agreement by Seller or the fulfillment by Seller of its
obligations under this Agreement, except (i) the filings and approvals
described in Article 5 (ii) real estate deeds and other documents filed in
connection with the transfer of the Real Property included in the Seller's
Purchased Property, (iii) certificates of title for the motor vehicles
included in the Seller's Purchased Property, and (iv) such other consents,
approvals, orders or authorizations, or registrations, declarations or
filings, which if not obtained or made would not result in a material
adverse effect on the other party hereto, or Seller's Business or its
Purchased Property after the Effective Date.
9.1.4 No Violation of Law. Except as indicated in each party's
Schedule 9.1.4, the execution and delivery of this Agreement and the
fulfillment by each party of its obligations under this Agreement will not
violate any applicable existing statute, ordinance, rule, regulation or
common law obligation (collectively, "Law"), except where such violation
would not have a material adverse effect on each party's Business as a
whole or on any significant part of its Purchased Property after the
Effective Date.
9.1.5 Corporate Organization. Tuolumne is a corporation duly
organized, validly existing and in good standing under the laws of
California; it has full corporate power and authority to own its
properties and to carry on the Tuolumne Business as it is now being
conducted and to own, or hold under lease the Tuolumne Purchased Property.
Citizens is a corporation duly organized, validly existing and in good
standing under the laws of Pennsylvania; it has full corporate power and
authority to own its properties and to carry on the Citizens Business as
it is now being conducted and to own, or hold under lease the Citizens
Purchased Property.
9.1.6 Brokers. Neither party has paid nor become obligated to pay
any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a claim against the other
party hereto for any broker's or finder's fees or similar fees or
expenses.
9.1.7 Assumed Liabilities. Seller is not in default with respect to
any of its obligations or liabilities that will become Assumed Liabilities
of the other party hereto at the Effective Date or the performance,
observance or fulfillment of any covenant or condition relating thereto,
and no event has occurred and is continuing that constitutes a material
breach or default thereunder or that would constitute such a material
breach or default with the giving of notice or lapse of time, or both.
9.1.8 Title to Purchased Property. Seller has good, valid,
undivided, marketable and defensible title to all of its owned Purchased
Property, free and clear of all restrictions, charges, liens, or
encumbrances of any kind, except for (i) the Assumed Liabilities (ii) the
liens, encumbrances and restrictions shown and disclosed on Seller's
Schedule 9.1.8-1, (iii) current real and personal property taxes and other
statutory liens covering amounts not yet due and payable, and (iv) such
other imperfections of title and encumbrances, if any, as do not interfere
in any material respect with the present use or value of the item of owned
Purchased Property to which such imperfection or encumbrance relates. No
condemnation proceeding is pending or, to the knowledge of Seller,
threatened with respect to any part of its Purchased Property and such
Purchased Property is not in any violation of any restrictive covenant
relating thereto. Seller's Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by Seller included
in its Purchased Property. In addition, Seller's Schedule 9.1.8-2 sets
forth a list of the Real Property included in the Purchased Property in
which Seller holds other than a fee interest (such as easements and rights
of way). Except to the extent indicated in Seller's Schedules 9.1.8-1 and
9.1.8-2, Seller has the unqualified right to transfer and convey to the
other party hereto Seller's interest in such Real Property.
9.1.9 Leases. Seller has set forth on its Schedule 9.1.9 a list of
all the Leases relating to Seller's Business. Each of such Leases is
valid, binding and enforceable in accordance with its terms, and except as
otherwise disclosed in Seller's Schedule 9.1.9, there is not any existing
material default or existing material breach of a covenant by Seller under
any such Lease. Seller enjoys peaceful and undisturbed possession under
all material Leases and, to Seller's knowledge, the lessor under any such
Lease is not (with or without notice or the lapse of time, or both) in
material breach or default thereunder, has performed all material
obligations required to be performed by it thereunder, and has not given
notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the Seller's tangible
Purchased Property is in substantially good operating condition and
repair, normal wear and tear excepted, well maintained, adequate for the
present uses thereof and in compliance in all material respects with
applicable federal, state and local ordinances, regulations and statutes
relating to the ownership and operation of such property. Except as set
forth on Seller's Schedule 9.1.10, Seller has not received any written
notice within the past twelve (12) months of a violation of any
ordinances, regulations or building, zoning and other similar laws with
respect to such assets that would have a material adverse effect on the
Seller's Business as a whole or any significant part of the Seller's
Purchased Property. Each parcel of Seller's Real Property and, to the
knowledge of Seller, of real estate leased by Seller and material or
necessary to its Business as presently conducted substantially complies
with all applicable Laws except where the failure to so comply
individually or in the aggregate, would not have a material adverse effect
on Seller's Business as a whole or any such parcel after the Effective
Date. Except as set forth on Schedule 9.1.10, other than Seller, no
person or party has actual possession or has a right to possession of all
or any material portion of any parcel of such Real Property or such leased
real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 9.1.10, Seller
MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED OR
STATUTORY, AS TO THE CONDITION OR FITNESS OF ITS TANGIBLE PERSONAL
PURCHASED PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED OR
STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to the other party hereto a true and
correct copy of its audited financial statements, consisting of a balance
sheet, income statement and related statement of cash flows as of and for
the respective periods ended December 31, 1992, and December 31, 1993,
together with in the case of Tuolumne, the auditor's report thereon (the
"Financial Statements"). The Financial Statements were prepared based
upon the books and records of Seller, and fairly present in all material
respects the financial condition of Seller as of the appropriate periods
and the results of operations for the year then ended, in each case in
conformity with GAAP and to the best of Seller's knowledge and to the
extent required by applicable law, have been prepared in all material
respects in conformity with the regulations of the FCC and the applicable
PUC. The Financial Statements of Seller contain no untrue statements of
any material fact nor omit to state any material facts required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The Additional Financial Statements of Seller to be
delivered to the other party hereto pursuant to Section 11.4 hereof (i)
will be prepared in each case in accordance with GAAP (except for the
omission of notes thereto with respect to interim Additional Financial
Statements), consistent with past practices, from the books and records of
Seller; and (ii) will fairly present the financial condition of Seller and
the results of operations of Seller for the periods indicated, subject, in
the case of interim Additional Financial Statements, to normal year-end
adjustments which will not be material in amount or effect; and (iii) to
the best of Seller's knowledge and to the extent required by applicable
Law, will be prepared in all material respects in conformity with the
regulations of the FCC and the PUC; and (iv) will not contain any untrue
statements of any material facts or omit to state any material facts
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The unaudited balance sheet of Seller as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes
thereto, consistent with past practices, from the books and records of
Seller and fairly presents the financial condition of Seller as of such
date subject to normal year-end adjustments which will not be material in
amount or effect, and to the best of Seller's knowledge and to the extent
required by applicable Law, was prepared in all material respects in
conformity with the regulations of the FCC and the PUC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
its Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Any material change in the financial condition, results of
operations, assets, liabilities, operations or future business prospects
of Seller's Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting Seller's Purchased Property
or its Business;
(c) Any disposition (including, without limitation, the grant
of a license, franchise, option or other right of any nature whatsoever to
sell or distribute) or encumbrance or agreement to dispose of or to
encumber, or pledge or grant of a security interest in or agreement to
pledge or grant a security interest in, any of Seller's Purchased
Property, or any increase or an agreement to increase any indebtedness of
Seller related to its Business or its Purchased Property, except in the
ordinary course of business;
(d) Any material change in Seller's tariffs or in the manner of
conducting its Business;
(e) Any dispute, litigation or other event or condition that
materially and adversely affects the business or prospects of Seller's
Business or its Purchased Property;
(f) Any waiver or release of any material rights or settlement
of any material dispute involving Seller's Business or its Purchased
Property;
(g) Any granting of a material salary increase or other
material benefits payable to any Employee of Seller, except for ordinary
and routine salary increases or bonuses authorized or granted in the
ordinary course of business and consistent with past practices;
(h) Any transaction entered into by Seller that would have a
material adverse effect on its Business as a whole or its Purchased
Property as a whole;
(i) Any change in the accounting methods or practices of Seller
with respect to its Purchased Property or its Business except as required
by GAAP or any change in depreciation or amortization policies or rates
heretofore adopted by Seller with respect to its Purchased Property or its
Business except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees of Seller's Business or, to Seller's
knowledge, any attempt to organize the Transferred Employees of its
Business for the purpose of collective bargaining;
(k) Any event that would have been prohibited under Section
11.5 if Section 11.5 had been in effect since December 31, 1993; or
(l) Any agreement or commitment by Seller (or any understanding
between Seller and any third party) to do or to take any of the actions
referred to in paragraphs (a) through (k) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts relating to Seller's
Business is in full force and effect as of the date of this Agreement in
accordance with its terms, and there is no outstanding notice of
cancellation or termination in connection therewith. Seller is not in
material breach or default in connection with any of such Contracts, and
there is no basis for any claim of breach or default by Seller, or to
Seller's knowledge, any other party, in any material respect under any of
such Contracts. None of such Contracts, either separately or in the
aggregate, materially and adversely affects Seller's Business or its
Purchased Property. After the Effective Date, all rights and obligations
of Seller under such Contracts shall continue unimpaired in other party
hereto (assuming that if any Contract requires the consent of the other
party thereto, such consent will have been obtained by the parties hereto
prior to the Effective Date). Except for the instruments specifically
listed in Seller's Schedule 9.1.13, Seller is not a party to or subject
to: (i) any agreement for the purchase or disposition of any material,
equipment, supplies, inventory or service, except individual purchase
orders and contracts in amounts less than Twenty-Five Thousand Dollars
($25,000); (ii) any agreement to which Seller is a party or by which any
of its Purchased Property is bound relating to indebtedness for money
borrowed including capital leases, security arrangements relating thereto
and any amendment or waiver thereof; and (iii) any other agreement not of
the type covered by any of the foregoing items of this Section 9.1.13
requiring payments by Seller in excess of Seventy-Five Thousand Dollars
($75,000) per agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract relating to Seller's
Business or its Purchased Property between Seller and any Affiliate of
Seller, and (b) each material Contract relating to Seller's Business or
its Purchased Property between Seller or an Affiliate of Seller and any
third party. Seller has made available to the other party hereto true and
correct copies of all agreements and instruments listed in Seller's
Schedule 9.1.13. Seller's Schedule 9.1.13 specifically identifies, with
respect to those Contracts which are required to be listed thereon, the
Contracts which require the consent, approval or waiver of the other party
thereto for the assignment thereof.
9.1.14 Insurance. Seller's Purchased Property of an insurable nature
and of a character usually insured by companies carrying on similar
businesses is insured under insurance policies in such amounts and against
such losses or casualties as is (i) usual in such companies and (ii)
required under any of the Contracts or Leases relating to Seller's
Business. The insurance policies referred to in this Section 9.1.14 are
(i) listed on Seller's Schedule 9.1.14, and (ii) in full force and effect
and the premiums due thereon have been duly and timely paid. The most
current statement of values (the statement of values of property of an
insurable nature that is submitted to an insurance company to be used as a
basis for the calculation of premiums) relative to Seller's Purchased
Property as presently insured has been made available to the other party
hereto by Seller. On the Effective Date, the coverage under the insurance
policies and programs applicable to Seller's Purchased Property will be
terminated, and the other party hereto will be responsible for providing
all insurance coverage for such Purchased Property. Following the
Effective Date, Seller shall be responsible for and shall pay any
additional premiums that might be required by an insurance company for
insurance coverage prior to the Effective Date relating to such Purchased
Property and shall be entitled to any refunds or dividends due from such
companies relating to such coverage. All claims that relate to the
operation of Seller's Purchased Property prior to the Effective Date shall
remain the sole responsibility of Seller. Seller's Schedule 9.1.14 sets
forth a list of the open material claims affecting Seller's Purchased
Property, complete in all material respects, and a description of any
self-insurance levels, underlying limits and deductibles.
9.1.15 Taxes.
(a) Except as disclosed on Schedule 9.1.15, (i) all Tax
Returns required to be filed by Seller on or before the Effective Date
with respect to its Business or its Purchased Property have or will have
been filed, and all taxes shown as due and payable on such Tax Returns
have been or will be paid by Seller when required by law; (ii) all
penalties, interest or other charges that have or will become due with
respect to the late filing of any such Tax Return or late payment of any
such Tax have been or will be timely paid in full, (iii) no deficiencies
for any taxes, assessments or other governmental charges have been
asserted in writing or assessed against Seller with respect to its
Business that remain unpaid and that individually or in the aggregate are
material to such Business; (iv) Seller has withheld all required federal,
state and local payroll taxes and other similar taxes with respect to
creditors and third party vendors, and has remitted all amounts required
to be remitted to the appropriate taxing authorities; (v) there are no tax
liens upon any of such Seller's Purchased Property except for statutory
liens covering taxes not yet due and payable; (vi) none of such Seller's
Purchased Property is tax-exempt use property within the meaning of
Section 168(h) of the IRC and none of such Purchased Property is property
that is or will be required to be treated as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986; and (vii) Seller is not a "foreign person"
within the meaning of Section 1445(b)(2) of the IRC and shall provide an
appropriate affidavit for purposes of Section 1445(b)(2) of the IRC.
(b) Seller has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material, current audits or material audits for which notification has
been received (in either case, with respect to Seller's Business) other
than those set forth on Seller's Schedule 9.1.15.
9.1.16 No Material Claims. Except as disclosed in Seller's Schedule
9.1.16 or with respect to Taxes, there are no claims, actions, lawsuits or
legal or administrative proceedings pending, or, to the knowledge of
Seller, threatened against or affecting Seller or its properties that, if
determined adversely to Seller, would reasonably be expected to have a
material adverse effect on Seller's Business as a whole or any significant
part of its Purchased Property. Seller does not know of any reasonable
basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to its Business or its
Purchased Property. Seller is not in default under any judgment, order or
decree of any Governmental Authority applicable to its Business or any
significant part of its Purchased Property which would reasonably be
expected to have a material adverse effect on such Business as a whole or
any significant part of such Purchased Property after the Effective Date.
9.1.17 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, each of Citizens and
Tuolumne is an issuing carrier in the National Exchange Carrier
Association Tariff F.C.C. No. 5 for the purpose of providing interstate
access service. Except as described on Seller's Schedule 9.1.17(a), the
state regulatory tariffs applicable to Seller's Business stand in full
force and effect on the date of this Agreement in accordance with all
terms of such state tariffs, and there is no outstanding notice of
suspension, cancellation or termination or, to Seller's knowledge, any
threatened suspension, cancellation or termination in connection
therewith, nor is Seller subject to any restrictions or conditions
applicable to its state regulatory tariffs that limit or would limit the
operation of its Business (other than restrictions or conditions generally
applicable to tariffs of that type). Except as described on Seller's
Schedule 9.1.17(a), each such state tariff has been duly and validly
approved by the appropriate state regulatory agency. Except as otherwise
disclosed on Seller's Schedule 9.1.17(a), Seller is not in material
violation under the terms and conditions of any such state tariff, and
there is no basis for any claim of material violation by Seller in any
material respect under any such state tariff. Except as described in
Seller's Schedule 9.1.17(a), there are no applications by Seller or
complaints or petitions by others or proceedings pending or threatened
before the state regulatory authority relating to Seller's Business or its
operations or the state regulatory tariffs. To the knowledge of Seller,
there are no material violations by subscribers or others under any such
state tariff that would be material to its Business. A true and correct
copy of each state tariff applicable to Seller's Business has been
delivered to Buyer.
(b) Listed on Seller's Schedule 9.1.17(b) are the FCC Licenses
held by Seller and used in the operation of its Business. Each such FCC
License is in full force and effect in accordance with its terms, and
there is no outstanding notice of suspension, cancellation or termination
or, to Seller's knowledge, any threatened suspension, cancellation or
termination in connection therewith nor are any of such FCC Licenses
subject to any restrictions or conditions that limit the operation of
Seller's Business (other than restrictions or conditions generally
applicable to licenses of that type). Subject to the Communications Act
of 1934, as amended, and the regulations thereunder, Seller's FCC Licenses
are free from all security interests, liens, claims, or encumbrances of
any nature whatsoever. Except as set forth on Seller's Schedule
9.1.17(b), there are no applications by Seller or material complaints or
material petitions by others or proceedings pending or threatened before
the FCC relating to Seller's Business or FCC Licenses.
(c) Listed on Seller's Schedule 9.1.17(c) are all Non-FCC
Authorizations materially necessary for the conduct of Seller's Business
which would include, without limitation, all FAA radio tower ownership
authorizations. Each such Non-FCC Authorization is in full force and
effect in accordance with its terms. To Seller's knowledge, no event has
occurred with respect to any materially necessary Non-FCC Authorization
which permits, or after notice or lapse of time or both would permit,
revocation or termination thereof, or would result in any other material
impairment of the rights of the holder of such materially necessary Non-
FCC Authorization.
9.1.18 Employee Matters.
(a) Seller's Schedule 9.1.18(a) lists (and identifies the
sponsor of) each material "employee pension benefit plan, " as that term
is defined in Section 3(2) of ERISA, each material " employee welfare
benefit plan," as that term is defined in Section 3(1) of ERISA maintained
or contributed to by Seller or any of its Affiliates in respect of any of
Seller's Transferred Employee (as defined below) (such plans being
hereinafter referred to collectively as the "ERISA Plans"), and each other
material retirement, pension, profit-sharing, money purchase, deferred
compensation, incentive compensation, bonus, stock option, stock purchase,
severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income,
salary continuation, health, life or other insurance, fringe benefit, or
other employee benefit plan, program, agreement, or arrangement maintained
or contributed to by Seller or its Affiliates in respect of or for the
benefit of any of Seller's Transferred Employee or former employee,
excluding any such plan, program, agreement, or arrangement maintained or
contributed to solely in respect of or for the benefit of Seller's
Transferred Employees or former employees employed or formerly employed by
Seller outside of the United States, as of the date hereof (collectively,
together with the ERISA Plans, referred to hereinafter as the "Plans").
Seller's Schedule 9.1.18(a) also includes a list of each material written
employment, severance, termination or similar-type agreement between
Seller or its Affiliates and any of Seller's Transferred Employee (the
"Employment Agreements"). Except to the extent that any assets,
liabilities, or accounts are transferred from the Plans or Agreements
(pursuant to an Employee Transfer Agreement or otherwise) to plan(s) or
agreement(s) maintained or contributed to by the other party hereto, all
such Plans and Agreements shall remain the liabilities of the Seller or
its Affiliates and Seller shall take any and all steps necessary to ensure
that such other party shall not be a sponsor of any such Plan or Agreement
subsequent to the Effective Date. Except as otherwise disclosed on
Seller's Schedule 9.1.18(a), the execution and delivery of this Agreement
by Seller and the performance of this Agreement by Seller will not
directly result now or at any time in the future in (i) the payment by
Seller or its Affiliates to any Transferred Employee of any severance,
termination, or similar type payments or benefits or (ii) any "parachute
payment" (as such term is defined in Section 28OG of the IRC) being made
by Seller or its Affiliates to any Transferred Employee.
(b) Except as set forth on Seller's Schedule 9.1.18(b):
(i) Neither Seller nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which Seller could
be subject to any material liability pursuant to Section 409 of ERISA or
to either a civil penalty assessed pursuant to Section 502(i) of ERISA or
a tax imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material
liability under Title IV of ERISA with respect to the ERISA Plans has been
incurred or is reasonably expected to be incurred by Seller or any of its
Affiliates (other than liability for premiums due to the PBGC), unless
such liability is reserved for or otherwise reflected on the Financial
Statements or unless such liability has been, or prior to the Effective
Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering
any Transferred Employee or former employee of Seller that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the IRC.
(iv) Neither Seller nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged
in, a transaction described in Section 4069 of ERISA.
(c) Except as set forth on Seller's Schedule 9.1.18(c), with
respect to the ERISA Plans other than those ERISA Plans identified on
Seller's Schedule 9.1.18(a) as "multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate
any Plan that is subject to Title IV of ERISA (the "Retirement Plans") and
no condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by Seller, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Seller's Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the IRC), whether or not waived, as of the last day of the most recent
fiscal year of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and
administered in all material respects in accordance with its provisions
and with all applicable laws;
(v) each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the IRC and, to the
extent applicable, Section 401(k) of the IRC, has been determined by the
IRS to be so qualified, and nothing has occurred since the date of the
most recent such determination (other than the effective date of certain
amendments to the IRC, the remedial amendment period for which has not yet
expired) that would adversely affect the qualified status of any of such
ERISA Plans;
(vi) there are no pending material actions, claims or
lawsuits which have been asserted or instituted against any of the ERISA
Plans, the assets of any of the trusts under such Plan, the plan sponsor,
the plan administrator, trustee or any other fiduciary of such Plans with
respect to any aspect of such ERISA Plans (except for routine benefit
claims or routine expenses).
(d) Except as set forth on Seller's Schedule 9.1.18(d), none of
the ERISA Plans is a "multi-employer plan," as that term is defined in
Section 3(37) of ERISA and with respect to any such multiemployer plans
(as so defined) listed in Seller's Schedule 9.1.18(d), Seller has not made
or incurred a "complete withdrawal" or a "partial withdrawal," as such
terms are respectively defined in Sections 4203 and 4205 of ERISA that
would result in the incurrence of a material liability by Seller that is
not reserved for or otherwise reflected on the Financial Statements of
Seller.
(e) Except as set forth on Seller's Schedule 9.1.18(e), no
post-retirement medical and life insurance benefit obligations exist with
respect to any Transferred Employees or former employees of Seller.
(f) No Plan identified on Seller's Schedule 9.1.18(a) has any
restrictions against termination or modification, either by its terms or,
to Seller's knowledge, due to any written or oral communications by any
representative of the Seller nor any of its Affiliates.
(g) Except as set forth on Seller's Schedule 9.1.18(g), (i)
none of Seller's Transferred Employees are represented by a labor union or
labor organization and (ii) neither Seller nor any of its Affiliates is a
party to nor is Seller subject to, any collective bargaining agreement
covering any Transferred Employee. There are currently no strikes,
slowdowns, work stoppages or lockouts by or with respect to any
Transferred Employee covered by collective bargaining agreements. Except
as set forth on Seller's Schedule 9.1.18(g), to the best knowledge of
Seller, during the twelve (12) months preceding the Execution Date there
have not been any union organizational campaigns by or directed at the
employees of Seller.
Except as set forth on Seller's Schedule 9.1.18(g), no condition has
existed or exists that has caused or could be expected to result in the
imposition of any lien or encumbrance under ERISA or the IRC on any part
of Seller's Purchased Property.
(h) Seller will make available to the other party hereto, prior
to the Closing Date, a list of those Transferred Employees that Seller
believes to have participated in the health or dependent care
reimbursement accounts of Seller, together with the elections made prior
to the Effective Date with respect to such accounts through the Effective
Date.
9.1.19 Schedules of the Telephone Plant. Seller has set forth on
Seller's Schedule 9.1.19 copies of schedules (at the level of detail
agreed to by the parties but in any case including details regarding net
book value and continuing property records lists associated therewith) of
its Telephone Plant as of June 30, 1994, including, to the extent
available, a schedule specifically identifying the Telephone Plant that is
associated with the Unregulated Business. The account balances reflected
on the schedule of Telephone Plant correspond, in all material respects,
to the associated account balances reflected on the Continuing Property
Records.
9.1.20. Accuracy of Certain Information.
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Seller's
Schedule 9.1.20 (a) is true and complete in all material respects as of
the respective dates set forth thereon.
(b) Tuolumne represents and warrants that the information set
forth only with respect to the 1993 column of the "Capital Budget Network
Modernization Forecast" attached as Tuolumne Schedule 9.1.20(b) is true
and complete as of December 31, 1993.
(c) Seller's Schedule 9.1.20 (c) sets forth a substantially
complete list of all vehicles included in Seller's Purchased Property
(including trailers, equipment mounted on trailers and self-propelled
equipment) together with the manufacturer, model and year of each such
vehicle, and indicates whether such vehicle is owned or leased by Seller.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of
the interstate billing and collection revenues and intrastate interlata
billing and collection revenues of Seller from its Business for the year
1993.
