SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported):
September 26, 1994 (September 9, 1994)
C-TEC CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 0-11053 232093008
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
105 Carnegie Center, Princeton, NJ 08540
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (609)734-3700
46 Public Square, P.O. Box 3000, Wilkes-Barre, PA 18703-3000
(Former name or former address, if changed since last report).
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On September 9, 1994, C-TEC Corporation completed the sale
of its cellular properties and business to an affiliate of Independent
Cellular
Network, Inc. for $182.5 million subject to certain adjustments, estimated to
be approximately $7 million to be made within ninety days after
closing.
The proceeds from the disposition were received in cash,
subject to certain escrow reserves and holdbacks.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(b) Pro Forma Financial Information
The following unaudited Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 1994 gives effect to the sale as though it had
occurred on June 30, 1994. The following unaudited Pro Forma Condensed
Consolidated Statements of Operations for the six months ended
June 30, 1994 and the year ended December 31, 1993 give effect to the sale as
though it had occurred on January 1, 1993. These pro forma financial
statements should be read in conjunction with the Company's historical
consolidated financial
statements and notes thereto contained in the Company's Annual
Report on Form 10-K/A for the year ended December 31, 1993, and in the
quarterly report on Form 10-Q for the six months ended June 30, 1994.
The Pro Forma Condensed Consolidated Statements of Operations and
Balance Sheet are not necessarily
indicative of the actual results of operations or financial
position which would have been reported if the sale had occurred on the
respective dates
referred to above nor do they purport to indicate the results of future
operations or financial position of the Company. In the opinion of
management, all adjustments necessary to present fairly such pro
forma financial statements have been made.
<PAGE>
<TABLE>
Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1994
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Six Months Ended
June 30, 1994 Pro Forma
(actual) Adjustments(b) Pro Forma(c)
_________________ ______________ ____________
<S> <C> <C> <C>
Sales $145,114 $(13,785) $131,329
Costs & Expenses 123,551 (12,264) 111,287
__________ ________ ________
Operating Income 21,563 (1,521) 20,042
Interest Income 1,250 (40) 1,210
Interest Expense (16,333) 79 (16,254)
Gain on Sale of Pennsylvania
Cable Properties 893 - 893
Other Income, Net 613 3 616
__________ ________ ________
Income Before Income Taxes 7,986 (1,479) 6,507
Provision For Income Taxes 3,973 (1,008) 2,965
__________ ________ ________
Income Before Minority Interest
and Equity in Unconsolidated
Entities 4,013 (471) 3,542
Minority Interest in Income of
Consolidated Entities (476) 429 (47)
Equity in Loss of
Unconsolidated Entities 281 (91) 190
__________ ________ ________
Income Before Extraordinary
Charge and Cumulative Effect
of Accounting Principle
Change $ 3,818 $ (133) $ 3,685
========== ======== =========
Earnings (Loss) Per Average
Common Share: Income before
extraordinary charge and
cumulative effect of
accounting principle change $ .23 $ .22
========= ========
Average Common Shares
Outstanding 16,509,593 16,509,593
See accompanying Notes to Pro Forma Condensed Consolidated
Statements.
</TABLE>
<PAGE>
<TABLE>
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1993
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Year Ended
December 31, 1993 Pro Forma
(actual) Adjustments(b) Pro Forma(c)
_________________ ______________ ____________
<S> <C> <C> <C>
Sales $283,987 $(72,570) $261,417
Costs & Expenses 244,421 (22,924) 221,497
Nonrecurring Charges 5,025 - 5,025
__________ _________ ________
Operating Income 34,541 354 34,895
Interest Income 1,609 1,609
Interest Expense (34,204) 184 (34,020)
Gain on Sale of Marketable
Equity Securities 1,988 - 1,988
Other Income, Net 1,408 (62) 1,346
__________ ________ ________
Income Before Income Taxes 5,342 476 5,818
Provision For Income Taxes 10,714 (830) 9,884
__________ ________ ________
Loss Before Minority Interest
and Equity in Unconsolidated
Entities (5,372) 1,306 (4,066)
Minority Interest in Income of
Consolidated Entities (341) 256 (85)
Equity in Income of
Unconsolidated Entities 227 (155) 72
__________ ________ ________
Loss Before Cumulative Effect of
Accounting Principle Changes $ (5,486) $ 1,407 $ (4,079)
========== ======== ========
(Loss) Earnings Per Average
Common Share: Loss before
cumulative effect of
accounting principle changes $ (.33) $ (.25)
========= ========
Average Common Shares
Outstanding 16,506,494 16,506,494
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements.
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet
(Dollars in Thousands)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
June 30,
1994 Pro Forma
(actual) Adjustments(a) Pro Forma
________ ____________ ________
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and temporary cash investments $ 47,328 $124,779 $172,107
Other current assets 48,811 12,783 61,594
Deferred income taxes 3,134 (27) 3,107
________ _________ ________
Total current assets 99,273 137,535 236,808
________ _________ ________
Property, Plant and Equipment
Telephone plant 388,430 - 388,430
Cable plant 180,902 - 180,902
Mobile and Cellular plant 30,468 (27,797) 2,671
Other property, plant and equipment 12,143 - 12,143
________ _________ ________
Total property, plant and equipment 611,943 (27,797) 584,146
Accumulated depreciation 264,040 9,121 254,919
________ _________ ________
Net property, plant and equipment 347,903 (18,676) 329,227
________ _________ ________
Investments 14,771 (1,283) 13,488
________ _________ _________
Intangible Assets, Net 91,669 (33,236) 58,433
________ _________ _________
Deferred Charges 17,249 - 17,249
________ _________ _________
Total Assets $570,865 $ 84,340 $655,205
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term
debt and preferred stock 9,449 (421) 9,028
Advance billings and customer deposits 8,526 (326) 8,200
Accrued taxes 11,684 - 11,684
Accrued interest 6,567 (37) 6,530
Other current liabilities 34,513 (3,215) 31,298
________ _________ _________
Total current liabilities 70,739 (3,999) 66,740
________ _________ ________
Long-Term Debt 386,187 (1,306) 384,881
________ _________ ________
Deferred Income Taxes and
Investment Tax Credits 30,572 5,558 36,130
________ _________ ________
Deferred Revenue - 25,000 25,000
________ _________ _________
Other Deferred Credits 19,718 - 19,718
________ _________ ________
Minority Interest 2,448 (2,448) -
________ _________ _________
Redeemable Preferred Stock 274 - 274
________ _________ _________
Common Shareholders' Equity
Common stock 16,887 - 16,887
Additional paid-in capital 20,635 - 20,635
Retained earnings 28,693 61,535 90,228
Treasury stock at cost, 377,842 shares
at June 30, 1994 (5,288) - (5,288)
________ _________ _________
Total common shareholders' equity 60,927 61,535 122,462
________ _________ _________
Total Liabilities
and Shareholders' Equity $570,865 $ 84,340 $655,205
======== ========== =========
See accompanying Notes to Pro Forma Condensed Consolidated
Financial Statements.
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Financial Statements
a) Adjustments to record the disposition of certain cellular
properties. The adjustments assume that the sales proceeds, net of certain
escrow reserves and holdbacks discussed below and net of income taxes estimated
to be payable after the utilization of certain net operating loss
carryforwards, are retained as temporary cash investments.
The escrow reserves and holdbacks are
included in other current assets. The adjustments assume the realization of
deferred tax assets of approximately $21 million, representing the tax
benefits associated with the utilization of approximately $54.7 million
federal net operating loss carryforwards and approximately $18.9
million state net operating loss carryforwards. The final resolution of the
Company's current IRS examination may impact the utilization of net
operating loss carryforwards.
Adjustments also assume a reduction in a related valuation
allowance for deferred tax assets of approximately $6 million.
An after-tax gain of approximately $55 million was assumed to be recognized
on the sale.
Certain working capital adjustments to the sales price to be
made ninety days after closing were estimated to be approximately $7 million
based on the historical asset and liability balances at June 30, 1994.
b) Adjustments to eliminate the historical results of operations of
certain cellular properties. Corporate overhead allocated to cellular
operations has not been eliminated since that overhead would have been
reallocated to other business segments.
c) The Pro Forma Consolidated Statements of Operations exclude a
non-recurring after-tax gain of approximately $55 million expected to be
realized on the sale, any gain or loss resulting from the curtailment of the
pension obligation related to employees of the Company's cellular operations,
and the reversal of a valuation allowance for deferred tax assets of
approximately $6 million.
d) Deferred revenue represents proceeds allocated by the Company to certain
noncompetition agreements entered into with an affiliate of Independent
Cellular Network, Inc. in connection with the disposition by the Company of
its cellular properties. The revenue will be recognized over the term of the
agreements, which is approximately three years.
e) Proceeds from the disposition and noncompetition agreements were $182.5
million subject to certain adjustments, estimated to be approximately $7
million, to be made within ninety days after closing. Such proceeds were
received in cash, subject to certain escrow reserves and holdbacks of
approximately $16 million.
<PAGE>
Item 7(c) Exhibits
Exhibit Number Description
______________ ___________
2 Purchase Agreement Among
C-TEC Corporation, Cellular Plus, Inc.,
Cellular Plus Services, Inc., C-TEC
Cellular Centre County, Inc., Cellular
Plus of Iowa, Inc., and Independent
Cellular Network, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
C-TEC Corporation
________________________
(Registrant)
/s/ Bruce Godfrey
By:_________________________
Bruce Godfrey
Executive Vice President
and Chief Financial Official
Date: September 26, 1994
<PAGE>
C-TEC Corporation
Form 8-K
Exhibit Index
Exhibit Number Description
______________ ___________
2 Purchase Agreement Among
C-TEC Corporation, Cellular Plus, Inc.,
Cellular Plus Services, Inc., C-TEC
Cellular Centre County, Inc., Cellular
Plus of Iowa, Inc., and Independent
Cellular Network, Inc.
<PAGE>
PURCHASE AGREEMENT
ALONG
C-TEC CORPORATION
CELLULAR PLUS, INC.
CELLULAR PLUS SERVICES, INC.
C-TEC CELLULAR CENTRE COUNTY, INC.
CELLULAR PLUS OF IOWA, INC.
AND
INDEPENDENT CELLULAR NETWORK, INC.
Dated as of April 1, 1994
G:\USERS\8BG\02130\022\CTECPUR.FIN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF STOCK AND ASSETS -1-
<S> <C> <C>
1.1 Sale and Purchase of Stock -1-
1.2 Sale and Purchase of Assets -2-
1.3 Excluded Assets -3-
1.4 Assumed Liabilities -4-
1.5 Excluded Liabilities -4-
1.6 Additional Deposit -5-
1.7 Purchase Price Computation and Payment -5-
1.8 Closing Date -12-
1.9 Closing Date Deliveries -12-
1.10 Further Assurances -13-
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLING GROUP AND C-TEC -14-
2.1 Due Organization; Power and Authority -14-
2.2 Subsidiaries and Investments -15-
2.3 Capital Stock of the Companies -15-
2.4 Status and Effect of Delivery of CCTS Shares -15-
2.5 Status and Effect of Delivery of ICCTC Shares -15-
2.6 Status of Partnership Interests -16-
2.7 Authority -17-
2.8 Financial Statements -18-
2.9 Operations Since December 31, 1993 -18-
2.10 No Undisclosed Liabilities -20-
2.11 Taxes -20-
2.12 Availability of Assets and Legality of Use -20-
2.13 Availability of Partnership and Company Assets and
Legality of Use -21-
2.14 Real Property -23-
2.15 Accounts Receivable -24-
2.16 Licenses -24-
2.17 Title to Property -25-
2.18 Employee Relations -25-
2.19 Status of Contracts -26-
2.20 No Violations, Litigation or Regulatory Action -27-
2.21 Environmental Matters -27-
2.22 Insurance -28-
2.23 Subscribers -29-
2.24 Customers -29-
2.25 Known Liabilities -29-
2.26 Intellectual Property -30-
2.27 Broker or Finder -30-
2.28 C-TEC Ownership/Guarantees -31-
2.29 Inventory -31-
2.30 Construction of Iowa System -31-
2.31 Disclosure -31-
<PAGE>
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF BUYER -31-
3.1 Organization of Buyer -31-
3.2 Authority of Buyer -32-
3.3 No Broker or Finder -32-
3.4 Investment Representation -32-
3.5 Financing -32-
ARTICLE 4 ACTIONS PRIOR TO THE CLOSING DATE -32-
4.1 Investigation of Selling Group and Companies by Buyer -32-
4.2 Preserve Accuracy of Representations and Warranties -33-
4.3 Consents and Approvals -34-
4.4 FCC Compliance -35-
4.5 No Public Announcements -35-
4.6 Termination of Intercompany Agreements -35-
4.7 Environmental Surveys -35-
4.8 Hart-Scott-Rodino Act Filings -36-
4.9 Exclusive Dealing -36-
4.10 Title Insurance and Surveys -36-
4.11 Tax Clearance -37-
ARTICLE 5 OTHER AGREEMENTS -37-
5.1 NonCompetition Agreements -37-
5.2 Selling Group's Employees -38-
5.3 Assignment of Cellular Billing Services -39-
5.4 SWAP of Cellular Properties -39-
5.5 Certain Debt -40-
5.6 Completion of Iowa System -40-
5.7 Consent of Partners in the Partnership -41-
5.8 Partition of Certain Partnerships -41-
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
6.1 No Misrepresentation or Breach of Covenants and
Warranties -42-
6.2 Corporate Action -42-
6.3 No Restraint or Litigation -43-
6.4 Necessary Actions, Consents and Permits -43-
6.5 Completion of Due Diligence -43-
6.6 Legal Opinion -44-
6.7 Other Documentation -44-
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLING GROUP -44-
7.1 No Misrepresentation or Breach of Covenants and -44-
7.2 Corporate Action -45-
7.3 No Restraint or Litigation -45-
7.4 Legal Opinion -45-
7.5 Other Documentation -45-
ARTICLE 8 TAX MATTERS -45-
8.1 Section 338(h)(10)Election -45-
8.2 Section 754 Election -46-
8.3 Tax Indemnity -46-
8.4 Tax Proceedings -47-
8.5 Cooperation and Exchange of Information -47-
8.6 Consent of Buyer -48-
8.7 Selling Group's Consolidated Return -48-
8.8 Effective Date for Partnership Allocations and
Distributions -48-
8.9 Accounting Transition -49-
ARTICLE 9 INDEMNIFICATION -49-
9.1 Indemnification by Selling -49-
9.2 Indemnification by Buyer -50-
9.3 Limitation of Damages -51-
9.4 Notice of Claims -52-
ARTICLE 10 TERMINATION -53-
10.1 Termination -53-
10.2 Remedies -54-
10.3 Risk of Loss -54-
ARTICLE 11 GENERAL PROVISIONS -55-
11.1 Confidential Nature of Information -55-
11.2 Governing Law -55-
11.3 Notices -55-
11.4 Successors and Assigns -56-
11.5 Entire Agreement; Amendments -56-
11.6 Waivers -56-
11.7 Expenses -57-
11.8 Sales and Transfer Taxes; Hart-Scott Fee -57-
11.9 Execution Counterparts -57-
11.10 Bulk Sales Compliance and Other Agreements -57-
</TABLE>
<PAGE>
[CAPTION]
SCHEDULES
[S] [C] [C]
I Partnerships
I(a) Controlled Partnerships
I(b) Minority Partnerships
II Markets
1.2(a) Fixed Assets
1.2(b) Real Property
1.2(c) Contracts
1.2(d) Licenses
2.1 Jurisdictions;
Qualifications
2.3 Company Capital Stock
2.5 ICCTC Shareholders
2.6 Prior Partnership
Calls/Distributions
2.9(b) Operations
2.10 Undisclosed Liabilities
2.11 Tax Matters
2.12 Condition of Assets
2.13(a) Entity Fixed Assets
2.13(b) Entity Real Property
2.13(c) Entity Contracts
2.13(d) Entity Licenses
2.14(b) Leased Real Property
2.18 Employee Matters
2.20 Litigation
2.22 Insurance
2.26 Intellectual Property
Rights
4.6 Assumed Intercompany
Agreements
5.6 Completion of Iowa System
6.4(vi) Contract Consents Required
EXHIBITS
1.7(b) Accounts Receivable Escrow
1.7(b)(ii) Holdback/Bulk Sales Escrow
Agreement
1.9(a)(vi) General Assignment and
Warranty Bill of Sale
<PAGE>
PURCHASE AGREEMENT
This PURCHASE AGREEMENT ("Agreement"), dated as of April 1,
1994, is by and among CELLULAR PLUS, INC., a Delaware
corporation ("CP"), CELLULAR PLUS SERVICES, INC., a
Pennsylvania corporation ("CPS"), C-TEC CELLULAR CENTRE COUNTY,
INC., a Pennsylvania corporation ("CCCC"), CELLULAR PLUS OF
IOWA, INC., a Delaware corporation ("CP of I") (CP, CPS, CCCC
and CP of I are sometimes hereinafter collectively referred to
as the "Selling Group"), C-TEC CORPORATION, a Pennsylvania
corporation ("CTEC"), and Independent Cellular Network, Inc., a
Delaware corporation ("Buyer").