9.1.21 Rate Base. Except as set forth on Seller's Schedule 9.1.21,
Seller has no materials and supplies, plant or equipment used in its
Business that has been disallowed from rate base or excluded from the
revenue calculations for any pool (unless due to the deregulation of the
service for which such assets are used) or in the most recent rate order
issued by the applicable PUC or the FCC or any determination by an
administrator of an interstate or intrastate pool, and has not received
written notification that the applicable PUC or the FCC or any pool
administrator proposes to exclude any assets from rate base or revenue
calculations for the pools, or any tariff filed with or approved in the
most recent rate order of the applicable PUC or the FCC, in each case
which materials and supplies, plant or equipment, in the aggregate, would
be in excess of one percent (1%) of Net Telecommunications Plant.
9.1.22 Payments. All material payments of any kind required to be
made by Seller to third parties under any Contract and maturing prior to
the Effective Date have been, or will be as of the Effective Date,
properly and timely paid or provided for, unless otherwise subject to a
bona fide dispute disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws. Except as Seller shall specifically
indicate on Seller's Schedule 9.1.23, (i) Seller is in compliance in all
material respects with all Laws applicable to its Purchased Property and
its Business and holds all governmental permits or licenses required in
order to conduct its Business and to own and operate its Purchased
Property; (ii) the present uses of Seller's Purchased Property in the
conduct of Seller's Business do not violate in any material respect any
Law and (iii) no written notice or warning from any governmental or
regulatory authority with respect to any failure or alleged failure by
Seller to comply with any Law or questioning the validity of any
governmental permit or license, with respect to its Business or its
Purchased Property has been issued or given, nor to the knowledge of
Seller, is any such notice or warning proposed or threatened. Seller is
not aware of any fact, event or circumstance relating to Seller that is
reasonably likely to cause a regulatory agency to deny or withhold its
approval to the transactions contemplated hereby.
9.1.24 Correct Records. The financial records, ledgers, account
books and other accounting records of Seller relating to its Business are
current, correct and complete and reasonably well organized, in all
material respects and to the best of Seller's knowledge and to the extent
required by applicable Law, conform in all material respects with the
rules and regulations of the FCC and PUC. Seller and its Affiliates have
retained substantially all Original Cost Documents regarding the
expenditures made by Seller within the immediately preceding two-year
period that relate to Seller's Net Telecommunications Plant or Net Fixed
Assets, as the case may be, and such Original Cost Documents are correct
and complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value
(as reflected on Seller's books) of Seller's materials and supplies
relating to its Business which are obsolete or in excess of the
requirements of such Business, will not materially exceed Seller's reserve
for obsolete or excess Materials and Supplies as reflected on Seller's
books.
9.1.26 Assets Necessary to the Business. Seller's Purchased
Property includes all of the assets and properties (including all licenses
and agreements) currently being used or which are reasonably necessary to
carry on Seller's Business as currently conducted, other than the assets
and properties included in the Excluded Property.
9.1.27 [INTENTIONALLY DELETED]
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of Seller's Unregulated Business, in detail reasonably
acceptable to the other party hereto.
9.1.29. Capital Improvements Required by PUC. Except as set forth on
Seller's Schedule 9.1.29, there are no changes, modifications, upgrades or
enhancements required by the applicable PUC to be made to Seller's
Purchased Property or the operation thereof.
9.2 [INTENTIONALLY DELETED]
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by
Citizens with respect to the Tuolumne Purchased Property or by Tuolumne
with respect to the Citizens Purchased Property, on or prior to March 15,
1995, the parties shall, as promptly as practicable but in any event
within 30 days after either party's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no
later than the Effective Date, pursuant to which Tuolumne will provide to
Citizens with respect to the Tuolumne Purchased Property, at Citizens'
expense, or Citizens will provide to Tuolumne with respect to the Citizens
Purchased Property, at Tuolumne's expense, such financial, accounting,
billing, computer, network, administrative and other services (including
services relating to the conversion of systems and processes) as may be
reasonably requested by Citizens or Tuolumne, which agreements shall be in
form and substance as mutually agreed to by both Citizens and Tuolumne
(the "Transition Services Agreement").
<PAGE>
ARTICLE 11. ADDITIONAL COVENANTS OF THE
PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions
(whether patentable or not and whether or not such inventions are
described or claimed in any patent or patent application), designs (useful
or ornamental), and works subject to copyright that may be embodied in,
without exclusion, invention disclosures, specifications, manuals,
drawings, functional or system block diagrams, flow charts, circuit
diagrams, design or user documentation, engineering notebooks, schematics,
test programs, documented procedures, documented processes, documented
flows, devices, software, or firmware, that relate to the function,
design, development, manufacture, testing, use, operation, maintenance or
repair of any product, apparatus, article of manufacture, process, method
or service. "Intellectual Property" shall also include patents, patent
applications (including continuations, continuations-in-part, divisions,
reissues, reexamined patents and patent applications and extensions
thereof), copyrights (whether common law or statutory, registered or
unregistered), or trade secrets, residing in the subject matter above.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement,
effective on the Effective Date, Seller shall grant to Buyer, and Buyer
shall accept, a nonexclusive, fully paid, royalty-free, perpetual license
for the Intellectual Property that, on the Effective Date, Seller owns or
controls or with respect to which Seller has an unrestricted right to
grant such license without permission from, or any consideration to, any
third party, and if Seller has a restricted right to grant such license,
Seller will use its best efforts to assist Buyer (provided that Buyer
shall be responsible for any fees associated therewith) in obtaining the
consent for the use of any such license, provided that the above grant and
any assistance required by Seller shall be effective with respect to only
such Intellectual Property that Seller has placed in public use on, or
prior to, the Effective Date and that is presently used by Seller, in the
ordinary and normal course of its Business, and shall exclude any
Intellectual Property listed in Seller's Schedule 2.4(g). The above
license shall include the right of Buyer to grant sublicenses after the
Effective Date to vendors and customers of Buyer and to other third
parties, as is necessary in the ordinary and normal course of such
Business with respect to Seller's Purchased Property after the Effective
Date.
(b) The grant set forth in Section 11.1.2(a) is made subject to
preexisting agreements; however, Seller represents that it is aware of no
other agreement that precludes the grant made herein.
(c) The above Sections 11.1.2(a) and (b) set forth Seller's
entire obligation with respect to the license of Intellectual Property to
Buyer. Except as specifically provided otherwise in this Agreement or any
other agreement between Buyer and Seller, Seller shall have no continuing
obligation beyond the Effective Date to provide support of any kind in
Buyer's use of such Intellectual Property.
(d) Buyer agrees and understands that Seller or its Affiliates
shall retain ownership of all Intellectual Property owned by Seller or its
Affiliates as of the Effective Date. Buyer further agrees and understands
that the retained ownership shall include the right of Seller to grant
licenses to vendors and customers of Seller, and to other third parties.
(e) Additional agreements, if any, between Buyer and Seller
regarding possession and use by Buyer of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are
set forth in Seller's and Buyer's Schedule 11.1.2.
11.1.3 Nonassertion. In addition to granting to Buyer the license
set forth in Section 11.1.2, Seller agrees that, with respect to the
Intellectual Property that as of the Effective Date Seller owns or
controls or under which it has the right to grant licenses, Seller shall
not assert against Buyer, or Affiliates of Buyer, or vendees, mediate or
immediate, of Buyer, a claim of infringement, misappropriation or misuse
of such Intellectual Property right arising from Buyer's activities
practiced in the ordinary and normal course of the conduct of Seller's
Business after the Effective Date.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that
Seller has not made or given, and does not make or give, any warranty as
to the value, enforceability, or validity of any Intellectual Property or
that the use by Buyer of any Intellectual Property under this Agreement
will not infringe other intellectual property rights not licensed under
this Agreement.
(b) Nothing contained in this Agreement shall be construed as
an agreement by, or obligation of, Seller to bring or prosecute actions or
suits against third parties for infringement or violation of any
Intellectual Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnity or
hold harmless Buyer from any damages, costs or expenses resulting from any
obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, a customer of
Buyer's or anyone claiming under Buyer constitutes direct or contributory
infringement or misuse of any intellectual property rights not licensed
under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses
resulting from any obligation, proceeding or suit based upon any claim
that any activity conducted or engaged in, subsequent to the Effective
Date, by Buyer, a customer of Buyer's, or anyone claiming under Buyer
constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
11.1.5 Trademark Phaseout. Buyer acknowledges that Seller or its
Affiliates are the owners of certain trade names, trade dress, trademarks,
service marks, logos and related intangible property (collectively,
"Marks") used in connection with Seller's Business, including, without
limitation, the items listed on Seller's Schedule 11.1.5, and Buyer
understands and agrees that the Marks, or any right or license to the
Marks are not being transferred pursuant to this Agreement. Buyer
acknowledges Seller's exclusive and proprietary rights in the use of the
Marks, and Buyer agrees that it shall not use the Marks (or any names or
Marks confusingly similar to the Marks) except as expressly set forth in
this Section 11.1.5. After the Effective Date, all Marks of Seller shall
be replaced by Buyer as soon as possible, but in no event later than one
hundred eighty (180) days after the Effective Date for Marks affixed to
items with a valid continuing use in Buyer's conduct of Seller's Business
after the Effective Date, including, without limitation, buildings,
vehicles, heavy equipment, hard hats, tools, tool boxes, kits (safety and
others), signs, manual covers and notebooks. After the Effective Date,
Buyer will not use, and will destroy or deliver to Seller, all such items
with Marks affixed to them that have no valid continuing use in Buyer's
conduct of such Business after the Effective Date, including items
affecting customer or employee relations or items that do not reflect
Buyer's true identity. Specific items to be destroyed or returned include
items with Marks affixed to them including, without limitation, giveaways;
order, purchase or materials forms; requisitions; invoices; statements;
time sheets/labor reports; bill inserts; stationery; personalized note
pads; maps; organization charts; bulletins/releases; sales/price
literature; manuals or catalogs; report covers/folders; program materials;
and materials such as media contact lists/cards. The one hundred eighty
(180) day time period for replacement of Marks affixed to telephone
directories that were already published or closed for publication as of
the Effective Date shall be extended to the production of replacements for
such directories.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill
associated with the Marks, and acknowledges that the Marks and all rights
therein and the goodwill pertaining thereto belong exclusively to Seller,
and that the Marks have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of Seller's
Business after the Effective Date by Buyer using the Marks shall be
provided in accordance with all applicable federal, state and local laws,
and that the same shall not reflect adversely upon the good name of
Seller, and that the conduct of such Business will be of a standard and
skill equivalent to that employed by Seller prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that its failure to cease use of the Marks as provided in
this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that
there is no adequate remedy at law for such failure to terminate use of
the Marks, or for such improper use of the Marks, and Buyer agrees that in
the event of such failure or improper use, Seller shall be entitled to
equitable relief by way of temporary restraining order or injunction or
any other relief available under this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents
that it is a sophisticated entity that was advised by knowledgeable
counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement and by the Effective Date will have
conducted its own independent review and evaluation of Seller's Purchased
Property. Accordingly, Buyer covenants and agrees that (i) except for the
representations and warranties set forth in this Agreement and Seller's
Schedules (and the Financial Statements of Seller, the Additional
Financial Statements of Seller, and actuarial reports required of Seller
pursuant to the Employee Transfer Agreement), Buyer has not relied and
will not rely upon any document or written or oral information furnished
to or discovered by it or its representatives, (ii) there are no
representations or warranties by or on behalf of Seller or its Affiliates
or representatives except for those expressly set forth in this Agreement
and in any other written agreement entered into with Seller or any of its
Affiliates in connection with this Agreement, and (iii) to the fullest
extent permitted by law, Buyer's rights and obligations with respect to
all of the foregoing matters will be solely as set forth in this Agreement
or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and
representatives will comply with the Confidentiality Agreement, the
provisions of which are expressly incorporated herein in their entirety by
this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of
Seller (collectively, the "Additional Financial Statements") within the
time periods set forth below:
(a) Within forty-five (45) days after the Execution Date for
the month of October, 1994, and within forty-five (45) days after the
close of each month beginning with November, 1994, and continuing up to
and including the month next preceding the month in which the Closing
occurs, a balance sheet and income statement as of and for such month, and
as of and for the year-to-date period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended
December 31, 1994, and an income statement and statement of cash flows for
1994, together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the
Effective Date, Seller shall conduct its Business in the ordinary course
in accordance with prudent business judgment and consistent with past
practice and policy and shall (i) preserve its Business as an ongoing
business, (ii) keep available to its Business its services and the
services of its Affiliates at least to the same extent as such were
generally available from January 1, 1994 through the Execution Date and
are available on the date hereof, (iii) not take any action that would
jeopardize any material and beneficial contractual relationships with
persons having business dealings with its Business, and (iv) preserve all
of its Business' tariffs, certificates, licenses, authorizations and other
rights.
From the Execution Date to the Effective Date, except with the prior
written consent of Buyer, which the Buyer shall not unreasonably withhold:
(a) Seller's Business will be conducted in substantially the
same manner as it is presently being conducted on the Execution Date.
With respect to its Business, Seller will refrain from entering into any
material transaction or contract other than in the ordinary course of
business and will not make any material change in the general nature of
its Business or in its methods of management, marketing, accounting or
operations (including repair and maintenance functions).
(b) Seller will not, with respect to its Business, (i) create
or incur any indebtedness for borrowed money or otherwise, except in the
ordinary course of business, (ii) enter into or terminate, as lessor or
lessee, any Lease other than in the ordinary course of business, (iii)
create any liens or other security interest, except in the ordinary course
of business, or (iv) change in any material respect or terminate any of
the insurance policies referred to in Seller's Section 9.1.14, unless
equivalent coverage is obtained.
(c) Except as listed or described on Seller's Schedule 11.5(c),
and except for dispositions of salvaged property that has been replaced in
accordance with the plans attached in such Schedule 11.5(c), Seller will
not sell, lease, dispose of or otherwise transfer, or make any contract
for the sale, lease, disposition or transfer of any of its Purchased
Property other than, with respect to any individual item (other than
vehicles) having a value of less than Seventy-Five Thousand Dollars
($75,000) and with respect to all items (other than vehicles) the
aggregate value of which shall not exceed Two Hundred Fifty Thousand
Dollars ($250,000).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by the applicable PUC, Seller will not (i)
institute any proceeding with respect to, or otherwise change, amend or
supplement any tariff or (ii) enter into or agree to any stipulation,
order, or decree of, or settlement with such PUC that, in case of (i) or
(ii) above, would have a material adverse effect on the revenue,
authorized return on equity or earnings of its Business. Seller will not
file any application, petition, motion, brief, testimony, settlement
agreement or other pleading in any proceeding before such PUC, or before
the FCC (except for filings on behalf of all of Parent's local exchange
telephone companies) or appeals related thereto, unless Seller shall have
first provided Buyer with a copy of the same and provided Buyer a
reasonable opportunity to comment to Seller with respect thereto. If
Buyer determines it should intervene in any proceeding before such PUC in
which Buyer's position is or may be different from Seller's, Seller,
without waiving any other rights related thereto, will not oppose Buyer's
intervention in such proceeding.
(e) Except as listed on Schedule 11.5(e) or as required by law
or in the ordinary course of business of Seller or pursuant to any
Contract of Seller, not (i) enter into or amend any employment agreement
with any individual that will become a Seller Transferred Employee, or
enter into or amend any union agreement or commitment (including any new
commitment to pay retirement or other benefits, or amendments to the
Seller's retirement plans), (ii) effect any net increase over five percent
(5%) since the Execution Date in the number of employees of the Seller who
will become Seller Transferred Employees, or (iii) increase over 5% the
benefit provided under any plans concerning employee benefits or increase
the general rates of compensation of the Seller Transferred Employees, or
change the manner by which compensation (including fringe benefits) is
determined and paid to any Seller Transferred Employee.
(f) Seller will not engage in any intercompany transactions
with any Affiliate of Seller, except for transactions consistent with past
practices.
(g) Seller shall maintain its Purchased Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain its Transferred Books and Records and Retained Books and Records
in the usual, regular and ordinary manner on a basis consistent with prior
years.
(h) Seller will not make any commitment to take any actions
prohibited by the provisions of this Section 11.5.
(i) Notwithstanding Section 11.5(b), Citizens shall not create or
incur any long term indebtedness with respect to its Business and
Purchased Property.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed Seller's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or
such later date agreed to by the parties). The construction and capital
expenditure plans which Buyer shall have approved (both as to the type of
project and the dollars expended) shall be set forth on Seller's Schedule
11.6, and the parties agree that when such expenditures have been incurred
they will constitute an addition to a component of Tuolumne's Net
Telecommunications Plant or Citizens' Net Fixed Assets, as the case may
be, thereby becoming subject to Section 3.2(c). Seller agrees to use its
best efforts substantially to complete such plans within the projected
time schedules; provided, that Seller will not incur any liability for
unbudgeted expenditures in excess of $200,000 in the aggregate without the
prior written consent of Buyer. All construction work that is in progress
on the Effective Date will be accounted for by identifying and accruing
all associated time reporting, material invoices or contractor invoices
inputted or received on or before the Effective Date, and all payments
therefor shall be the responsibility of Seller and will constitute an
addition to a component of Seller's Net Telecommunications Plant or
Citizens' Net Fixed Assets, as the case may be, thereby becoming subject
to Section 3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to
Buyer such other instruments and information as Buyer may reasonably
request in order to convey to Buyer title to Seller's Purchased Property,
to be delivered from time to time upon Buyer's reasonable request.
11.8 Prorations.
(i) With respect to Seller's Purchased Property, the
following liabilities shall be prorated between Seller and Buyer: (a)
utility charges (which shall include, without limitation, water, sewer,
electricity, gas and other utility charges) with respect to the Real
Property, the property subject to the Leases and customer owned equipment,
(b) rental charges (which shall include, without limitation, rental
charges and other lease payments under the Leases), (c) real and personal
property taxes and (d) regulatory and telephone relay service fees. With
respect to measurement periods during which the Effective Date occurs (all
such periods of time being hereinafter called "Proration Periods"), the
liabilities described in clauses (a) and (b) of the preceding sentence
shall be apportioned between Seller and Buyer as of the Effective Date,
with Buyer bearing only the expense thereof in the proportion that the
number of days in the applicable Proration Period after the Effective Date
bears to the total number of days covered by such Proration Period. Real
and personal property taxes shall be prorated between Buyer and Seller
based on the period the Purchased Property was owned by each respective
party during the fiscal period for which such taxes were unposed by the
taxing jurisdiction (as such fiscal period is reflected on the bill
rendered by such taxing jurisdiction). Buyer and Seller shall pay or be
reimbursed for real and personal property taxes (including instances in
which such property taxes have been paid before the Effective Date)
prorated on this basis. Unless otherwise handled as an adjustment to the
Cash Consideration and then, only to such extent, if a payment on a
prorated bill is due after the Effective Date, the party that is legally
or contractually required to make such payment shall make such payment and
promptly forward an invoice to the other party for its pro rata share, if
any. If the other party does not pay the invoice within thirty (30)
calendar days of receipt, the amount of such payment shall bear interest
at the rate of seven percent (7%) per annum beginning from the date thirty
(30) calendar days after receipt until time of payment.
(ii) All prepayments made by Seller with respect to service
or maintenance agreements with third parties shall be prorated between
Seller and Buyer to the extent Buyer shall receive the benefits of such
prepayments after the Effective Date.
(iii) All Universal Service Fund payments by NECA or its
state equivalent received by either of the parties with respect to a
Proration Period concerning the Purchased Exchange shall be apportioned
between Seller and Buyer as of the Effective Date, with Buyer receiving
and being allowed to retain only that portion of the payment that the
number of days in the applicable Proration Period after the Effective Date
bears to the total number of days covered by such Proration Period.
11.9 Risk of Loss Prior to the Effective Date. If any material
damage, loss or destruction of any sort (including, without limitation, by
theft, unauthorized use, fire, act of God or condemnation) occurs prior to
the Effective Date to any of the tangible properties that constitute
Seller's Purchased Property, Seller shall promptly notify Buyer thereof
(the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably
estimate that the cost to repair or replace such of Seller's damaged, lost
or destroyed Purchased Properties (the "Damaged Property") will exceed
Seven Hundred Fifty Eight Thousand One Hundred Dollars ($758,100.00),
either party may, by written notice to the other party (the "Casualty
Termination Notice") within thirty (30) days after the date of delivery of
the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably
estimate that the cost to repair or replace the Damaged Property will not
exceed Seven Hundred Fifty Eight Thousand One Hundred Dollars
($758,100.00), or the Casualty Termination Notice is not given by either
party, then Seller, within forty-five (45) days after the damage or
destruction, shall agree in writing,
(i) to repair or replace, prior to the Effective Date or at
some later date as may be mutually agreed to by the parties, at Seller's
sole cost and expense, the Damaged Property, and Seller will be entitled
to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged
Property; or
(ii) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated
by this Agreement, the Damaged Property will be excluded from Seller's
Purchased Property and will become Excluded Property, Seller will
substitute therefor an equivalent item or items of Purchased Property if
the Damaged Property is personal property and if the Damaged Property is
Real Property substitute Real Property therefor but only if such
substituted personal property or Real Property is satisfactory to Buyer,
and Seller will be entitled to make all claims related to the Damaged
Property and to receive and retain all proceeds of insurance payable with
respect to the Damaged Property.
(c) if Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30)
days after the initial forty-five (45) day period, to elect one of the
following options:
(i) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated
by this Agreement, the Damaged Property will remain part of Seller's
Purchased Property, the adjustment to the Cash Consideration contemplated
by Section 3.2(a)(1) will be made, and Seller shall be entitled to make
all claims related to the Damaged Property and to receive and retain any
proceeds of insurance received by Seller with respect to the Damaged
Property; or
(ii) subject to the other terms and conditions of this
Agreement, the parties will proceed to Closing in the manner contemplated
by this Agreement, the Damaged Property will be excluded from Seller's
Purchased Property and will become Excluded Property, Seller will be
entitled to make all claims related to the Damaged Property and to receive
and retain all proceeds of insurance payable with respect to the Damaged
Property, and the Cash Consideration adjustment contemplated by Section
3.2(a)(2) will be made.
(d) Notwithstanding the other provisions of this Section 11.9,
if the time periods pursuant to this Section 11.9 continue beyond the
Effective Date or if Seller has not fully performed its obligations
pursuant to Section 11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date
(or otherwise made reasonably satisfactory arrangements with Buyer),
either party hereto may elect to postpone the Closing and the Effective
Date, until the expiration of any such periods or the full performance of
such obligations, which election shall be binding upon all parties hereto.
11.10 Settlements and Cost Studies. Seller agrees that, with respect
to all toll revenues, settlements, pools, separations studies, Universal
Service Fund payments or similar activities, Seller shall be responsible
for (and shall receive the benefit or suffer the burden of) the results of
any such activities that are related to the conduct of its Business or the
ownership or operation of its Purchased Property on or before the
Effective Date.
11.11 Construction Advances and Customer Deposits. Seller agrees to
transfer to Buyer as of the Effective Date all of Seller's rights to hold
and control the construction deposits of its Business (and interest
thereon, if any) held by Seller as of the Effective Date (the
"Construction Advances") and the customer deposits, advances and interest
of its Business held by Seller as of the Effective Date (the "Customer
Deposits"), and Buyer agrees to hold, disburse and retain such
Construction Advances and Customer Deposits in accordance with the
tariffs, laws and Contracts related thereto. The parties acknowledge that
the adjustment to the Cash Consideration made pursuant to Section 3.2(b)
is intended to compensate Buyer for the liability associated with the
Construction Advances and Customer Deposits.
<PAGE>
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing
Corporation.