CP, a whollyowned subsidiary of C-TEC, owns all of the
issued and outstanding capital stock of Commonwealth Cellular
Telephone Services, Inc., a Delaware corporation ("CCTS"), CPS,
CCCC and CP of I. CCTS owns all right, title and interest in
and to the partnership interests in the general and limited
partnerships (the "Partnerships") identified on Schedule I
attached hereto and made a part hereof (the Partnerships listed
on Schedule I(a) attached hereto are sometimes hereinafter
collectively referred to as the "Controlled Partnerships", and
the Partnerships listed on Schedule I(b) attached hereto are
sometimes hereinafter collectively referred to as the "Minority
Partnerships"). CCTS, CPS, CCCC, CP of I, together with CP of
I's subsidiary Iowa City Cellular Telephone Company, Inc., a
Delaware corporation ("ICCTC"), and the Partnerships own and
operate all of the business, assets and rights related to the
cellular telephone system and business in the Metropolitan
Statistical Areas and Rural Statistical Areas ("Markets") in
the Commonwealth of Pennsylvania ("PA System") and the State of
Iowa ("IA System") identified on Schedule II attached hereto
and made a part hereof (collectively, the "Systems"). Buyer
desires to purchase,and C-TEC, CP, CPS, CCCC and CP of I desire
to sell or cause to be sold, the capital stock of CCTS and
substantially all of the assets of CPS, CCCC and CP of I,
including, without limitation, all capital stock owned by CP of
I in ICCTC, upon the terms and subject to the conditions set
forth herein.
The parties agree, for good and valuable consideration, as
follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK AND ASSETS
1.1 Sale and Purchase of Stock.
A. Sale of CCTS Stock. On the terms and subject to the
conditions set forth in this Agreement, CP agrees to and shall
sell, transfer, assign and deliver to Buyer on the Closing Date
(as defined in Section 1.8 hereof), free and clear of all
liens, security interests, pledges, encumbrances, claims and
equities of every kind, and Buyer agrees to and shall purchase
and accept from CP, on the terms and subject to the conditions
set forth herein, 100 shares of common stock, par value $1.00,
of CCTS constituting
<PAGE>
100% of the issued and outstanding shares of capital stock of
CCTS (the "CCTS Shares").
B. Sale of ICCTC Stock. On the terms and subject to
the conditions set forth in this Agreement, CP of I agrees to
and shall sell, transfer, assign and deliver to Buyer on the
Closing Date, free and clear of all liens, security interests,
pledges, encumbrances, claims and equities of every kind, and
Buyer agrees to and shall purchase and accept from CP of I, on
the terms and subject to the conditions set forth herein,
25,417.478 shares of common stock, no par value, of; ICCTC
constituting 100.00% of the issued and outstanding shares of
capital stock of ICCTC owned by CP of I and 93.949% of the
issued and outstanding shares of capital stock of ICCTC (the
"ICCTC Shares").
1.2 Sale and Purchase of Assets. On the terms and subject
to the conditions set forth in this Agreement, each member of
the Selling Group shall, on the Closing Date, sell, transfer
and assign, or cause to be sold, transferred or assigned, to
Buyer the respective entire right, title and interest in and to
all of the assets and rights of such entities and SRHC, Inc., a
Pennsylvania corporation and secondtier subsidiary of C-TEC
("SRHC"), related to and used or useful in the Markets and the
Systems (other than the Excluded Assets (as defined in Section
1.3 below)), free and clear of all liens, security interests,
pledges, encumbrances, claims and equities of every kind (the
"Assets"), including, without limitation, the followinq:
(a) Fixed Assets and Personal Property. All fixed assets
and personal property of every type or description used or
useful in connection with the Markets and the Systems and
owned, used or leased on the Closing Date, including without
limitation, all transmitters/receivers, towers and antennas,
switching equipment, computer hardware and all spare parts,
accessories and supplies related thereto ("Fixed Assets"),
including, without limitation, the Fixed Assets identified on
Schedule 1.2(a) attached hereto and made a part hereof.
(b) Real Property. All real property (and any interest
therein and improvements thereon) ("Real Property") identified
on Schedule 1.2(b) attached hereto and made a part hereof.
(c) Leases, Contracts, Options and Other Obliqations. To
the extent approved in writing by Buyer, all leases, contracts,
options, manufacturer's warranties and other rights related to
the Markets and the Systems existing on the Closing Date
("Contracts"), set forth on Schedule 1.2(c) attached hereto and
made a part hereof.
(d) Licenses and Certificates. All authorizations, grants,
permits and other licenses, including, without limitation, all
licenses and certificates from the Federal Communications
Commission (the "FCC"), Federal Aviation Administration ("FAA")
and applicable state regulatory commissions (individually, a
"State Commission" and
<PAGE>
collectively, the "State Commissions"), issued in connection
with the Markets and/or the Systems on or before the Closing
Date, and all applications and construction permits related
thereto ("Licenses"), including, without limitation the
Licenses identified on Schedule 1.2(d) attached hereto and made
a part hereof.
(e) Current Assets. All current assets including, without
limitation, cash, cash equivalents, marketable securities,
prepaid expenses (to the extent specifically agreed to be
purchased by Buyer) and trade and other accounts and notes
receivable, if any, outstanding on the Closing Date and related
to the Systems ("Current Assets").
(f) Cellular Telephone Units. All cellular telephone units
and related components, spare parts and accessories, owned,
used or leased and either (i) related to the Markets and/or the
Systems and either maintained in inventory or shipped by a
supplier and enroute for delivery on the Closing Date or (ii)
related to the Markets and/or the Systems and in the custody of
customers of the Systems (on a rented or leased basis) or
repair or service personnel on the Closing Date ("Cellular
Phones").
(g) Other Assets and Riqhts. All computer software
including source and object codes, accounting data, trade
secrets, customer lists, supplier lists, the trademark
"Cellular Plus" and all other Intellectual Property Rights (as
defined in Section 2.26 hereof), rights under an acquisition
agreement or agreements whereby the Selling Group and/or
Affiliates (as defined in Section 5.1) acquired the CCTS
Shares, ICCTC Shares and the Assets and Entity Assets (as
defined in Section 2.13), rights under any pending lawsuits or
claims, bo~ks and records and other tangible and intangible
property, including goodwill and covenants not to compete,
related to the Markets and/or the Systems and existing on the
Closing Date.
1.3 Excluded Assets. Buyer shall not acquire the following
assets of Selling Group used or useful in connection with the
Systems ("Excluded Assets"):
(a) any capital stock owned by CP in Mobilfone, Inc. and
Paging Plus, Inc., each a Pennsylvania corporation, or any
assets of such corporations, including all assets of the
telephone answering service business owned by Paging Plus,
Inc.,
(b) any interest of CP of I in CDON Partnership, a
Pennsylvania partnership, and
(c) any rights or interests of C-TEC with respect to the
receipt of royalties under that certain Restated Data
Processing Agreement dated October 1, 1992 between C-TEC and
<PAGE>
Systematics Telecommunications Services, Inc. ("Systematics
Agreement").
1.4 Assumed Liabilities. Concurrent with the transfer of
the Assets to Buyer on the Closing Date, Buyer shall assume or
undertake, and the Companies and the Partnerships shall have
incurred or be responsible for, solely and only (a) the Current
Liabilities (as defined in Section 1.7 below) and (b) the
obligations under the Contracts expressly assumed in writing by
Buyer accrued and relating to events occurring from and after
the Closing Date (the "Assumed Liabilities"), which Assumed
Liabilities shall be set forth on a schedu'ie to be agreed upon
by Buyer and Selling Group at the Closing consistent with the
above principles.
1.5 Excluded Liabilities. Except for the Assumed Liabilities,
Buyer will not assume or otherwise be responsible for any
liabilities or obligations of C-TEC, Selling Group, the
Companies and Partnerships, whether attributable to the
Systems, the Markets or otherwise, direct or indirect, known or
unknown, absolute or contingent, and, by way of illustration
but not limitation, for any of the following liabilities,
obligations or commitments of C-TEC, Selling Group, the
Companies and/or Partnerships (the "Excluded Liabilities"):
(a) any foreign, federal, state, county or local income or
other tax arising from the operation of the Systems or the
ownership of the Assets or Entity Assets prior to the Closing
Date;
(b) any liability to any Affiliates or to any of the
Partnerships which are not affiliates (except for those
Intercompany Agreements (as defined in Section 4.6 hereof) which
are included in the Contracts which Buyer agrees in writing to
assume);
(c) any cost, broker's or finder's fee or expense incurred
incident to the negotiation or preparation of this Agreement or
the performance. and compliance with the agreements and
conditions contained herein;
(d) any liability, obligation or commitment to creditors
(contingent or actual) or to any party holding a lien on any
assets of Selling Group, CCTS, ICCTC or the Partnerships to the
extent the value of such lien is not included in Current
Liabilities (as defined in Section 1.7 below);
(e) any employee obligation including, without limitation,
any obligation for wages, commissions, vacation and holiday pay,
sick pay, bonuses, severance pay, retiree or employee medical
benefits, obligations to employees under COBRA and other health
insurance obligations, underfunding of any defined benefit plan,
withdrawal liability under the MultiEmployer Pension Plan
Amendment Act of 1980, as amended, or any obligation under any
collective bargaining agree=ment, employment agreement or
employment atwill relationship;
<PAGE>
(f) any liability imposed by the Worker Adjustment
Retraining and Notification Act, 29 U.S.C. 2101 et.seq.
("WARN") in connection with the notice or failure to provide
notice of a plant closing or termination of employees;
(g) any liability, obligation or commitment of Selling
Group incurred after the Closing Date;
(h) any liability the existence of which would constitute a
breach of any of the representations, warranties and covenants
of any party,other than Buyer hereunder; or
(i) any other liability, obligation or commitment not
expressly assumed by Buyer hereunder.
It is the intent of the parties that liabilities, obligations
and commitments of the Companies and Partnerships and otherwise
in connection with the Markets and the Systems incurred,
accrued, or arising from conditions or events existing prior to
the Closing Date shall be the sole responsibility of Selling
Group and that liabilities, obligations and commitments in
connection with the Companies and Partnerships and otherwise in
connection with the Markets and the Systems incurred, accrued,
or arising from conditions or events created, subsequent to the
Closing Date by Buyer shall be the sole responsibility of
Buyer.
1.6 Additional Deposit. Within three (3) business days after
the execution hereof, and to induce Selling Group and C-TEC to
enter into this Agreement, Buyer shall deliver by transfer of
immediately available federal funds to The First National Bank
of Chicago, as escrow agent (the "Deposit Escrow Agent"), the
sum of Nine Million Dollars ($9,000,000.00) (together with the
sum of One Million Dollars ($1,000,000.00) previously
transferred to the Deposit Escrow Agent in connection with the
Letter of Intent (as defined in Section 4.1 hereof), the
"Earnest Money Deposit"), to be held pursuant to the terms of
an Escrow Agreement dated February 9, 1994 (the "Deposit Escrow
Agreement"), among Buyer, C-TEC and the Deposit Escrow Agent.
The provisions of the Deposit Escrow Agreement set forth the
conditions under which the Earnest Money Deposit, together with
all accrued interest thereon, may be delivered to Selling Group
or returned to Buyer. Upon the closing of the transactions
contemplated by this Agreement, the amount of the Earnest Money
Deposit, together with all accrued interest earned thereon,
shall be credited against the Purchase Price (as defined in
Section 1.7 hereof).
1.7 Purchase Price Computation and Payment.
(a) Computation. The purchase price for the CCTS Shares,
ICCTC Shares, Assets and the NonCompetition Agreements
described in Section 5.1 hereof, shall be One Hundred Eighty
Two Million Five Hundred Thousand Dollars ($182,500,000.00)
(the "Purchase Price"), plus or minus adjustments for proratable
items of CCTS (including, without double counting, CCTS's
prorata share of proratable items of
<PAGE>
the Partnerships), CPS, CCCC and CP of I (including, without
double counting, CP of I's prorata share of proratable items of
ICCTC), including, without limitation, rent, property taxes,
utility fees and deposits, license fees, customer prepayments,
prepaid advertising charges, credit balances and deposits,
prepaid rent, prepaid insurance policies expressly assumed by
Buyer, to the extent such items are proratable, accrued
liabilities and expenses, all determined in accordance with
generally accepted accounting principles consistently applied
from prior periods ("GAAP") determined as of the close of
business on the date immediately prior to the Closing Date (the
"Effective Date") (to the extent the exact amount of any such
proratable items is not ascertainable on the Effective Date the
prorations shall be based on the most.recent billings for any
such items), plus or minus (without double counting) an amount
equal to a working capital adjustment ("Working Capital
Adjustment") as of the Effective Date calculated and determined
as follows:
(i) Calculation. The difference between (x) the "Current
Liabilities" of CCTS (including, without double counting,
CCTS's prorata share of Current Liabilities of the
Partnerships), CPS, CCCC and CP of I (including, without double
counting, CP of I's prorata share of Current Liabilities of
ICCTC) on the Effective Date and (y) the "Current Assets" of
CCTS (including, without double counting, CCTS's prorata share
of Current Assets of the Partnerships), CPS, CCCC and CP of I
(including, without double counting, CP of I's prorata share of
Current Assets of ICCTC) on the Effective Date, all determined
in accordance with GAAP, subject to the following
modifications:
(A) Current Assets for purposes of the Working Capital
Adjustment shall be comprised of the following categories of
assets only: cash, trade accounts receivable (as set forth,
defined and adjusted pursuant to Section 1.7(b) below, provided
that there is no double counting), prepaid expenses (to the
extent specifically agreed to be purchased by Buyer), Cellular
Phones (as set forth in clause (B) below), and marketable
securities.
(B) The book value of Cellular Phones in excess of
$450,000.00 will be credited to Selling Group. The book value
of Cellular Phones less than $350,000 will be credited to
Buyer. The book value of the inventory of Cellular Phones as of
the Closing Date shall not include the book value of Cellular
Phones in the custody of customers of the Systems (on a rented
or leased basis) or in the custody of repair or service
personnel or other employees of Selling Group, and shall be
estimated by Selling Group in good faith based on a lower.of
cost (firstin, firstout) or market basis with
<PAGE>
appropriate adjustments for obsolete, slow-moving, damaged or
defective goods and such amount sllall e included on the
Closing Statement (as defilled in Section 1.7(a)(ii) below). As
close as practicable to the Closing Date, Buyer shall take, and
Selling Group shall observe, a physical count of the inventory
of Cellular Phones. Selling Group shall have full access to all
work papers and records of such physical count. If Buyer's
valuation of the physical inventory differs from Selling
Group's estimate included on the Closing Statement, the
differences shall be resolved in accordance with the procedures
set forth in Section 1.7(a)(ii)(C) below.
(C) Current Liabilities shall be comprised of the following
categories of liabilities:
(1) trade accounts payable,
(2) customer deposits,
(3) any intercompany transactions (loans, fees, or other
obligations) between or among any member of the Selling Group,
CCTS, CP of I, the Partnerships, ICCTC or any partner or
shareholder, director, officer, employee or agent of a partner
or shareholder of such entities, or any affiliate thereof,
unless such intercompany transactions are eliminated, and debts
relating thereto fully satisfied, as of the Effective Date,
(4) the face value (toge~her with the face value of any
penalties and interest) of any liens (whether or not recorded)
on any Assets, and CCTS's or CP oE I's prorata share of any
liens on Entity Assets;
(5) the applicable member of the Selling Group's, the
Companies' and the Partnership's prorata share of the principal
amount and all accrued interest, penalties, late charges,
release fees, prepayment fees, bank attorneys' fees and other
charges on the Motorola Debt, RFTC Debt and CLNS Debt (as such
terms are defined in Section 5.5 hereof) taking into account
any guarantees thereof by the Companies or the Partnerships,
third party debt or other longterm debt (and the current
portion thereof) of the Companies or the Partnerships;
(6) the amount of any tax liability of CCTS and CP of I's
prorata share of tax
liabilities of ICCTC, whether or not any such tax liabilities
are required to be accrued under GAAP, to the extent required
and determined in accordance with Section 8.8 hereof; and
(7) to the extent not included in any category described
above, any other liabilities, accrued or otherwise, in
connection with the operation of the Systems prior to the
Closing Date.
This section will only apply to CCTS (including, without double
counting, CCTS's prorata share of identified Current
Liabilities of the Partnerships), CP of I's prorata share of
identified Current Liabilities of ICCTC, and any other Current
Liabilities of the Selling Group specifically agreed to be
assumed by Buyer at the Closing.
(E) Notwithstanding GAAP, the Current Assets and Current
Liabilities of each of the Partnerships and Companies shall
reflect CCTS' and CP of I's proportionate share ownership of
such entities.
(ii) Closinq Date Statement.
(A) Fifteen (15) business days prior to the Closing,
Selling Group shall provide Buyer with a preliminary good faith
calculation of the adjustments to the Purchase Price
contemplated in Section 1.7(a) hereof (the "Closing
Statement"), t~gether with supporting documentation in
reasonable detail. The Closing Statement shall be considered
preliminary and such Closing Statement shall not discharge
either party from any obligation it might otherwise have
hereunder with respect thereto in the event that any amounts
reflected thereon prove to be incorrect. There shall be a
continuing duty on the parties to make appropriate credits and
payments to the other party once the amounts are finally
determined and such duty shall survive the Closing.
(B) Buyer shall review the Closing Statement upon its
receipt from Selling Group. Five (5) business days prior to
Closing, Buyer shall deliver to Selling Group a statement
setting forth any good faith objections that Buyer may have to
the Closinq Statement, together with any supporting
documentation reasonably requested by Selling Group ("Adjusted
Closing Statement"). The payments to be made at Closing shall
be based upon the Adjusted Closing Statement.
<PAGE>
(C) Within ninety (90) days after the Closing, Buyer or
Selling Group, as the case may be, shall notify the other party
in writing (the "Dispute Notice(s)") of any dispute as to the
Adjusted Closing Statement or any supporting documentation
furnished in connection therewith or in connection with the
Closing Statement. Buyer and Selling Group shall provide one
another with such additional information relating to the
Closing Statement and the Adjusted Closing Statement as each
party shall reasonably request. Within fifteen (15) days after
delivery of the last of the Dispute Notices, Selling Group and
Buyer shall attempt to resolve such dispute in good faith, and
if the parties cannot agree within thirty (30) days after
Delivery of the last of the Dispute Notices such dispute shall
be resolved by a nationally known independent firm of certified
public accountants jointly chosen by Buyer and Selling Group.
The written decision of such accounting firm shall be final and
binding on the parties hereto and shall not be subject to
dispute or review. Any fees or expenses payable to such
accounting firm shall be shared equally between Selling Group
and Buyer. Any amounts payable by Selling Group pursuant to
this Section 1.7(a)(ii)(C) shall be payable from the Holdback
Escrow Deposit (as defined in Section 1.7(c)(ii) below) up to
an amount equal to $250,000, and if the amounts payable by
Selling Group are in excess of $250,000, the difference shall
be payable by transfer of immediately available federal funds
to such bank account as Buyer shall designate. Any amounts
payable by Buyer shall be payable by transfer of immediately
available federal funds to such bank account as Selling Group
shall designate. If any amounts prorated as of the Effective
Date are not finally known within such time (such as real
estate taxes), these items shall be re adjusted as soon as the
final numbers are known.
(b) Accounts Receivable. Within five (5) business days prior
to the Closing Date, Selling Group shall provide to Buyer a
statement in good faith valuing as of such date the net book
value of the trade accounts receivable of CCTS in connection
with the Systems from entities which are not Affiliates, taking
into account an appropriate reserve, consistent with past
practices, for bad debts and an appropriate reduction for any
applicable advance billings (including, without double
counting, CCTS's prorata share of accounts receivable of the
Partnerships), CPS, CCCC and CP of I (including, without double
counting, CP of I's prorata share of accounts receivable of
ICCTC) (the "Closing Date A/R") together with a list of all
account debtors included in the Closing Date A/R, the amounts
owed to Selling Group (the
<PAGE>
"A/R List") and the aging of such accounts. The value of the
Closing Date A/R shall be paid by Buyer ("Receivables Deposit")
to the Deposit Escrow Agent to be held pursuant to the terms of
an escrow agreement ("Receivables Escrow Agreement")
substantially in the form of Exhibit 1.7(b) attached hereto and
made a part hereof. The payment of the Receivables Deposit
shall satisfy any payment required by Buyer in connection with
trade accounts receivable included in the Working Capital
Adjustment. For a period of ninety (90) days following the
Closing Date ("Collection Period"), Buyer shall use reasonable
efforts to collect the Closing Date A/R consistent with Buyer's
'usual and customary collection practices and shall have full
authority in its reasonable discretion to settle, compromise or
institute collection proceedings in connection with any such
account, provided that Buyer shall not be required to institute
collection proceedings unless reasonably requested to do so by
the Selling Group and at the sole cost and expense of the
Selling Group. Buyer shall apply all amounts received from an
account debtor on the A/R List first to any account
specifically identified by such account debtor and, if none is
designated, then to such account debtor's oldest outstanding
invoice or invoices. On the date that is ninety (90) days
following the Closing Date (the "PostClosing A/R Adjustment
Date"), Buyer shall present to Selling Group a list of the
accounts on the A/R List which have been collected ("Collected
Accounts") and a list of the accounts on the A/R List which
have not been paid as of the PostClosing A/R Adjustment Date
("Uncollected Receivables") together with a certificate of
Buyer stating that Buyer has utilized its usual and customary
collection practices in the collection of such accounts,
together with reasonable backup documents requested by the
Selling Group. If on the Post~Closing A/R Adjustment Date the
amount of the Collected A~counts is less than the Receivables
Deposit, Buyer and Selling Group shall execute a joint written
direction authorizing the Deposit Escrow Agent to (i) pay to
Selling Group from the Receivables Deposit, the amount of the
Collected Accounts, plus interest earned by the Deposit Escrow
Agent on such amount through the date of disbursement to
Selling Group, and (ii) to pay to Buyer the balance, if any, of
the Receivables Deposit, plus accrued interest thereon. If on
the PostClosing A/R Adjustment Date the amount of the Collected
Accounts exceed the Receivables Deposit, Buyer and Selling
Group shall execute a joint written direction authorizing the
Deposit Escrow Agent to pay to the Selling Group the full
amount of the Receivables Deposit, plus accrued interest
thereon, and Buyer shall pay to Selling Group the difference
between the Collected Accounts and the Receivables Deposit.
Selling Group shall have the right from and after the
PostClosing A/R Adjustment Date to contact the account debtors
of any Uncollected Receivables to obtain payment and to take
any and all action, at Selling Group's sole cost and expense,
to seek payment of the Uncollected Receivables (provided that
Selling Group hereby agrees to indemnify and hold Buyer
harmless from any expense relating to bringing any
<PAGE>
collection action against such account debtors and resulting
from any counterclaims brought by such account debtors).
(c) Payment. The Purchase Price shall be paid by Buyer as
follows:
(i) On the Closing Date, the Earnest Money Deposit and all
accrued interest thereon shall be paid to Selling Group and
credited toward the payment of the Purchase Price by Buyer.
Otherwise, the Earnest Money Deposit shall be held by Deposit
Escrow Agent and distributed in accordance with the terms of
the Deposit Escrow Agreement.
(ii) On the Closing Date, Buyer shall deposit the sum of
Six Million Dollars ($6,000,000), plus the amount of Estimate
or Deficiency as defined in Section 4.11 hereof in excess of
One Hundred Thousand Dollars ($100,000) ("Holdback/Bulk Sales
Deposit") directly with the Deposit Escrow Agent, which
Holdback/Bulk Sales Deposit shall accrue interest for the
benefit of Selling Group and be held pursuant to the terms of
an escrow agreement (the "Holdback/Bulk Sales Escrow
Agreement") substantially in the form of Exhibit 1.7(c)(ii)
attached hereto and made a part hereof.
(iii) The balance of the Purchase Price shall be paid to
Selling Group by transfer of immediately available funds on the
Closing Date to such bank account or accounts as Selling Group
shall designate.
(d) Allocation. The Purchase Price shall be allocated among
the CCTS Shares, ICCTC Shares, Assets and Non Competition
Agreements in a manner consistent with the principles set forth
in Sections 338 and 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations promulgated
thereunder. Prior to the Closing or within thirty (30) days
after the Closing, Buyer shall select
and appoint an independent appraiser, which
appraiser shall be selected after reasonable consultation with
Selling Group and shall be reasonably acceptable to Selling
Group, to conduct an appraisal of the value of the Assets and
the Entity Assets (as defined in Section 2.13). Such
independent appraiser shall complete its work within sixty (60)
days after its selection, the costs of which shall be split
equally between the Selling Group, on the one hand, and the
Buyer on the other. The allocations shall be finalized pursuant
to the mutual agreement of Buyer and Selling Group taking into
account the values disclosed in the appraisal. Such allocations
shall be final and binding on the parties (except to the extent
a successful challenge thereto is brought by an unaffiliated
third party). The parties hereto covenant and agree that
neither of them will take a position on any tax return, before
any governmental or regulatory body charged with the collection
of any tax, or in any judicial or administrative
<PAGE>
proceeding, that is in any way inconsistent with the appraisals
and/or the allocations as finally agreed upon by the parties.
1.8 Closinq Date. Subject to the provisions of Section 10.1
hereof, the completion of the purchase of the CCTS Shares,
ICCTC Shares and Assets shall be on a date as may be agreed
upon by Buyer and Selling Group within fifteen (15) business
days after the date the last of the HSR Termination and Final
Approvals (as both terms are defined in Section 6.4) from the
FCC and State Commissions have been received, unless such time
is extended or shortened as may be agreed upon by Buyer and
Sellillg Group, after the conditions set forth in Articles 6
and 7 have been satisfied, at the offices of Gould & Ratner,
222 N. LaSalle, Suite 800, Chicago, Illinois 60601, or at such
other place or at such other time as shall be agreed upon in
writing by Buyer and Selling Group (such date and time being
hereafter called the "Closing" or "Closing Date").
1.9 Closinq Date Deliveries.
(a) Sellinq Group's Deliveries. On the Closing Date,
Selling Group shall deliver to Buyer the following:
(i) certificates representing the CCTS Shares registered in
the name of CP, duly endorsed by CP for transfer, and/or
accompanied by an assignment of the CCTS Shares duly executed
by CP,
(ii) certificates representing the ICCTC Shares registered
in the name of CP of I, duly endorsed by CP of I for transfer,
and/or accompanied by an assignment of such shares duly
executed by CP of I,
iii) Certificates of Incorporation of Selling Group, CCTS
and ICCTC and Certificates of Limited Partnership of the
Partnerships that are limited partnerships (certified by the
Pennsylvania or Delaware Secretaries of State, as the case may
be, within two (2) weeks prior to the Closing and by the
Secretary of such entities as of the Closing) and ByLaws of
CCTS and ICCTC and Partnership Agreements of the Partnerships
(certified by the Secretaries or General Partners, as the case
may be, of such entities as of the Closing), original minute
books, seals, stock transfer books and all other books and
records of CCTS and ICCTC,
(iv) general assignments and warranty bills of sale in the
form of Exhibit l.9(a)(iv) executed by CPS, CCCC and CP of I
transferring the Assets to Buyer,
(v) recordable special warranty deed(s) and/or assignments
of leases to transfer the Real Property to Buyer subject only
to Permitted Exceptions (as defined in Section 2.14(a),
<PAGE>
(vi) the Holdback/Bulk Sales Escrow Agreement and
Receivables Escrow Agreement,
(vii) a Corporate Cleaance Certificate from the department
of Revenue of the state of Pennsylvania in connetion with CP,
CPS and CCCC, a Lien Certificate from the Department of Revenue
of the State of Pennsylvania in connection with CCTS and a Tax
Clearance Letter from the Department of Revenue of the State of
Iowa in connection with CP of I and ICCTC,
(viii) good standing certificates of Selling Group, CCTS
and ICCTC and Certificates of Existence of the Partnerships
that are limited partnerships from the Delaware, Pennsylvania
and Iowa Secretaries of State, as the case may be, each
dated within two (2) weeks prior to the Closing,
(ix) possession of the CCTS Shares, ICCTC Shares and Assets
pursuant to Sections 1.1 and 1.2 and the terms of this
Agreement,
(xiv) resignations of all directors and officers of
the companies and terminatlon of all powers of attorney, and
(xv) all of the documents, instruments and opinions
required to be delivered by Selling Group pursuant to
Article 6.
(b) Buyer's Deliveries. On the Closihg Date, Buyer shall
deliver to Selling Group the following:
(i) the Purchase Price in accordance with the terms of
Section 1.7,
(ii) an assumption of the Assumed Liabilities,
(iii) the duly executed Holdback/Bulk Sales Esarow
Agreement and Receivables Escrow Agreement, and
(iv) all of the documents, instruments and opinions
required to be delivered by Buyer pursuant to Article 7.
l.lO Further Assurances. On the Closing Date, Selling Group
shall (i) deliver to Buyer such other bills of sale,
endorsements, assignments and other good and sufficient
instruments of conveyance and transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in
Buyer all the right, title and interest of Selling Group in, to
or under any or all of the CCTS Shares, ICCTC Shares and Assets
as contemplated hereby and (ii) take all steps as may be
reasohably necessary to put Buyer in actual possession and
oontrol of all the CCTS Shares, ICCTC Shares and Assets. From
time to the following the closing, Selling Group
<PAGE>
shall execute and deliver, or cause to be executed and
delivered, to Buyer, at Buyer's cost and expense, such other
instruments of conveyance and transfer as Buyer may reasonably
request or as may be otherwise necessary to more effectively
convey and transfer to, and vest in, Buyer and put Buyer in
possession of, any part of the CCTS Shares, ICCTC Shares and
Assets, and, in the case of licenses, certificates, approvals,
authorizations, agreements, contracts, leases, easements and
other commitments included in the CCTS Shares, ICCTC Shares or
Assets which cannot be transferred or assigned effectively
without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with Buyer at its
request in endeavoring to obtain such consent promptly.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF SELLING GROUP AND C-TEC
As an inducement to Buyer to enter into this Agreement and
to consummate the transactions contemplated hereby, each member
of Selling Group and C-TEC hereby jointly and severally
represent, warrant and covenant to Buyer and agree as follows:
2.1 Due Orqanization; Power and Authority. Each member of
the Selling Group and each of the Companies (as defined in
Section 2.2) is a corporation duly organized, validly existing
and in good standing under the laws of its state of
incorporation as set forth in Schedule 2.1 hereof and each
member of the Selling Group is duly qualified to transact
business as a foreign corporation in the states listed on
Schedule 2.1 which is each jurisdiction where the ownership of
its respective assets or the conduct of its respective
operations requires such qualification. C-TEC is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Pennsylvania. Each of the Partnerships is
a duly organized and validly existing limited partnership
(other than CLNS General Partnership, a Pennsylvania general
partnership ("CLNS"), and Pennsylvania RSA No. 5 General
Partnership, a Pennsylvania general partnership ("PA5GP"),
which are duly organized and validly existing general
partnerships) under the laws of its jurisdiction of
organization as indicated on Schedule I and is qualified as a
foreign limited partnership in the States indicated on Schedule
I which is every jurisdiction where the ownership of each such
Partnership's assets or the conduct of its operation requires
such qualification. Selling Group and the Companies have full
corporate power and authority, and the Partnerships have full
partnership power and authority, to own, lease or otherwise
hold the CCTS Shares, ICCTC Shares, Assets and Entity Assets
(as defined in Section 2.13 below), as the case may be, and to
operate and use the Assets and Entity Assets and to carry on
the operation of the Systems as now conducted.
2.2 Subsidiaries and Investments. CCTS and ICCTC
(collectively, the "Companies") and the Partnerships do not
individually or collectively (a) own, of record or
beneficially, any outstanding voting securities of or other
equity interests in
<PAGE>
any corporation, partnership, association, joint venture or
other entity or (b) control (directly or indirectly and alone
or in combination with others) any corporation, partnership,
association, joint venture or other entity, other than CCTS's
investments in the Partnerships in the percentages and amounts
as disclosed on Schedule I ("Partnership Interests") and the
ownership interest of CLNS in PA5GP.
2.3 Capital Stock of the ComPanies. Schedule 2.3 sets forth
the number of authorized shares of each of the Companies'
capital stock, the number of such shares which are issued and
outstanding, the owners, including, without iimitation, CP and
CP of I, of all of the issued and outstanding shares and the
number of such shares which are issued and held in its
treasury. All voting rights in the Companies are vested
exclusively in their shares of common stock. All of the issued
and outstanding shares of common stock of the Companies are
validly authorized and issued and are fully paid and
nonassessable, free of preemptive rights and have not been
issued in violation of federal or state securities laws. There
are no outstanding warrants, options, commitments or rights of
any kind to acquire from the Companies any shares of their
common stock or securities of any kind. The Companies have, and
on the Closing Date will have, no obligation to acquire any of
their issued and outstanding shares of common stock or any
other security issued by them from any holder thereof. There
are no voting agreements, voting trust agreements or
shareholder or similar agreements relating to any capital stock
of the Companies. C-TEC owns all of the issued and outstanding
capital stock of (a) CP and (b) SRHC Properties, Inc. which in
turn owns all of the issued and outstanding capital stock of
SRHC.
2.4 Status and Effect of Delivery of CCTS Shares. CP is the
lawful owner of all the CCTS Shares and has good and marketable
title thereto, free and clear of all liens, security interests,
pledges, encumbrances, claims and equities of every kind. CP's
and Selling Group's and its Affiliates' sole ownership interest
in CCTS is represented by the CCTS Shares. Except for this
Agreement, there are no outstanding warrants, options or rights
of any kind to acquire from CP any of the CCTS Shares. Delivery
of the CCTS Shares by CP to Buyer in accordance with this
Agreement will vest title to all of the CCTS Shares in Buyer,
free and clear of all liens, secu~ity interests, pledges,
encumbrances, claims and equities of every kind.
2.5 Status and Effect of DeliverY of ICCTC Shares. CP of I
is the lawful owner of the ICCTC Shares and has good and
marketable title thereto, free and clear of all liens, security
interests, pledges, encumbrances, claims and equities of every
kind. CP of I's and Selling Group's and its Affiliates' sole
ownership interest in ICCTC is represented by the ICCTC Shares.
The remaining shares of capital stock in ICCTC are held by the
parties and in the amounts identified on Schedule 2.5. Except
for this Agreement, there are no outstanding warrants, options
or rights of any kind to acquire from CP of I any of the ICCTC
Shares. Delivery of the ICCTC Shares by CP of I to Buyer in
accordance with this Agreement
<PAGE>
will vest title to all of the ICCTC Shares in Buyer, free and
clear of all liens, security interests, pledges, encumbrances,
claims and equities of every kind.