(a) The Directory Publishing Agreement dated as of November 15,
1994, by and between Tuolumne and ALLTEL Publishing Corporation (the
"Directory Publishing Agreement") is an Excluded Contract on Tuolumne
Schedule 11.22(h), except as hereinafter provided. Within thirty days
after the Execution Date, Citizens shall cause its existing directory
provider to indicate in writing whether it will provide directory
publication services to Citizens, as of the Effective Date (or as of such
later date as described below) with regard to all of the Tuolumne
Purchased Exchanges on the same terms and conditions as it is presently
providing such services to Citizens, and Citizens shall inform Tuolumne
within such thirty day period of Citizens' existing telephone directory
provider's written intention. If Citizens' existing directory provider's
indication is that it will not provide directory publication services for
all of the Tuolumne Purchased Exchanges on the same terms and conditions
that it is presently providing such services to Citizens, then the
Directory Publishing Agreement shall be deemed to become a Contract for
the purposes of this Agreement. Promptly, thereafter, Citizens and ALLTEL
Publishing Corporation shall agree to meet in good faith to negotiate any
necessary amendments to the Directory Publishing Agreement, to be
effective as of the Effective Date, to provide for a retention rate equal
to or greater than the higher of (x) 60% or (y) the retention rate
provided for in any substantially similar directory publishing agreement
between ALLTEL Publishing Corporation and a non-affiliate of ALLTEL
Publishing Corporation that was entered into within 18 months prior to the
Effective Date. If Citizens' existing directory provider indicates that
it will provide directory publication for all the Tuolumne Purchased
Exchanges, as provided above, the Directory Publishing Agreement shall
remain in effect as to the directory of each of the Tuolumne Purchased
Exchanges for which (i) the directory is scheduled to be or is published
prior to the Effective Date or (ii) the canvass for the directory has
begun prior to the Effective Date and it is scheduled to be published
after the Effective Date. Under such circumstances, Citizens' existing
directory provider will not begin providing directory publication services
for such Tuolumne Purchased Exchange until canvass and production begins
for the next succeeding directory related to such Tuolumne Purchased
Exchange.
(b) If Citizens' existing directory provider indicates that it
will provide directory publication for all of the Tuolumne Purchased
Exchanges, as provided in Section 11.12.1(a) of this Agreement, Tuolumne
and Citizens agree to cooperate and to use their best efforts as follows:
(i) Tuolumne will deliver to Citizens on a date mutually
agreeable to Citizens and Tuolumne, copies of all records, documents, and
materials of Tuolumne even if in the possession of a third party related
to directories of the Tuolumne Purchased Exchanges that are published by
Tuolumne or its Affiliate.
(ii) Except as otherwise agreed between the parties,
Tuolumne and its Affiliate shall have no responsibility for the canvass
and production functions of any directories related to the Tuolumne
Purchased Exchanges that are scheduled to begin canvassing and publication
after the Effective Date.
(iii) Tuolumne and Tuolumne's Affiliates and Citizens shall
provide the other reasonable access to such documentation, reports and
accounting records related to directory production as may be necessary to
insure a proper transition of directory publication in accordance with the
terms of such agreements in effect on the Effective Date.
(iv) As promptly as practicable after receipt by Tuolumne
of Citizens' existing directory provider's indication that it will provide
directory publication services for all of the Tuolumne Purchased
Exchanges, Tuolumne or its Affiliate (ALLTEL Publishing Corporation), and
Citizens will meet to negotiate in good faith to agree upon the services
or work, if any, that Tuolumne or its Affiliate (ALLTEL Publishing
Corporation) will provide, and the compensation that Citizens will pay for
such services and work, related to any directories that will be canvassed
and published by Citizens' existing directory provider.
11.12.2 Telephone Directories Published by L. M. Berry and Company
("L.M. Berry").
(a) The Directory Publishing Agreement dated as of November
17, 1993, by and between Citizens Utilities Company and L. M. Berry (the
"Berry Publishing Agreement") is an Excluded Contract on Citizens Schedule
11.22(h), except as hereinafter provided. The Berry Publishing Agreement
shall remain in effect as to the directory of each of the Citizens
Purchased Exchanges for which (i) the directory is scheduled to be or is
published prior to the Effective Date or (ii) the canvass for the
directory has begun prior to the Effective Date and it is scheduled to be
published after the Effective Date. Under such circumstances, ALLTEL
Publishing Corporation will not begin providing directory publication
services for such Citizens Purchased Exchange until canvass and production
begins for the next succeeding directory related to such Citizens
Purchased Exchange.
(b) Tuolumne and Citizens agree to cooperate and to use their
best efforts as follows:
(i) Citizens will deliver to Tuolumne on a date mutually
agreeable to Tuolumne and Citizens, copies of all records, documents, and
materials of Citizens even if in the possession of a third party related
to directories of the Citizens Purchased Exchanges that are published by
L. M. Berry.
(ii) Except as otherwise agreed between the parties,
Citizens and L. M. Berry shall have no responsibility for the canvass and
production functions of any directories related to the Citizens Purchased
Exchanges that are scheduled to begin canvassing and publication after the
Effective Date.
(iii) Citizens and Tuolumne shall provide the other
reasonable access to such documentation, reports and accounting records
related to directory production as may be necessary to insure a proper
transition of directory publication in accordance with the terms of such
agreements in effect on the Effective Date.
(iv) As promptly as practicable after the Execution Date,
Citizens and Tuolumne will meet to negotiate in good faith to agree upon
the services or work, if any, that Citizens and L. M. Berry will provide,
and the compensation that Tuolumne will pay for such services and work,
related to any directories that will be canvassed and published by ALLTEL
Publishing Corporation.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the
Closing, use their best efforts to allow Buyer to negotiate a billing and
collection agreement ("B&C Agreement") reasonably satisfactory to Buyer
with each interexchange carrier ("IXC") and each local exchange carrier
("LEC") for which Seller provides, on the Execution Date, billing and
collection services in any of its Purchased Exchanges (each such IXC or
LEC is hereinafter referred to as a "Carrier"). Seller and Buyer shall
cooperate with each other and make available to each other all documents
and records relevant and necessary to allow Buyer to finalize negotiations
of B&C Agreements, as necessary, and to perform such B&C Agreements after
the Effective Date.
11.12.4 Equipment Manufacturers. Seller shall use its best efforts
to assist Buyer in obtaining a written agreement with such equipment
manufacturers (such as Northern Telecom and Stromberg-Carlson;
collectively "Equipment Manufacturers") as Buyer may request, covering
such software license agreements and other agreements as are necessary to
enable Buyer to operate the equipment manufactured and sold by the
Equipment Manufacturers included in Seller's Purchased Property in
substantially the same manner as operated by Seller prior to the Effective
Date. The agreements shall contain material terms and conditions
(including license and warranty, but not necessarily including pricing)
that are substantially the same as those provisions in the corresponding
agreements between Seller and the Equipment Manufacturers. Buyer
understands and agrees that the price and fee provisions of such
agreements will be as negotiated between Buyer and the Equipment
Manufacturers. The above obligation of Seller shall be expressly
conditioned upon the acceptance by Buyer of all material obligations
accepted by Seller in such corresponding agreements. It is the
responsibility of Buyer to enter into appropriate agreements with the
Equipment Manufacturers in respect of service, support, training,
maintenance, and future development (hardware and software) for Seller's
Purchased Property, such agreements to include terms and conditions agreed
to between Buyer and the Equipment Manufacturers. To the extent
assignable, Seller agrees to assign, and to the extent non-assignable,
Seller agrees to assist Buyer in obtaining the Equipment Manufacturers'
consent to the assignment of training credits remaining at the Effective
Date on Seller's Purchased Property furnished by the Equipment
Manufacturers.
11.12.5 Integrated Contracts. Seller and Buyer acknowledge that
certain agreements between Seller (or Affiliates of Seller) and third
parties relate both to Seller's Purchased Property and the Excluded
Property. Seller agrees to use its best efforts to assist Buyer in
obtaining contractual arrangements with such third parties relating to
Seller's Purchased Property, which arrangements will be reasonably
satisfactory to Buyer; provided that neither Seller nor any of its
Affiliates shall be obligated under this Section 11.12.5 to make any
payment to any such third party unless such payment is expressly provided
for in such agreement.
11.13 Retention of Books and Records. After the Closing, the parties
shall retain the Retained Books and Records or the Transferred Books and
Records, as applicable, until the shorter of the date that other party
consents in writing to their destruction or the seventh anniversary of the
Effective Date. Each party shall provide full and free access to the
Transferred Books and Records and Retained Books and Records, as the case
may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and
Records are required to be retained. Either party may make copies of any
such Books and Records as it deems desirable, at its own expense. After
the Effective Date, upon reasonable notice, Seller shall provide Buyer
with reasonable assistance in locating any of Seller's Original Cost
Documents which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 Allocation of Cash Consideration. Prior to the Effective Date
Citizens and Tuolumne shall agree to the allocation (the "Allocation") of
the Purchased Property, Cash Consideration and the Assumed Liabilities to
the individual assets or classes of assets. Buyer, Seller, and their
respective Affiliates, shall file all Tax Returns and schedules thereto
consistent with the Allocation unless otherwise required by applicable
Law.
11.16 Real Property Transfers. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering Seller's Real Property.
Thereafter, no later than sixty (60) days before the Effective Date,
Seller shall deliver (at its expense) to Buyer a preliminary title binder
(on a standard form reasonably acceptable to Buyer), issued by Lawyers
Title Insurance Corporation or another title insurance company reasonably
acceptable to Buyer, with respect to all Real Property included in
Seller's Purchased Property and in which Seller purports to own fee title.
Such title binders shall be in form, substance and amount reasonably
satisfactory to Buyer (ALTA Owners Policies where available but based upon
boundary surveys as described below) and shall be current as of a date no
earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each
policy shall equal the dollar value set forth on Seller's continuing
property records list as of December 31, 1993 for land and buildings.
Such title binders shall reflect that, upon consummation of the sale
contemplated by this Agreement, Buyer will be vested with good, fee
simple, marketable and insurable title to such Real Property, subject only
to (i) standard printed exceptions; (ii) inchoate liens for current taxes
and assessments not yet delinquent, (iii) standard utility and roadway
easements, covenants and restrictions whether or not of record that do not
individually or in the aggregate materially detract from the value, or
impair the use of the Real Property affected thereby, (iv) existing zoning
or similar laws or ordinances that do not interfere with the operation of
Seller's Business, (v) Leases and (vi) survey exceptions that do not
individually or in the aggregate materially detract from the value or
impair the use of the Real Property affected thereby (collectively, the
"Permitted Exceptions"). If a preliminary title binder indicates an
exception other than a Permitted Exception that would impair marketability
in any material respect, Seller shall, at its expense, cause such
exception to be removed on or before the Effective Date. With respect to
each parcel of Real Property covered by a preliminary title binder, Seller
shall deliver to Buyer (at Seller's expense and on or prior to sixty (60)
days before the Effective Date) a certified current boundary survey
showing (x) access to the property, and (y) all improvements on the
property and any encroachments across the property line by any
improvements of Seller or owners of adjacent property and (at Seller's
expense and within sixty (60) days after the Effective Date) owner's title
insurance policies for the Real Property (ALTA Owners Policies where
available but based upon boundary surveys as set forth above).
11.17 Transfer Taxes and Sales Taxes.
(a) Citizens and Tuolumne shall take all reasonable measures to
provide that the sale contemplated by this Agreement qualifies for any
available exclusion from sales and use taxes for occasional, casual or
isolated sales.
(b) Citizens and Tuolumne each shall bear and be responsible
for paying one-half of any sales, use, transfer, gross receipts, or
similar taxes (including related penalties and interest) imposed by state
or local tax authorities with respect to the exchange of Purchased
Property pursuant to this Agreement (including, without limitation, the
Real Property), regardless of whether the tax authority seeks to collect
the tax from the transferor or the recipient. Seller shall be responsible
for filing the applicable return in a timely manner and administering the
payment of such sales, use, transfer, gross receipts or similar tax, and
both parties shall be responsible for defending or pursuing any
proceedings related thereto, provided that any expenses related thereto
shall be shared equally between both parties. Twenty (20) days prior to
filing of any such returns, Seller shall deliver to the Buyer those
returns for review. Ten (10) business days prior to filing of any such
returns, Buyer shall approve the information contained therein and the
filing of such returns.
(c) Citizens and Tuolumne shall each give prompt written notice
to the other party of any proposed adjustment or assessment of a sales,
use, transfer, gross receipts or similar tax on the sale contemplated
hereby, or of any examination of the sale in a sales, use, transfer or
similar tax audit. In any proceedings, whether formal or informal,
Citizens and Tuolumne shall permit the other party to participate and
defend such proceeding, and shall take all actions and execute all
documents required to allow such participation. Neither party shall
negotiate a settlement or compromise of any sales, use, transfer, gross
receipts or similar tax on the exchange of the Purchased Property without
the written consent of the other party, which consent shall not be
unreasonably withheld. Seller shall be responsible for the income or
franchise taxes imposed with respect to its transfer of its Purchased
Property.
11.18 Bulk Sales Laws. Citizens and Tuolumne waive compliance with
applicable laws under any version of Article 6 of the Uniform Commercial
Code adopted by any state or any similar law relating to the sale of
inventory, equipment or other assets in bulk in connection with the sale
of the Purchased Property.
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will permit Buyer to insert preprinted
single-page subscriber education materials into billing documentation to
be delivered during such period to subscribers affected by the sale. All
reasonable costs and expenses related to such insertion and delivery shall
be borne and paid by Seller. Other means of notifying subscribers may be
employed by either party, at the expense of the initiating party, but in
no event shall any notification be initiated without the prior consent of
the other party (which consent shall not be unreasonably withheld) or
earlier than three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as provided in Section 11.22,
Seller shall have a period of ten (10) business days after the Execution
Date (the "Supplemental Schedule Period") to supplement or otherwise
modify its Schedules to this Agreement by delivering to Buyer, within the
Supplemental Schedule Period, a substitute schedule or schedules
(collectively, the "Supplemental Schedules"), bearing the legend "This
Schedule _, dated _______________, is executed and delivered in accordance
with Section 11.20 of the Asset Purchase Agreement, dated as of November
28, 1994 which shall be duly executed by Seller and submitted to Buyer.
Buyer shall have a period of ten (10) business days after the expiration
of the Supplemental Schedule Period to review the Supplemental Schedules
and within such ten (10) business day period notify Seller in writing
(which writing may be transmitted by facsimile) of any objections thereto.
If Buyer's objections are not resolved to the satisfaction of Buyer within
five (5) days of such notification, Buyer may terminate this Agreement,
effective immediately upon written notification of that termination. In
the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of
any changes in the Schedules as reflected in the Supplemental Schedules.
For purposes of determining breaches of representations, warranties or
covenants hereunder, the Supplemental Schedules provided by Seller shall
be deemed Schedules for all purposes.
11.21 FCC Tariffs. In connection with obtaining assignment to
Tuolumne's FCC Licenses, as described in Section 5.4, during the period
from the Execution Date until the Effective Date, Citizens shall not file
any application or request for a waiver of Part 36 (study areas), Part 61
(tariffs), and Part 69 (price caps and study areas) of the FCC Rules, and
on the Effective Date the study areas relating to the Tuolumne Purchased
Exchanges shall remain in the National Exchange Carrier Association Tariff
FCC No. 5; provided, however, that such study areas shall remain in the
NECA Tariff FCC No. 5 after the Effective Date only for so long as
Citizens, in its sole discretion, shall determine. In connection with
obtaining assignment of Citizens' FCC Licenses, as described in Section
5.4, during the period from the Execution Date until the Effective Date,
Tuolumne shall not file any application or request for a waiver of Part 36
(study areas), Part 61 (tariffs), and Part 69 (price caps and study areas)
of the FCC Rules, and on the Effective Date the study areas relating to
the Citizens Purchased Exchanges shall remain in the National Exchange
Carrier Association Tariff F.C.C. No. 5, provided, however, that such
study areas shall remain in the NECA Tariff FCC No. 5 after the Effective
Date only for so long as Tuolumne with respect to such study areas, in its
sole discretion, shall determine.
11.22 Post-Execution Lease and Contract Review. Buyer shall have a
period of forty-five (45) calendar days after the Execution Date to review
Seller's Leases and Seller's Contracts listed on Citizens' and Tuolumne's
Schedules 9.1.9 and 9.1.13 respectively, and to notify Seller in writing
(which writing may be transmitted by facsimile) of the identity of those
Leases and Contracts that Buyer reasonably believes are material to the
operation of Seller's Business as a whole or any significant part of the
Seller's Purchased Property and which will require Seller, in accordance
with Section 7.1.6 or 7.2.11, as the case may be, to obtain a consent to
their assignment before the Effective Date can occur. If Buyer does not
notify Seller in writing within such forty-five (45) calendar day period
of the identity of the material Seller's Leases and Seller's Contracts
requiring consent, then Buyer shall be deemed to have agreed that none of
the Seller's Leases and Seller's Contracts which are listed on Citizens'
or Tuolumne's Schedules 9.1.9 and 9.1.13 require consent to their
assignment before the Effective Date can occur. If Buyer does notify
Seller in writing within such forty-five (45) calendar day period of the
identity of the material Seller's Leases and Seller's Contracts requiring
consent, then Seller shall have a period of ten (10) business days upon
receipt of such notification to notify Buyer in writing (which writing may
be transmitted by facsimile) of any objections thereto. Thereafter, Buyer
and Seller shall negotiate in good faith and agree in writing as to the
identity of those Seller's Leases and Seller's Contracts which are
material to the operation of Seller's Business as a whole or any
significant part of Seller's Purchased Property and which will require
Seller, in accordance with Section 7.1.6 or 7.2.11, as the case may be, to
obtain a consent to their assignment before the Effective Date can occur
(the "Material Leases and Contracts"). The parties shall reflect their
written agreement as to the identity of the Material Leases and Contracts
by placing an asterisk next to the appropriate Lease or Contract on
Seller's Schedule 9.1.9 or 9.1.13, which revised Seller's Schedule 9.1.9
or 9.1.13 shall be deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in separate
agreements, each entitled Employee Transfer Agreement, the terms and
provisions of each of which are incorporated into this Agreement as if
fully set forth herein and a copy of each of which is attached hereto as
Schedule 12.1 (collectively, the "Employee Transfer Agreement").
<PAGE>
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of Seller made pursuant
to this Agreement shall survive the Closing for the following periods
after the Effective Date:
(i) The representations and warranties of Seller set forth
in Sections 9.1.6 and 9.1.8 shall survive without limitation as to time.
(ii) The representations and warranties set forth in
Section 9.1.15 shall survive until sixty (60) days after the expiration of
the applicable statute of limitations (including all extensions).
(iii) All other representations and warranties shall
survive for eighteen (18) months.
The date of expiration of any representation or warranty shall be
referred to herein as the "Termination Date." Representations and
warranties of Seller under this Agreement shall be of no further force or
effect after the applicable Termination Date. Any claim for
indemnification with respect to any alleged breach of any representation
or warranty not asserted by notice given as herein provided that
specifically identifies a particular breach and the underlying facts
relating thereto, which notice is given prior to the Termination Date, may
not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty of Seller
will be deemed to have been properly made except to the extent it is based
upon a Third Party Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants
contained in Section 2.5.1 (except for Section 2.5.1(a) with respect to
Taxes), Section 2.5.2 (except for Section 2.5.2(d)), Section 4.3, Section
5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3, 11.6,
11.7, 11.10, 11.12, 11.13, 11.15, 11.16 and 11.18, Articles 16 and 17 and
in the Employee Transfer Agreements, will survive the Closing and remain
in effect indefinitely, or in the case of Sections 2.5.1(a) (with respect
to Taxes), 2.5.2(d), 11.17, and the property tax proration provisions set
forth in Section 11.8, will survive until sixty (60) days after expiration
of the applicable statute of limitations. All other covenants contained
in this Agreement will terminate, without further action, upon the
occurrence of the Effective Date and any claim following the Effective
Date for an alleged breach of any such covenant may not be pursued, and is
irrevocably waived, upon the occurrence of the Effective Date, except that
Buyer may make a claim for Seller's breach of the covenants contained in
Section 11.5 at any time within eighteen months after the Effective Date.
The immediately preceding sentence shall not apply to, or limit to
preclude, a party's rights and remedies if the sale contemplated by this
Agreement is not concluded as a result of the other party's breach of this
Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification
Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying
Party" means any person or entity required to provide indemnification
under this Agreement, and (iv) "Indemnifiable Losses" means any losses,
liabilities, costs, fines, penalties, damages (actual, punitive or other),
and expenses and any claims, demands or suits by any person or entity,
including, without limitation, any Governmental Authority, and costs and
expenses actually incurred in connection with any actions, suits, demands,
assessments, judgments and settlements and reasonable attorneys' fees and
expenses, in any such case (x) reduced by the amount of insurance proceeds
recovered from any person or entity as a result of the Indemnifiable
Losses involved and (y) provided that the underlying liability or
obligation is not solely the result of any action taken or omitted to be
taken by the Indemnitee.
(b) As between Citizens and any Affiliate of Citizens, on the
one hand, and Tuolumne and any Affiliate of Tuolumne, on the other hand,
the rights and obligations set forth in this Article 13 will be the
exclusive rights and obligations with respect to the liabilities and
obligations referred to in Section 13.3, and any breach of the
representations, warranties or covenants referred to in Section 13.3.,
except for any liability, obligation or breach that results from the
actual fraud under the common law, not otherwise implied or imputed, by a
party to this Agreement. Without limiting the foregoing, as a material
inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action
that it otherwise might assert, including, without limitation, under the
common law or federal or state securities, trade regulation or other laws,
by reason of the liabilities and obligations, and any breach of the
representations, warranties or covenants, referred to in Section 13.3,
except for claims or causes of action brought under and subject to the
terms and conditions of this Article 13, and except for claims or causes
of action arising due to the actual fraud under the common law, not
otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of
any applicable law, no Indemnitee will be entitled to make a claim against
an Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6 and 9.1.8) or 13.3(b)(i) (except with respect to indemnification for
a breach of the representations contained in Section 9.1.6) until the
aggregate amount of claims that may be asserted for such Indemnifiable
Losses incurred by the Indemnitee exceeds Thirty Seven Thousand Nine
Hundred Five Dollars ($37,905.00) and then only to the extent of the
excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except
with respect to indemnification for a breach of the representations
contained in Sections 9.1.6 and 9.1.8) and of Buyer under Section
13.3(b)(i) (except with respect to indemnification for a breach of the
representations contained in Section 9.1.6) will not exceed the sum of One
Million One Hundred Thirty Seven Thousand One Hundred Fifty Dollars
($1,137,150.00).
(e) Notwithstanding anything to the contrary contained herein,
no Indemnifying Party shall be liable to or obligated to indemnity any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss
or interruption of business, profits, business opportunities or goodwill,
loss of use of facilities, loss of capital, claims of customers, or any
cost or expense related thereto, except to the extent such damages have
been recovered by a third person and are the subject of a Third Party
Claim for which indemnification is available under the express terms of
this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller
will indemnity, defend and hold harmless Buyer and its Affiliates,
directors, officers, agents and representatives from all Indemnifiable
Losses relating to, resulting from or arising out of (i) a breach by
Seller of any of Seller's representations and warranties contained in
Article 9 except for any such breach of representations and warranties
which was specified on Seller's Closing Certificate, all of which are
waived upon Closing, (ii) a breach by Seller of any covenant of Seller
contained in this Agreement or in the Employee Transfer Agreement except
for any such breach of covenants which was specified on Seller's Closing
Certificate, all of which are waived upon Closing, (iii) the Retained
Liabilities with respect to Seller's Business and Seller's Purchased
Property, (iv) any Third Party Claim, whether filed, asserted, or sought
before or after the Effective Date, in respect of the conduct of Seller's
Business or any part of such Business (including contractual obligations
in connection with sales or transfers of assets made by Seller prior to
the Effective Date), or the ownership or operation of such Business, on or
prior to the Effective Date, regardless of whether known or unknown,
asserted or unasserted, on the Effective Date. Notwithstanding anything
to the contrary contained herein except for Section 11.17, Seller shall
not be liable for and shall not be required to indemnify Buyer for any
Taxes arising with respect to the post-Effective Date period, regardless
of whether the claim is based on breach of a representation, warranty,
covenant or otherwise.