2.6 Status of Partnership Interests. CCTS is the lawful
owner of the Partnership Interests and has good and marketable
title thereto, free and clear of all liens, claims, security
interests, pledges, encumbrances and equities of every kind,
which Partnership Interests entitle CCTS to the percentage of
the profits, losses, distributions, percentage interests,
capital account balances and voting rights in the Partnerships
set forth on Schedule I attached hereto. CCTS's and Selling
Group's and its Affiliates' sole ownership interest in the
Partnerships is represented by the Partnership Interests. There
are no outstanding rights, options, warrants, subscriptions or
agreements of any kind to acquire from CCTS or Selling Group
any of the Partnership Interests other than the various rights
of first refusal set forth in each of the Partnership
Agreements of the Partnerships (collectively, the "Partnership
Agreements"). Other than as set forth on the financial
statements of the Partnerships (and provided for on the Working
Capital Adjustment), none of the Partnerships nor any present
or former partner of CCTS in the Partnerships nor any
affiliate, are owed any sums attributable to capital
contributions, loans, advances, consulting fees, management
fees, deferred fees, guarantee fees, compensation or similar
payments or is contesting its partnership or percentage
interest therein. Other than as set forth on the financial
statements of the Partnerships, neither CCTS nor any Affiliate
owes any sums (whether capital contributions, loans, advances,
consulting fees, management fees, deferred fees, guarantee
fees, compensation or similar payments or otherwise) to any of
the Partnerships. The acquisition of CCTS by Buyer contemplated
by this Agreement would, under each of the Partnership
Agreements, not require the consent or approval of the
respective Partnership, any other partner in the Partnerships
or any third party, except as set forth in Section 5.7 hereof,
and CCTS will continue as a general partner or limited partner
in the Partnerships, as the case may be, with all of the rights
which CCTS possessed as such a partner prior to the Closing
Date. Selling Group has delivered true and correct copies of
the Partnership Agreements to Buyer. The Partnership Agreements
are in full force and effect, have not been amended or modified
(except as provided in writing to Buyer), and there have been
no breaches, defaults or notices thereof or events which with
or without the passage of time or the giving of notice or both
would constitute a breach or default or both by CCTS or, to the
knowledge of Selling Group, any other partner thereto. Schedule
I attached hereto sets forth CCTS's capital account balances in
the Partnerships and such balances represent the percentage of
the aggregate capital account balance of all partners in the
Partnerships. Except as set forth on Schedule 2.6, CCTS has not
received notice of any other partner's in the Partnerships
intent to transfer or assign their interests in the
Partnership. Except as set forth on Schedule 2.6, there is
presently no notice pending which would require CCTS or any
other partner to contribute additional capital to the
Partnerships. CCTS or any other partner of a Controlled
<PAGE>
Partnership has never received any distributions from the
Partnerships in excess of or less than CCTS's or such partner's
pro rata entitlement thereto and no contributions of CCTS to
the Partnerships have been returned by the Partnerships to
CCTS. Schedule 2.6 contains a list of (a) all prior capital
calls (dates, amounts and purposes of each), (b) all prior
distributions of cash from the Partnerships to its partners,
both since the date CCTS acquired its interest in each
Partnership, (c) all dilutions of partners (and increase in
partners' interests) resulting from a partner's failure to make
a call for additional capital, (d) any notices or claims made
with respect to clauses (a) through (c) by any partner
including CCTS and (e) all transfers of partnership interests
(by CCTS or any other partner) of a Partnership within the past
three years.
2.7 Authority. Selling Group and C-TEC have full power and
authority to enter into this Agreement, to consummate the
transactions contemplated hereby and to comply with the terms,
conditions and provisions hereof.
The execution, delivery and performance of this Agreement
by Selling Group and C-TEC, including, without limitation, the
deliveries and other agreements of Selling Group contemplated
hereby, have been duly authorized and approved by the boards of
directors of each member of Selling Group and C-TEC and do not
require any further authorization or consent of any third party
or of any governmental authority except as may be expressly set
forth herein. This Agreement is, and each other agreement or
instrument of Selling Group and C-TEC contemplated hereby will
be, the legal, valid and binding agreement of Selling Group and
C-TEC, enforceable in accordance with its terms except (a) as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
similar law affecting the enforcement of creditors' rights
generally, or (b) to the extent that such enforceability is
subject to the principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law)
(the "Enforceability Exceptions").
Neither the execution nor the delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will conflict with or result in any violation of or constitute
a default under any term of (a) the Certificates or Articles of
Incorporation or ByLaws of Selling Group or the Companies or
C-TEC, (b) the Certificates of Limited Partnership or
Partnership Agreements of the Partnerships, or (c) any
agreement, mortgage, debt instrument, indenture, franchise,
license, permit, authorization, lease or other instrument,
judgment, decree, order, law or regulation by which Selling
Group, C-TEC, the Companies, the Controlled Partnerships or, to
the best knowledge of Selling Group, the Minority Partnerships
is bound, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the CCTS Shares,
ICCTC Shares or Assets.
2.8 Financial Statements. (a) Selling Group has heretofore
provided to Buyer true, complete and correct copies of (i)
audited
<PAGE>
balance sheets, statements of operations, partner's capital and
cash flows (together with all notes and opinions thereto of
independent auditors) for Northeast Pennsylvania SMSA Limited
Partnership ("NEPA"), Allentown SMSA Limited Partnership
("Allentown"), Reading SMSA Limited Partnership ("Reading"),
each a Delaware limited partnership, and PA5GP for the fiscal
years ended December 31, 1988 through 1992 and drafts of the
1993 audited financial statements in connection with NEPA and
PASGP, (ii) audited balance sheets, statements of income and
cash flows together with all notes and opinions thereto of
independent auditors) for C-TEC, on a consolidated basis for
the fiscal years ended December 31, 1988 through 1993, (iii)
unaudited balance sheets, statements of operations, partner's
capital and cash flows for PA3 Wireline Settlement Limited
Partnership ("PA3LP") and PA4 Wireline Settlement Limited
Partnership ("PA4LP"), each a Pennsylvania limited partnership,
on an individual basis, for the fiscal years ended December 31,
1988 through 1993, and (iv) unaudited balance sheets,
statements of income and cash flows for CP, CCTS, CPS, CCCC, CP
of I and ICCTC, on an individual basis, for the fiscal years
ended December 31, 1988 through 1993, (collectively, the
"Financial Statements"). The Financial Statements have been
prepared in conformity with GAAP and present fairly in all
material respects the assets, liabilities, financial position
and results of operations of the Systems and of each applicable
entity as of their respective dates and for the respective
periods covered thereby.
(b) Selling Group shall provided to Buyer true and correct
copies of unaudited interim balance sheets, statements of
income, operations, partner's capital and cash flows for the
Systems, on a consolidated basis, and for the Companies, each
Partnership, CPS, CCCC and CP of I, on an individual basis, for
each month and three month period (together with yeartodate
statements) beginning with the statements for the month ending
January 31, 1994 and through the month preceding the Closing
(collectively, the "Interim Statements"). The Interim
Statements shall be prepared in conformity with GAAP (except
for required and normal yearend adjustments) and present fairly
in all material respects the assets, liabilities, financial
position and results of operations of the Systems and of each
applicable entity as of their respective dates and for the
respective periods covered thereby.
2.9 Operations Since December 31, 1993.
(a) Since December 31, 1993, there has been (i) no material
adverse change in the Assets (individually or in the
aggregate), the assets and operations of the Companies, the
Controlled Partnerships or the Systems or, to the best
knowledge of Selling Group, the Minority Partnerships, and, to
the best knowledge of Selling Group, no fact or condition
exists or is contemplated or threatened which might reasonably
be expected to cause such a change in the future other than
Buyer's purchase and use of the CCTS Shares, ICCTC Shares and
the Assets and conditions attributable to the overall economy
and cellular telephone business in general and (ii) no damage,
<PAGE>
destruction, loss or claim, whether or not covered by insurance,
or condemnation or other taking in excess of $10,000,
individually or $50,000 in the aggregate, adversely affecting
in any material respect the Assets, the assets and operations
of the Companies, the Controlled Partnerships, the Systems or,
to the best knowledge of Selling Group, the Minority
Partnerships.
(b) Since December 31, 1993, Selling Group, the Controlled
Partnerships, the Companies and, to the best knowledge of
Selling Group, the Minority Partnerships have conducted the
Systems in the ordinary course of business consistent with
existing operating procedures and practices. Without limiting
the generality of the foregoing, since December 31, 1993,
except as set forth on Schedule 2.9(b), neither Selling Group,
nor the Companies nor the Controlled Partnerships nor, to the
best knowledge of Selling Group, the Minority Partnerships
have:
(i) sold, leased, transferred or otherwise disposed of
(except in the ordinary course of business), or mortgaged or
pledged, or imposed or suffered to be imposed any lien, charge
or encumbrance on, any of the Assets or the assets of the
Companies or the Partnerships;
(ii) canceled any debts owed to, or claims held by, Selling
Group, the Companies or the Partnerships in connection with the
Systems (including the settlement of any claims or litigation)
other than in the ordinary course of business consistent with
past practice;
(iii) canceled or terminated any material contract,
relationship, lease or agreement in connection with the Systems
or entered into and become bound by any material contract,
relationship, lease or agreement in connection with the Systems
except Intercompany Agreements not set forth on Schedule 4.6;
(iv) delayed payment of any account payable or other
liability of the Systems beyond its due date or the date when
such liability would have been paid in the ordinary course of
business consistent with the past practice;
(v) entered into, amended, waived or declared (or received
a declaration of) default under any Contract; and
(vi) made any agreements, written or oral, to perform any
of the above, other than this Agreement.
2.10 No Undisclosed Liabilities. Selling Group and, to the
best knowledge of Selling Group, the Minority Partnerships, are
not subject to any material liability, commitment or obliga~ion
(including, without limitation, unasserted claims whether known
or
<PAGE>
unknown), whether absolute, contingent, accrued or otherwise,
and the Companies and the Controlled Partnerships are not
subject to any liability, commitment or obligation (including,
without limitation, unasserted claims whether known or
unknown), whether absolute, contingent, accrued or otherwise,
in connection with the Systems, except as set forth in (a)
Section 2.25 hereof, (b) Schedule 2.10 and (c) the Financial
Statements (with respect to actual dollar amounts and not
merely line items).
2.11 Taxes. Selling Group, the Companies, the Controlled
Partnerships and, to the best knowledge of Selling Group, the
Minority Partnerships, have and will timely file all required
federal, state, county and local income, excise, withholding,
property, sales, use, franchise and other tax returns,
declarations and reports with respect to or affecting the
Systems which are required to be filed on or before the date
hereof and the Closing, and have paid or reserved for all taxes
which have become due pursuant to such returns or pursuant to
any assessment which has become payable with respect to or
affecting the Systems. All monies required to be withheld by
Selling Group, the Companies, the Controlled Partnerships and,
to the best knowledge of Selling Group, the Minority
Partnerships from employees of the Systems for income taxes,
social security, workmens' compensation, unemployment insurance
and other payroll taxes have been collected or withheld, and
either paid to the respective governmental agencies, set aside
in accounts for such purpose, or accrued, reserved against and
entered upon the books of Selling Group, the Companies, the
Controlled Partnerships and, to the best knowledge of Selling
Group, the Minority Partnerships. The returns, declarations and
reports referred to in the previous sentences of this Section
2.11 are or will be true and correct and reflect or will
reflect accurately all taxable income or tax liabilities for
the periods covered thereby. ~xcept as disclosed on Schedule
2.11, Selling Group, the Companies, the Controlled Partnerships
or, to the best knowledge of Selling Group, the Minority
Partnerships have not received a notice that any examination of
or proceeding with respect to any tax return or report relating
to the Systems has been scheduled or conducted. There are no
outstanding agreements or waivers extending the statutory
period of limitations applicable to any tax return of Selling
Group, the Companies, the Controlled Partnerships or, to the
best knowledge of Selling Group, the Minority Partnerships.
Schedule 2.11 sets forth the Partnerships where a valid election
under Section 754 of the Code has been made and is irrevocable.
2.12 Availability of Assets and Leqality of Use. Except as
set forth on Schedule 2.12, the Fixed Assets are in good
operating condition, ordinary wear and tear excepted, and
suitable for the use for which intended. All such assets and
their uses conform in all material respects to all applicable
laws, regulations, rules, ordinances, codes, licenses,
franchises and permits (including, without limitation,
electrical, building, zoning, environmental and occupational
safety and health requirements), and no notice of any violation
of any of such matters relating to the Assets or their use has
been received by Selling Group. All Cellular Phones in
<PAGE>
possession of Selling Group, and, to the best of Selling
Group's knowledge, in possession of its customers, are in
good and merchantable condition, contain a valid manufacturer's
warranty, and the Cellular Phones in possession of Selling
Group are of a level as customarily maintained by Selling
Group. The Assets constitute all of the assets of CPS, CCCC and
CP of I used or useful in the operation of the Systems. The
Assets, together with the Entity Assets (as defined in Section
2.13) constitute all of the assets used or useful in the
operation of the Systems.
2.13 Availability of Partnership and Company Assets and
Legality of Use. The assets and properties of the Companies and
the Partnerships (the "Entity Assets") contain all of the
assets and properties used or useful by the Companies and the
Partnerships in the conduct of the Systems, including without
limitation the following:
(a) Fixed Assets and Personal Propertv. All fixed assets and
personal property of every type or description used or useful
in connection with the Systems and owned, used or leased by the
Companies, the Controlled Partnerships and, to the best
knowledge of Selling Group, the Minority Partnerships,
including without limitation, all transmitters/receivers,
towers and antennas, switches and switching equipment, computer
hardware and software used solely in connection with switches
(including source and object codes), other leasehold
improvements, and all spare parts, accessories and supplies
related thereto ("Entity Fixed Assets"), incIuding, without
limitation, the Entity Fixed Assets identified on Schedule
2.13(a) attached hereto and made a part hereof.
(b) Real Property. All real property (and any interest
therein and improvements thereon) of the Companies, the
Controlled Partnerships or, to the best knowledge of Selling
Group, the Minority Partnerships ("Entity Real Property"),
including, without limitation, the Entity Real Property
identified on Schedule 2.13(b) attached hereto and made a part
hereof.
(c) Leases, Contracts, Options and Other Obligations. All
leases, contracts, options, manufacturer's warranties and other
rights and obligations related to the Systems or otherwise held
by the Companies, the Controlled Partnerships or, to the best
knowledge of Selling Group, the Minority Partnerships ("Entity
Contracts"), set forth on Schedule 2.13(c) attached hereto and
made a part hereof.
(d) Licenses and Certificates. All authorizations, grants,
permits and other licenses issued to the Companies, the
Controlled Partnerships or, to the best knowledge of Selling
Group, the Minority Partnerships, including, without
limitation, all licenses and certificates issued by the FCC and
the FAA and applicable State Commissions, in connection with
the Systems, and all applications and construction
<PAGE>
permits related thereto ("Entity Licenses"), including, without
limitation the Entity Licenses identified on Schedule 2.13(d)
attached hereto and made a part hereof.
(e) Current Assets. All current assets including, without
limitation, cash, cash equivalents, marketable securities and
trade and other accounts receivable, if any, of the Companies,
the Controlled Partnerships or, to the best knowledge of
Selling Group, the Minority Partnerships and related to the
Systems ("Entity Current Assets").
(f) Interests in Entities. All shares of stock and other
evidence of ownership interests in any partnerships, joint
ventures, corporations, subsidiaries or other entities,
including, without limitation, all interests of CCTS in the
Partnerships.
(g) Cellular Telephone Units. All cellular telephone units
and related components, spare parts and accessories, owned,
used or leased by the Companies, the Controlled Partnerships
or, to the best knowledge of Selling Group, the Minority
Partnerships and either (i) related to the Markets and/or the
Systems and either maintained in inventory or shipped by a
supplier and enroute for delivery or (ii) related to the
Markets and/or the Systems and in the custody of customers of
the Systems (on a rented or leased basis) or repair or service
personnel ("Entity Cellular Phones").
(h) Other Assets and Riqhts. All Company, Controlled
Partnership or, to the best knowledge of Selling Group,
Minority Partnership accounting data including customer lists,
supplier lists, customer account information, Intellectual
Property Rights, minute books, stock transfer records,
corporate seals and other books and records, and other tangible
and intangible property related to the Systems and owned by the
Companies, the Controlled Partnerships or, to the best
knowledge of Selling Group, the Minority Partnerships.
Except as set forth on Schedule 2.13(a), all of the Entity
Fixed Assets owned by the Controlled Partnerships are in good
operating condition, ordinary wear and tear excepted, and to
the best knowledge of Selling Group, all Entity Fixed Assets
owned by the Minority Partnerships are in good operating
condition, ordinary wear and tear excepted. All Entity Fixed
Assets owned by the Controlled Partnerships and, to the best
knowledge of Selling Group, all Entity Fixed Assets owned by
the Minority Partnerships and their uses conform in all
material respects to all applicable laws, regulations, rules,
ordinances, codes, licenses, franchises and permits (including,
without limitation, electrical, building, zoning, environmental
and occupational safety and health requirements), and no notice
of any violation of any of such matters relating to the Entity
Assets or their use has been received by Selling Group, the
Controlled Partnerships or the Companies, or to the best
knowledge of the Selling Group, the Minority Partnerships. All
Entity Cellular Phones in possession of
<PAGE>
the Companies and the Controlled Partnerships, and to the best
knowledge of Selling Group, all Entity Cellular Phones in
possession of the Minority Partnerships and in possession of
the Companies' or Partnerships' respective customers, are in
good and merchantable condition, contain a valid manufacturer's
warranty (except for those warranties that have expired by
their terms), and the Entity Cellular Phones are of a level as
customarily maintained by Selling Group. The Entity Assets
constitute all of the assets of the Companies and Partnerships
used or useful in the operation of the Systems.
2.14 Real Property. (a) Owned Real Property. Schedule
1.2(b), together with Schedule 2.13(b), contains a brief
description of each parcel of real property owned by Selling
Group, the Controlled Partnerships, SRHC and, to the best
knowledge of Selling Group, the Minority Partnerships and used
or useful in the Systems, and all such real estate owned by the
Companies, (in each case showing the record title holder, legal
description, location, improvements and any indebtedness
secured by a mortgage or other lien thereon) and of each option
held or given by Selling Group, the Controlled Partnerships,
SRHC, the Companies or, to the best knowledge of Selling Group,
the Minority Partnerships to acquire any real property used or
useful in the Systems. True, complete and correct copies of all
existing policies of title insurance, and documents referenced
therein, available to Selling Group, the Controlled
Partnerships, SRHC, the Companies and, to the best knowledge of
Selling Group, the Minority Partnerships with respect to each
such parcel have heretofore been delivered by Selling Group to
Buyer. The applicable member of Selling Group, the Companies,
SRHC, the Controlled Partnerships or, to the best knowledge of
Selling Group, the Minority Partnerships has good and
marketable title in fee simple absolute to all such real
property and to all buildings, structur~es and other
improvements thereon, in each case free and clear of all liens,
claims, charges, encumbrances, security interests, mortgages,
easements, defects in title, covenants and other restrictions
or encroachments of any kind, except for liens for taxes not
yet due and payable and except as set forth in such policies
(none of which matters set forth therein affect in any material
way the marketability of or detract from or interfere in any
material respect with the existing use or enjoyment of the
property subject thereto) or as otherwise shown on Schedule
2.13(b) ("Permitted Exceptions"), and in each case such
Permitted Exception has been reflected, to the extent that a
value is ascertainable, as a Current Liability. All such real
property and its use conform in all material respects with all
laws, regulations, rules, ordinances, codes, licenses, deed
restrictions and covenants of record, franchises and permits
(including, without limitation, electrical, building, zoning,
environmental and occupational safety and health requirements),
and no notice of any violation of such matters relating to such
assets or their use has been received by Selling Group, SRHC,
the Companies, the Controlled Partnerships or, to the best
knowledge of Selling Group, the Minority Partnerships.
<PAGE>
(b) Leased Real Property. Schedule 2.14(b) sets forth
a list and brief description of each lease or similar agreement
(showing the rental fees, expiration date, renewal and purchase
options, if any, the improvements thereon, the uses being made
thereof, and the location of the real property covered by such
lease or other agreement) under which Selling Group, SRHC, the
Companies, the Controlled Partnerships or, to the best
knowledge of Selling Group, the Minority Partnerships, is
lessee of, or holds or operates, any real property owned by any
third party ("Leased Real Property") used or useful in
connection with the Systems. True, complete and correct copies
of all existing policies of title insurance, and documents
referenced therein, available to Selling Group, SRHC, the
Controlled Partnerships, the Companies and, to the best
knowledge of Selling Group, the Minority Partnerships with
respect to each such parcel have heretofore been delivered by
Selling Group to Buyer. The applicable lessee has the right to
quiet enjoyment of all such real property described in such
Schedule 2.14(b) for the full term of each such lease or
similar agreement (and any renewal option related thereto)
relating thereto, and the leasehold or other interest of the
applicable lessee in such real property is not subject or
subordinate to any security interest, lien or mortgage except
for liens for real estate taxes not yet due and payable. All
rentals due and owing have been paid and accepted, and the
applicable lessee is not in default or breach under said leases
or agreements. Schedule 2.14(b) also contains a brief
description of each lease or other agreement (including in each
case the annual rental, expiration date and description of
property covered) under which Selling Group, SRHC, the
Companies, the Controlled Partnerships or, to the best
knowledge of Selling Group, the Minority Partnerships, is
lessor, assignor or sublessor of any real property.
2.15 Accounts Receivable. All accounts receivables of the
Companies, CPS, CCCC,CP of I, the Controlled Partnerships and,
to the best knowledge of Selling Group, the Minority
Partnerships in connection with the Systems have arisen from
bona fide transactions by such entities in the ordinary course
of business, none of such accounts receivable is subject to
defense, counterclaim or set off, and none of the account
debtors of such accounts receivables is C-TEC or an Affiliate
thereof.
2.16 Licenses. Schedule 1.2(d), together with 2.13(d),
lists all authorizations, grants, permits and other licenses
(collectively, "Seller Licenses") held by Selling Group (with
respect to the Markets and the Systems), the Companies and the
Partnerships on the date hereof, including, without limitation,
all licenses or construction permits from the FCC and FAA, and
all certificates from the State Commissions held by Selling
Group (with respect to the Markets and the Systems), the
Companies and the Partnerships and otherwise necessary for the
operation of the Systems, correct copies of which have
previously been delivered to Buyer. The applicable member of
Sellin~ Group, the Companies and the Partnerships, as the case
may be, is the exclusive holder of each of the Seller Licenses,
all of which are in full force and effect and are not subject
to any pending or threatened challenge,
<PAGE>
revocation, amendment or forfeiture. No default or breach
exists with respect to any of the Seller Licenses and no event
or condition exists which but for the lapse of time or notice
or both would constitute a default or breach with respect to
any of the Seller Licenses owned by the Companies, CPS, CCCC,
CP of I or the Partnerships. True and correct copies of all
reports relating to the Licenses have been and will be timely
filed with the appropriate body, and true and correct copies of
such reports have been and will be delivered to Buyer.
2.17 Title to Property. Except as otherwise provided in
Section 2.14, Selling Group, the Companies, the Controlled
Partnerships and, to the best knowledge of Selling Group, the
Minority Partnerships have good and marketable title to all of
the Assets and Entity Assets, as the case may be, free and
clear of all liens, claims, charges, encumbrances, security
interests, mortgages, easements, defects in title, covenants
and other restrictions of any kind. Delivery to Buyer on the
Closing Date of the instruments of transfer contemplated by
Section 1.9 will thereby transfer to Buyer good and marketable
title to the Assets, free and clear of and subject to no liens,
claims, charges, encumbrances, security interests, mortgages,
easements, defects in title, covenants or other restrictions of
any kind except for the Permitted Exceptions.
2.18 Employee Relations. All persons who perform services
for the operation of the Systems (except for Allentown and
Reading) are employed by CPS and ICCTC. There are currently no
employees utilized in connection with the Systems employed by
CCTS, CCCC, CP, the Controlled Partnerships, and to the best
knowledge of Selling Group, the Minority Partnerships. The
Companies, the Controlled Partnerships and, to the best
knowledge of Selling Group, the Minority Partnerships are not
subject to any claim and have no liability, expense or
obligation, accrued, contingent or otherwise, pertaining to or
arising out of the employment of any individual prior to the
date hereof. Neither Selling Group nor the Companies nor the
Controlled Partnerships nor, to the best knowledge of Selling
Group, the Minority Partnerships is a party or has ever been a
party to any collective bargaining agreement. CPS and ICCTC
have complied in all material respects with all applicable
laws, rules and regulations which relate to prices, wages,
hours, discrimination in employment and collective bargaining
and to the operation of the Systems and are not liable for any
arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing. Selling Group believes that
the respective relations of CPS and ICCTC with the Systems'
employees are good. To the best of Selling Group's knowledge,
there has been no union organizing effort within the last five
(5) years in connection with the operation of the Systems and
there have been no strikes, lockouts, slowdowns or similar work
stoppages affecting the employees in connection with the
Systems. Any pension or profit sharing plan, including, without
limitation, all multiemployer plans, to which Selling Group
contributes and the Systems' employees participate complies
fully with the provisions of the Employee Retirement Income
Security Act of 1974 and the Multi-
<PAGE>
Employer Pension Plan Act Amendments of 1980, and all such
plans, which are listed on Schedule 2.18, are fully funded and
contain no withdrawal liability. Schedule 2.18 also lists all
employment agreements, policy manuals and other written
understandings with employees (including covenants not to
compete) (true and correct copies of which have been provided
to Buyer) and also lists all employees and independent sales
representatives of the Systems whose gross salary (including
commissions) exceeded $25,000.00 during the 1992 or 1993
calendar year and are expected to exceed such amount for the
1994 calendar year.
2.19 Status of Contracts. Each of the Contracts and Entity
Contracts constitutes a legal, valid and binding obligation of
the parties thereto subject to the Enforceability Exceptions
and is in full force and effect, has not been amended or
modified and, with respect to the Contracts, may be transferred
to Buyer pursuant to this Agreement and will continue in full
force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of
any rights thereunder and without the consent, approval or act
of, or the making of any filing with, any other party. Selling
Group, the Companies, the Controlled Partnerships and, to the
best knowledge of Selling Group, the Minority Partnerships, as
the case may be, is not in, or alleged to be in, breach or
default under, nor is there or is there alleged to be any basis
for termination of, any of the Contracts, Entity Contracts or
Partnership Agreements and, to the best knowledge of Selling
Group, no other party to any of the Contracts, Entity Contracts
or Partnerships has breached or defaulted thereunder, and no
event has occurred and no condition or state of facts exists
which, with the passage of time or the giving of notice or
both, would constitute such a default or breach by Selling
Group, the Companies, the Controlled Partnerships or, to the
best knowledge of Selling Group, the Minority Partnerships, or,
to the best of the knowledge of Selling Group, by any such
other party. Selling Group, the Companies, the Controlled
Partnerships or, to the knowledge of Selling Group, the
Minority Partnerships is not currently renegotiating any of the
Contracts or Entities Contracts and is not paying liquidated
damages in lieu of performance thereunder. Complete and correct
copies of each of the Contracts and Entity Contracts have
heretofore been delivered to Buyer by Selling Group. Neither
the Companies nor Partnerships has any liability under any of
the terminated Intercompany Agreements.
2.20 No Violations, Litiqation or Requlatory Action.
(a) Selling Group, the Companies, the Controlled
Partnerships and, to the best knowledge of Selling Group, the
Minority Partnerships have complied in all material respects
(except relating to the FCC or State Commissions in which case
such compliance is in all respects) with all laws, regulations,
rules, writs, injunctions, ordinances, franchises, decrees or
orders of any court or of any foreign, federal, state,
municipal or other government, governmental department,
commission, board, bureau, agency or
<PAGE>
instrumentality which are applicable to the Assets, the Entity
Assets or the Systems;
(b) Except as disclosed on Schedule 2.20, there are no
lawsuits, claims, suits, proceedings or investigations pending
or, to the best knowledge of Selling Group, threatened aqainst
or affecting Selling Group (relating to the Systems), the
Companies or the Partnerships, and there are no lawsuits,
claims, suits or proceedings pending in which Selling Group
(relating to the Systems), the Companies or the Partnerships is
the plaintiff or claimant; and
(c) There is no action, suit or proceeding pending or, to
the best knowledge of Selling Group, threatened which questions
the legality or propriety of the transactions contemplated by
this Agreement or which may have an adverse effect on Selling
Group's ability to perform its obligations hereunder.
2.21 Environmental Matters. Selling Group (with respect to
the Systems), the Companies, the Controlled Partnerships and,
to the best knowledge of Selling Group, the Minority
Partnerships are conducting (and each has at all times
conducted) its business and operations in compliance with all
Environmental Legal Requirements (as defined below) and there
is no pending or, to the best knowledge of Selling Group,
threatened, civil or criminal litigation, notice of violation,
notice as a "potentially responsible party" (as such term is
defined under the Comprehensive Environmental Response,
Compensation Liability Act, as amended) or lien, or
administrative proceeding relating to Environmental Legal
Requirements involving the Systems, the Companies, the
Controlled Partnerships and, to the best knowledge of Selling
Group, the Minority Partnerships. Selling Group (with respect
to the Systems), the Companies, the Controlled Partnerships
and, to the best knowledge of Selling Group, the Minority
Partnerships have obtained from every governmental body,
including, without limitation, the United States Environmental
Protection Agency and the Environmental Protection Agencies of
the States of Pennsylvania and Iowa, as the case may be, all
approvals, consents, licenses, permits and orders necessary to
operate its respective businesses and operations as currently
operated. Neither Selling Group nor the Companies nor the
Controlled Partnerships nor, to the best knowledge of Selling
Group, the Minority Partnerships have transported, either
onsite or offsite, Hazardous Substances (as defined below) or
arranged for the transportation of such Hazardous Substances to
any location which is the subject of Federal, state or local
enforcement actions, inquiries or other investigations. Neither
Selling Group nor the Companies nor the Controlled Partnerships
nor, to the best knowledge of Selling Group, the Minority
Partnerships have treated, stored for more than ninety (90)
days, recycled or disposed of any Hazardous Substances on any
property now or previously owned or leased by Selling Group (in
connection with the Systems) or the Companies or the
Partnerships, nor has anyone else treated, stored for more than
ninety (90) days, recycled or disposed of Hazardous Substances
on any property now or
<PAGE>
previously owned or leased by Selling Group in connection with
the Systems) or the Companies or the Partnerships. There are no
storage tanks (above or below ground) located on any of the
Real Property or Entity Real Property. The Selling Group has no
knowledge of any remediation costs incurred by Selling Group,
the Companies or the Partnerships in connection with any of
the Real Property, Entity Real Property or Leased Real Property
to the Companies or Partnerships. True and correct copies of
all envlronmental assessments previously prepared in connection
with the Real Property, Entity Real Property and Leased Real
Property have been delivered by Selling Group to Buyer. The
term "Environmental Legal Requirement" shall mean any
applicable federal, state or local law, statute, rule,
regulation or ordinance relating to public health, safety or
the environment, lncluding, without limitation, relating to
releases, discharges or emissions to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the
use and handling of polychlorinated biphenyls or asbestos, to
the disposal, treatment, storage or management of solid or
Hazardous Substances or to exposure to toxic or hazardous
Substances, to the handling, transportation, discharge or
release of gaseous or liquid substances. The term hazardous
Substance" shall mean any hazardous or toxic material,
substance or waste which is defined by those or similar terms
or is regulated as such under any federal, state or local
authority having jurisdiction over the use or ownership of the
real property previously or currently used in or related to the
Systems, the Companies or Partnerships.
2.22 Insurance. Schedule 2.22 sets forth a list and brief
descriptlon (including policy numbers, insurers, nature of
coverage, limits, deductibles, premiums, carriers, claims
pending under any other insurance policy, and effective and
termination dates) of all policies of insurance maintained,
owned or held by Selling Group, the Companies, the Controlled
Partnerships and, to the best knowledge of Selling Group, the
Minority Partnerships on the Assets and Entity Assets on the
date hereof. Selling Group, the Companies and the Partnerships
shall keep such insurance or comparable insurance in full force
and effect through the Closing Date. Selling Group, the
Companies, the Controlled Partnerships and, to the best
knowledge of Selling Group, the Minority Partnershlps, as the
case may be, has complied with each of such insurance policies
and has not failed to give any notice or present any claim
thereunder in a due and timely manner. Selling Group has
delivered to Buyer correct and complete copies of each such
insurance policy and of the most recent inspection reports, if
any, received from insurance underwriters as to the condition
of the Assets and Entity Assets.
2.23 Subscribers and Covered Population. As of February
28, 1994, Selling Group, the partnerships and the Companies
have in excess of 32,000 Subscribed Units (as defined
herein) after adjusting the number of such Subcribed Units for
CCTS's pro-rata share of the Partnerships and CP of I's
pro-rata share in ICCTC. As defined herein, the term
"Subscribed Units" shall mean a cellular telephone used by a
Systems subscriber to the relevant
<PAGE>
service at the regular monthly rate for such service, where
such subscriber has been making regular payments as a
subscriber at tariffed rates without discount (except for
discounts for service and equipment in the usual and ordinary
course) and such subscriber has been a paying customer of
Selling Group, the Partnerships or the Companies, and has not
been in default under any of its obligations under its
subscriber agreement, for at least the past sixty (60) days. As
of such date, the Partnerships and the Companies cover a
population of 2,579,356, based on 1990 U.S. Census Data, in
accordance with FCC rules and regulations.
2.24 Customers. Selling Group, the Companies, the
Controlled Partnerships or, to the best knowledge of Selling
Group, the Minority Partnerships have received no written
notice that there exists an actual or threatened termination,
cancellation or litigation of, or any materially adverse
modification or change in, the business relationship of Selling
Group, the Companies, the Controlled Partnerships or, to the
best knowledge of Selling Group, the Minority Partnerships with
any customer that individually or in the aggregate constituted
five percent (5%) or more of the revenues of the Systems
("Significant Customers") in 1993, and there exists no present
condition or state of facts or circumstances, involving
Significant Customers which Selling Group has notice which
would materially adversely affect the Systems or prevent
Selling group, the Companies, the Controlled Partnerships or,
to the best knowledge of Selling Group, the Minority
Partnerships from operating the Systems after the consummation
of the transactions contemplated by this Agreement in
essentially the same manner in which it has heretofore been
operated by Selling Group, the Companies and the Partnerships,
except as affected by the transactions contemplated hereby.