(b) Subject to the other sections of this Article 13, Buyer
will indemnity, defend and hold harmless Seller and its Affiliates, and
their directors, officers, agents and representatives from all
Indemnifiable Losses relating to, resulting from or arising out of (i) a
breach by Buyer of any of Buyer's representations or warranties contained
in Article 9 except for any such breach which was specified on Buyer's
Closing Certificate, all of which are waived upon Closing, (ii) a breach
by Buyer of any covenant of Buyer contained in this Agreement or in the
Employee Transfer Agreement, except for any such breach which was
specified on Buyer's Closing Certificate, all of which are waived upon
Closing, (iii) the Assumed Liabilities with respect to Seller's Business
and Seller's Purchased Property, (iv) any Third Party Claim, filed,
asserted, or sought after the Effective Date, in respect of the conduct of
Seller's Business or any part of such Business or the ownership or
operation of such Business, after the Effective Date.
(c) All environmental matters or issues, including without
limitation, the indemnification obligations contained in Article 14 with
respect to Environmental Liabilities, are to be governed by Article 14 and
are not addressed, limited or governed by the provisions of this Article
13.
(d) Payments made under this Section 13.3 shall be treated by
the parties as purchase price adjustments and the parties shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to
the contrary contained herein, Buyer shall not be indemnified or
reimbursed for any adjustment to the basis of any asset resulting from an
adjustment to the purchase price or any additional or reduced taxes
resulting from any such basis adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any action, proceeding, or investigation
by any entity or person that is not a party to this Agreement or an
Affiliate of such a party (a "Third Party Claim") against such Indemnitee,
with respect to which an Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnitee will give such
Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than thirty (30) calendar days after receipt of actual
notice of such Third Party Claim; provided, however, that the failure of
the Indemnitee to notify the Indemnifying Party during the required
notification period shall only relieve the Indemnifying Party from its
obligation to indemnity the Indemnitee pursuant to this Article 13 to the
extent that Indemnifying Party is materially prejudiced by such failure
(whether as a result of the forfeiture of substantive rights or defenses
or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as
required pursuant to Section 13.1(a) in order for such party to be
indemnified. Indemnifying Party shall be entitled, upon written notice to
the Indemnitee, to assume the investigation and defense thereof with
counsel reasonably satisfactory to the Indemnitee. Whether or not the
Indemnifying Party elects to assume the investigation and defense of any
Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof,
provided, however, that the Indemnitee shall pay the fees and
disbursements of such separate counsel unless (i) the employment of such
separate counsel has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party has failed to assume the
defense of such Third Party Claim within a reasonable time after receipt
of notice thereof with counsel reasonably satisfactory to such Indemnitee
or (iii) the named parties to the proceeding in which such claim, demand,
action or cause of action has been asserted include both the Indemnifying
Party and such Indemnitee and, in the reasonable judgment of counsel to
such Indemnitee, there exists one or more defenses that may be available
to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one
counsel for all Indemnified Parties in connection with any one proceeding
or any similar or related proceedings arising from the same general
allegations or circumstances. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any settlement of
any Third Party Claim that would lead to liability or create any financial
or other obligation on the part of the Indemnitee unless such settlement
includes as an unconditional term thereof the release of the Indemnitee
from all liability in respect of such Third Party Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable
Loss that does not result from a Third Party Claim (a "Direct Claim") will
be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than thirty (30) calendar days
after the Indemnitee actually becomes aware of the incurrence thereof, and
the Indemnifying Party will have a period of thirty (30) calendar days
within which to respond in writing to such Direct Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying
Party shall only relieve the indemnifying Party from its obligation to
indemnify the Indemnitee pursuant to this Article 13 to the extent the
Indemnifying Party is materially prejudiced by such failure (whether as a
result of the forfeiture of substantive rights or defenses or otherwise);
and provided, however, that the Indemnitee must, in any event, notify the
Indemnifying Party prior to the Termination Date as required pursuant to
Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar
day period, the Indemnifying Party will be deemed to have rejected such
claim, in which event the Indemnitee will be free to pursue such remedies
as may be available to the Indemnitee on the terms and subject to the
provisions of this Article 13.
(c) If after the making of any Indemnification Payment the
amount of the Indemnifiable Loss to which such payment relates is reduced
by recovery, settlement or otherwise under any insurance coverage, or
pursuant to any claim, recovery, settlement or payment by or against any
other entity, the amount of such reduction (less any costs, expenses,
premiums or taxes incurred in connection therewith) will promptly be
repaid by the Indemnitee to the Indemnifying Party. Upon making any
Indemnification Payment, the Indemnifying Party will, to the extent of
such Indemnification Payment, be subrogated to all rights of the
Indemnitee against any third party that is not an Affiliate of the
Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party
shall then be in compliance with its obligations under this Agreement in
respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers
full payment of its Indemnifiable Loss, all claims of the Indemnifying
Party against any such third party on account of said Indemnification
Payment will be subrogated and subordinated in right of payment to the
Indemnitee's rights against such third party. Without limiting the
generality or effect of any other provision of this Article 13, each such
Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above-
described subrogation and subordination rights.
<PAGE>
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Each party hereto, in its
role as Buyer, shall have the opportunity to conduct environmental due
diligence regarding Seller's Purchased Property in accordance with this
Section 14.1, for a period not to exceed 120 days after the Environmental
Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as
a result of the environmental due diligence authorized by this Section
14.1 will be subject to the terms and conditions of the Confidentiality
Agreement, except as otherwise expressly provided in this Section 14.l.
Buyer shall provide to Seller copies of all reports, assessments and other
information composed or compiled by Buyer's environmental consultant(s)
and shall treat all such information in accordance with the procedures of
Section 14.1.5(c). Within thirty (30) days after the Execution Date (the
"Environmental Data Delivery Date"), Seller will provide to Buyer copies
of all surveys and reports in Seller's possession concerning the existence
or possible existence of asbestos or materials containing asbestos
relating to any of Seller's Real Property, a list of all underground
storage tanks which to Seller's knowledge are located on, or have been
removed within the last three years from, any Real Property owned or real
estate leased or operated by Seller in connection with its Business and
any other reports, studies or documents in Seller's possession relating to
Seller's potential liability under any Existing Environmental
Requirements. The parties further agree that, if Seller discloses the
existence or suspected existence of materials containing asbestos with
respect to a given parcel of its Real Property and the asbestos does not
exceed applicable limits, if Buyer desires to make renovations or
structural changes to the property after the Effective Date (which changes
require the removal of asbestos), the removal will be at the expense of
Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more
outside environmental consultants to assist in its environmental due
diligence concerning Seller's Purchased Property and shall notify Seller
of the environmental consultant or consultants Buyer intends to retain.
Thereafter, Seller shall have five (5) business days after receipt of such
notification to notify Buyer in writing of Seller's objection (which must
be for good cause) and substantiate the basis for that objection. If
Seller does not object for good cause and substantiate that objection
within said five (5) business day period, Seller shall be deemed to have
consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I
environmental assessment activities of Seller's Purchased Property,
including inspecting individual sites, submitting environmental
questionnaires to Seller and reviewing existing environmental reports,
correspondence, permits and related materials regarding such Purchased
Property. Phase I environmental assessment activities shall not include
any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days'
notice prior to any entry onto such Purchased Property.
(b) If Buyer enters such Purchased Property, a representative
of Seller may be, but is not required to be, present during such entry on
such Purchased Property.
(c) All activities of Buyer regarding environmental due
diligence shall be conducted to minimize any inconvenience or interruption
of the normal use and enjoyment of Seller's Business and its Purchased
Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of Seller's Purchased Property
(including, but not limited to, the taking and analysis of soil, surface
water and groundwater samples, testing of buildings, drilling wells and
taking soil borings) after first conducting a Phase I assessment of a
particular site provided that such Phase II assessment activities are
conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing
at a site included in Seller's Purchased Property, Buyer must notify
Seller of its desire at least five (5) business days in advance of the
proposed date of such sampling or testing and provide a description of the
scope of work regarding such sampling or intrusive testing. If Seller
does not notify Buyer in writing of Seller's objection to such proposed
sampling or testing within five (5) business days after receipt of such
notice, Seller shall be deemed to have consented to the proposed sampling
or testing. Seller shall not unreasonably object to Buyer's request to
perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material
or information regarding the sampling or intrusive testing ("Environmental
Data") within three (3) business days of Buyer's receipt of such data and
shall promptly provide Seller with "matched" or "paired" samples, in
accordance with standard sampling and testing protocols, that are obtained
during the sampling or intrusive testing of a particular site; provided,
however, that Seller shall have no obligation to Buyer to take any action
whatsoever regarding such samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental
Data without the prior written consent of Seller and that all such
information shall be kept strictly confidential. The Environmental Data
shall be prepared at the request of counsel to Buyer and, to the fullest
extent permitted by law, shall be the work product of such counsel and
constitute confidential attorney/client communications. The Environmental
Data shall be transferred among Buyer and its consultant(s) in a manner
that will preserve, to the greatest extent possible, such privileges.
Buyer expressly agrees that until the Closing, it will not distribute the
Environmental Data to any third party without Seller's written consent.
After the Closing, Buyer agrees that it will not distribute the
Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a
period of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Seller's Purchased
Property only after first notifying the Seller, and without such notice at
any time after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees
to
indemnify and hold harmless Seller, Seller's Affiliates and their
respective officers, directors, employees, agents, successors and assigns
from and against any and all claims, liabilities, damages, losses, orders,
penalties, fines, costs, charges and expenses (including reasonable
attorneys' fees and disbursements, and reasonable costs of experts and
expert witnesses) with respect to persons or property arising out of or in
connection with the entry of Buyer or its environmental consultant(s) onto
Seller's Purchased Property and resulting from any act or omission of
Buyer or its environmental consultant(s) provided that Buyer shall not be
liable for any Environmental Liabilities incurred by any such party merely
discovered by the environmental due diligence performed by Buyer or its
environmental consultants. In addition, in the event the transactions
contemplated herein with regard to any portion of Seller's Purchased
Property do not close, Buyer agrees to restore such portion of such
Purchased Property to the condition which existed prior to Buyer's
inspections and testing thereof to the extent such portion of such
Purchased Property was damaged by such inspections and testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during
the period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements
with respect to one or more items of Seller's Purchased Property; and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the
foregoing Environmental Liabilities based upon Existing Environmental
Requirements cannot be completed for less than Three Hundred Three
Thousand Two Hundred Forty Dollars ($303,240.00) (the "Environmental
Liabilities Amount") To be effective, any such conditional termination of
this Agreement must be delivered in writing to Seller, which writing must
specifically acknowledge that the termination is subject to the provisions
of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement
by Buyer in accordance with Section 14.1.7(a) above, Seller may nullify
the termination by agreeing to:
(i) respond to and fully remediate the Environmental
Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) in such manner and on such terms and conditions as
are mutually satisfactory to Buyer and Seller, remove from Seller's
Purchased Property the item or items of Seller's Purchased Property that
have occasioned the Environmental Liabilities based upon Existing
Environmental Requirements and either substitute therefor an equivalent
item or items of Purchased Property satisfactory to Buyer, or make other
adjustments to the terms and conditions of the sale contemplated by this
Agreement all in such manner and on such terms and conditions as are
mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by
selecting one of the above options shall be, in each case, specified in a
writing mutually satisfactory to the parties, and thereafter on or before
the Closing (subject to Section 14.1.7(d)), Seller shall perform its
obligations under that writing in full. If the parties fail to sign the
writing specifying Seller's obligations within thirty (30) days following
Buyer's conditional termination (or such longer period acceptable to
Buyer) or sign that writing but Seller fails to perform its obligations
thereunder in full on or before the Closing (subject to Section
14.1.7(d)), Buyer's conditional termination under paragraph (a) above
automatically shall become final and unconditional unless the parties
agree otherwise.
(c) If the results of Buyer's environmental due diligence
conducted in accordance with this Section 14.1 indicate that the costs of
responding to and remediating Environmental Liabilities based upon
Existing Environmental Requirements with respect to one or more items of
Seller's Purchased Property are less than the Environmental Liabilities
Amount in the aggregate, Seller agrees, at its sole cost, to either (i)
remove from such Purchased Property the item or items of Purchased
Property that have occasioned the Environmental Liabilities based upon
Existing Environmental Requirements and either make a substitution or
other adjustment therefor prior to the Closing in accordance with Section
14.1.7(b)(iii) above, or (ii) prior to the Closing (subject to Section
14.1.7(d)), otherwise respond to and remediate those Environmental
Liabilities based upon Existing Environmental Requirements in accordance
with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the cost
of such substitution or the conduct of such response action would exceed
the Environmental Liabilities Amount in which case Seller's sole
obligation under this Section 14.1.7(c) shall be to pay the Environmental
Liabilities Amount toward the completion of such substitution or response
and remediation actions. If Seller discharges its obligations under this
Section 14.1.7 by expending the Environmental Liabilities Amount on such
substituted property or response and remediation action (such expenses to
be verified by Seller by delivery by Seller to Buyer of a reasonably
detailed statement setting forth such expenses), or paying to Buyer the
Environmental Liabilities Amount, Buyer shall sign and deliver to Seller
at the Closing a release of Seller from any further liability to Buyer for
such remediation and shall indemnify Seller against any liability for such
Environmental Liabilities or Environmental Requirements.
(d) If Seller elects to respond to and fully remediate
Environmental Liabilities based upon Existing Environmental Requirements
pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental
Remediation Agreement in form and substance reasonably satisfactory to the
parties and proceed to Closing; provided, however, that in the case of
response and remediation under Section 14.1.7(b)(i), Buyer may elect to
postpone the Closing until sufficient response and remediation has been
completed so that the remaining response and remediation is equal to or
less than the Environmental Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that
the indemnification provided under this Section 14.2 shall be the sole
remedy for allocating responsibility regarding environmental matters
related to the exchange contemplated by this Agreement, the Seller's
Business and the Seller's Purchased Property of which Buyer does not
receive notice prior to the Closing (either from Seller in Schedule 14.3
or pursuant to notice given pursuant to Section 17.1 or in any written
communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by
this Agreement and without further action on the part of such party, shall
waive and release the other party from any and all liability under any
other cause of action at law or in equity concerning the Known
Environmental Matters, whether raised pursuant to (i) Environmental
Requirements, (ii) any other applicable federal, state or local statute,
ordinance, rule or regulation, or (iii) common law.
14.2.2 Indemnification. Subject to the provisions of Sections
14.2.3, 14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless
Buyer, its Affiliates and their respective officers, directors, employees,
agents, successors and assigns from and against any and all Environmental
Liabilities under Existing Environmental Requirements arising from acts or
omissions occurring, or from the use or ownership of, or any condition or
circumstance, relating to, Seller's Purchased Property or its Business
that occurred or arose prior to or on the Effective Date on such Purchased
Property or in connection with the operation of such Business prior to or
on the Effective Date. The foregoing indemnity in this Section 14.2.2
shall only apply to matters that do not constitute Known Environmental
Matters (such matters being referred to as the "Unknown Environmental
Matters"). Such indemnification under this Section 14.2.2 shall be
provided only for claims for Unknown Environmental Matters noticed to the
other party pursuant to the procedures of Section 14.2.3, within eighteen
(18) months after the Effective Date. Subject to the provisions of
Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and hold harmless
Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements
in existence now or hereafter in effect, arising from acts or omissions
occurring after the Effective Date, or from the use or ownership of
Seller's Purchased Property after the Effective Date, or any condition or
circumstance relating to such Purchased Property or Seller's Business that
occurred or arose after such Effective Date on such Purchased Property or
in connection with the operation of such Business after the Effective
Date.
14.2.3 Notice. A party seeking indemnification under this Section
14.2 must give written notice to the other party, including information
sufficient to inform the other party of, and allow such other party to
confirm the nature of, the claim and any activities required to address
the claim, in sufficient detail for the indemnifying party to confirm that
all costs incurred or to be incurred by the party to be indemnified under
this Section 14.2 are required by Environmental Requirements, as
applicable to Buyer, and Existing Environmental Requirements, as
applicable to Seller, and are reasonable and cost-effective. If the
indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree
as to costs or methods of remediation, the matter shall be resolved in
accordance with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section
14.2 shall not include incidental or consequential damages except to the
extent such damages have been recovered by a third person and are the
subject of a Third Party claim for which indemnification is available
under the express terms of this Article 14. Any indemnifiable claim under
this Section 14.2 shall be reduced to account for any insurance, storage
tank fund, or other proceeds received by the party to be indemnified, as a
result of the indemnifiable losses involved. The parties agree to take
all reasonable steps to mitigate any indemnifiable claim under this
Section 14.2, including complying with any registration and reporting
requirements necessary to qualify for reimbursement from any storage tank
fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not
exceed the aggregate amount of Five Hundred Sixty Eight Thousand Five
Hundred Seventy Five Dollars ($568,575.00).
14.2.6 Adjustments to Cash Consideration. Payments made under this
Article 14 shall be treated by Buyer and Seller as purchase price
adjustments, and Buyer and Seller shall file all Tax Returns consistent
with such treatment. Notwithstanding anything to the contrary contained
herein, Buyer shall not be indemnified or reimbursed for any adjustment to
the basis of any asset resulting from an adjustment to the Cash
Consideration or any additional or reduced taxes resulting from any such
basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any
time prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Citizens or Tuolumne, as applicable, if there has been a
material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however,
that a party shall not be entitled to exercise its right of termination
under this subsection (b) if the breach is capable of being cured to the
non-breaching party's reasonable satisfaction and the breaching party is
proceeding diligently with its best efforts to effect such cure.
(c) by either party in its role as Buyer, pursuant to Section
11.20 (Delivery of Schedules);
(d) by Citizens and Tuolumne, as the result of Section
14.1.7(a);
(e) by Citizens or Tuolumne, pursuant to Section 11.9;
(f) by Citizens or Tuolumne, if the Closing shall not have
occurred by December 31, 1995 due to no fault or delay attributable to the
party seeking termination; provided, however, that a party shall not be
entitled to exercise any right of termination pursuant to this subsection
(f) if such party shall not have performed diligently and in good faith
the obligations required to be performed by such party hereunder prior to
the date of termination;
(g) by Citizens if a Governmental Authority, the approval of
which is a condition to Citizens' obligations under Section 7.1, has
provided written notice that it shall not consent to or approve the
transactions contemplated hereby; or
(h) by Tuolumne, if a Governmental Authority, the approval of
which is a condition to Tuolumne's obligations under Section 7.2, has
provided written notice that it shall not consent to or approve the
transactions contemplated hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1
(a), (c), (d), (e), (f), (g) or (h), this Agreement shall be of no further
force and effect and there shall be no further liability hereunder on the
part of either party or its Affiliates, directors, officers, shareholders,
agents or other representatives.
(b) A party's exercise of its right of termination under
Section 15.1(b) shall not constitute a waiver of its rights to recover
damages, whether pursuant to breach of contract or in tort, or other
remedies available at law or in equity, from the other party as a result
of the other party's breach of this Agreement.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3,
17.8, 17.11, 17.13, 17.14 and Article 16 shall survive any termination of
this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit
to compel compliance with this dispute resolution process, the parties
agree to use the following alternative dispute resolution procedure as
their sole remedy with respect to any controversy or claim arising out of
or relating to this Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party,
each party shall appoint a knowledgeable, responsible representative to
meet and negotiate in good faith to resolve any dispute arising under this
Agreement. The discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize other
alternative dispute resolution procedures such as mediation to assist in
the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties
shall not be admissible in the arbitration described below or in any
lawsuit. Documents identified in or provided with such communications,
which are not prepared for purposes of the negotiations, are not so
exempted and may, if otherwise admissible, be admitted in evidence in the
arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between
the representatives of the parties do not resolve the dispute within sixty
(60) days of the initial written request, the dispute shall be submitted
to binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Either party
may demand such arbitration in accordance with the procedures set out in
those rules. The arbitration hearing shall be commenced within sixty (60)
days of the demand for arbitration and the arbitration shall be held in a
mutually agreeable location. The arbitrator shall control the scheduling
(so as to process the matter expeditiously) and any discovery. The
parties may submit written briefs. The arbitrator shall rule on the
dispute by issuing a written opinion within thirty (30) days after the
close of hearings. The times specified in this Section 16.3 may be
extended upon mutual agreement of the parties or by the arbitrator upon a
showing of good cause. Judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs
and expenses in submitting and presenting its position with respect to any
such dispute to the arbitrator, and the fees and expenses of such
arbitration procedures, including the fees of the arbitrator will be
shared equally by the parties, except that a party seeking discovery shall
reimburse the responding party the cost of production of documents
(including search time and reproduction costs); provided, however, that if
the arbitrator determines that the position taken in the dispute by the
non-prevailing party taken as a whole is unreasonable, the nonprevailing
party will bear all such fees and expenses, and reimburse the prevailing
party for all of its reasonable costs and expenses in submitting and
presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with
respect to the resolution of disputes without litigation shall not apply
to any dispute, controversy or claim arising out of the provisions of
Section 11.1, or the Confidentiality Agreement, or to a party's seeking to
proceed under Section 17.14, it being understood and agreed that in the
event of a breach by either party of the provisions of Section 11.1, or
the Confidentiality Agreement, or in the event that a party seeks to
proceed under Section 17.14, the non-defaulting party shall be entitled to
proceed to protect and enforce its rights by an action at law, a suit in
equity or other appropriate proceeding, whether for specific enforcement
of any agreement contained in Section 11.1, or the Confidentiality
Agreement or in aid of the exercise of any power granted by Section 11.1,
17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications
required or permitted hereunder shall be in writing and, unless otherwise
provided in this Agreement, will be deemed to have been given when
delivered in person or dispatched by electronic facsimile transfer
(confirmed in writing by certified mail, concurrently dispatched) or one
business day after having been dispatched for next-day delivery by a
nationally recognized overnight courier service to the appropriate party
at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72202
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72202
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may
from time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or
other forth of release of information concerning this Agreement or the
transactions contemplated hereby that is intended to provide such
information to the news media or the public (a "Press Release"). Neither
party shall issue or cause the publication of any such Press Release
without the prior written consent of the other party; provided, however,
that nothing herein will prohibit either party from issuing or causing
publication of any such Press Release to the extent that such action is
required by applicable Law or the rules of any national stock exchange
applicable to such party or its Affiliates, in which case the party
wishing to make such disclosure wig, if practicable under the
circumstances, notify the other party of the proposed time of issuance of
such Press Release and consult with and allow the other party reasonable
tune to comment on such Press Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each
party will pay any expenses (including, without limitation, attorneys'
fees) incurred by it incident to this Agreement and in consummating the
transactions provided for herein. All regulatory filing fees required
pursuant to Sections 5.1, 5.4 and 5.5 shall be split equally between the
parties. Each party will pay the appropriate costs and filing fees
relating to any other applications required to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign or delegate any of its
rights or duties hereunder without the prior written consent of the other
party; provided that either party may assign its rights to receive the
Seller's Purchased Property and Assumed Liabilities under this Agreement
without the prior written consent of the other party, to any directly or
indirectly wholly owned subsidiary of its Parent, but no such assignment
and assumption shall in any way operate to relieve the assigning party of
its obligations hereunder and provided that assigning party agrees to
cause such subsidiary to perform the Assumed Liabilities received by such
subsidiary, and shall be jointly and severally liable for any non-
performance thereof. Upon the sale, assignment or transfer by Buyer of
the Seller's Business or the Seller's Purchased Property to a non-
Affiliate of Buyer not in the ordinary course of business of Buyer,
Seller's representations and warranties and indemnification obligation for
breach thereof shall terminate. Any assignment made in violation of the
foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement,
nor as in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean
collectively this document, the Schedules hereto, any agreements expressly
incorporated herein, and the Confidentiality Agreement. This Agreement
supersedes and revokes any prior discussions and representations, other
agreements, commitments, arrangements or understandings of any sort
whatsoever, whether oral or written, that may have been made or entered
into by the parties relating to the matters contemplated hereby. This
Agreement constitutes the entire agreement by and among the parties, and
there are no representations, warranties, agreements, commitments,
arrangements or understandings except as expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such
right, power or privilege preclude any other or further exercise thereof,
or the exercise of any other right, power or privilege available to each
party at law or in equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other
than the parties and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same
instrument.
17.11 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the internal laws of the
State of Delaware (except that no effect shall be given to any conflicts
of law principles of the State of Delaware that would require the
application of the laws of any other jurisdiction). In accordance with
Title 6, Section 2708 of the Delaware Code Annotated, the parties agree to
the jurisdiction of the courts of Delaware and to be served with legal
process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested
by one of the parties, the other party will execute and deliver, or cause
to be executed and delivered, all such documents and instruments as may be
reasonably necessary to consummate and make effective the transactions
contemplated by this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of
or to this Agreement, (ii) each term defined in this Agreement has the
meaning so assigned to it, (iii) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iii) all references to the "knowledge of a party" will be
deemed to refer to the actual knowledge of the Executive Officers of the
party after reasonable investigation, and (iv) all references to a
party's "best efforts" and references of like import will be deemed to
refer to the best efforts of such party in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor
of, or against, either of the parties by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any
prior draft of such provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and
remedies available at law or in equity, any party hereto may pursue, to
the fullest extent available, the remedy of specific performance in order
to compel the other party to close pursuant to Article 8.
17.15 Alternative Payment Provisions. If the Effective Date has
not occurred by November 30, 1995 due solely to the parties' failure to
obtain all Regulatory Approvals and FCC Consents with respect to the
transactions regarding the Citizens Purchased Property or the Tuolumne
Purchased Property (as the case may be, the "Non-Approved Transaction")
then, subject to the provisions of Section 15.1(f), either party by
written notice to the other party shall have the right to terminate the
Non-Approved Transaction, provided that this Agreement shall remain in
effect with respect to the transaction regarding the transfer of the
Purchased Property for which all of the Regulatory Approvals and FCC
Consents have been obtained (the "Approved Transaction"). In such case,
the parties shall promptly proceed to Closing with respect to the Approved
Transaction and the Agreement shall be deemed amended to provide that the
purchase price (Cash Consideration) of the Citizens Purchased Property
shall be $9,926,000.00 payable at Closing by wire transfer of immediately
available funds, or that the purchase price (Cash Consideration) of the
Tuolumne Purchased Property shall be $15,162,000.00 payable at Closing by
wire transfer of immediately available funds. The parties acknowledge
that in filing their applications for the Regulatory Approvals, they will
incorporate this alternative payment provision and attempt to obtain
language in the Final Order which would allow the parties, in their
discretion, to Close the transaction under either payment alternative.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of
the date first above written.
CITIZENS UTILITIES COMPANY OF
PENNSYLVANIA
By: /s/ Leonard Tow
______________________
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
TUOLUMNE TELEPHONE COMPANY
By: /s/ Charles R. Galloway
_____________________________
Name: Charles R. Galloway
Title: Senior Vice President -
Accounting & Finance
EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of NCC Systems, Inc., a Texas corporation
(the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, the Shares (as defined below), upon the terms
and conditions set forth in this Agreement; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment hereto, the following
terms are defined as set out below or in the Section referenced below:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets on
the Company's Balance Sheet), and (iv) Other Current Assets (item 10-Assets on
the Company's Balance Sheet) to the extent such other current assets do not
represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and which RTB Stock is owned by the
Company immediately after the Effective Date, (ii) Unamortized Debt Expense
(item 16-Assets on the Company's Balance Sheet) to the extent such debt expense
relates to debt which is to remain outstanding immediately after the Effective
Date and (iii) Deferred Maintenance and Retirements (Item 17 - Assets on the
Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued - Other
(item 9 - Liability on the Company's Balance Sheet), (v) Interest Accrued-Other
(item 13-Liabilities on the Company's Balance Sheet) to the extent such
interest relates to debt which is to remain outstanding immediately after the
Effective Date, and (vi) that portion of Other Deferred Credits (item 25 -
Liabilities on the Company's Balance Sheet) that relates to liabilities that
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing cable
television services to the communities served by the NCCSI Systems and other
related regulated and non-regulated activities, services and products
associated with the NCCSI Systems, including without limitation such
unregulated activities, services and products of the Company conducted, offered
or serviced by the Transferred Employees or provided or related to the
Company's subscribers or customers served in or from the NCCSI Systems (such
unregulated activities, services and products (the "Unregulated Business") are
considered an integral part of the Business for all purposes of this
Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Cable Act of 1992 means the Cable Television Consumer Protection and
Competition Act of 1992 and rules and regulations promulgated thereunder.
Cable Plant is defined in Section 2.2.1.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company par value $1.00.
Communications Act means the Communications Act of 1934, as amended, and
rules and regulations promulgated thereunder.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Copyright Act means Title 17 of the United States Code, as amended, and
rules and regulations promulgated thereunder.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
Environmental Liabilities means all liabilities, obligations (including
obligations to respond to, investigate and remediate conditions caused by any
Regulated Material), responsibilities, losses, damages (including punitive or
treble damages), costs and expenses (including reasonable fees, disbursements
and expenses of counsel, experts, consultants and expert witnesses), fines,
penalties, interest or bonds, based upon any Environmental Requirements of any
Governmental Authority, or as a consequence of (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Property by any person or party or the conduct of
the Business or any part thereof, that does not comply with Environmental
Requirements, or (c) any claim, demand, notice, cause of action, directive,
order, judgment, fine or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to this
Agreement, to the extent that the condition or circumstance or event giving
rise to the claim, demand, notice, cause of action, directive, order, judgment,
fine or penalty relates to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Excluded Books and Records means the general ledger and all books and
records relating to (i) tax returns and tax records, (ii) the Excluded Property
or (iii) the Retained Liabilities, (iv) employees of the Company that are not
Transferred Employees, and (v) subject to Section 11.13, all Original Cost
Documents that are not located in the NCCSI Systems.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
and the assets disposed, transferred or dividended by the Company pursuant to
Section 11.22 and any assets excluded pursuant to Sections 11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
Executive Officers of an entity means the president and any vice president
of the entity in charge of a principal business unit, division or function.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
F.A.A. means the U.S. Federal Aviation Administration
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, a Franchising Authority , or any
other Governmental Authority, as to which: (a) no request for stay of the
action by the FCC, a Franchising Authority, or such other Governmental
Authority, as the case may be, is pending, no such stay is in effect, and if
any time period for filing any request for such a stay is provided by statute
or regulation, such time period has passed; (b) no petition, motion or
application for rehearing, reconsideration, or review, of the action is pending
before the FCC, a Franchising Authority, or such other Governmental Authority,
as the case may be, and the time provided for filing any such petition, motion
or application has passed; (c) the FCC, a Franchising Authority, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, a Franchising
Authority's or such other Government Authority's action, as the case may be, is
pending or in effect, and the deadline for filing any such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
Franchises is defined in Section 2.2.5.
Franchising Authorities is defined in Section 2.2.5.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company is
a party, or to which any Affiliate of the Company is a party and which are used
in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's Balance
Sheet as of a date certain comprising the Company's Materials and Supplies
(item 8 - Assets on the Company's Balance Sheet).
NCCSI Systems means the Navajo System, Needles System and Zuni System
collectively.
Navajo System means the Company's cable television systems that are
franchised or hold other operating authority in and around Window Rock,
Arizona; Fort Defiance, Arizona; Ganado, Arizona; Navajo, Arizona; Ship Rock,
New Mexico; Chinlie, Arizona; Many Farms, Arizona; Tohatchi, New Mexico;
Kayenta, Arizona; and Tsaile, Arizona.
Needles System means the Company's cable television systems that are
franchised or hold other operating authority in and around Needles, California
and Mohave County, Arizona.
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant Under
Construction -- Short Term (item 23 - Assets on the Company's Balance Sheet),
Plant Under Construction -- Long Term (item 24 - Assets on the Company's
Balance Sheet), and Telecommunications Plant -- Other (item 25 - Assets on the
Company's Balance Sheet), less Accumulated Depreciation and Amortization (item
27 - Assets on the Company's Balance Sheet).
Non-FCC Authorizations is defined in 2.2.6.
Original Cost Documents means all original cost documentation relating to
the Cable Plant.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Potential Subscriber means, for each System, the total number of single
family dwellings plus the total number of individual households in multiple
dwelling units (apartments, condominiums, mobile home parks, etc.) for all
locations with access to the existing cable plant within the relevant System as
set forth on Schedule 9.1.20(a) and as reported to the FCC in the relevant
Annual Reports of Cable Television Systems for 1993 (FCC Form 325).
Press Release is defined in Section 17.2.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 200,000 shares of the Common Stock owned by Seller.
Subscriber means, for each System, the number of subscribers to cable
television provided by the Company in each community unit computed according to
the following method: Number of single family dwellings plus the number of
individual households in multiple dwelling units (apartments, condominiums,
mobile home parks, etc.) paying at the basic subscriber rate plus bulk rate
customers plus courtesy and free service as set forth in Schedule 9.1.20(a) and
as reported to the FCC in the relevant Annual Reports of Cable Television
Systems for 1993 (FCC Form 325).
System means any of the systems included within the Navajo System, Needles
System or the Zuni System, as the context requires.
Tax Returns means a report, return or other information statement required
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
Tax(es) means any foreign, federal, state, provincial, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance, recording, ad valorem,
gains, value-added, unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social security, estimated,
add-on, minimum, privilege or withholding tax and any interest and penalties
and additions to such taxes (civil or criminal) related thereto or to the
nonpayment thereof.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance Sheet),
"Regulatory Liabilities" (Item 24 - Liabilities on the Company's Balance
Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the Company's
Balance Sheet), and "Donations of Telephone Plant" (Item 26 - Liabilities on
the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance Sheet
as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth in
this Article 1.
Zuni System means the Company's cable television systems that are
franchised in or hold other operating authority in and around Yah-Ta-Hey, New
Mexico, Zuni, New Mexico, and Ramah, New Mexico.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, the Shares, free and clear of
all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists of
the Cable Plant, Contracts and Leases (to the extent permitted following
compliance with Section 5.3), Company Books and Records, FCC Licenses,
Franchises, the Non-FCC Authorizations and other assets in effect or owned by
the Company as of the Effective Date that are associated with (i) the NCCSI
Systems, and (ii) the Unregulated Business described on Schedule 2.2(b).
2.2.1 Cable Plant. For purposes of this Agreement, "Cable Plant" means
the Real Property, machinery, equipment, vehicles and all other assets and
properties used, or held for future use, in connection with the conduct of the
Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, towers, tower equipment, antennas,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, furniture, fixtures, supplies, inventory, and other
physical assets of every nature and kind owned by the Company or in which the
Company holds an interest (other than as a lessee) and used in connection with
the Business. For purposes of this Agreement, "Real Property" means the real
property owned by the Company and used in connection with the Business,
including, without limitation, all land, buildings, structures, easements,
rights of way, appurtenances, improvements or privileges located thereon and
relating thereto.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate of
the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement, "Company
Books and Records" means all of the Company's customer or subscriber lists and
records, accounts and billing records (including a copy of the detailed general
ledger and the summary trial balances, where available for the past two fiscal
years), engineering records, files, data, drawings, blueprints, schematics,
reports, lists, plans, and processes, and all files of correspondence, lists,
records, and reports concerning subscribers and prospective subscribers, signal
and program carriage, and dealings with Governmental Authorities, including but
not limited to all reports filed on behalf of the Company with the F.C.C. and
statements of account filed by or on behalf of the Company with the United
States Copyright Office, personnel records (where applicable), Original Cost
Documents (where located but excluding Excluded Books and Records) and all
other documents, computer data and records (including records and files on
computer disks or stored electronically) relating to the Business (excluding
Excluded Books and Records), the Property and the Transferred Employees, except
for the Excluded Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
all licenses, certificates, permits or other authorizations granted to the
Company by the FCC.
2.2.5 Franchises. For purposes of this Agreement, "Franchises" means all
franchises and similar authorizations or permits issued or granted to the
Company that are used in the conduct of the Business by any local, municipal,
county, state or other regulatory authority (the "Franchising Authorities").
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses and Franchises) granted to the Company
by Governmental Authorities (including without limitation those that are listed
or required to be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance with
the other terms and conditions of this Agreement, on the Closing Date, Buyer
will pay to Seller the sum of three million Three Hundred Fifty-Six Thousand
Dollars ($3,356,000.00), subject to adjustment as provided in Section 3.2 (the
"Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price. Such delivery shall be made by bank wire transfer to an account that
Seller shall designate at least two (2) business days prior to the Effective
Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing Date,
provided that all conditions to Closing set forth in Article 7 have been
satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
shall be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which the sum of Net Telecommunications Plant and Materials and
Supplies as of the Effective Date exceeds or is less than the June 1994 Base
Amount; provided, however, that in determining Net Telecommunications Plant and
Material and Supplies as of the Effective Date, no effect will be given for:
(i) any decrease thereof resulting from damage, loss or destruction of Damaged
Property which is repaired or replaced by Seller or the Company or for which
Seller or the Company makes a substitution, in accordance with Section 11.9(b);
(ii) any increase thereof resulting from expenditures made by Seller or the
Company in connection with any such repair, replacement or substitution of
Damaged Property in accordance with Section 11.9(b); or (iii) any increase
thereof resulting from Seller's expenditures pursuant to its obligations under
Section 14.1.7(b) and (c) except for the cost of purchasing specific items of
new plant (i.e., storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase Price
will be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which, in each case as of the Effective Date: (i) Adjusted Total
Current Assets plus Adjusted Total Non-Current Assets exceeds or is less than
(ii) Adjusted Total Current and Non-Current Liabilities plus Total Long Term
Debt to the extent such Total Long-Term Debt shall remain outstanding
immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment Regarding
Assets and Liabilities in Section 3.2(d)) and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer of
Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for purposes
of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c) and the
Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and in
accordance with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For the
purpose of preparing Buyer's calculations and adjustments, Seller shall give
Buyer access to all books, records, and other information regarding the Company
available to Seller that Buyer may reasonably determine appropriate.) Within
thirty (30) days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments of
the Purchase Price shall be final and binding on Seller and Buyer. (For the
purpose of reviewing Buyer's calculations and adjustments, Buyer shall give
Seller access to all books, records, and other information regarding the
Company available to Buyer that Seller may reasonably determine appropriate.)
If Seller shall object, Seller and Buyer shall work in good faith to agree on
the correct amounts for the final Purchase Price, but if they fail to agree,
either party may exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) if the Final Purchase Price shall exceed the Estimated
Purchase Price, Buyer shall cause to be transferred to such account in the
United States as Seller may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications to
be filed with the Franchising Authorities and with respect to the Material
Regulatory Approvals, the parties shall file the applications and notices
described on Schedule 5.1 in such form as agreed to by the parties with the
appropriate Governmental Authorities, including without limitation the
Franchising Authorities, seeking an order permitting the transfer of control of
the Company to Buyer (the "Regulatory Approvals"). Each party agrees to use
its best efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with all Governmental Authorities to obtain
the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and 7.2.4,
and the Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness identified
on Schedule 5.2(a) (the "Long Term Indebtedness"), where required by the
underlying debt instruments, as promptly as practicable following the Execution
Date, but in any event no more than forty-five (45) days thereafter, the
parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consents") to
the transfer of control of the Company on terms acceptable to the parties. The
parties acknowledge that all Long Term Indebtedness for which Debtholder
Consents have been obtained before the Effective Date and all other Long Term
Indebtedness for which Debtholder Consent is not required, shall remain
outstanding immediately after the Effective Date and shall be included as a
Purchase Price adjustment pursuant to Section 3.2(d). Each party shall bear
their own costs and expenses in obtaining such Debtholder Consent. Neither
party, however, shall be required to make any payment to the debtholder to
obtain the Debtholder Consent, except that Seller shall be responsible for any
such payments as are specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in full
(including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall repay
on or prior to the Effective Date, Seller shall take, at Seller's sole cost and
expense, all actions necessary with respect to all persons or entities
(collectively, the "Secured Parties") holding any security interest or lien
against the Property, to obtain the termination or release, as of the Effective
Date, and the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the Property (such
terminations and releases being hereinafter collectively referred to as the
"Indebtedness Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Indebtedness Releases or
Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to the transfer of control of the Company to Buyer as a result of
Buyer's purchase of the Shares. To the extent any of the approvals, consents
or waivers required with respect to any Lease, Contract or Immaterial
Authorization have not been obtained with respect to any Lease, Contract or
Immaterial Authorization as of the Effective Date, Seller shall continue to use
its best efforts to obtain the consent of such other third party that is
required for the transfer of control of such Lease, Contract or Immaterial
Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to the transfer of control of a
Lease, Contract or Immaterial Authorization after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, then Seller and Buyer shall within thirty (30)
days after expiration of such six-month period negotiate in good faith and
agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or Immaterial
Authorization except as otherwise provided in Section 11.12 with respect to the
Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
but no later than forty-five (45) days after the Execution Date, the parties
shall file all applications and requests described on Schedule 5.4 in such form
as agreed to by the parties with the FCC seeking, and shall use their best
efforts to obtain, the FCC's consent to the transfer of control of all FCC
Licenses (as listed in Schedule 9.1.17(a)) from Seller to Buyer (the "FCC
Consents"). Each party agrees to use its best efforts, and the parties agree
to cooperate fully with each other and with the FCC, to obtain the FCC Consents
at the earliest practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
but in no event later than thirty (30) days after the Execution Date, the
parties will make such filings as may be required by the HSR Act with respect
to the sale contemplated by this Agreement. Thereafter, the parties will file
as promptly as practicable any supplemental information that may be requested
by the U.S. Federal Trade Commission or the U.S. Department of Justice pursuant
to the HSR Act. The parties agree to cooperate in seeking early termination of
the waiting periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to all
customers of the Company, and to all officers, employees and agents of the
Company having knowledge or information concerning the operations of the
Company so as to afford Buyer the opportunity to make such review, examination
and investigation of the Company and the Property as Buyer may desire to make,
to evaluate the competitiveness of the Company and the Business, and to enable
Buyer to assimilate the Company and the Business into Buyer's operations as
soon as practicable after the Effective Date. To the extent it so desires,
Seller shall accompany Buyer on all of Buyer's access to the customers and
agents of the Company. Buyer will be permitted to make extracts from or copies
of such books and records as may be reasonably necessary. Buyer will not
contact any employee, customer or supplier of the Company as to this Agreement
or the matters involved herein except in accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall cause
the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including sessions
to train such employees in Buyer's business planning process in order to have
the Company after the Effective Date follow Buyer's business planning process
and procedures);
(ii) The Company's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to participate
in the Company's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish, and cause the Company to furnish, such financial and
operating data and other information pertaining to the Company as Buyer may
reasonably request in order, among other things, to comply with Buyer's
disclosure obligations under the federal securities or other laws as such
obligations relate to Buyer's prospective ownership of the Company, including
any disclosure required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller or the Company to
take actions that would unreasonably disrupt the normal course of the business
of the Company or violate the terms of any applicable Law or any contract to
which the Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or the Company's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with respect
to issuing an auditor's report required by Buyer. Any information or document
provided to Buyer or acquired by Buyer during this investigation shall be
deemed "Evaluation Material" as that term is defined in the Confidentiality
Agreement and shall be subject in all cases to the terms of the Confidentiality
Agreement; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business or
the Company that Buyer, upon consultation with counsel, determines is required
to be disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 7, the parties will use their best efforts
to satisfy promptly all conditions required to be satisfied prior to the
Closing.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Company, the Business or the transactions
contemplated by this Agreement; of which in any such case, Seller's
representatives listed on Schedule 6.3(b) become aware on or before the
Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit Buyer
access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) are not true and correct in which event, if the Closing occurs, any
claim with respect to matters so specified shall be waived by Buyer unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.1.4 Material Adverse Changes. There shall have been no material adverse
changes to the Property as a whole or the financial position or results of
operations of the Company as a whole, and, subject to Section 11.9, the Company
shall not have suffered any material loss or damage to the Property, whether or
not insured, that would materially affect or impair the Company's ability to
conduct the Business after the Effective Date. None of the Additional
Financial Statements of the Company delivered pursuant to Section 11.4 shall
reflect a material change in the financial position or results of operations of
the Company from the financial position or results of operations reflected in
the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.26. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution Date
or any time thereafter, of the public records regarding liens and judgments
with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Buyer if required by the underlying debt instrument shall have received
the Debtholder Consents and shall have entered into any other necessary
agreements with the holders of such Long-Term Indebtedness evidencing such
Debtholder Consent in form and substance reasonably acceptable to Buyer.
7.1.12. Navajo Stock Purchase. The closing of this transaction shall be
concurrent with the closing of Buyer's purchase of all the outstanding common
stock of Navajo Communications Co., Inc. from ALLTEL Corporation, pursuant to
that certain Stock Purchase Agreement between Buyer and ALLTEL Corporation
dated November 28, 1994.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Seller:
7.2.1 No Misrepresentations or Breach of Covenants and Warranties. There
shall have shall have been no material breach by Buyer of any of its covenants
to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 9.2 shall be true and
correct as of the Effective Date, except for such representations or warranties
made expressly as of some other date, which shall be true and correct as of
such other date (all such representations and warranties to be qualified by any
materiality standards contained therein), and Buyer shall have delivered to
Seller a certificate ("Buyer's Closing Certificate"), dated as of the Effective
Date and signed by one of Buyer's Executive Officers, certifying each of the
foregoing or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct in
which event if the Closing occurs any claim with respect to matters so
specified shall be waived by Seller unless otherwise expressly agreed by Buyer
at Closing.
7.2.2 Documents. Buyer shall have delivered to Seller all documents
required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have delivered to Seller, in the manner
specified in Section 3.1, the Estimated Purchase Price as adjusted pursuant to
Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions,
or restrictions which Seller determines, in good faith in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Seller of the transactions contemplated by this
Agreement. For purposes of this Section 7.2.4, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. In addition, there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Seller, if required by the underlying debt instrument, shall have
received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar month
in which occurs the tenth (10th) business day after the date Seller notifies
Buyer in writing (the "Notice") of its determination that all required Material
Regulatory Approvals and FCC Consents have been obtained and provided that the
other conditions set forth in Article 7 shall have been satisfied, or at such
other place and time as may be agreed upon by Seller and Buyer. The
transactions to be consummated at Closing shall be deemed to have been
consummated as of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the Notice (the
"Effective Date"). If the Effective Date is not a day on which financial
institutions are open and operating, then the Closing Date shall be the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for transfer
or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence satisfactory
to Buyer that all Long-Term Indebtedness (and interest, premiums and penalties
thereon) to be repaid pursuant to Section 5.2(b) has been (or will be at
Closing) repaid in full.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver
to Seller the following items and documents duly executed and acknowledged as
appropriate:
(a) The Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement and to fulfill its respective obligations
under this Agreement. The execution and delivery by Seller of this Agreement
and the fulfillment of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and, assuming the due
execution and delivery of this Agreement by Buyer, constitutes a valid and
binding obligation of Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally and subject to the qualification
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of Seller's or the Company's certificate of incorporation or bylaws
or, (ii) except as set forth in Schedule 9.1.13, or subject to obtaining the
approvals and consents reflected in Article 5, conflict with, violate or result
in the breach of, constitute a default under, accelerate the performance
required by, or result in the creation of any encumbrance upon any of the
Property under any provision of any Contract other than any such conflict,
violation or breach that alone or in the aggregate would not have an adverse
effect on the Buyer, the Company, the Business or the Property after the
Effective Date.
9.1.3 Consents and Approvals of Governmental Authorities. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court or governmental agency, authority or instrumentality,
including, without limitation, the Navajo Nation ("Governmental Authority") is
required to be obtained or made by or with respect to Seller or the Company or
in connection with the execution and delivery of this Agreement by Seller or
the fulfillment by Seller of its obligations under this Agreement, except (i)
the filings and approvals described in Article 5, (ii) as described in Schedule
9.1.3, and (ii) such other consents, approvals, orders or authorizations, or
registrations, declarations or filings, which if not obtained or made would not
result in a material adverse effect on Buyer, the Company, the Business or the
Property.