2.25 Known Liabilities. The sole liabilities, commitments
and obligations (whether actual or contingent) of the
Companies, the Controlled Partnerships and, to the best
knowledge of Selling Group, the Minority Partnerships are, and
as of the Closing Date will be, as follows:
(a) all obligations related to the Contracts set forth on
Schedule 1.2(a) and Entity Contracts set forth on Schedule
2.13(d) attached hereto or otherwise expressly agreed to be
assumedby Buyer in writing;
(b) all service obligations of the Companies and
Partnerships to customers of the Systems under standard
subscriber agreements relating to service performed or to be
performed, a standard form of which has been provided to Buyer;
(c) all obligations of the Companies and Partnerships under
the Licenses arising after the date hereof; and
(d) all liabilities which under GAAP would be required to
be recorded as a current liability on the books and records of
the Companies and Partnerships and which are included in the
<PAGE>
definition of Current Liabilities, and such liabilities are
fully stated in their actual amount in the Working Capital
Adjustment.
All obligations, services and duties under those items set
forth in (a) through (d) above have been fully and
satisfactorily performed by the Companies, the Controlled
Partnerships and, to the best knowledge of Selling Group, the
Minority Partnerships through the date hereof and will be fully
and satisfactorily performed by the Companies and Partnerships
through the Closing Date. Except for those items listed in (a)
through (d) above, as of the date hereof there is, and as of
the Closing Date there will be, no liabilities, commitments or
obligations of the Companies, the Controlled Partnerships or,
to the best knowledge of Selling Group, the Minority
Partnerships except for those which are required to be recorded
as a current or long term liability of the Companies or
Partnerships under GAAP and reflected on the Working Capital
Adjustment.
2.26 Intellectual Property. Schedule 2.26 is a true and
complete list of all copyrights, trademarks, service marks,
trade names, patents, business names and other similar
intangible property rights and interests (hereinafter sometimes
individually and collectively referred to as the "Intellectual
Property Rights") applied for, issued to or owned by the
Selling Group, Companies or Partnerships under which the
Selling Group, Companies or Partnerships are licensed or
franchised and used in the conduct of the Systems and
operations thereof, all of which are valid and in good standing
and uncontested, except as disclosed on Schedule 2.26. Selling
Group has delivered to Buyer copies of all documents
establishing the Intellectual Property Rights. Except as
disclosed on Schedule 2.26, the Selling Group, Companies or
Partnerships, by ownership or use of the Intellectual Property
Rights, is not infringing uponor otherwise acting adversely to
any copyright, trademark, trademark rights, service marks,
service names, trade names, patents, patent rights, licenses,
trade secrets or franchises owned by any person or persons, and
there is no such claim or action pending, or to the best
knowledge of the Selling Group threatened, with respect
thereto.
2.27 Broker or Finder. Neither Selling Group, the
Companies, the Partnerships nor any party acting on their
behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement.
2.28 C-TEC Ownership/Guarantees. C-TEC or any member of its
consolidated group (except for the Companies and Partnerships)
does not own any assets or rights (other than the stock of CP
and the Assets) including, without limitation, fixed assets,
current assets, real property, contract rights, licenses or any
other assets or rights of any kind or nature whatsoever, used
or useful in connection with the Markets or the Systems other
than rights under the Systematics Agreement. Neither the
Selling Group, the Companies or the Partnerships or any
Affiliate thereof has
<PAGE>
guaranteed all or any portion of the Motorola Debt, RFTC Debt,
CLNS Debt or any other debt or obligation of any third party
including, without limitation, any debt or obligation of any
other member of the Selling Group, the Companies or the
Partnerships.
2.29 Inventory. All Cellular Phones in inventory are of
good, merchantable and usable quality, salable in the ordinary
course of business. The volume and variety of Cellular Phones
in inventory is consistent with the historical and customary
operating procedures of the Selling Group, the Partnerships and
Companies. The inventory of Cellular Phones is reflected on the
financial statements of the Selling Group at the lower of cost
(on a first in, first-out basis) or market value.
2.30 Construction of Iowa System. The IA System constructed
prior to the Closing Date, for which construction Buyer
acknowledges Selling Group purchased Motorola equipment and
other used equipment and materials, has been constructed and
completed in accordance with the standards, quality, guidelines
and procedures customary in the industry and previously used by
Selling Group in the construction of the System as a whole and
in accordance with the construction plan and schedule set forth
in section 5.6.
2.31 Disclosure. To the best knowledge of Selling Group,
none of the representations or warranties of Selling Group
contained herein, none of the information contained in the
Schedules referred to in Article 2, and none of the other
information or documents furnished or to be furnished to Buyer
or any of its representatives by Selling Group or its
representatives, is false or misleading in any material respect
or omits to state a fact here or therein necessary to make the
statements herein or therein not misleading in any material
respect.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
As an inducement to Selling Group to enter into this
Agreement and to consummate the transactions contemplated
hereby, Buyer hereby represents, warrants and covenants to
Selling Group and agrees as follows:
3.1 Orqanization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and
authority to own, lease or otherwise hold its properties and
assets and to carry on its business as now conducted.
3.2 Authority of Buyer. Buyer has full power and authority
to enter into this Agreement, to consummate the transactions
contemplated hereby and to comply with the terms, conditions
and provisions hereof.
The execution, delivery and performance of this Agreement
by Buyer, including, without limitation, the deliveries and
other agreements of Buyer contemplated hereby, have been duly
authorized
<PAGE>
and approved by its board of directors and do not require any
further authorization or consent of any third party or of any
governmental authority except as expressly set forth herein.
This Agreement is, and each other agreement or instrument of
Buyer contemplated hereby will be, the legal, valid and binding
agreement of Buyer, enforceable in accordance with its terms
except for the Enforceability Exceptions.
Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will
conflict with or result in any violation of or constitute a
default under any term of the Certificate of incorporation or
ByLaws of Buyer, or any agreement, mortgage, debt instrument,
indenture, franchise, license, permit, authorization, lease or
other instrument, judgment, decree, order, law or regulation by
which Buyer is bound.
3.3 No Broker or Finder. Neither Buyer nor any party acting
on its behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement.
3.4 Investment Representation. Buyer is purchasing the CCTS
Shares and the ICCTC Shares for its own account and without any
present view to distribute or resell same, except as permitted
under section 11.4(a) hereof.
3.5 Financinq. Buyer will have sufficient financing with
which to consummate the transactions contemplated hereby and
agrees that it will not qualify any application submitted to
the FCC for the transfer of the Licenses with respect to any
financing contingency.
ARTICLE 4
ACTIONS PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take
the following actions between the date hereof and the Closing
Date:
4.1 Investiqation of Sellinq Group and Companies bY Buyer.
Buyer acknowledges that the initial phase of its due diligence
investigation of Selling Group, described as Phase I due
diligence in that certain Letter of Intent dated February 4,
1994 between Buyer and C-TEC ("Letter of Intent"), has been
completed. Upon execution of this Agreement, Buyer shall
proceed with its Phase II due diligence review as described in
the Letter of Intent. In connection therewith, Selling Group
shall afford to the officers, employees and authorized
representatives (including, without limitation, independent
public accountants and attorneys) of Buyer and its financing
sources reasonable access and opportunity to conduct and
complete its Phase II due diligence review, including, without
limitation, a review of all books and records relating to the
Systems, contracts, income tax returns, physical inspection of
the Assets and Entity Assets (including the Real Property and
Entity Real Property for the purpose of conducting an
environmental
<PAGE>
audit, if necessary, and to inspect the Fixed Assets and Entity
Fixed Assets), and the right to contact and communicate with
Systems' employees, customers, vendors, suppliers, independent
contractors, representatives and others having a business
relationship with the Systems, including, without limitation,
the other partners and managing partners of the Partnerships.
Selling Group shall furnish to Buyer and its authorized
representatives such additional information concerning the
Assets, Entity Assets and the Systems as shall be reasonably
requested, including, without limitation, all such information
as shall be necessary to enable Buyer and its representatives
to verify the accuracy of the representations and warranties
contained in Article 2, and to determine whether the conditions
set forth in Article 6 have been satisfied. Buyer understands
that the Closing is not conditioned on the completion of or
satisfaction with its due diligence review (either Phase I or
Phase II) except to the extent of the existence of defects in
excess of the Due Diligence Threshold (as defined and more
specifically set forth in Section 6.5). Buyer agrees to use its
reasonable best efforts to complete its Phase II due diligence
review within a reasonable period of time from the date hereof
but nothing shall prohibit such review from continuing until
the Closing if Buyer, in its reasonable judgment, believes that
this is necessary. Buyer shall be responsible for all of its
costs and expenses relative to its acquisition review. Buyer
agrees that it will keep and maintain any and all information
obtained by it, its agents and counsel confidential, and will
not make use of any such information other than for its
evaluation of the transactions contemplated by this Agreement.
Buyer shall return all written information to Selling Group in
the event that the transactions contemplated by this Agreement
do not occur.
4.2 Preserve Accuracy of Representations and Warranties.
Each of the parties hereto shall refrain from taking any action
which would render any representation, warranty or covenant
contained in Article 2 or 3 of this Agreement inaccurate as of
the Closing Date. Each party shall promptly notify the other of
any (a) event or condition which would render any
representation or warranty set forth in Article 2 or 3 untrue
or in breach or would cause any covenant in Article 2 or 3 to
be unfulfilled or (b) any action, suit or proceeding that shall
be instituted or threatened against such party to restrain,
prohibit or otherwise challenge the legality ofany transaction
contemplated by this Agreement. In addition, Selling Group
shall update all Schedules and Exhibits when facts and
circumstances change to warrant such updates to make such
Schedules and Exhibits accurate. Not in limitation of the
foregoing, between the date of execution of this Agreement and
the Closing Date, Selling Group shall not make any material
changes in connection with the Systems without first obtaining
the prior written approval of Buyer, which approval shall not
be unreasonably withheld. Not in limitation, but in furtherance
of the foregoing, without the prior written approval of Buyer,
Selling Group, the Controlled Partnerships or the Companies
shall not (a) move any antenna or office site or enter into or
terminate any lease for any site in connection with the PA
System and enter into or terminate any lease for any site in
connection with the IA System where the
<PAGE>
annual rentals exceed $10,000 and the term exceeds 5 years
(unless such lease could be terminated by tenant on 90 days or
less notice without penalty), (b) enter into any agreements to
purchase Cellular Phones, transmitters, switches, antennas or
other equipment, other than in connection with the construction
of the IA System pursuant to Section 5.6 hereof, in excess of
$100,000 individually or $500,000 in the aggregate, (c)
materially change billing practices or rates, (d) change
salaries, bonuses or compensation structure of any employee,
(e) terminate or move to another Selling Group, Partnership or
Company operation any employee listed on Schedule 2.18, (f)
issue any additional shares or partnership interests in t~e
Companies or Partnerships, (g) redeem any shares or partnership
interests in the Companies or Partnerships, (h) merge,
liquidate, consolidate, reorganize or change the organic
structure of any of the Partnerships or Companies, (i) make any
dividend or distribution from any of the Companies or
Controlled Partnerships in violation of the provisions of any
Partnership Agreement or applicable law, (j) borrow any money
on behalf of such entities other than in the ordinary course of
business, provided, that (1) in no event shall such entities
incur any longterm liabilities (due and payable in one (1) year
or more) and (2) any liabilities incurred by such entities
shall be included as a Current Liability in the calculation of
the Working Capital Adjustment, (k) amend or change the
Certificate of Incorporation or ByLaws of any of the Companies
or Partnership Agreements or Certificates of Limited
Partnership of any of the Partnerships or (1) make any
commitment or agreement with respect to the foregoing.
4.3 Consents and Approvals. Promptly (and in any event
within ten (10) business days) after the execution hereof,
Selling Group and Buyer shall prepare and file, and cooperate
with each other in so doing, the necessary transfer and consent
to assignment applications with the FCC to transfer the
Licenses and Entity Licenses from Selling Group to Buyer.
Selling Group shall use its best efforts promptly to obtain all
other consents from parties to Contracts and Entity Contracts
(without increasing any financial or other burden on the
assignee) and all consents, amendments or permits from
governmental authorities which are required by the terms
thereof, this Agreement or otherwise for the due and punctual
consummation of the transactions contemplated by this
Agreement, provided that C-TEC and the Selling Group shall
obtain all consents required from affiliates of Selling Group
(including SRHC and Paging Plus, Inc.) that are parties to the
Intercompany Agreements. Selling Group shall also cooperate
with and assist Buyer and its authorized representatives in
order to provide an efficient transfer of the control and
management of the Systems and to avoid any undue interruption
in the activities and operations of the Systems following the
Closing Date except for the transactions contemplated hereby.
4.4 FCC Compliance. The parties agree that, notwithstanding
any provision of this Agreement, Buyer shall not, prior to the
Closing Date, directly or indirectly control, supervise, or
direct the operation of the Systems. The parties further agree
to
<PAGE>
cooperate in good faith and shall take all steps as may be
necessary or proper to expeditiously and diligently prosecute
the assignment application filed with the FCC to a favorable
conclusion (subject to Section 10.1) including, but not limited
to, the following: (a) appealing or seeking reconsideration of
any FCC denial of such assignment application, or conditional
grant; (b) satisfying any conditions imposed upon such grant;
and (c) taking all other actions necessary or appropriate to
bring about the transactions contemplated by this Agreement;
provided, however, such actions do not materially alter the
benefits or burdens of either party under this Agreement.
4.5 No Public Announcements. Neither of the parties hereto
shall, without the approval of the other party (which may not
be unreasonably withheld), make any press release or other
public announcement concerning the transactions contemplated by
this Agreement, except as and to the extent that such party
shall be so obligated by law or applicable rules or regulations
of governmental or regulatory agencies (such as the SEC or
NASDAQ), in which case the other party shall be advised and the
parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
4.6 Termination of Intercompany Aqreements. As of the
Closing Date, all agreements, commitments and other obligations
between Selling Group, the Companies, the Partnerships and
their affiliates ("Intercompany Agreements") set forth on
Schedule 4.6 hereof shall be assumed by Buyer. All other
Intercompany Agreements shall be terminated without penalty to
Buyer, Selling Group, the Companies or the Partnerships, as the
case may be.
4.7 Environmental Surveys. Buyer may, at its sole cost and
expense, engage an environmental consulting firm of good
reputation in the industry to conduct a phase I environmental
assessment of each parcel of Real Property, Entity Real
Property and Leased Real Property included in the Assets or
Entity Assets (or otherwise used in the Systems or otherwise by
the Companies or Partnerships) (the "Environmental Review") to
determine what remedial actions, if any, are necessary to cause
any applicable entity to be in compliance with the
Environmental Legal Requirements. If such Environmental Review
indicates that a phase II environmental assessment or any
remedial actions are reasonably necessary to comply with the
Environmental Legal Requirements, Buyer shall notify Selling
Group in writing of the actions required and the estimated
costs of such actions ("Remediation Costs"). Selling Group
shall promptly engage reputable and recognized environmental
engineers to cause the applicable entity to be in compliance
with all Environmental Legal Requirements and Selling Group
shall pay all Remediation Costs (without any Working Capital
Adjustment or other adjustment to the Purchase Price). If the
total Remediation Costs exceed the Due Diligence Threshold (as
defined in Section 6.5) and the remediation associated
therewith cannot be completed in full by the Closing, Buyer
shall have the option to (a) terminate this Agreement and its
obligations hereunder without any liability, cost or p~nalty
whatsoever, (b) delay the Closinq until said remediation is
<PAGE>
completed in its reasonable satisfaction or (c) proceed to
Closing but increase the Holdback in an amount equal to 110% of
the good faith estimate of the Remediation Costs.
4.8 Hart-Scott-Rodino Act Filings. Selling Group and Buyer
shall each cooperate and use all reasonable efforts to prepare
and file with the Federal Trade Commission ("FTC") and the
Antitrust Division of the United States Department of Justice
("DOJ") and other regulatory authorities, within twenty ~20)
days after the execution and delivery of this Agreement, all
requisite applications and amendments thereto, together with
related information, data and exhibits, necessary to satisfy
the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Hart-Scott Act")
with respect to the transactions contemplated hereby. Selling
Group and Buyer will keep the other party apprised of the
status of any inquiries made of such party by the FTC, the DOJ
or any other governmental agency with respect to this Agreement
or the transactions contemplated hereby.
4.9 Exclusive Dealinq. Selling Group and its Affiliates
shall deal exclusively with Buyer with respect to the sale of
the Assets, CCTS Shares or ICCTC Shares, the Entity Assets of
the Controlled Partnerships, and use their reasonable efforts
to cause the Minority Partnerships not to sell their Entity
Assets, and shall not solicit, encourage or entertain offers or
inquiries (nor shall Selling Group or any of its affiliates
authorize or permit any director, officer, employee, attorney,
accountant or other representative or agent to solicit,
encourage or entertain offers or inquiries) from other possible
acquiring companies, persons or entities, provide information
to or participate in any discussions or negotiations with any
companies, persons or entities with a view to an acquisition of
all or substantially all of the CCTS Shares, ICCTC Shares,
Entity Assets or Assets.