9.1.4 No Violation of Law. Except as indicated in Schedule 9.1.4, the
execution and delivery of this Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any applicable existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect on
the Company, the Business as a whole or on any significant part of Property
after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; it
has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
9.1.6 Brokers. Seller has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Buyer for any broker's or finder's
fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any of
its obligations or liabilities, or the performance, observance or fulfillment
of any covenant or condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default thereunder or that
would constitute such a material breach or default with the giving of notice or
lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(ii) current real and personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii) such other imperfections of
title and encumbrances, if any, as do not interfere in any material respect
with the present use or value of the item of owned Property to which such
imperfection or encumbrance relates. No condemnation proceeding is pending or,
to the knowledge of Seller or the Company, threatened with respect to any part
of the Property and such Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by the Company included
in the Property. In addition, Schedule 9.1.8-2 sets forth a list of the Real
Property included in the Property in which the Company holds other than a fee
interest (such as easements and rights of way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there is
not any existing material default or existing material breach of a covenant by
the Company under any Lease. The Company enjoys peaceful and undisturbed
possession under all material Leases and, to Seller's and the Company's
knowledge, the lessor under any such Lease is not (with or without notice or
the lapse of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it thereunder,
and has not given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is in
substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation of
such Property. Except as set forth on Schedule 9. 1. 10, the Company has not
received any written notice within the past twelve (12) months of a violation
of any ordinances, regulations or building, zoning and other similar laws with
respect to such assets that would have a material adverse effect on the
Company, the Business as a whole or any significant part of the Property. Each
parcel of Real Property and, to the knowledge of Seller and the Company, of
real estate leased by the Company and material or necessary to the Business as
presently conducted substantially complies with all applicable Laws except
where the failure to so comply individually or in the aggregate, would not have
a material adverse effect on the Company, the Business as a whole or any such
parcel after the Effective Date. Except as set forth on Schedule 9.1.10, other
than the Company, no person or party has actual possession or has a right to
possession of all or any material portion of any parcel of such Real Property
or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PROPERTY INCLUDED IN THE PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
OR STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet, income
statement and related statement of cash flows as of and for the respective
periods ended December 31, 1992, and December 31, 1993, together with the
auditor's report thereon (the "Financial Statements"). The Financial
Statements were prepared based upon the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
as of the appropriate periods and the results of operations for the year then
ended, in each case in conformity with GAAP and to the best of Seller's
knowledge and to the extent required by applicable Law, have been prepared in
all material respects in conformity with the regulations of the FCC. The
Financial Statements contain no untrue statements of any material fact nor omit
to state any material facts required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of the Company; and (ii) will fairly present the financial
condition of the Company and the results of operations of the Company for the
periods indicated, subject, in the case of interim Additional Financial
Statements, to normal year-end adjustments which will not be material in amount
or effect; and (iii) to the best of Seller's knowledge and to the extent
required by applicable Law, will be prepared in all material respects in
conformity with the regulations of the FCC; and (iv) will not contain any
untrue statements of any material facts or omit to state any material facts
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of the Company and
fairly presents the financial condition of the Company as of such date subject
to normal year-end adjustments which will not be material in amount or effect,
and to the best of Seller's knowledge and to the extent required by applicable
Law, was prepared in all material respects in conformity with the regulations
of the FCC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities, operations
or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or the
Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance or
agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of the
Property, or any increase or an agreement to increase any indebtedness of the
Company, except in the ordinary course of business;
(d) Any material change in the manner of conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation or
other event or condition that materially and adversely affects the business or
prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on the
Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the Company
except as required by GAAP or any change in depreciation or amortization
policies or rates heretofore adopted by the Company except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's knowledge,
any attempt to organize the Transferred Employees for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity other
than loans, advances, capital contributions or investments made in the ordinary
course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or the
Company and any third party) to do or to take any of the actions referred to in
paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith. The
Company is not in material breach or default in connection with any Contracts,
and there is no basis for any claim of breach or default by the Company, or to
Seller's the Company's knowledge, any other party, in any material respect
under any of the Contracts. None of the Contracts, either separately or in the
aggregate, materially and adversely affects the Company, the Business or the
Property. After the Effective Date, all rights and obligations of the Company
under the Contracts shall continue unimpaired in the Company (assuming that if
any Contract requires the consent of the other party thereto, such consent will
have been obtained by the parties hereto prior to the Effective Date). Except
for the instruments specifically listed in Schedule 9.1.13, the Company is not
a party to or subject to: (i) any agreement for the purchase or disposition of
any material, equipment, supplies, inventory or service, except individual
purchase orders and contracts in amounts less than Twenty-Five Thousand Dollars
($25,000.00); (ii) any agreement to which the Company is a party or by which
any of the Property is bound relating to indebtedness for money borrowed
including capital leases, security arrangements relating thereto and any
amendment or waiver thereof; and (iii) any other agreement not of the type
covered by any of the foregoing items of this Section 9.1.13 requiring payments
by the Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required to
be listed thereon, the Contracts which require the consent, approval or waiver
of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a character
usually insured by companies carrying on similar businesses is insured under
insurance policies in such amounts and against such losses or casualties as is
(i) usual in such companies and (ii) required under any of the Contracts or
Leases. The insurance policies referred to in this Section 9.1.14 are (i)
listed on Schedule 9.1.14, and (ii) in full force and effect and the premiums
due thereon have been duly and timely paid. The most current statement of
values (the statement of values of property of an insurable nature that is
submitted to an insurance company to be used as a basis for the calculation of
premiums) relative to the Property as presently insured has been made available
to Buyer by Seller. On the Effective Date, the coverage under the insurance
policies and programs of Seller and its Affiliates applicable to the Company
will be terminated, and Buyer will be responsible for providing all insurance
coverage for the Company. Following the Effective Date, Seller shall be
responsible for and shall pay any additional premiums that might be required by
an insurance company for insurance coverage prior to the Effective Date
relating to the Company and shall be entitled to any refunds or dividends due
from such companies relating to such coverage. Schedule 9.1.14 sets forth a
list of the open material claims affecting the Company complete in all material
respects, and a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be filed
on or prior to the Effective Date (taking into account all extensions of due
dates) by or with respect to the Company and has paid or adequately provided
for all Taxes shown thereon as owing, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, have a material adverse effect on Buyer, the Business, or the Company after
the Effective Date, (ii) all such Tax Returns were or will be correct and
complete in all material respects, (iii) to the knowledge of Seller, all
withholding Tax requirements imposed on or with respect to the Company have
been or will be satisfied in full in all respects, and (iv) all penalties,
interest or other charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have been or will
be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no material
written claim against the Company for any Taxes, and no material assessment,
deficiency or adjustment has been asserted or, to the knowledge of Seller
proposed with respect to any Tax Return of or with respect to the Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect
to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements includes
adequate provisions for the payment in full of all federal and state income
taxes of the Company for all taxable periods or portions thereof during the
period beginning with respect to each Tax Return statute of limitations and
ending no later than December 31, 1993. The balance sheet included in the
Financial Statements has attached thereto a schedule (the "Tax Schedule") which
sets forth provisions for such federal and state income taxes.
(f) All accrued rights or obligations under any written or unwritten
Tax allocation or sharing agreements or arrangements affecting the Company are
reflected in the intercompany accounts of the Company. All such Tax allocation
or sharing agreements or arrangements have been or will be cancelled on or
prior to the Effective Date. No payments are or will become due by the Company
after the Effective Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the property
of the Company is held in an arrangement for which partnership Tax Returns are
being filed, and the Company does not own any interest in any controlled
foreign corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the property
of the Company or any of its Subsidiaries is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section 168(h) of
the IRC) or "tax-exempt bond financed property" (within the meaning of Section
168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will not
be required to include any amount in income for any taxable period beginning
after December 31, 1993 as a result of a change in accounting method for any
taxable period ending on or before December 31, 1992 or pursuant to any
agreement with any Tax authority with respect to any such taxable period.
(j) The Company has not consented to have the provisions of Section
341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this Agreement,
neither Buyer nor the Company will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the IRC without regard to whether
such payment is reasonable compensation for personal services performed or to
be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the proper
governmental authorities or properly deposited as required by applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that, if
determined adversely to the Company, would reasonably be expected to have a
material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of any
reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the Business
as a whole or the Property. The Company is not in default under any judgment,
order or decree of any Governmental Authority which would reasonably be
expected to have a material adverse effect on the Company, the Business as a
whole or any significant part of the Property after the Effective Date.
9.1.17 FCC Licenses, Franchises and Non-FCC Authorizations.
(a) Listed on Schedule 9.1.17(a) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension, cancellation or
termination or, to Seller's or the Company's knowledge, any threatened
suspension, cancellation or termination in connection therewith nor are any of
such FCC Licenses subject to any restrictions or conditions that limit the
operation of the Business (other than restrictions or conditions generally
applicable to licenses of that type). The FCC Licenses are free from all
security interests, liens, claims, or encumbrances of any nature whatsoever.
Except as set forth on Schedule 9.1.17(a), there are no applications by the
Company or material complaints or material petitions by others or proceedings
pending or threatened before the FCC relating to the Company or the FCC
Licenses.
(b) Listed on Schedule 9.1.17(b) are the Franchising Authorities and
the Franchises, including any amendments thereto, held by the Company. Seller
has made available to Buyer a copy of each Franchise. The Company is in
substantial compliance with each of the Franchises and there has not occurred
any default (without regard to lapse of time or the giving of notice, or both)
by the Company under any of the Franchises, except such defaults which
individually or in the aggregate do not have a material adverse effect on the
Property or the Business and each Franchise is in full force and effect in
accordance with its terms, and there is no outstanding notice of suspension,
cancellation, modification or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation, modification or termination
in connection therewith nor are any of such Franchises subject to any
restrictions or conditions that limit the operations of the Business in any
material respect. Schedule 9.1.17 (b) lists any Franchising Authority which
has an option or right to purchase any Franchise. No Franchising Authority has
notified Seller in writing of its intention to exercise its rights to purchase
any System or portion thereof subject to such Franchise. Except as disclosed
in Schedule 9.1.17(b), the Franchises are free from all security interests,
liens, claims, or encumbrances of any nature whatsoever; there are no
applications by the Company or material complaints or material petitions by
others or proceedings pending or threatened before any Franchising Authority
relating to the Company or the Franchises.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's and the Company's knowledge, no event has occurred with respect to
any materially necessary Non-FCC Authorization which permits, or after notice
or lapse of time or both would permit, revocation or termination thereof, or
would result in any other material impairment of the rights of the holder of
such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(a) lists (and identifies the sponsor of) each
material "employee pension benefit plan, " as that term is defined in Section
3(2) of ERISA, each material " employee welfare benefit plan," as that term is
defined in Section 3(1) of ERISA maintained or contributed to by the Company or
any of its Affiliates in respect of any Transferred Employee (as defined below)
(such plans being hereinafter referred to collectively as the "ERISA Plans"),
and each other material retirement, pension, profit-sharing, money purchase,
deferred compensation, incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation pay, savings, medical,
dental, post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement maintained or
contributed to by the Company or its Affiliates in respect of or for the
benefit of any Transferred Employee or former employee, excluding any such
plan, program, agreement, or arrangement maintained or contributed to solely in
respect of or for the benefit of Transferred Employees or former employees
employed or formerly employed by the Company outside of the United States, as
of the date hereof (collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Seller has supplied Buyer with a true and
complete copy of each Plan and all amendments thereto. Schedule 9.1.18(a) also
includes a list of each material written employment, severance, termination or
similar-type agreement between the Company or its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except to the extent that
any assets, liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or otherwise) to plan(s)
or agreement(s) maintained or contributed to by Buyer, all such Plans and
Agreements shall remain the liabilities of the Seller or its Affiliates and
Seller shall take any and all steps necessary to ensure that neither Buyer nor
the Company shall be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(a), the
execution and delivery of this Agreement by Seller and the performance of this
Agreement by Seller will not directly result now or at any time in the future
in (i) the payment by the Company or its Affiliates to any Transferred Employee
of any severance, termination, or similar type payments or benefits or (ii) any
"parachute payment" (as such term is defined in Section 28OG of the IRC) being
made by the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company could
be subject to any material liability pursuant to Section 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability is
reserved for or otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) none of the ERISA Plans has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
IRC), whether or not waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer plan," as that term is defined in Section 3(37) of ERISA
and with respect to any such multiemployer plans (as so defined) listed in
Schedule 9.1.18(d), Seller has not made or incurred a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA that would result in the incurrence of a material liability
by the Company that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or the
Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is the
Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered by
collective bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller and the Company, during the twelve (12) months
preceding the Execution Date there have not been any union organizational
campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of the Company, together
with the elections made prior to the Effective Date with respect to such
accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Cable Plant. Seller has set forth on Schedule
9.1.19 copies of schedules (at the level of detail agreed to by the parties but
in any case including details regarding net book value) of the Company's Cable
Plant as of June 30, 1994, including, to the extent available, a schedule
specifically identifying the Cable Plant that is associated with the
Unregulated Business.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) Schedule 9.1.20 (a) sets forth, for each System, a material true
and accurate description of the following information as of the dates
specified:
(i) the number of miles of plant included in the Property as
reported to the FCC in the Annual Reports of Cable Television Systems for 1993
(FCC Form 325);
(ii) the number of Subscribers served by the System as reported to the
FCC in the Annual Reports of Cable Television Systems for 1993 (FCC Form 325);
(iii) the number of Potential Subscribers as served by the System as
reported to the FCC in the Annual Reports of Cable Television Systems for 1993
(FCC Form 325);
(iv) the average monthly billings for the radio services;
(v) the last twelve months total billing for the radio services for
the month ending October 31, 1994;
(vi) the number of radio services customers as of October 1994;
(vii) the significant radio services customers (billings over
$5,000.00 per month);
(viii) a description of basic and optional or tier services
available from the System, the rates charged for each, and the number of
Subscribers receiving each optional or tier service as of June 30, 1994;
(ix) the stations and signals carried by the System and the channel
position of each such signal and station as of June 30, 1994; and
(x) the cities, towns, villages and counties served by the System
as of June 30, 1994.)
(b) Schedule 9.1.20 (b) sets forth a substantially complete list of all
vehicles included in the Property (including trailers, equipment mounted on
trailers and self-propelled equipment) together with the manufacturer, model
and year of each such vehicle, and indicates whether such vehicle is owned or
leased by the Company.
9.1.21 [INTENTIONALLY DELETED]
9.1.22 Payments. All material payments of any kind required to be made by
the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws.
(a) Except as Seller shall specifically indicate on Schedule
9.1.23(a), (i) the Company is in compliance in all material respects with all
Laws (including, without limitation the Communications Act, the Copyright Act
and the laws, rules and regulations of any Franchising Authority and the FAA)
applicable to it, the Property and the Business and holds all governmental
permits or licenses required in order to conduct the Business and to own and
operate the Property; (ii) the present uses of the Property in the conduct of
the Business do not violate in any material respect any Law and (iii) no
written notice or warning from any governmental or regulatory authority with
respect to any failure or alleged failure by the Company to comply with any Law
or questioning the validity of any governmental permit or license, has been
issued or given, nor to the knowledge of Seller or the Company, is any such
notice or warning proposed or threatened. Neither Seller nor the Company is
aware of any fact, event or circumstance relating to the Company that is
reasonably likely to cause a regulatory agency to deny or withhold its approval
to the transactions contemplated hereby.
(b) Except as Seller shall specifically set forth in Schedule
9.1.23(b), the Company has made all material submissions under any laws, rules
and regulations of the FCC, the U.S. Copyright Office, any Franchising
Authority and the F.A.A.
(c) (i) Except as Seller shall specifically set forth in Schedule
9.1.23(c)(i), the Company has timely filed all required forms and other
materials with the Franchising Authorities and the FCC with regard to the rates
charged by the Company to its subscribers and, except as Seller shall
specifically set forth on Schedule 9.1.23(c)(i), to the best of Seller's and
the Company's knowledge, the rates presently charged by the Company are in
compliance with the FCC's rate regulations.
(ii) Schedule 9.1.23(c)(ii) lists all of the Franchising
Authorities which have been certified to regulate the rates charged by the
Company and the status of all rate proceedings pending before said Franchising
Authorities.
(iii) Schedule 9.1.23(c)(iii) lists all complaints filed with the
FCC or any other Governmental Authority regarding the rates charged by the
Company in connection with the NCCSI Systems and the status of these
complaints.
(d) Except as Seller shall specifically disclose in Schedule 9.1.23(d),
the Company is authorized to use all frequencies in the aeronautical bands
currently being used in the Business.
9.1.24 Correct Records. The financial records, ledgers, account books and
other accounting records of the Company are current, correct and complete and
reasonably well organized, in all material respects and to the knowledge of
Seller and the Company, to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC. The Company
and its Affiliates have retained substantially all Original Cost Documents
regarding the expenditures made by the Company within the immediately preceding
two-year period that relate to the Company's Net Telecommunications Plant, and
such Original Cost Documents are correct and complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value (as
reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements of
the Business, will not materially exceed the Company's reserve for obsolete or
excess Materials and Supplies as reflected on the Company's books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 Indian and BIA Consents.
(a) Schedule 9.1.27 sets forth all easements, rights-of-way,
franchises, licenses, permits, consents, approvals, certificates and other
authorizations of tribal authorities and the United States Bureau of Indian
Affairs (the "BIA") held by the Company (collectively "Indian Authorizations").
All such Indian Authorizations are in full force and effect, the Company is not
in material default thereunder, and there are no other Indian Authorizations
required to be obtained by the Company from, or filings required to be made by
the Company with, any tribal authority or the BIA; except where the failure to
obtain such Indian Authorizations or to make such filings would not have a
material adverse effect on the Company, the Business as a whole or on any
significant part of the Property after the Effective Date.
(b) Except as disclosed on Schedule 9.1.27, there are no material
claims, actions, lawsuits or other proceedings pending, or, to the knowledge of
Seller or the Company threatened, with respect to any of the Property located,
or any operations of the Business conducted, on Indian reservations or tribal
lands, and no tribal authority has given written notice of or, to Seller's or
the Company's knowledge, has threatened, any cancellation, revocation,
termination or material amendment or modification of any Indian Authorization.
(c) Except as set forth on Schedule 9.1.27, no consent, approval or
waiver from, or filing with, any tribal authority or the BIA is required to be
obtained or made in connection with the execution and delivery by Seller of
this Agreement, or Seller's fulfillment of its obligations under this
Agreement.
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by the Franchising Authorities.
Except as set forth on Schedule 9.1.29, there are no changes, modifications,
upgrades or enhancements required by the Franchising Authorities to be made to
the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this Agreement
or as otherwise set forth in Schedule 9.1.30 the Company has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), of a nature required to be
recorded or disclosed in a corporate balance sheet prepared in accordance with
GAAP, except liabilities and obligations which are not materially in excess of
amounts reflected, reserved against or disclosed in the December 31, 1993
Financial Statements or the notes thereto and except for liabilities and
obligations incurred in the ordinary course of business since December 31,
1993. Except as may be reflected in the December 31, 1993 Financial Statements
or the notes thereto or on Schedule 9.1.30, the Company has no obligations
under guarantees, endorsements or indemnities of the obligations of any other
person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons
holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner of
the Shares, which comprise 100% of the outstanding shares of all classes of
capital stock of the Company. Seller has legal, valid and marketable title to
the Shares, free and clear of all liens, claims, options, security interests or
other encumbrances of any character whatsoever ("Encumbrances"). The sale and
delivery of the Shares to Buyer pursuant to Article 2 will vest in Buyer legal,
valid and marketable title to the Shares free and clear of all Encumbrances
other than Encumbrances created or suffered by Buyer and restrictions on sales
of the Shares under applicable federal and state securities laws.
9.1.33 Capital Stock. The Common Stock is the only capital stock
authorized to be issued by the Company. The Shares are the only shares of
Common Stock outstanding. All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. Except as described on Schedule 9.1.33,
there are outstanding no securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of the Company nor are there
any subscriptions, warrants, options, rights or other arrangements or
commitments (other than this Agreement) which could obligate Seller or the
Company to issue any shares of capital stock or dispose of any ownership
interest therein. There are no outstanding obligations of the Company to issue
or deliver, or to repurchase, redeem or otherwise acquire any capital stock or
other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the right
to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Texas;
it has full corporate power and authority to own its properties and to carry on
the Business as it is now being conducted, and to own or hold under the lease,
the Property.
9.1.36 Copyright.
(a) Except as disclosed on Schedule 9.1.36(a), for each relevant
semi-annual reporting period within the last three years, the Company has
timely filed with the U.S. Copyright Office all required statements of account
in materially true and correct form, and has paid when due all required
copyright royalty fee payments in correct amount, relating to the NCCSI
Systems' carriage of television broadcast signals.
(b) Except as disclosed on Schedule 9.1.36(b), the Company within
the last three years has responded to all written inquiries received by the
Company or brought to the Company's attention from the U. S. Copyright Office
with respect to statements of account and other documents and instruments filed
with respect to the NCCSI Systems, and has submitted or will submit factual
information, amended statements of account and supplemental royalty fee
payments as appropriate in response to such inquiries.
9.1.37 FAA Authorization. All necessary FAA approvals have been obtained
with respect to the operation of the towers on which the equipment used or held
for use in the Business is located, and all towers owned by the Company are
properly marked and lighted pursuant to FAA regulations except where the
failure to mark and light such towers would not have a materially adverse
effect on the Company as a whole, the Business as a whole or any significant
part of the Property after the Effective Date.
9.1.38 Overbuilds. Except as disclosed on Schedule 9.1.38, (i) to the
best knowledge of the Seller and the Company, the Company is currently the only
cable television operator providing or intending to provide cable television in
the service area of the Systems; and (ii) to the best knowledge of the Seller
and the Company, no person other than the Company possesses a valid cable
television franchise to serve any of the communities or unincorporated areas
presently served by the Systems.
9.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold the assets owned, leased or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement, to own the Shares and to fulfill all
other obligations of Buyer under this Agreement. The execution and delivery by
Buyer of this Agreement and the fulfillment by it of its obligations under this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to purchase, own and
hold the Shares upon the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by Buyer and,
assuming the due execution and delivery of this Agreement by Seller,
constitutes a valid and binding obligation of Buyer, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualifications that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.2.3 No Restrictions Against Purchase of the Shares. The execution and
delivery of this Agreement by Buyer do not, and the fulfillment by Buyer of its
obligations under this Agreement will not, conflict with, violate or result in
the breach of any provision of the certificate of incorporation or bylaws of
Buyer or, subject to obtaining the approvals and consents referred to in
Article 5, conflict with, violate or result in the breach of, constitute
default under, or accelerate the performance required by any Contract to which
Buyer is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the fulfillment by
Buyer of its obligations under this Agreement, except (i) the filings and
approvals described in Article 5, and (ii) the filings and approvals listed on
Schedule 9.2.3.
9.2.4 No Violation of Law. The execution and delivery of this Agreement
and the fulfillment by Buyer of its obligations under this Agreement will not
violate any Law.
9.2.5 Brokers. Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a
manner as to give rise to a claim against Seller for any broker's or finder's
fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
proceedings pending or, to the knowledge of Buyer, threatened against Buyer or
its properties that would prevent the consummation of the transactions
contemplated by this Agreement.
9.2.7 [INTENTIONALLY DELETED]
9.2.8 Investment. Buyer understands that the Shares that it will acquire
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Act"), and cannot be offered for sale, sold or otherwise
transferred unless the Shares subsequently are so registered or qualified for
exemption from registration under the Act. The Shares are being acquired under
this Agreement by Buyer in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Act. The Shares will not be offered for sale, sold or otherwise
transferred by Buyer without either registration or exemption from registration
under the Act and applicable state securities laws. Buyer has such knowledge
and experience in financial and business matters that Buyer is capable of
evaluating the merits and risks of Buyer's investment in the Shares. Buyer
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding the Shares for an indefinite
period of time, inasmuch as the Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
or prior to March 15, 1995, the parties shall, as promptly as practicable but
in any event within 30 days after Buyer's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no later
than the Effective Date, pursuant to which Seller will provide to the Company,
at the Company's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services relating to the
conversion of systems and processes) as may be reasonably requested by Buyer,
which agreement shall be in form and substance as mutually agreed to by both
Buyer and Seller (the "Transition Services Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed
in any patent or patent application), designs (useful or ornamental), and works
subject to copyright that may be embodied in, without exclusion, invention
disclosures, specifications, manuals, drawings, functional or system block
diagrams, flow charts, circuit diagrams, design or user documentation,
engineering notebooks, schematics, test programs, documented procedures,
documented processes, documented flows, devices, software, or firmware, that
relate to the function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus, article of
manufacture, process, method or service. "Intellectual Property" shall also
include patents, patent applications (including continuations, continuations-
in-part, divisions, reissues, reexamined patents and patent applications and
extensions thereof), copyrights (whether common law or statutory, registered or
unregistered), or trade secrets, residing in the subject matter above.
<PAGE>
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall be
responsible for any fees associated therewith) in obtaining the consent of any
necessary third party for the use of any Intellectual Property that the Company
has placed in public use on, or prior to, the Effective Date and that is
presently used by the Company, but excluding any Intellectual Property listed
in Schedule 11.22(h).
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except as
specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in the Company's use of such
Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are set
forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the Intellectual
Property that as of the Effective Date the Company owns or controls or under
which it has the right to grant licenses, Seller shall not assert against
Buyer, or Affiliates of Buyer, or vendees, mediate or immediate, of Buyer or
the Company, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from the Company's activities practiced in
the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by the
Company of any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, the Company, a customer
of Buyer's or the Company's or anyone claiming under Buyer or the Company
constitutes direct or contributory infringement or misuse of any intellectual
property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, the
Company, a customer of Buyer's or the Company's, or anyone claiming under Buyer
or the Company constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
<PAGE>
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the owners
of, and have permitted the Company to use, certain trade names, trade dress,
trademarks, service marks, logos and related intangible property (collectively,
"Marks") used in connection with the Business, including, without limitation,
the items listed on Schedule 11.1.5, and Buyer understands and agrees that the
Marks, or any right or license of the Company to the Marks are not being
transferred pursuant to this Agreement. Buyer acknowledges Seller's exclusive
and proprietary rights in the use of the Marks, and Buyer agrees that it shall
cause the Company not to use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this Section 11.1.5.
After the Effective Date, Buyer shall cause the Company to replace all Marks of
Seller as soon as possible, but in no event later than one hundred eighty (180)
days after the Effective Date for Marks affixed to items with a valid
continuing use in the Company's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats, tools, tool boxes,
kits (safety and others), signs, manual covers and notebooks. After the
Effective Date, Buyer will cause the Company to not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that have no valid
continuing use in the Company's conduct of the Business, including items
affecting customer or employee relations or items that do not reflect the
Company's true identity. Specific items to be destroyed or returned include
items with Marks affixed to them including, without limitation, giveaways;
order, purchase or materials forms; requisitions; invoices; statements; time
sheets/labor reports; bill inserts; stationery; personalized note pads; maps;
organization charts; bulletins/releases; sales/price literature; manuals or
catalogs; report covers/folders; program materials; and materials such as media
contact lists/cards.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as to
reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the value of the goodwill associated
with the Marks, and acknowledges that the Marks and all rights therein and the
goodwill pertaining thereto belong exclusively to Seller, and that the Marks
have a secondary meaning in the minds of the public.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company using the Marks shall be provided in
accordance with all applicable federal, state and local laws, and that the same
shall not reflect adversely upon the good name of Seller, and that the conduct
of the Business will be of a standard and skill equivalent to that employed
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's failure to cease use of the Marks as provided
in this Agreement, or its improper use of the Marks, will result in immediate
and irreparable damage to Seller. Buyer acknowledges and admits that there is
no adequate remedy at law for such failure to terminate use of the Marks, or
for such improper use of the Marks, and Buyer agrees that in the event of such
failure or improper use, Seller shall be entitled to equitable relief by way of
temporary restraining order or injunction or any other relief available under
this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and agrees
that (i) except for the representations and warranties set forth in this
Agreement and the Schedules (and the Financial Statements, the Additional
Financial Statements, and actuarial reports required pursuant to the Employee
Transfer Agreement), Buyer has not relied and will not rely upon any document
or written or oral information furnished to or discovered by it or its
representatives, (ii) there are no representations or warranties by or on
behalf of Seller or its Affiliates or representatives except for those
expressly set forth in this Agreement and in any other written agreement
entered into with Seller or any of its Affiliates in connection with this
Agreement, and (iii) to the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will be solely as set
forth in this Agreement or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and representatives
will comply with the Confidentiality Agreement, the provisions of which are
expressly incorporated herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company to
conduct the Business in the ordinary course in accordance with prudent business
judgment and consistent with past practice and policy and to (i) preserve the
Business as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same extent as such
were generally available from January 1, 1994 through the Execution Date and
are available on the date hereof, (iii) not take any action that would
jeopardize any material and beneficial contractual relationships with persons
having business dealings with the Business, and (iv) preserve all of the
Business' Franchises, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. Seller will cause
the Company to refrain from entering into any material transaction or contract
other than in the ordinary course of business and to not make any material
change in the general nature of the Business or in its methods of management,
marketing, accounting or operations (including repair and maintenance
functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course of
business, (ii) enter into or terminate, as lessor or lessee, any Lease other
than in the ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or (iv) change in
any material respect or terminate any of the insurance policies referred to in
Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will cause the Company not to
sell, lease, dispose of or otherwise transfer, or make any contract for the
sale, lease, disposition or transfer of any Property other than, with respect
to any individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items (other
than vehicles) the aggregate value of which shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by a Franchising Authority, Seller will cause the
Company not to (i) institute any proceeding with respect to, or otherwise
change, amend, supplement, terminate, renew, suspend or abrogate any Franchise
or (ii) enter into or agree to any stipulation, order, or decree of, or
settlement with any Franchising Authority that in the case of (i) or (ii)
above, would have a material adverse effect on the revenue, authorized return
on equity or earnings of the Business. Seller will cause the Company not to
file any application, petition, motion, brief, testimony, settlement agreement
or other pleading in any proceeding before any Franchising Authority, or before
the FCC or appeals related thereto, unless Seller shall have first provided
Buyer with a copy of the same and provided Buyer with a reasonable opportunity
to comment to Seller with respect thereto. If Buyer determines it should
intervene in any proceeding before any Franchising Authority in which Buyer's
position is or may be different from the Seller's or the Company's, Seller will
not, and will cause the Company not to oppose Buyer's intervention in such
proceeding, without waiving any other rights related thereto.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of the Company or pursuant to any Contract,
Seller will cause the Company not to (i) enter into or amend any employment
agreement with any individual that will become a Transferred Employee, or enter
into or amend any union agreement or commitment (including any new commitment
to pay retirement or other benefits, or amendments to the Company's retirement
plans), (ii) effect any net increase over five percent (5%) since the Execution
Date in the number of employees of the Company who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under any plans
concerning employee benefits or increase the general rates of compensation of
the Transferred Employees, or change the manner by which compensation
(including fringe benefits) is determined and paid to any Transferred Employee.
(f) Seller will cause the Company not to engage in any intercompany
transactions with any Affiliate thereof, except for transactions consistent
with past practice.
(g) Seller shall cause the Company to maintain the Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to take
any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate with
any other person or entity or acquire a material amount of assets of any other
person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital expenditure
plans which Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the parties agree
that when such expenditures have been incurred they will constitute an addition
to a component of Net Telecommunications Plant thereby becoming subject to
Section 3.2(c). Seller agrees to cause the Company to use its best efforts
substantially to complete such plans within the projected time schedules;
provided, that the Company will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the prior
written consent of Buyer. All construction work that is in progress on the
Effective Date will be accounted for by identifying and accruing all associated
time reporting, material invoices or contractor invoices inputted or received
on or before the Effective Date, and all payments therefor shall be the
responsibility of the Company and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of <PAGE>
God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the Property,
Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed One Hundred Sixty-Seven Thousand Eight
Hundred Dollars ($167,800.00), either party may, by written notice to the other
party (the "Casualty Termination Notice") within thirty (30) days after the
date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed One
Hundred Sixty-Seven Thousand Eight Hundred Dollars ($167,800.00), or the
Casualty Termination Notice is not given by either party, then Seller, within
forty-five (45) days after the damage or destruction, shall agree in writing to
take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property;
or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain as
a substitute therefor an equivalent item or items of Property if the Damaged
Property is personal property, and Real Property if the Damaged Property is
Real Property, but only if such substituted personal property or Real Property
is satisfactory to Buyer, and the Company will be entitled to make all claims
related to the Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the manner contemplated by this
Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property,
and the Purchase Price Adjustment contemplated by Section 3.2(a)(2) will be
made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 [INTENTIONALLY DELETED]
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (collectively "Equipment Manufacturers") as Buyer
may request, covering such software license agreements and other agreements as
are necessary to enable the Company after the Effective Date to operate the
equipment manufactured and sold by the Equipment Manufacturers included in the
Property in substantially the same manner as operated by the Company prior to
the Effective Date. The agreements shall contain material terms and conditions
(including license and warranty, but not necessarily including pricing) that
are substantially the same as those provisions in the corresponding agreements
between the Company and the Equipment Manufacturers as of the Effective Date.
Buyer understands and agrees that the price and fee provisions of such
agreements will be as negotiated between Buyer, on behalf of the Company, and
the Equipment Manufacturers. The above obligation of Seller shall be expressly
conditioned upon the acceptance by Buyer, on behalf of the Company, of all
material obligations accepted by Seller in such corresponding agreements. It
is the responsibility of Buyer, on behalf of the Company, to enter into
appropriate agreements with the Equipment Manufacturers in respect of service,
support, training, maintenance, and future development (hardware and software)
for the Property, such agreements to include terms and conditions agreed to
between Buyer, on behalf of the Company, and the Equipment Manufacturers.
Seller agrees to assist Buyer, on behalf of the Company, in obtaining the
Equipment Manufacturers' consent, if necessary, to enable the Company after the
Effective Date to avail itself of all training credits remaining at the
Effective Date on Property furnished by the Equipment Manufacturers.
11.12.2 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third parties
relate both to the Property and the Excluded Property. Seller agrees to use
its best efforts to assist Buyer in obtaining, on behalf of the Company,
contractual arrangements with such third parties relating to the Property,
which arrangements will be reasonably satisfactory to Buyer; provided that
neither the Company nor any Affiliate of the Company shall be obligated under
this Section 11.12.5 to make any payment to any such third party unless such
payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company to
retain the Company Books and Records, in either case, until the shorter of the
date that other party consents in writing to their destruction or the seventh
anniversary of the Effective Date. Each party shall provide full and free
access to the Company Books and Records and Retained Books and Records, as the
case may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and Records
are required to be retained. Either party may make copies of any such Books
and Records as it deems desirable, at its own expense. After the Effective
Date, upon reasonable notice, Seller shall provide Buyer and the Company with
reasonable assistance in locating any of the Company's Original Cost Documents
which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver (at
its expense) to Buyer a preliminary title binder (on a standard form reasonably
acceptable to Buyer), issued by Lawyers Title Insurance Company or another
title insurance company reasonably acceptable to Buyer, with respect to all
Real Property included in the Property and in which the Company purports to own
fee title. Such title binders shall be in form, substance and amount
reasonably satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as set forth below) and shall be current as of a
date no earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each policy
shall equal the dollar value set forth on the Company's continuing property
records list as of December 31, 1993 for land and buildings. Such title
binders shall reflect that the Company is vested with good, fee simple,
marketable and insurable title to such Real Property, subject only to (i)
standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v)
Leases, (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby, (vii) title plat exceptions to the extent the matters shown
on such title plats do not individually or in the aggregate materially detract
from the value or impair the use of the Real Property affected thereby, and
(viii) water rights exceptions (collectively, the "Permitted Exceptions"). If
a preliminary title binder indicates an exception other than a Permitted
Exception that would impair marketability in any material respect, Seller
shall, at its expense, cause such exception to be removed on or before the
Effective Date. With respect to each parcel of Real Property covered by a
preliminary title binder, Seller shall deliver to Buyer (at Seller's expense
and on or prior to sixty (60) days before the Effective Date) a certified
current boundary survey showing (x) access to the property and (y) all
improvements on the property and any encroachments across the property line by
any improvements of the Company or owners of adjacent property and (at Seller's
expense and within sixty (60) days after the Effective Date) owner's title
insurance policies for the Real Property (ALTA Owners Policies where available
but based upon boundary surveys as set forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer to
insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by the
sale. All reasonable costs and expenses related to such insertion and delivery
shall be borne and paid by the Company. Other means of notifying subscribers
may be employed by either party, at the expense of the initiating party, but in
no event shall any notification be initiated without the prior consent of the
other party (which consent shall not be unreasonably withheld) or earlier than
three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as provided in Section 11.26, Seller
shall have a period of ten (10) business days after the Execution Date (the
"Supplemental Schedule Period") to supplement or otherwise modify the Schedules
to this Agreement by delivering to Buyer, within the Supplemental Schedule
Period, a substitute schedule or schedules (collectively, the "Supplemental
Schedules"), bearing the legend "This Schedule _, dated _______________, is
executed and delivered in accordance with Section 11.20 of the Stock Purchase
Agreement, dated as of November 28, 1994 which shall be duly executed by Seller
and submitted to Buyer. Buyer shall have a period of ten (10) business days
after the expiration of the Supplemental Schedule Period to review the
Supplemental Schedules and within such ten (10) business day period notify
Seller in writing (which writing may be transmitted by facsimile) of any
objections thereto. If Buyer's objections are not resolved to the satisfaction
of Buyer within five (5) days of such notification, Buyer may terminate this
Agreement, effective immediately upon written notification of that termination.
In the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of any
changes in the Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or covenants
hereunder, the Supplemental Schedules provided by Seller shall be deemed
Schedules for all purposes.
11.21 [INTENTIONALLY DELETED]
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall take,
and shall cause the Company to take, all action necessary to effect, on or
prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate Receivables")
shall be netted against all "Advances and Notes-Parent Company" (item 2 -
Liabilities on the Company's Balance Sheet), "Accounts Payable-Affiliates"
(item 5 - Liabilities on the Company's Balance Sheet), "Dividends Accrued -
Affiliates" (item 10 - Liabilities on the Company's Balance Sheet) and
"Interest Accrued - Alltel" (item 12 - Liabilities on the Company's Balance
Sheet) (collectively, "Affiliate Payables"). To the extent there is a net
excess of Affiliate Receivables, a cash payment or payments will be made to the
Company which cash will then be disposed of by the Company, and to the extent
there is a net excess of Affiliate Payables, such Affiliate Payables will be
contributed to the Company as a contribution to the Company's capital, and take
any other action necessary, such that the balances of each of the Affiliate
Receivable and Affiliate Payable accounts, and of any other intercompany
accounts, as of the Effective Date will be zero.
(c) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 - Assets
on the Company's Balance Sheet) and all "Investments in Affiliates" (item 14 -
Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and all "Unamortized Debt Expense" (Item
16 - Assets on the Company's Balance Sheet), except to the extent such
unamortized debt expense relates to debt which is to remain outstanding
immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets on the
Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, (i) all "Other Current Assets" (item 10 - Assets
on the Company's Balance Sheet) to the extent such other current assets
represent cash accounts, and (ii) all "Other Non-Current Assets" (item 19 -
Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's interest
in any business other than the Business, and those other assets, including
agreements and contracts ("Excluded Contracts"), set forth on Schedule
11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial Accounting
Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income (item
8 -Liabilities on the Company's Balance Sheet) shall be zero as of the
Effective Date.
(k) The balance in the Company's Other Current Liabilities (item
14 - Liabilities on the Company's Balance Sheet), Notes Payable-Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding (item
4 - Liabilities on the Company's Balance Sheet) and Dividends Accrued - Other
(item 11 - Liabilities on the Company's Balance Sheet) accounts shall be zero
as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet) and Interest Accrued
- - Other (item 13 - Liabilities on the Company's Balance Sheet), to the extent
each of such amounts relate to debt which is not to remain outstanding
immediately after the Effective Date, shall be zero as of the Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section 11.23.1,
Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or governmental
charges imposed by any taxing jurisdiction (but not including Income Taxes, as
hereinafter defined, which shall be paid by Seller), and all recording or
filing fees, notarial fees and other similar costs of Closing with respect to
the transfer of the Shares or otherwise on account of this Agreement or the
transactions contemplated herein (but not including any transactions
contemplated by this Agreement to be effected pursuant to the transactions
contemplated by Section 11.22 or otherwise between Seller and the Company,
which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) for all periods
ending on or before or which include the Effective Date, all items of income,
gain, loss, deduction, and credit or other items (collectively "Tax Items")
attributable to the operations of the Company during such periods or portions
thereof determined by an interim closing of the books as of the Effective Date.
Seller will sign and file timely all such Tax Returns with the appropriate
United States, state and local Governmental Authorities. Buyer will provide or
cause to be provided any consent request to file such Tax Returns on behalf of
the Company. Seller will make all payments shown thereon as owing with respect
to any such Tax Returns.
(c) With respect to any taxable period that would otherwise include
but not end on the Effective Date, to the extent permissible pursuant to
applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income Tax
Returns (other than Tax Returns described in Section 10.5.1(b)) for the Company
required to be filed with the appropriate United States, state, and local
Governmental Authorities for any taxable period that ends on or before the
Effective Date that have not been filed prior to the Effective Date. Seller
will sign and file timely all such Tax Returns with the applicable Governmental
Authority and make all payments shown thereon as owing with respect to such Tax
Returns. If requested by Seller, Buyer will deliver or cause the Company to
deliver to Seller a power of attorney authorizing Seller to sign such Tax
Returns. Notwithstanding the foregoing, if Seller is legally precluded from
filing any such Tax Return, Buyer shall sign such Tax Return. Seller shall
deliver a copy of each such Tax Return to Buyer within 10 days prior to filing
such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed all
Tax Returns for the Company that are required to be filed with the appropriate
United States, state, and local Governmental Authorities for any taxable period
which begins before and ends after the Effective Date. In the case of Income
Taxes, Buyer shall cause such Tax Return to be prepared and shall cause to be
included in such Tax Return all Tax Items required to be included therein.
Buyer shall determine (by an interim closing of the books as of the Effective
Date) the portion, if any, of the Income Tax due with respect to the period
covered by such Tax Return which is attributable to the Company for a Pre-
Effective Date Taxable Period (as hereinafter defined). At least 15 days prior
to the due date (taking into account all extensions of due date) of such Tax
Return, Buyer shall deliver to Seller a copy of such Tax Return and of its
determinations. If the amount reflected as a liability for Income Taxes on the
Tax Schedule less Prior Reimbursements (as hereafter defined) is less than the
amount of Income Tax so determined to be attributable to the Pre-Effective Date
Taxable Period, Seller shall pay to Buyer the amount of such shortfall not less
than 5 days prior to the due date (taking into account all extensions of due
dates) of such Tax Return (or the due date of the applicable estimated Tax
payments, if earlier). If the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period is less than the amount
reflected as a liability for Income Taxes on the Tax Schedule, to the extent
not previously paid to Seller or the applicable Governmental Authority by the
Company and subject to Section 11.23.1(f), Buyer will pay to Seller the amount
of such excess not less than 5 days prior to the due date (taking into account
all extensions of due dates) of such Tax Return (or the due date of the
applicable estimated Tax payments, if earlier). As used in this Agreement,
"Pre-Effective Date Taxable Period" means all or a portion of (i) any taxable
period up to and including the Effective Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company arising on or before, or existing as of, the
Effective Date. As used in this Agreement, "Income Taxes" means all Taxes
measured in whole or in part on or by net income imposed by the United States,
any state of the United States or any political subdivision thereof, and will
include any such Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as a
liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that have
previously been (A) paid by Buyer (or by the Company at the Buyer's direction
or consent) to Seller pursuant to Section 11.23.1(b), Section 11.23.1(d) or
Section 11.23.1(e) or (B) paid by Buyer or the Company to Seller or to the
applicable Governmental Authority with respect to Income Taxes properly
attributable to Pre-Effective Date Taxable Periods that are reflected on Tax
Returns described in Section 11.23.1(b), Section 11.23.1(d) or Section
11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax Returns
that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to such
information and personnel as Seller may require in order to properly prepare
such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable Governmental Authority) received by Buyer after the Effective
Date and attributable to Taxes paid by Seller or the Company (or any
predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of any
Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives or
is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund together
with any interest received from or credited thereon the applicable Governmental
Authority, net of any Taxes imposed upon Seller or any affiliate by reason of
the receipt of such refund, credit or interest (calculated at the maximum
statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of state
or local Law) with respect to the purchase of the Shares hereunder. Both
Seller, as the common parent of the affiliated group of corporations (which
includes the Company) that file a consolidated federal income Tax Return and
Buyer are eligible to and will make a timely and effective election under
Section 338(h)(10) of the IRC (and any comparable provision of state or local
Law) with respect to such purchase (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
Law, the "Section 338(h)(10) Elections"). To facilitate such election, within
thirty (30) days of the Closing, Buyer will deliver to Seller a completed
Internal Revenue Service Form 8023 and the required schedules thereto and any
similar forms under applicable state or local Law (the "Forms") with respect to
Buyer's purchase of the Shares, which Forms shall have been duly executed by an
authorized person for Buyer. Provided that the information on such Forms is,
in the reasonable determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, cause such Forms to be duly executed by
an authorized person for Seller and deliver such Forms to Buyer. If any
changes or supplements are required to the Forms as a result of information
that is first available after the Closing, Seller and Buyer will promptly agree
upon and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates to
take, any action to modify or revoke the elections contained in or the content
of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any Pre-
Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii)
joined in the filing of a combined or unitary Tax Return with the Company on or
prior to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a), any
Taxes attributable to the transactions contemplated by this Agreement; and
(ii) Any breach of any representation, warranty or covenants of
Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a result
of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of the
Company which Taxes are not attributable to any Pre-Effective Date Taxable
Period; and
(ii) Any breach of any representation, warranty or covenant of
Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the indemnification
of a party under this Section 11.23.2 (referred to herein as a "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Section 11.23.2 to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 11.23.2(c)(i) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than 5 days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay the
Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable Law) after the
giving of the notice required by Section 11.23.2(c)(i), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or decree
of a court or other tribunal or a final and binding settlement with an
administrative agency having jurisdiction thereof, the Tax Indemnified Party
shall promptly repay to the Tax Indemnifying Party the amount advanced to the
extent of any refund received by the Tax Indemnified Party with respect to a
claim together with any interest received thereon from the applicable
Governmental Authority and any recovery of legal fees from such Governmental
Authority, net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated at the
maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding, the
representations, warranties, covenants, agreements, rights and obligations of
the parties hereto with respect to any Tax covered by this Agreement shall
survive the Effective Date and shall not terminate until sixty days after the
expiration of the statute of limitations (including extensions) applicable to
such Tax.
11.24 Cable Regulatory Due Diligence. Within twenty (20) business days
after the Execution Date, Seller shall have complied with all reasonable
requests by Buyer for copies of documentation, including but not limited to
reports, filings, correspondence and complaints, relating to the NCCSI Systems
or Business, made, filed, sent, received, or submitted by or on behalf of the
Company with the FCC, the Franchising Authorities, the FAA or the U.S.
Copyright Office (the "Cable Regulatory Due Diligence"). Buyer has provided
Seller with an initial list of such requested documents to Seller. The Buyer
shall have a period of thirty (30) business days after the expiration of such
20 business day period to review the Cable Regulatory Due Diligence and provide
the Seller with a list of items from its review of the Cable Regulatory Due
Diligence which list, taken as a whole, reasonably could be expected to have a
materially adverse effect on the Company as a whole, the Business as a whole or
any significant part of the Property. Within ten (10) business days
thereafter, Seller and Buyer will discuss the list and agree on which items
require corrective action and the corrective action that the Seller should
cause the Company to take. Thereafter, the Seller will, at its or the
Company's expense, cause the Company to take the agreed upon corrective action
so as to correct the agreed upon problems before the Effective Date.