4.10 Title Insurance and Surveys. Selling Group shall
cooperate fully with and assist Buyer in the procurement as
soon as practicable, but in no event later than thirty (30)
days, after the date hereof, of (a) title insurance commitments
for an ALTA Owners Form policy ("Commitments"), issued by a
title insurance company mutually agreed on by the parties,
committing to insure Buyer's title and showing Selling Group,
the Companies or the Partnerships, as the case may be, in title
to the Real Property and Entity Real Property together with any
of the Leased Real Property requested by Buyer, in such amounts
and with extended coverage, 3.1 zoning and such additional
endorsements as Buyer may reasonably request subject only to
Permitted Exceptions, and (b) current plats of survey
("Surveys") of each parcel of the real property set forth on
Schedules 1.2(b) and 2.13(b) made by licensed surveyors and
certified to Buyer and Buyer's lender, if any, as having been
made in compliance with 1986 ALTA standards. At Closing, Buyer
shall receive ALTA owners title insurance policies consistent
with the Commitments and the Surveys. Buyer shall pay all costs
in connection with the procurement of such Commitments,
policies based thereon and the Surveys. Seller shall assist and
cooperate with
<PAGE>
Buyer in the procurement of all such policies and Surveys and
shall execute and deliver at Closing all other documents and
instruments necessary to transfer the Real Property to Buyer
subject only to Permitted Exceptions, including, without
limitation, real estate transfer tax declarations, FIRPTA
affidavits, environmental disclosure reports, if required, and
such other documents and instruments necessary or required to
transfer the Real Property to Buyer.
4.11 Tax Clearance. As soon as practicable from the date
hereof, Selling Group shall provide appropriate notices to the
Department of Revenue of the State of Pennsylvania ("PADOR")
and the Department of Revenue of the State of Iowa ("IADOR")
(PADOR and IADOR are sometimes hereinafter collectively
referred to as the "Departments") in order to procure a
Corporate Clearance Certificate from PADOR in connection with
CP, CPS and CCCC, a Lien Certificate from PADOR in connection
with CCTS and a Tax Clearance Letter from the IADOR in
connection with CP of I and ICCTC. At the Closing, Selling
Group shall provide to Buyer either (i) evidence of a stop
order from the Departments and/or a receipt from the
Departments evidencing that no amounts are owed by Selling
Group to either or both Departments, (ii) statements from
either or both Departments stating the amounts which are owed
by Selling Group (the "Deficiency") or (iii) an estimate
mutually agreed to by the parties of such liability (the
"Estimate"). Any portion of the sum of the Estimate or
Deficiency in excess of $100,000 shall be withheld from the
Purchase Price and be paid by Buyer to the Deposit Escrow Agent
as set forth in Section 1.5(c)(ii) to be held as part of the
Bulk Sales Deposit pursuant to the Holdback/Bulk Sales Escrow
Agreement. The Holdback/Bulk Sales Escrow Agreement shall
provide that the Bulk Sales deposit will be released to Selling
Group and/or the Departments, as the case may, be in accordance
with the various final releases received from said Departments.
ARTICLE 5
OTHER AGREEMENTS
5.1 NonCompetition Aqreements. At the Closing, each member
of Selling Group shall enter into a NonCompetition Agreement
(the "NonCompetition Agreement") providing that each such
entity, its officers, directors, shareholders and Affiliates
shall not (a) own, conduct, sell or act as an agent for the
sale of, invest in, lcan to, guaranty the debt of or otherwise
finance, or have any direct or indirect interest in any
business providing wireless telecommunications and data
services, including, without limitation, PCS and SMR, but
excluding basic telephone service, paging service (but not
excluding paging service bundled with cellular service), cable
television or fiber optic transmission services within the
boundaries of (i) the States of Pennsylvania and Iowa for a
period of two (2) years after the Closing and (ii) the Markets
for a period of three (3) years after the Closing, provided,
however, that the ownership of securities of any company owning
or operating a business referred to above is permitted if such
securities are publicly traded on a national securities market
<PAGE>
and constitute less than five percent (5%) of the outstanding
stock thereof and do not constitute control over such company,
(b) solicit employees and agents thereof for the same period
and (c) utilize confidential and proprietary data with respect
to the cellular telephone business for a period of ten (10)
years from the Closing. The NonCompetition Agreement shall
contain such other terms and provisions as are mutually
acceptable to Buyer and Selling Group.
As used in this Agreement, "Affiliate" of a Person shall
mean any other Person directly or indirectly owning,
controlling or holding, with power to vote, t'en percent (10%)
or more of the outstanding voting securities of such firstnamed
Person; and any other Person ten percent (10%) or more of whose
outstanding voting securities are directly or indirectly
controlled by or under common control with or of such
firstnamed Person. As used herein, the term "control," together
with "controlled," "controlling" or similar variants used
herein, means the possession, directly or indirectly, of the
power to direct or cause the direction and management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise and includes all directors
and executive officers thereof. Notwithstanding the foregoing,
as used in this Section 5.1, the definition of "Affiliate"
shall be the same as set forth in this paragraph except that it
will not include passive investors in C-TEC whose ownership
interest is less than fifty percent (50%) of the issued and
outstanding common stock as of the date hereof. Further, the
Non Competition Agreement contemplated by this Section 5.1
shall only be binding on Peter Kiewit ~ Sons, Inc. ("Kiewit")
within the Markets and with respect to the specific properties
contemplated by the Swap and shall not apply to non-C-TEC
subsidiaries and Affiliates owned by Kiewit the shares of which
are publicly traded on a national securities market.
"Person" shall mean an individual, partnership,
corporation, association, joint venture, trust or other entity.
5.2 Selling Group's Employees. On and as of the Closing
Date, Selling Group will take all action necessary to terminate
the employees of CPS and ICCTC who performed services on behalf
of the Systems. In addition, on the Closing Date, the Selling
Group shall (a) cause to be paid to such employees of CPS and
ICCTC all payroll sums, including, without limitation, vacation
pay, "golden parachute", retiree medical, or other benefits due
to them through the close of business on the Closing Date or
arising thereafter and shall indemnify, defend and hold
harmless Buyer from and against all Indemnifiable Damages (as
defined in Section 9.1) resulting or arising from such sums or
from the termination of employment. All such payments, to the
extent not made in full by the Selling Group, shall be
considered a Current Liability for purposes of the Working
Capital Adjustment. Buyer may, in its sole discretion and
without obligation, commencing within ten (10) days prior to
the Closing, offer employment to employees of the Systems on
terms and conditions unilaterally proposed by Buyer effective
on the Closing Date. Effective the Closing Date, the Selling
Group shall
<PAGE>
terminate, without penalty, all benefit and welfare plans
applicable to the Companies and Partnerships and shall provide
to all such employees a rollover or distribution of any vested
and other benefits and sums to which such employees may be
entitled. Buyer shall provide to all employees hired as of the
Closing Date coverage under benefit and welfare plans
established by Buyer to the fullest extent such coverage is
available to each such employee pursuant to the terms of such
benefit and welfare plans it being understood that (a) this
agreement is not intended to benefit any third party, (b) there
may be gaps in coverage to new ICN employees imposed by the
insurance company (such as waiting periods, pre existing
conditions etc.) and (c) nothing contained herein shall relieve
the Selling Group of any liability to any employee for claims,
benefits or other obligations owing to employees relating to
Periods prior to the Closing.
5.3 Assiqnment of Cellular Billinq Services. If permitted
by law and pursuant to the terms thereof, at Closing, C-TEC
will assign to Buyer all rights of C-TEC with regard to
cellular billing services provided to C-TEC under the
Systematics Agreement. If such assignment is not permitted
pursuant to the terms of the Systematics Agreement (and no
amendment of the Systematics Agreement is possible to allow for
such assignment) or by law, C-TEC will use its best efforts to
assist Buyer in obtaining a facility management agreement with
Systematics Telecommunications, Inc. which shall include
cellular billing capabilities reasonably similar to those terms
and conditions currently set forth in the Systematics Agreement
or at least reasonably in line with industry standards.
5.4 SWAP of Cellular Properties. Upon Buyer's written
election delivered to C-TEC and in consideration for amounts
previously paid or contemplated to be paid to the appropriate
member of the S,elling Group hereunder, C-TEC agrees to use its
reasonable best efforts to assist Buyer in negotiating and
completing a swap with United States Cellular Corporation
("USCC"), of USCC's Pennsylvania cellular properties for CP of
I's Iowa cellular properties (the "Swap"). C-TEC agrees to
provide any pertinent information it may have concerning the
proposed Swap which is not inconsistent with any legal
obligations or agreements C-TEC may have relative to USCC and
the Swap. Further, C-TEC will make available for a reasonable
time frame those C-TEC individuals and empIoyees who have
knowledge to best assist Buyer with the proposed Swap. The
Closing is not conditioned on the occurrence of the Swap.
5.5 Certain Debt. Selling Group agrees that the principal
amount and all accrued interest, penalties, late charges,
release fees, prepayment fees, bank attorneys' fees and other
charges on any debt (a) owed by ICCTC to Motorola, Inc.
("Motorola Debt"), (b) owed by PA5GP to Rural Finance Telephone
Cooperative ("RFTC Debt"), (c) owed by CLNS to former partners
of CLNS ("CLNS Debt"), shall be fully paid and satisfied as of
the Closing Date by the Selling Group. To the extent the
Motorola Debt, RFTC Debt and CLNS Debt is not fully satisfied,
an amount equal to CP of I's or CCTS's, as the
<PAGE>
case may be, percentage of the Motorola Debt, RFTC Debt and
CLNS Debt shall be included in the Working Capital Adjustment
as a Current Liability as set forth in Section 1.7(a)(i)(C)(5).
All other debt owed by the Companies or Partnerships to the
other or to any member of the Selling Group or Affiliate
thereof shall be satisfied on the Closing Date, and all debt
owed by any member of the Selling Group, the Companies or the
Partnership to the Companies or the Partnerships shall be
satisfied in full on the Closing Date, unless approved by Buyer
and reflected on the Working Capital Adjustment.
5.6 Completion of Iowa Svstem. Prior to the Closing Date,
Selling Group shall continue the construction of the IA System
in accordance with the plans and schedules set forth on
Schedule 5.6 attached hereto and made a part hereof. Such
construction shall be completed in accordance with the
standards, quality, guidelines and procedures customary in the
industry and previously used by Selling Group in the
construction of the System as a whole and such construction
shall be lien free. Not in limitation of the foregoing, Buyer
acknowledges Selling Group may purchase Motorola equipment and
other used equipment and materials to complete the construction
of the IA System. During the period commencing on February 4,
1994 and continuing through the Closing Date ("Construction
Period"), Selling Group shall expend $2,583,222 ("Construction
Limit") in connection with capital expenditures and related
capital costs in connection with the construction of the IA
System. Any costs paid to affiliates of the Selling Group shall
not be includable in the Construction Limit. During the
Construction Period, Buyer shall have the option of requiring
Selling Group to accelerate or slow down the construction of
the IA System and Selling Group shall comply with the
instructions of Buyer in connection therewith. If Selling Group
expends less than the Construction Limit during the
Construction Period, Buyer shall receive a Purchase Price
reduction equal to the difference between the Construction
Limit and the amounts actually expended by Selling Group in
accordance with Schedule 5.6 or pursuant to the direction of
Buyer. If Selling Group expends more than the Construction
Limit during the Construction Period, Selling Group shall
receive a credit at Closing equal to the difference between the
amounts actually expended by Selling Group and the Construction
Limit. Selling Group shall provide to Buyer all documentation
reasonably requested by Buyer to evidence and verify the
amounts actually spent by Selling Group during the Construction
Period. Any amounts which cannot be verified shall not be
included in the Construction Limit.
5.7 Consent of Partners in the Partnerships. The
Partnership Agreements and certain management agreements
related thereto contain certain restrictions regarding either
the (a) sale of stock in a corporation which owns a partnership
interest in a Partnership, including restrictions with respect
to PA3LP and the management agreement for PA5GP (a "Stock Sale
Transfer") or (b) transfer of a partnership interest to an
affiliate (as defined in such applicable Partnership Agreement)
("Affiliated Transfer"). Selling Group shall use its best
efforts prior to the Closing to
<PAGE>
(i) obtain the consents of all unaffiliated partners in the
Partnerships to the Stock Sale Transfers, (ii) obtain the
consents of all unaffiliated partners in the Partnerships to an
Affiliated Transfer as may be required or requested pursuant to
an acquisition structure to be proposed by Buyer and (iii) if
requested by Buyer, convert or assign all of CCTS' general
partnership interest in NEPA, except for a 1% general
partnership interest in NEPA, to CCTS' limited partnership
interest. Selling Group shall also use its best efforts to
obtain or assist Buyer in obtaining a waiver from unaffiliated
partners in PA3LP and PA4LP with respect to any future rights
of first refusal such partners may have in connection with
transfers of interest by,~CTS in PA3LP and PA4LP. If Selling
Group is unable, prior to Closing, to obtain the consents of
all unaffiliated partners in PA3LP to the Stock Sale Transfers,
Buyer shall receive a Purchase Price reduction equal to (X) the
proportionate number of "pops" (pursuant to 1990 U.S. Census
Data) owned by the Selling Group in any such Partnership
(believed to be 37,070 in sector 1 and 9,637 in sector 2),
multiplied by (Y) a per "pop" value of $180 ("Reduction
Amount"). In addition, C-TEC and Selling Group shall continue
to use their best efforts after the Closing to obtain the
consents of all unaffiliated partners in PA3LP to the Stock
Sale Transfers and if the receipt of same occurs within one
hundred and eighty (180) days of the Closing, Buyer shall pay
the Reduction Amount to Selling Group by wire transfer of same
day funds. To the extent that the transfer of the PA3LP
interest is retained by Selling Group, Selling Group shall
provide Buyer with a right of first refusal (subject to the
terms of the relevant Partnership Agreement) to purchase said
interest. If Selling Group is unable to obtain the consents of
the unaffiliated partners in PA5GP to the Stock Sale Transfers
(i.e. to keep CCTS as the System Manager), Buyer shall be
entitled to receive all termination payments and other amounts
that may be due to CCTS in connection with the termination of
the manaqement aqreement for PA5GP
5.8 Partition of Certain Partnerships. Selling Group will
use its best efforts to cause PA3LP and PA4LP (the "Partitioned
RSAs") to be partitioned (collectively, the "Partitions") into
two sectors as contemplated in the respective Partnership
Agreements for such Partnerships prior to Closing. Selling
Group will use its best efforts to obtain Final Approval for
the Partitions on or prior to the Closing Date. Simultaneous
with the Partitions, the Partnerships covering (a) sector 1 of
both Partitioned RSAs shall be owned 100% by CCTS (or Buyer)
and all other partners shall release and waive any claims in
and to said partnerships and against CCTS as general partner
and (b) sector 2 shall be created to reflect (in the case of
PA3LP) CCTS's ownership interest and rights (and consents to
transfer as contemplated in Section 5.7 hereof). If Final
Approval for the Partition of PA4LP has not been obtained on or
prior to the Closing Date, Buyer shall have the option of
paying into an escrow ("Partition Escrow") a portion of the
Purchase Price equal to $252,300, which is equal to (a) (i) the
proportionate number of "pops" pursuant to 1990 U.S. Census
Data to be owned by CCTS in PA4LP after the Partition (28,076),
minus (ii) the proportionate number of "pops" pursuant to 1990
U.S. Census
<PAGE>
Data that would be owned by CCTS in PA4LP if the Partition did
not occur (26,396 or (95,147 x 27.742%)), multiplied by t2) a
per ''popll value of $150, ("Partition Holdback"). The
Partition Escrow shall be a joint order escrow and shall
provide that the Partition Holdback, together with all accrued
interest on such portion, will be (X) paid to Selling Group
upon the granting of Final Approval for the Partition of PA4LP,
or (Y) paid to Buyer upon the final rejection by the FCC of the
petition requesting Final Approval for the Partition of PA4LP.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date,
of the conditions set forth below.
6.1 No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Selling
Group in the performance of any of its covenants and agreements
herein; each of the representations and warranties of Selling
Group contained or referred to herein shall be true and correct
in all material respects on the Closing Date as though made on
the Closing Date, except for changes therein specifically
permitted by this Agreement or resulting from any transaction
expressly consented to in writing by Buyer; and there shall
have been delivered to Buyer a certificate or certificates to
that effect, dated the Closing Date, signed on behalf of each
member of Selling Group, by its President or any duly
authorized officer, provided that the condition to Closing set
forth in this Section 6.1 shall be deemed satisfied if the
aggregate amount of any such breaches does not exceed the Due
Diligence Threshold.
6.2 Corporate Action. Each member of Selling Group shall
have taken all corporate action necessary to approve the
transactions contemplated by this Agreement prior to the
execution of this Agreement, and, upon execution of this
Agreement, Selling Group shall have furnished Buyer with
certified copies of the resolutions adopted by the
Stockholder(s) (where required) and Board of Directors of each
member of Selling Group, in form and substance satisfactory to
counsel for Buyer, in connection with such transactions.
6.3 No Restraint or Litiqation. No action, suit,
investigation or proceeding shall have been instituted and
pending or threatened in writing by any third party,
governmental or regulatory agency to restrain, prohibit or
otherwise challenge the legality or validity of the
transactions contemplated hereby.