11.25 Renewal of Franchises. Seller and Buyer agree to have their
representatives meet within sixty (60) days after the Execution Date to discuss
the desirability of filing requests for renewals under Section 626(a) of the
Cable Act of 1992, with the proper Governmental Authorities with respect to
each Franchise (Zuni and Needles) expiring within 36 months after the Effective
Date. Thereafter, the parties will agree to the action, reasonably
satisfactorily to the parties, that should be taken with respect to such
renewals and the parties shall take the agreed upon action at the appropriate
agreed upon time.
11.26 Post-Execution Lease and Contract Review. Buyer shall have a period
of forty-five (45) calendar days after the Execution Date to review the Leases
and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify
Seller in writing (which writing may be transmitted by facsimile) of the
identity of those Leases and Contracts that Buyer reasonably believes are
material to the operation of the Business as a whole or any significant part of
the Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent as a condition to the transfer
of control of the Company to Buyer as a result of Buyer's purchase of the
Shares, before the Effective Date can occur. If Buyer does not notify Seller
in writing within such forty-five (45) calendar day period of the identity of
the material Leases and Contracts requiring consent, then Buyer shall be deemed
to have agreed that none of the Leases and Contracts which are listed on
Schedules 9.1.9 and 9.1.13 require consent, in accordance with Section 7.1.6,
before the Effective Date can occur. If Buyer does notify Seller in writing
within such forty-five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a period of ten
(10) business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile) of any objections thereto.
Thereafter, Buyer and Seller shall negotiate in good faith and agree in writing
as to the identity of those Leases and Contracts which are material to the
operation of the Business as a whole or any significant part of the Property
and which by their terms will require Seller, in accordance with Section 7.1.6,
to obtain a third party consent as a condition to the transfer of control of
the Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have addressed the
transfer of employees and employee benefits matters in a separate agreement,
entitled Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as to
time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) The representations and warranties set forth in Section
9.1.36 shall survive the Effective Date and shall not terminate until sixty
days after the expiration of the applicable statute of limitations (including
extensions) as set forth within 17 U.S.C.. Section 507.
(iv) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination Date. Any claim for indemnification with respect to any alleged
breach of any representation or warranty not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts relating thereto, which notice is given prior to the Termination Date,
may not be pursued and is irrevocably waived and released after such time.
Without limiting the generality or effect of the foregoing, no claim for
indemnification with respect to any representation or warranty will be deemed
to have been properly made except to the extent it is based upon a Third Party
Claim or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3,
11.6, 11.7, 11.12, 11.13, 11.16 and Articles 16 and 17 and in the Employee
Transfer Agreement, will survive the Closing and remain in effect indefinitely.
Covenants regarding Taxes shall survive as set forth in Section 11.23.2(d).
All other covenants contained in this Agreement will terminate, without further
action, upon the occurrence of the Effective Date and any claim following the
Effective Date for an alleged breach of any such covenant may not be pursued,
and is irrevocably waived, upon the occurrence of the Effective Date, except
that Buyer may make a claim for Seller's breach of the covenants contained in
Section 11.5 at any time within eighteen months after the Effective Date. The
immediately preceding sentence shall not apply to, or limit to preclude, a
party's rights and remedies if the sale contemplated by this Agreement is not
concluded as a result of the other party's breach of this Agreement.
13.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, and
(iv) "Indemnifiable Losses" means any losses, liabilities, costs, fines,
penalties, damages (actual, punitive or other), and expenses and any claims,
demands or suits by any person or entity, including, without limitation, any
Governmental Authority, and costs and expenses actually incurred in connection
with any actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expenses, in any such case (x) reduced by the
amount of insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) As between Seller and any Affiliate of Seller, on the one hand,
and Buyer and any Affiliate of Buyer, on the other hand, the rights and
obligations set forth in this Article 13 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 13.3, and any breach of the representations, warranties or covenants
referred to in Section 13.3., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. Without limiting the foregoing, as a
material inducement to entering into this Agreement, to the fullest extent
permitted by law, each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under the common law
or federal or state securities, trade regulation or other laws, by reason of
the liabilities and obligations, and any breach of the representations,
warranties or covenants, referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and conditions of this
Article 13, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Sections 13.3(a)(i) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section 9.2.5)
until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds Eight Thousand Three
Hundred Ninety Dollars ($8,390.00) and then only to the extent of the excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32, and 9.1.33) and of Buyer under Section
13.3(b)(i) (except with respect to indemnification for a breach of the
representations contained in Section 9.2.5) will not exceed the sum of Two
Hundred Fifty-One Thousand Seven Hundred Dollars ($251,700.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 13.
13.3 Indemnification.
(a) Subject to the other sections of this Article 13, Seller will
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), directors, officers, agents and
representatives from all Indemnifiable Losses relating to, resulting from or
arising out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee Transfer
Agreement, except for any such breach of covenants which was specified on
Seller's Closing Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted, or
sought before or after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business (including
contractual obligations in connection with sales or transfers of assets made by
the Company prior to the Effective Date), or the ownership or operation of the
Business, on or prior to the Effective Date, regardless of whether known or
unknown, asserted or unasserted, on the Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct of
the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect to
the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date; and
(iii) All liabilities, responsibilities and obligations arising out of or
related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation, claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the Company
Date to the extent Buyer receives a Purchase Price adjustment in its favor
pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Buyer of any of
the representations or warranties contained in Section 9.2, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) any Third Party Claim, filed, asserted, or sought
after the Effective Date, in respect of the operations of the Company or the
conduct of the Business or any part of the Business or the ownership or
operation of the Company or the Business, after the Effective Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23 and
Article 14, respectively, and are not addressed, limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from an adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
13.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action, proceeding, or investigation by any
entity or person that is not a party to this Agreement or an Affiliate of such
a party (a "Third Party Claim") against such Indemnitee, with respect to which
an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss
that does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than thirty (30) calendar days after the
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Article 13 to the extent the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 13.
(c) If after the making of any Indemnification Payment the amount of
the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of
the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
result of the environmental due diligence authorized by this Section 14.1 will
be subject to the terms and conditions of the Confidentiality Agreement, except
as otherwise expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer's environmental consultant(s) and shall treat all such
information in accordance with the procedures of Section 14.1.5(c). Within
thirty (30) days after the Execution Date (the "Environmental Data Delivery
Date"), Seller will provide to Buyer copies of all surveys and reports in
Seller's or the Company's possession concerning the existence or possible
existence of asbestos or materials containing asbestos relating to any of the
Real Property, a list of all underground storage tanks which to Seller's or the
Company's knowledge are located on, or have been removed within the last three
years from, any Real Property owned or real estate leased or operated by the
Company in connection with the Business and any other reports, studies or
documents in Seller's or the Company's possession relating to the Company's
potential liability under any Existing Environmental Requirements. The parties
further agree that, if Seller discloses the existence or suspected existence of
materials containing asbestos with respect to a given parcel of Real Property
and the asbestos does not exceed applicable limits, if Buyer desires to make
renovations or structural changes to the property after the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer in writing of
Seller's objection (which must be for good cause) and substantiate the basis
for that objection. If Seller does not object for good cause and substantiate
that objection within said five (5) business day period, Seller shall be deemed
to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
assessment activities of the Property, including inspecting individual sites,
submitting environmental questionnaires to Seller and the Company and reviewing
existing environmental reports, correspondence, permits and related materials
regarding the Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may be,
but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not limited
to, the taking and analysis of soil, surface water and groundwater samples,
testing of buildings, drilling wells and taking soil borings) after first
conducting a Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the Property, Buyer must notify Seller of its desire at least
five (5) business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding such sampling
or intrusive testing. If Seller does not notify Buyer in writing of Seller's
objection to such proposed sampling or testing within five (5) business days
after receipt of such notice, Seller shall be deemed to have consented to the
proposed sampling or testing. Seller shall not unreasonably object to Buyer's
request to perform sampling or testing.
(b) Buyer shall provide Seller with copies of field data, field
reports, laboratory analyses, logs, laboratory reports and other material or
information regarding the sampling or intrusive testing ("Environmental Data")
within three (3) business days of Buyer's receipt of such data and shall
promptly provide Seller with "matched" or "paired" samples, in accordance with
standard sampling and testing protocols, that are obtained during the sampling
or intrusive testing of a particular site; provided, however, that Seller shall
have no obligation to Buyer to take any action whatsoever regarding such
samples.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Company or the Property
only after first notifying the Seller, and without such notice at any time
after such two (2) year period.
14.1.6 Indemnity for Due Diligence Activities. Buyer hereby agrees to
indemnify and hold harmless Seller, Seller's Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders, penalties, fines,
costs, charges and expenses (including reasonable attorneys' fees and
disbursements, and reasonable costs of experts and expert witnesses) with
respect to persons or property arising out of or in connection with the entry
of Buyer or its environmental consultant(s) onto the Property and resulting
from any act or omission of Buyer or its environmental consultant(s) provided
that Buyer shall not be liable for any Environmental Liabilities incurred by
any such party merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property do
not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to the
extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than Sixty-Seven Thousand One Hundred Twenty Dollars
($67,120.00) (the "Environmental Liabilities Amount") To be effective, any
such conditional termination of this Agreement must be delivered in writing to
Seller, which writing must specifically acknowledge that the termination is
subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of the
sale contemplated by this Agreement all in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but the
Company fails to perform its obligations thereunder in full on or before the
Closing (subject to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and unconditional unless
the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Property or with respect
to the Company are less than the Environmental Liabilities Amount in the
aggregate, Seller agrees, to cause the Company at the Company's sole cost, to
either (i) make a mutually satisfactory adjustment to the terms and conditions
of the transactions contemplated by this Agreement prior to the Closing in
accordance with Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate those
Environmental Liabilities based upon Existing Environmental Requirements in
accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the
cost of conducting such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under this Section
14.1.7(c) shall be to pay the Environmental Liabilities Amount toward the
completion of such response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the Environmental
Liabilities Amount on such response and remediation action (such expenses to be
verified by Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the Environmental
Liabilities Amount, Buyer shall sign and deliver to Seller at the Closing a
release of Seller from any further liability to Buyer for such remediation and
shall indemnify Seller against any liability for such Environmental Liabilities
or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the Closing
until sufficient response and remediation has been completed so that the
remaining response and remediation is equal to or less than the Environmental
Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
indemnification provided under this Section 14.2 shall be the sole remedy for
allocating responsibility regarding environmental matters related to the sale
contemplated by this Agreement, the Company, the Business and the Property of
which Buyer does not receive notice prior to the Closing (either from Seller in
Schedule 14.3 or pursuant to notice given pursuant to Section 17.1 or in any
written communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by this
Agreement and without further action on the part of such party, shall waive and
release the other party from any and all liability under any other cause of
action at law or in equity concerning the Known Environmental Matters, whether
raised pursuant to (i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation, or (iii) common
law.
14.2.2 Indemnification. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Environmental Liabilities under Existing Environmental
Requirements arising from acts or omissions occurring with respect to, or from
the use or ownership of, or any condition or circumstance relating to, the
Company or the Property that occurred or arose prior to or on the Effective
Date. The foregoing indemnity in this Section 14.2.2 shall only apply to
matters that do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such indemnification
under this Section 14.2.2 shall be provided only for claims for Unknown
Environmental Matters noticed to the other party pursuant to the procedures of
Section 14.2.3, within eighteen (18) months after the Effective Date. Subject
to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and
hold harmless Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements in
existence now or hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the Property after
the Effective Date, or any condition or circumstance relating to the Company,
the Property or the Business that occurred or arose after the Effective Date on
the Property or in connection with the Company or the operation of the Business
after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including information sufficient
to inform the other party of, and allow such other party to confirm the nature
of, the claim and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2 are required by
Environmental Requirements, as applicable to Buyer, and Existing Environmental
Requirements, as applicable to Seller, and are reasonable and cost-effective.
If the indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree as to
costs or methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent such
damages have been recovered by a third person and are the subject of a Third
Party claim for which indemnification is available under the express terms of
this Article 14. Any indemnifiable claim under this Section 14.2 shall be
reduced to account for any insurance, storage tank fund, or other proceeds
received by the party to be indemnified, as a result of the indemnifiable
losses involved. The parties agree to take all reasonable steps to mitigate
any indemnifiable claim under this Section 14.2, including complying with any
registration and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not exceed
the aggregate amount of One Hundred Twenty-Five Thousand Eight Hundred Fifty
Dollars ($125,850.00).
14.2.6 Adjustments to Purchase Price. Payments made under this Article 14
shall be treated by Buyer and Seller as purchase price adjustments, and Buyer
and Seller shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any adjustment to the basis of any asset
resulting from an adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Seller or Buyer, as applicable, if there has been a material
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) if such party shall
not have performed diligently and in good faith the obligations required to be
performed by such party hereunder prior to the date of termination;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 15.2 and of Sections 17.1, 17.2, 17.3, 17.8, 17.11,
17.13, 17.14 and Article 16 shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5, the parties agree to
resolve disputes arising out of this Agreement without litigation.
Accordingly, except as provided in Section 16.5, or in the case of a suit to
compel compliance with this dispute resolution process, the parties agree to
use the following alternative dispute resolution procedure as their sole remedy
with respect to any controversy or claim arising out of or relating to this
Agreement or its breach.
16.2 Dispute Resolution Process. At the written request of a party, each
party shall appoint a knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under this Agreement.
The discussions shall be left to the discretion of the representatives. Upon
agreement, the representatives may utilize other alternative dispute resolution
procedures such as mediation to assist in the negotiations. Discussions and
correspondence among the parties' representatives for purposes of these
negotiations shall be treated as confidential information developed for
purposes of settlement, exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the arbitration
described below or in any lawsuit. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence
in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if negotiations between the
representatives of the parties do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. Either party may demand such
arbitration in accordance with the procedures set out in those rules. The
arbitration hearing shall be commenced within sixty (60) days of the demand for
arbitration and the arbitration shall be held in a mutually agreeable location.
The arbitrator shall control the scheduling (so as to process the matter
expeditiously) and any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this Section
16.3 may be extended upon mutual agreement of the parties or by the arbitrator
upon a showing of good cause. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
16.4 Costs and Attorneys' Fees. Each party will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator determines that
the position taken in the dispute by the non-prevailing party taken as a whole
is unreasonable, the nonprevailing party will bear all such fees and expenses,
and reimburse the prevailing party for all of its reasonable costs and expenses
in submitting and presenting its position.
16.5 Certain Limitations. The provisions of this Article 16 with respect
to the resolution of disputes without litigation shall not apply to any
dispute, controversy or claim arising out of the provisions of Section 11.1, or
the Confidentiality Agreement, or to a party's seeking to proceed under Section
17.14, it being understood and agreed that in the event of a breach by either
party of the provisions of Section 11.1, or the Confidentiality Agreement, or
in the event that a party seeks to proceed under Section 17.14, the non-
defaulting party shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate proceeding, whether
for specific enforcement of any agreement contained in Section 11.1, or the
Confidentiality Agreement or in aid of the exercise of any power granted by
Section 11.1, 17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been given when delivered in person or
dispatched by electronic facsimile transfer (confirmed in writing by certified
mail, concurrently dispatched) or one business day after having been dispatched
for next-day delivery by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
(a) If to Buyer, to:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or address or addresses as any such party may from
time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with each other in
preparing any press release, public announcement, news media response or other
forth of release of information concerning this Agreement or the transactions
contemplated hereby that is intended to provide such information to the news
media or the public (a "Press Release"). Neither party shall issue or cause
the publication of any such Press Release without the prior written consent of
the other party; provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such Press Release to the
extent that such action is required by applicable Law or the rules of any
national stock exchange applicable to such party or its Affiliates, in which
case the party wishing to make such disclosure will, if practicable under the
circumstances, notify the other party of the proposed time of issuance of such
Press Release and consult with and allow the other party reasonable time to
comment on such Press Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided herein, each party
will pay any expenses (including, without limitation, attorneys' fees) incurred
by it incident to this Agreement and in consummating the transactions provided
for herein. All regulatory filing fees required pursuant to Sections 5.1, 5.4
and 5.5 shall be split equally between the parties. Each party will pay the
appropriate costs and filing fees relating to any other applications required
to be filed by such party.
17.4 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Buyer may not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Seller; provided that
Buyer may assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or indirectly
wholly owned subsidiary of Buyer provided such subsidiary assumes in writing
all of the duties and obligations of Buyer hereunder, but no such assignment
and assumption shall in any way operate to enlarge, alter or change any
obligation of or due to Seller or relieve Buyer of its obligations hereunder
and provided that Buyer agrees to cause such subsidiary to perform each of its
agreements and covenants herein, and shall be jointly and severally liable for
any non-performance thereof. Seller may not assign or delegate any of its
rights or duties hereunder without the prior written consent of the Buyer.
Upon the sale, assignment or transfer by Buyer of the Company, the Business or
the Property to a non-Affiliate of Buyer not in the ordinary course of business
of Buyer, Seller's representations and warranties and indemnification
obligation for breach thereof shall terminate. Any assignment made in
violation of the foregoing provisions shall be void.
17.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
17.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement" shall mean collectively
this document, the Schedules hereto, any agreements expressly incorporated
herein, and the Confidentiality Agreement. This Agreement supersedes and
revokes any prior discussions and representations, other agreements,
commitments, arrangements or understandings of any sort whatsoever, whether
oral or written, that may have been made or entered into by the parties
relating to the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
17.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other right, power or privilege available to each party at law or in
equity.
17.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of Delaware
(except that no effect shall be given to any conflicts of law principles of the
State of Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
17.12 Further Assurances. From time to time, as and when requested by one
of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate and make effective the transactions contemplated by
this Agreement.
17.13 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or to
this Agreement, (ii) each term defined in this Agreement has the meaning so
assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iii) all
references to the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft of such
provision or of this Agreement.
17.14 Specific Performance. In addition to all other rights and remedies
available at law or in equity, any party hereto may pursue, to the fullest
extent available, the remedy of specific performance in order to compel the
other party to close pursuant to Article 8.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
ALLTEL CORPORATION
By: /s/ Max E. Bobbitt
-----------------------
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS UTILITIES COMPANY
By: /s/ Leonard Tow
------------------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT NO. 12
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Statement Showing Computation of Ratio of Earnings to Fixed Charges
for the year ended December 31, 1994
(dollars in thousands)
A. Net income per Consolidated Statement of Income $143,997
B. Taxes based on income or profits $64,323
C. Earnings, before income taxes (A + B) $208,320
D. Fixed charges $77,458
E. Earnings before income taxes and fixed charges (C + D) $285,778
F. Ratio of Pre-tax Income to Net income (C / A) 1.45
G. Ratio of Earnings to Fixed charges (E / D) 3.69
EXHIBIT NO. 21
21. SUBSIDIARIES (all wholly-owned, except where otherwise indicated)
------------
State of
Name Incorporation
---- -------------
AAlert Paging Company Delaware
Subsidiaries of AAlert Paging Company:
AAlert Paging Company of Sacramento California
AAlert Paging Company of San Diego California
AAlert Paging Company of San Francisco California
Blue Mountain Consolidated Water Company Pennsylvania
Citizens Cable Company Delaware
Citizens Communications Services, Inc. California
Citizens Mohave Cellular Company Delaware
Citizens Resources Company Delaware
Citizens Telecommunications Company Delaware
Citizens Telecommunications Company of California California
Citizens Telecommunications Company of Idaho Delaware
Citizens Telecommunications Company of Montana Delaware
Citizens Telecommunications Company of New York New York
Citizens Telecommunications Company of Oregon Delaware
Citizens Telecommunications Company of Utah Delaware
* Citizens Utilities Company of California California
* Citizens Utilities Company of Illinois Illinois
Citizens Utilities Company of Ohio Ohio
* Citizens Utilities Company of Pennsylvania Pennsylvania
Citizens Utilities Home Water Company Pennsylvania
Citizens Utilities Rural Company, Inc. Delaware
* Citizens Utilities Water Company of Pennsylvania Pennsylvania
CU CapitalCorp Delaware
Subsidiary of CU CapitalCorp:
Electric Lightwave, Inc. Delaware
Electric Energy Export Corporation Arizona
* Flowing Wells, Inc. Indiana
* Francis Land and Water Company California
Glen Alsace Water Company Pennsylvania
Havasu Water Company, Inc. Arizona
* Lake Heritage Utilities, Inc. Pennsylvania
* Larkfield Water Company California
LGS Concord Corporation Minnesota
LGS Natural Gas Company Louisiana
LGS Securities, Inc. Louisiana
Southwestern Capital Corporation Delaware
Southwestern Investments, Inc. Nevada
* Sun City Sewer Company Arizona
* Sun City Water Company Arizona
Sun City West Utilities Company Arizona
* Tubac Valley Water Company, Inc. Arizona
Utilities Advances Corporation New York
Valley Utility Company Ohio
* Subsidiaries subject to the Indenture of Mortgage and Deed of Trust dated as
of March 1, 1947, as supplemented.
EXHIBIT No. 22
Independent Auditor's Consent
-----------------------------
The Board of Directors
Citizens Utilities Company:
We consent to the incorporation by reference in the Registration Statement
(No. 33-37602) on Form S-8, in the Registration Statement (No. 33-39566) on Form
S-8, in the Registration Statement (No. 33-39455) on Form S-8, in the
Registration Statement (No. 33-41682) on Form S-8, in the Registration Statement
(No. 33-42972) on Form S-8, in the Registration Statement (No. 33-48683) on
Form S-8, in the Registration Statement (No. 33-54376) on Form S-8, in the
Registration Statement (No. 33-44069) on Form S-3, in the Registration
Statement (No. 33-44068) on Form S-3 in the Registration Statement
(No. 33-51529) on Form S-3 and in the Registration Statement (No. 33-55075)
on Form S-3 of Citizens Utilities Company of our report dated March 8, 1995,
relating to the consolidated balance sheets of Citizens Utilities Company
and subsidiaries as of December 31, 1994, 1993, and 1992 and the related
consolidated statements of income, shareholders' equity, and cash flows for
the years then ended, which report appears in the December 31, 1994 annual
report on Form 10-K of Citizens Utilities Company.
KPMG PEAT MARWICK LLP
New York, New York
March 15, 1995
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Robert A. Stanger
---------------------
Robert A. Stanger
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Norman I. Botwinik
----------------------
Norman I. Botwinik
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 27, 1995 /s/ Aaron I. Fleishman
-----------------------
Aaron I. Fleishman
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Stanley Harfenist
----------------------
Stanley Harfenist
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 17, 1995 /s/ Andrew N. Heine
----------------------
Andrew N. Heine
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Elwood A. Rickless
----------------------
Elwood A. Rickless
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities to
sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company, and
any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ John L. Schroeder
----------------------
John L. Schroeder
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities to
sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Robert D. Siff
----------------------
Robert D. Siff
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 8, 1995 /s/ Edwin Tornberg
----------------------
Edwin Tornberg
<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities
to sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Leonard Tow
----------------------
Leonard Tow<PAGE>
EXHIBIT No. 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Citizens Utilities Company constitutes and appoints Robert J. DeSantis and
Livingston E. Ross, jointly and severally, for him in any and all capacities to
sign on Form 10-K for the fiscal year 1994 for Citizens Utilities Company,
and any and all amendments to said Form 10-K, and to file the same, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or
cause to be done by virtue hereof.
February 7, 1995 /s/ Claire Tow
----------------------
Claire Tow
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,224
<SECURITIES> 433,829
<RECEIVABLES> 169,223
<ALLOWANCES> (2,428)
<INVENTORY> 18,330
<CURRENT-ASSETS> 314,054
<PP&E> 3,583,723
<DEPRECIATION> 1,014,068
<TOTAL-ASSETS> 3,576,566
<CURRENT-LIABILITIES> 879,177
<BONDS> 994,189
<COMMON> 48,368
0
0
<OTHER-SE> 1,108,538
<TOTAL-LIABILITY-AND-EQUITY> 3,576,566
<SALES> 916,014
<TOTAL-REVENUES> 916,014
<CGS> 202,995
<TOTAL-COSTS> 484,895
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,744
<INCOME-PRETAX> 208,320
<INCOME-TAX> 64,323
<INCOME-CONTINUING> 143,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,997
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
</TABLE>