6.4 Necessary Actions, Consents and Permits. At the
Closing, (i) Selling Group shall have obtained all thirdparty
consents and approvals required for the transfer of the Shares
and Assets to Buyer, including, without limitation, the
consents and approvals required for the assignment to Buyer of
the Contracts, (ii) the
<PAGE>
expiration of all waiting periods under the Hart-Scott-Rodino
Act (the "HSR Termination") shall have occurred, (iii) the
Final Approval (as defined below) of the FCC and the State
Commissions for the transfer and assignment of the Licenses and
Shares shall have been received, (iv) the consents to the Stock
Sale Transfers contemplated in Section 5.7 shall have been
received or Buyer shall have received a Purchase Price
reduction and other amounts as set forth in Section 5.7, (v)
the Intercompany Agreements other than those set forth on
Schedule 4.6 shall be terminated without penalty or cost to any
of the Companies or Partnerships, and (vi) the consents and
estoppel letters of those landlords of Leased Real Property and
other parties to'Contracts set forth on Schedule 6.4(vi) hereof
shall have been obtained, provided that the condition to
Closing in this Section 6.4(vi) shall be deemed satisfied if
the failure to obtain any such consents and estoppels does not
impair the acquisitions contemplated hereby in an amount in
excess of the Due Diligence Threshold. For purposes hereof,
"Final Approval" means that such consents shall no longer be
subject to administrative or judicial appeal, review or
reconsideration by the FCC or any State Commission.
6.5 Completion of Due Diliqence. Buyer shall have completed
its due diligence investigation described in Section 4.1 hereof
to its full and complete reasonable satisfaction in its sole
discretion, which shall be deemed to have occurred if Buyer,
upon completion of its due diligence (not later than the
Closing Date), has not learned any material defects relative to
the transactions described hereby which in the aggregate are in
excess of five percent (5%) of the Purchase Price ("Due
Diligence Threshold") or, if Buyer does uncover defects in
excess of the Due Diligence Threshold (a) said defects are
cured at the Selling Group's expense within thirty (30) days of
notice thereof from Buyer to Selling Group, or (b) in the case
of any such defects with respect to the Seller Licenses,such
defects are cured by Selling Group within the time period
prescribed by the FCC and State Commissions. Provided, however,
that it shall be a condition to Closing that all defects
relative to the Seller Licenses be cured regardless of the
materiality of such defects, unless otherwise agreed by Buyer
and Selling Group. If Selling Group cannot cure any and all
defects within the requisite time periods, then Buyer, in its
sole and absolute discretion, may either extend the time period
to cure such remaining defects, deduct the amount of the
remaining uncured defects from the Purchase Price and proceed
to Closing or terminate this Agreement, in which case, Buyer
and Selling Group will execute a direction directing the
Deposit Escrow Agent to return the Earnest Money Deposit,
including accrued interest thereon to Buyer ! and this
Agreement will terminate without penalty to any party (except
for the wilful bad acts of Selling Group). Notwithstanding
anything contained herein to the contrary, the provisions of
this Section 6.5 shall not limit the right of Buyer to proceed
to Closing and receive indemnification, or the obligation of
Selling Group to provide indemnification, pursuant to the
provisions of Article 9 hereof with respect to any defects
uncovered by ~uyer in connection with its due diligence review
or thereafter in amounts less than or greater than the Due
Diligence Threshold, unless Buyer
<PAGE>
received a Purchase Price reduction in connection with such
amounts at Closing, in which case Buyer shall not be entitled
to indemnification with respect to such amounts pursuant to
Article 9.
6.6 Leqal Opinion. Buyer shall have received a reasonably
satisfactory opinion from (a) Raymond Ostroski, Vice President
and General Counsel to Selling Group, in form and substance
reasonably satisfactory to counsel to Buyer, which opinion,
shall include, without limitation, the representations and
warranties made by Selling Group in Sections 2.1, 2.4 (to the
best of such counsel's knowledge after a due and diligent
inquiry), 2.5 (to the best of such counsel's knowledge after ,
due and diligent inquiry), 2.7 and 2.20(b) and (c) (to the best
of such counsel's knowledge after a due and diligent inquiry)
and (ii) Becker ~ Madison, Selling Group's FCC counsel, in form
and substance reasonably satisfactory to counsel to Buyer, that
all consents, approvals, authorizations or orders of the FCC
and other governmental authorities required to assign the
Licenses, CCTS and ICCTC Shares to Buyer have been obtained,
are valid and effective and are not subject to appeal, review
or reconsideration and constitute the Final Approval of the
FCC.
6.7 Other Documentation. Buyer shall have received all of
the documents and showings required to be delivered by Selling
Group at the Closing pursuant to Section l.9(a) hereof or
otherwise contained in Articles 4 or 5 herein, and such other
documentation reasonably requested by counsel to Buyer and
necessary and appropriate to complete the transactions
contemplated hereby.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING GROUP
The obligations of Selling Group under this Agreement shall
be subject to the satisfaction, on or prior to the Closing
Date, of the conditions set forth below.
7.1 No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by Buyer
in the performance of any of its covenants and agreements
herein; each of the representations and warranties of Buyer
contained or referred to herein shall be true and correct in
all material respects on the Closing Date as though made on the
Closing Date except for change therein specifically permitted
by this Agreement or resulting from any transaction expressly
consented to in writing by Selling Group or any transaction
contemplated by this Agreement; and there shall have been
delivered to Selling Group a certificate or certificates to
such effect, dated the Closing Date, and signed on behalf of
Buyer by its President or any duly authorized officer.
7.2 Corporate Action. Buyer shall have taken all corporate
action necessary to approve the transactions contemplated by
this Agreement, and Buyer shall have furnished Selling Group
with certified copies of resolutions adopted by the Board of
Directors
<PAGE>
of Buyer, in form and substance satisfactory to counsel for
Selling Group, in connection with such transactions.
7.3 No Restraint or Litiqation. No action, suit or
proceeding shall have been instituted and pending or threatened
in writing by any third party or governmental agency to
restrain, prohibit or otherwise challenge the legality or
validity of the transactions contemplated hereby.
7.4 Leqal Opinion. Selling Group shall have received a
satisfactory opinion from Gould & Ratner, counsel to Buyer, in
form and substance satisfactory to counsel to Selling Group
opining to the representations and warranties made by Buyer in
Sections 3.1 and 3.2.
7.5 Other Documentation. Selling Group shall have received
the payment of the Purchase Price as set forth in Section 1.7
hereof and all of the documents and showings required to be
delivered by Buyer at the Closing pursuant to Section l.9(b)
hereof or otherwise contained herein, and such other
documentation reasonably requested by counsel to Selling Group
and necessary and appropriate to complete the transactions
contemplated hereby.
ARTICLE 8
TAX MATTERS
8.1 Section 338(h)(10)Election. The parties acknowledge and
agree that the purchase of the CCTS Shares and ICCTC Shares
constitutes a "qualified stock purchase" for purposes of
Section 338(d)(3) of the Code, and that Buyer intends to make
an "express election" pursuant to Section 338(g) of the Code
and the regulations promulg~ted thereunder with respect to the
purchase of the CCTS Shares and ICCTC Shares. C-TEC represents
and warrants to Buyer that it is now and at Closing will be
qualified to make a valid election under Section 338(h)(10) of
the Code with respect to such purchase. C-TEC, Selling Group
and Buyer agree to join in making a valid election under
Section 338(h)(10) of the Code with respect to the purchase of
the CCTS Shares and ICCTC Shares within the time period
prescribed by the Code. Buyer, C-TEC and Selling Group also
agree to make the state law equivalent of the Section
338(h)(10) election wherever such election is available within
the time period prescribed by applicable state law. Buyer shall
prepare Form 8023 and submit it to C-TEC and Selling Group for
C-TEC and Selling Group's reasonable approval and for timely
signing and filing with the appropriate governmental agency and
C-TEC and Selling Group will provide Buyer with copies of all
filings and correspondence related thereto. Buyer, C-TEC and
Selling Group shall cooperate fully in timely making the
election and filing under Section 338(h)(10) of the Code and
similar available elections pursuant to applicable state and
local laws. The parties agree to allocate the Purchase Price
pursuant to the procedures in Section 1.7(d) hereof.
<PAGE>
8.2 Section 754 Election. To the extent a valid election
under Section 754 of the Code is not in effect with respect to
any Controlled Partnerships, CCTS will cause such election to
be made pursuant to the Partnership Agreements of any such
Controlled Partnerships, so that a valid election under Section
754 of the Code may be made upon the filing of any such
Partnership's next required tax return subsequent to the
Closing ("Mandatory Elections"). To the extent a valid election
under Section 754 of the Code is not in effect with respect to
any Minority Partnerships, CCTS will use its best efforts to
obtain, prior to the Closing, the necessary consents and
approvals from the partners of any such Minority Partnershlps,
with authority to cause such election to be made pursuant to
the Partnership Agreements of any such Minority Partnerships,
so that a valid election under Section 754 of the Code may be
made upon the filing of any such Minority Partnership's next
required tax return subsequent to the Closing, provided,
however, that the failure to obtain such consents or make such
elections in connection with the Minority Partnerships shall
not be a condition to Closing.
8.3 Tax Indemnity. Selling Group and C-TEC hereby jointly
and severally agree, and C-TEC hereby agrees to cause the other
members of the C-TEC consolidated Group, to indemnify and hold
harmless Buyer, the Partnerships and the Companies from and
against (a) any liability for federal, state and local income
taxes, charges, fees, penalties, duties, levies or other
assessments ("Taxes") of Selling Group, C-TEC, any other member
of the C-TEC consolidated group, the Partnerships and the
Companies applicable to periods ending on or prior to the
Closing Date including without limitation amounts assessed,
asserted or ultimately due and owing pursuant to the
proceedings set forth on Schedule 2.11, (b) any liability for
any Taxes attributable to the elections under Sections 338(g)
or Section 338(h)(10) of the Code, or comparable provisions of
state or local law, (c) any liability for any Taxes arising
under Treas. Reg. Section 1.15026 or comparable provisions of
state or local law, asserted or assessed against affiliated
groups which included the Companies for all years prior to and
including the Closing Date, and (d) any reasonable expenses
incurred (including attorneys', accountants', and expert
witness fees) in connection with any of the foregoing, provided
that each party agrees to bear its own expenses in connection
with the matters described in Sections 8.1 and 8.2, except
expenses resulting from a breach by the other party of such
provisions or matters covered by the fore~oing indemnities.
8.4 Tax Proceedinqs. In the event that any of Buyer, the
Companies, the Partnerships, any member of Selling Group, C-TEC
or any of their Affiliates receives notice of any pending or
threatened examination, claim, adjustment or other proceeding
relating to Taxes for any period for which Selling Group or
C-TEC is or may be liable hereunder, Buyer shall timely notify
C-TEC in writing thereof, but in no event later than 30 days
after the receipt of such notice. Selling Group and C-TEC shall
promptly notify Buyer of any pending or threatened examination,
claim, adjustment or other proceeding relating to Taxes for any
peri~dfor which Selling Group, C-TEC or any member of the C-TEC
consolidated
<PAGE>
group (including the Companies) is or may be liable hereunder
which could have a material adverse effect on the Companies or
the Partnerships and agree to keep Buyer advised of the status
of such actions, as well as furnishing Buyer relevant material
documentation relating thereto. As to any such Taxes for which
Selling Group or any of the Companies or Partnerships or C-TEC
or any of their Affiliates is or may be liable hereunder, C-TEC
shall be entitled to control or settle the content of such
examination, claim, adjustment or other proceedings, provided
that any such settlement that adversely effects the Companies
or Buyer shall only be completed with the prior written consent
of Buyer. The parties shall cooperate with each other in good
faith in the negotiation and settlement of any proceedings
described in this Section 8.4. Each party will provide, or
cause to be provided, to the other party any authorizations
(including power of attorney) necessary to control any
proceedings which such other party is entitled to control
pursuant to this Section 8.4. Each party will provide, or cause
to be provided, to the other party copies of all correspondence
received from any taxing authority which relates to any
liability for Taxes for any period for which such other party
is or may be liable hereunder.
8.5 Cooperation and Exchanqe of Information. Selling
Group, C-TEC and Buyer agree to cooperate and exchange
information as follows:
(a) Except as otherwise provided herein, any amount to
which a party is entitled under this Article 8 shall be
promptly paid to such party by the party obligated to make such
payment following written notice (together with reasonably
detailed information describing the claim and the basis
therefor) to the party so obligated that such amount is
due hereunder:
(b) Selling Group, C-TEC and Buyer shall (i) each provide
the other, with such assistance as may reasonably be requested
by any of them in connection with the preparation of any tax
return, audit or other examination by any taxing authority or
judicial or administrative proceedings relating to liability
for Taxes, (ii) each retain and provide the other with any
records or other information which may be relevant to such tax
return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of
any such audit or examination, proceeding or determination that
affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of
the foregoing, Buyer shall retain, and shall cause the
Companies to retain, Selling Group and C-TEC shall retain,
until thirty days after the expiration of the applicable
statute of limitations, copies of all tax returns, supporting
work schedules and other records or information which may be
relevant to such tax returns for all tax periods of portions
thereof ending before or including the Closing Date and shall
not thereafter destroy or otherwise dispose of any~such records
without first providing the other party with a
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reasonable opportunity to review and copy the same at such
other party's expense;
(c) Any information obtained pursuant to this Section 8.5
shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or claims
for refund or in conducting any audit or other proceedings;
(d) Each party shall provide the cooperation
and information required by this Section 8.5 at its own
expense;
(e) Selling Group, C-TEC and Buyer shall cooperate in the
timely filing of any other returns or related information
required to be filed in connection with the sale of the CCTS
Shares and ICCTC Shares.
8.6 Consent of Buyer. Except as set forth in Section 8.1,
Selling Group and C-TEC shall not make, and shall not permit
the Companies to make, any elections (or change any existing
elections) with respect to Taxes of the Companies or Controlled
Partnerships, without the prior written consent of Buyer, which
consent will not be unreasonably withheld.
8.7 Sellinq Group's Consolidated Return. Selling Group and
C-TEC agree to timely file all consolidated or combined tax
returns and respective state income tax returns for all periods
ending on or prior to the Closing Date of any affiliated group
which includes the Companies. All such returns will be prepared
on a basis consistent with the basis on which similar returns
were prepared for prior periods and will be true and correct in
all material respects. All Taxes owing with respect to such
returns will be timely paid.
8.8 Effective Date for Partnership Allocations and
Distributions.
(a) The parties will cause the financial books and records
of the Partnerships to be closed as close as possible to the
Closing Date to in effect reflect two short years, one from
January 1, 1994 to the Closing Date and the other from the
Closing Date to December 31, 1994. Buyer and Selling Group
acknowledge and agree that all allocations of profits, losses
or other such items under the Partnership Agreements (including
all allocations of profits, losses and other such items under
the Partnership Agreements which relate to the sale or other
disposition of any capital asset or property described in
Section 1231(b) of the Code), shall be allocated to Selling
Group if such profits, losses or other such items relate solely
to the period prior to the Effective Date and shall be
allocated to Buyer if such profits, losses or other such items
relate solely to the period subsequent to the Effective Date.
(b) All calculations and determinations for the Closing
Fiscal Year of ordinary income and loss and the gain or loss
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from the sale or disposition of capital assets shall be made by
each Partnership's independent certified public accounting firm
(subject to the review and approval of Buyer's independent
certified public accounting firm) on the basis of each
Partnership's past practices, consistently applied, and such
calculations and determinations shall be final and binding on
Selling Group and Buyer, and the cost thereof shall be borne by
each respective Partnership.
(c) From and after the Effective Date, all distributions
made by the Partnerships in respect of the Partnership
Interests of CCTS shall be for the account of Buyer whether
such distribution relates to profits earned prior to the
Effective Date or otherwise.
(d) Selling Group agrees that if any Partnership
distributes any cash directly to Selling Group which cash
distribution was intended to be or should have been made to
CCTS, then Selling Group shall promptly forward such
distribution to CCTS.
8.9 Accountinq Transition. After the Closing, the parties
shall cooperate as reasonably necessary to effect a smooth
accounting transition of the Companies and Controlled
Partnerships to Buyer's accountants and agents. The parties
will cause the financial books and records of the Companies to
be closed as close as possible to the Closing Date to in effect
reflect two short years, one from January 1, 1994 to the
Closing Date and the other from the Closing Date to December
31, 1994. Accounting methods shall be used in closing such
books which shall be consistent with those methods used in
prior years and which do not have the effect of distorting
income or expenses, except that state, local and other taxes
based on items other than income or sales shall be computed for
the twelve (12) months beginning January 1, 1994 and separately
calculated for the different short years.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification bv Sellinq Group and C-TEC.
Notwithstanding any investigation by Buyer or the occurrence of
the Closing, Selling Group and C-TEC, jointly and severally,
together with their respective successors and assigns, shall
indemnify and hold Buyer, its shareholders, directors,
officers, employees, agents, lenders and its and their
respective successors, assigns, partners, heirs and personal
representatives harmless from, against or in respect of the
aggregate of all Indemnifiable Damages of Buyer. For this
purpose, the term "Indemnifiable Damages" of Buyer means the
aggregate of any and all damage, loss, deficiency, liability,
expense (including, but not limited to, any reasonable
attorney's fees, expert witness fees, court costs and
expenses), action, suit, proceedings, demand, settlement,
assessment or judgment to or against Buyer arising out of or in
connection with:
