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UNITED STATES
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): April 10, 1997
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HICKORY TECH CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 0-13721 41-1524393
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
221 East Hickory Street, P.O. Box 3248, Mankato, MN 56002-3248
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (800) 326-5789
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 10, 1997, the Registrant, under terms of a purchase agreement
originally dated June 15, 1995 and subsequently amended, acquired the assets of
11 rural telephone exchanges in the State of Iowa from US West Communications,
Inc., a Colorado corporation ("US West") for $35,271,000. The 11 exchanges
contain approximately 12,500 telephone access lines located in and around the
Iowa communities of Akron, Bancroft, Boyden, Doon, Hawarden, Hull, Ireton,
Lakota, Rock Rapids, Rock Valley, and Sibley. The acquisition was accounted for
as a purchase and approximately $22,322,000 of cost in excess of net assets
acquired was recorded.
The Registrant funded the acquisition by the issuance of long-term debt
instruments to seven institutional investors (insurance companies) in a private
placement. The long-term debt consists of Senior Unsecured Notes of $40 million
with final maturity in 15 years. The interest rate is fixed at 7.11%.
Pro forma financial statements are being filed herewith pursuant to Rule 11-
01(a)(5) of Regulation S-X.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information
The following pro forma financial information is attached:
(i) Pro forma statement of income and explanatory notes (not audited)
which show the pro forma effect on the historical results of
operations of the Registrant for the calendar year 1996, as if
the acquisition of the assets of the rural telephone exchanges
occurred at the beginning of the Registrant's fiscal year 1996
(January 1, 1996).
(ii) Pro forma balance sheet and explanatory notes (not audited) which
show the effect on the Registrant of the acquisition of the
assets of the rural telephone exchanges as of December 31, 1996,
as if the acquisition occurred on December 31, 1996.
(c) Exhibits
2(a) Agreement For Purchase and Sale of Exchanges between US West
Communications, Inc. and Hickory Tech Corporation dated June 15, 1995.
2(b) First Amendment to Agreement for Purchase and Sale of
Exchanges between US West Communications, Inc. and Hickory Tech
Corporation dated February 21, 1996.
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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.
Date: April 25, 1997
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HICKORY TECH CORPORATION
By
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Robert D. Alton, Jr., Chief Executive Officer
By
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David A. Christensen, Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Document Description
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2(a) Agreement For Purchase and Sale of
Exchanges between US West Communications,
Inc. and Hickory Tech Corporation dated
June 15, 1995.
2(b) First Amendment to Agreement for Purchase
and Sale of Exchanges between US West
Communications, Inc. and Hickory Tech
Corporation dated February 21, 1996.
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PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(NOT AUDITED)
(Dollars in Thousands, except Per Share Amounts)
Acquired
US West Pro
Hickory Telephone Forma
Tech Corp Exchanges Combined
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Operating Revenues $66,562 $8,279 $74,841
Costs and Expenses 49,789 5,187 54,976
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Operating Income 16,773 3,092 19,865
Other Income & Expense 512 (2,606) (2,094)
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Income Before Income Taxes 17,285 486 17,771
Income Taxes 6,866 202 7,068
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Net Income $10,419 $284 $10,703
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------- ---- -------
Earnings Per Share $2.09 $0.06 $2.15
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NOTES TO PRO FORMA STATEMENT OF INCOME (NOT AUDITED)
The presented pro forma statement of income for the year ended December 31,
1996 consists of the historical statement of income of the Registrant plus
the forecasted statement of income from the assets purchased from US West
on April 10, 1997 as if they were acquired on January 1, 1996.
OPERATING REVENUES AND EXPENSES ASSUMPTIONS
The pro forma revenues for the newly acquired rural telephone exchanges
were estimated based on the number of telephone access lines served by the
assets and an estimate of the minutes of use those lines would generate.
The resulting usage estimates were then multiplied by the rate elements
applied for by the Registrant. The pro forma operating expenses of the
newly acquired rural telephone exchanges were developed by estimating the
necessary staffing requirements to support their unique service and
geographic territories. In addition, operating expenses were estimated
based upon the Registrant's experience as a local telephone service
provider in similar geographic areas and its experience in completing
previous rural telephone exchange acquisitions.
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DEPRECIATION AND AMORTIZATION ASSUMPTIONS
The pro forma property and equipment depreciation was computed using the
straight-line method at rates based on estimated service lives of the
assets as follows:
Assets Service Lives
Buildings 30 - 40 years
Telephone Plant and Equipment 5 - 40 years
The pro forma cost in excess of the fair value of the net assets acquired
and cost associated with the acquisition were amortized over 40 years.
INTEREST EXPENSE ASSUMPTIONS
The Registrant borrowed $40 million to complete the purchase of the rural
telephone exchanges from US West on April 10, 1997. In the pro forma,
interest expense, as if the acquisition occurred on January 1, 1996, is
included in Other Income & Expense at a rate of 7.11%. The purchase price
to US West was $35,271,000.
INCOME TAX
A combined federal and state income tax rate of 41.5% was utilized for the
newly acquired assets.
EARNINGS PER SHARE
Earnings per share were calculated based on 4,980,006 average shares
outstanding for the year ended December 31, 1996.
The pro forma statement of income is not necessarily indicative of the
results of operations as if acquisition occurred at the beginning of the
period presented, nor are necessarily indicative of the results of future
operations.
The pro forma statement of income and the notes should be read in
conjunction with the Registrant's consolidated financial statements and
related notes for the year ended December 31, 1996 incorporated in the Form
10-K filing dated March 27, 1997.
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PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(NOT AUDITED)
(Dollars in Thousands)
Acquired
US West Pro
Hickory Telephone Forma
Tech Corp Exchanges Combined
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ASSETS
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Current Assets $17,967 $4,729 $22,696
Investments 2,980 2,980
Net Property, Plant & Equipment 40,873 12,949 53,822
Intangible and Other Assets 9,443 22,322 31,765
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Total Assets $71,263 $40,000 $71,263
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities $11,688 $ $11,688
Long-Term Debt 877 40,000 40,877
Other Liabilities 6,071 6,071
Shareholders' Equity 52,627 52,627
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Total Liabilities and Shareholders' Equity $71,263 $40,000 $111,263
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NOTES TO PRO FORMA BALANCE SHEET (NOT AUDITED)
The presented pro forma balance sheet as of December 31, 1996 consists of
the historical balance sheet of the Registrant plus the assets purchased
from US West on April 10, 1997 as if they were purchased on December 31,
1996. The acquisition was accounted for under the purchase method of
accounting.
The $40 million long-term debt proceeds from the institutional investors
was utilized for the acquisition. The Registrant's transaction with US
West was summarized as cash paid of $35,271,000 for net property, plant and
equipment valued at $12,949,000 and costs in excess of net assets of
$22,322,000. The remaining cash from the long-term debt proceeds of
$4,729,000 will be utilized for ongoing capital expenditures for the newly
acquired rural telephone exchanges as well as the Registrant's existing
telephone exchanges.
The pro forma balance sheet is not necessarily indicative of the financial
position as if acquisition occurred on December 31, 1996 as presented, nor
is it necessarily indicative of the financial position in the future.
The pro forma balance sheet and the notes should be read in conjunction
with the Registrant's consolidated financial statements and related notes
for the year ended December 31, 1996 incorporated in the Form 10-K filing
dated March 27, 1997.
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Exhibit 2(a)
AGREEMENT FOR PURCHASE AND SALE OF EXCHANGES
This Agreement for Purchase and Sale of Exchanges is made and entered
into as of the 15th of June, 1995, by and between U S WEST Communications,
Inc., a Colorado corporation ("Seller"), and Hickory Tech Corporation, a
Minnesota corporation ("Buyer").
RECITALS
A. Seller currently has certain rights to provide and operate wireline
telecommunication services and owns certain Assets used to provide such
services in the Exchange Area, pursuant to a grant of operating
authority issued by the Utilities Board, which have been offered for
sale.
B. Buyer desires to acquire the right to provide and operate wireline
telecommunication services and to purchase the Assets, and Seller
wishes to sell, assign and transfer the aforesaid right to provide and
operate the wireline telecommunication services and Assets to Buyer.
C. Each defined term shall have the meaning set forth in this Agreement
where such term is first used or, if no definition is so set forth, the
meaning set forth in the "Glossary of Terms," attached hereto and
incorporated herein by reference.
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NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 SALE AND TRANSFER. Upon the terms and subject to the conditions
hereinafter set forth, Seller agrees to sell, convey, transfer, assign and
deliver all of the Assets and the right to provide and operate the wireline
telecommunication service in the Exchanges to Buyer, and Buyer agrees to
purchase and receive the right to provide and operate the wireline
telecommunication service in the Exchanges and Assets from Seller.
1.2 PURCHASE PRICE. Buyer shall pay to Seller as consideration for the
sale and transfer set forth in Section 1.1, a total purchase price of
twenty-two million one hundred thousand dollars (U.S. $22,100,000)(the
"Purchase Price"). The Purchase Price shall be paid as follows:
A. EARNEST MONEY. (i) Within five (5) Business Days from the date
of this Agreement, Buyer shall either (a) deposit in immediately available
funds an amount equal to three hundred thousand dollars (U.S. $300,000)(the
"Earnest Money") in an escrow account
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(the "Escrow Account") established with Norwest Bank Minnesota, N.A. pursuant
to an Escrow Agreement substantially in the form of Exhibit A (the "Escrow
Agreement") or (b) provide to Seller an irrevocable standby letter of credit
with language contained in the form attached hereto in Exhibit 1.2(A)(the
"Standby Letter of Credit") with a term of one (1) year, and renewable for an
additional one year term in an amount equal to three hundred thousand dollars
(U.S. $300,000) payable to Seller. If Buyer fails to deposit the Earnest
Money or provide the Standby Letter of Credit as provided herein or if the
Related Party, set forth on Schedule 3.1(J), fails to deposit its Earnest
Money or provide the Standby Letter of Credit to Seller as provided herein,
Seller may terminate this Agreement in its entirety without further
obligation to Buyer.
(ii) Within thirty (30) days from the date of this Agreement, Buyer
shall (a) deposit an additional amount of three hundred thousand dollars
(U.S. $300,000) in the Escrow Account, or (b) provide to Seller an
irrevocable Standby Letter of Credit (with language contained in the form of
Exhibit 1.2(A)) for such amount. (Upon such deposit or provision of a Standby
Letter of Credit, the total amount of six hundred thousand dollars (U.S.
$600,000) shall thereafter be the "Earnest Money" hereunder.) If Buyer does
not deposit this additional amount in the Escrow Account or provide such
Standby Letter of Credit to Seller by the end of such thirty (30) day period
or if the Related Party, as set forth on Schedule 3.1(J) fails to deposit its
Earnest Money or provide its Standby Letter of Credit as provided in its
agreement with Seller, this Agreement shall terminate without further
obligation of Seller or Buyer and Seller shall be entitled to immediately
receive the first three hundred thousand dollars (U.S. $300,000)
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deposited in such Escrow Account pursuant to Section 1.2(A)(i) above or if
the Buyer has provided a Standby Letter of Credit Seller shall be entitled to
receive three hundred thousand dollars (U.S. $300,000) under the Standby
Letter of Credit.
(iii) Within one hundred twenty (120) days following the execution
of this Agreement, Buyer shall have obtained a written commitment letter(s),
containing standard and customary terms and conditions for transactions of
this size and nature, from a lender(s) assuring Buyer that funds will be
available to Buyer for the consummation of this Transaction and that related
transaction set forth on Schedule 3.1(J). Buyer shall deliver such commitment
letter(s) to Seller promptly after receiving such letter(s). If Buyer fails
to deliver such written commitment letters, in a form in accordance with this
Section, within such one hundred twenty (120) day period, this Agreement
shall terminate without further obligation of the Buyer or Seller, and Seller
shall be immediately entitled to receive the Earnest Money or draw upon the
Standby Letter of Credit (as the case may be) and all interest accrued
thereon, in its entirety.
(iv) All fees and expenses payable to Norwest Bank Minnesota, N.A.
pursuant to the Escrow Agreement or in connection with the Standby Letter of
Credit (as the case may be) shall be paid equally between the Buyer and the
Seller.
(v) At Closing, the Earnest Money and interest accrued thereon
shall be applied towards the payment of the Purchase Price. In the event that
the Closing does not take
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place as a result of a breach by Buyer of any term and condition of this
Agreement, the Earnest Money or Standby Letter of Credit (as the case may
be), and accrued interest thereon (if any), shall be delivered to Seller as
liquidated damages, and not as a penalty (in view of the difficulty of
determining the aggregate amount of damages which may result to Seller from
such breach), and this Agreement shall thereafter terminate. Except as set
forth in Sections 3.1(C) regarding payment of expenses, such liquidated
damages shall constitute the sole and exclusive damages payable by Buyer to
Seller under this Agreement for a breach by Buyer of any term and condition
of this Agreement as a result of which the Closing does not take place.
B. REMAINING BALANCE. On the Closing Date, the remaining balance
of the Purchase Price, minus any adjustment pursuant to Section 1.3, shall be
payable to Seller by wire transfer of immediately available funds to such
bank account(s) as Seller shall designate no later than three (3) Business
Days prior to Closing.
1.3 ASSET VERIFICATION. (a) Buyer shall have a sixty (60) day period
from and after the date of this Agreement during normal Business hours to
verify the accuracy of the Seller's Continuing Property Records ("CPRs") for
the Exchanges, and Seller shall grant Buyer reasonable access to its
personnel and facilities for this purpose during such sixty (60) day period.
Buyer shall provide to Seller at the end of such sixty (60) day period a
statement of any Major Discrepancy ("Buyer's Statement") between the CPRs and
the Buyer's findings of Assets. The Buyer's Statement will contain a list of
any missing Assets which constitute a Major
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Discrepancy with the value as established by Seller's net book value of such
Asset as set forth in the CPRs. Seller shall also provide a statement to
Buyer setting forth any Assets with Seller's net book value therefor, not
previously contained in the CPRs ("Seller's Statement"). Seller and Buyer
shall attempt to resolve any dispute concerning Major Discrepancies set forth
in Buyer's Statement and, if applicable, Seller's Statement within ten (10)
days thereafter. To the extent that Buyer's Statement does not identify any
Major Discrepancy with the CPRs within such period, the CPRs shall
conclusively be deemed to be an accurate statement of the Assets to be
transferred, except for Assets added or deleted thereafter by Seller in the
normal course of Business, in accordance with Sections 6.2(C) and 6.2(E), and
the Purchase Price shall not be adjusted thereafter for any discrepancies
between the CPR's and the Assets that Buyer acquires at Closing.
(b) In the event that Seller and Buyer are unable to reach
agreement on the Major Discrepancies set forth in Buyer's Statement, the
parties shall refer such Major Discrepancies to Ernst & Young, whose report
(the "Independent Report") shall be final and binding. If and to the extent
that the Independent Report allows any Major Discrepancies in Buyer's
Statement ("Buyer's Allowed Discrepancies"), the Independent Report shall
consider the Major Discrepancies set forth in Seller's Statement, and shall
be permitted to allow any such Major Discrepancies ("Seller's Allowed
Discrepancies") in an amount not exceeding Buyer's Allowed Discrepancies.
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(c) The Purchase Price shall not be reduced until the aggregate
amount of Buyer's Allowed Discrepancies less any of Seller's Allowed
Discrepancies, or all Major Discrepancies agreed upon by the parties (as the
case may be) equal or exceed five hundred thousand dollars (U.S. $500,000),
at which time the full amount of Buyer's Allowed Discrepancies, as reduced by
Seller's Allowed Discrepancies, shall be deducted from the Purchase Price. In
no event shall the Purchase Price exceed twenty-two million one hundred
thousand dollars (U.S. $22,100,000). For purposes of this Section 1.3, a
"Major Discrepancy" shall mean an Asset included in Buyer's Statement or
Seller's Statement whose net book value as set forth in the CPR's equals or
exceeds one hundred thousand dollars (U.S. $100,000).
(d) The fees and disbursements of Ernst & Young, shall be paid by
(i) Seller in the proportion that Buyer's Allowed Discrepancies bear to the
aggregate amount of Major Discrepancies in Buyer's Statement, and (ii) Buyer
in the proportion that the Major Discrepancies in Buyer's Statement which are
not Buyer's Allowed Discrepancies bear to the aggregate amount of Major
Discrepancies in Buyer's Statement.
1.4 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
allocated as mutually agreed upon between Buyer and Seller no later than
thirty (30) days prior to the Closing.
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1.5 ALLOCATION OF TAX LIABILITY. Seller and Buyer shall pay any and
all sales, use, transfer, stamp, conveyance, value added or similar taxes,
duties, excises or governmental charges imposed by any taxing jurisdiction
(and any interest or penalty imposed on any tax but only to the extent such
interest or penalty is imposed after a good faith and reasonable position is
taken by the party upon whom such interest or penalty is imposed), including
all recording fees, notarial fees and other similar costs of Closing incurred
in connection with the sale, transfer, or assignment of the Assets or
otherwise on account of this Agreement (collectively, the "Taxes"). Such
Taxes shall be allocated as of the Closing Date between Buyer and Seller to
the extent they are determined or determinable. If a Tax is not determined or
determinable as of the Closing Date, any such Tax shall be allocated in
accordance with this Section and paid by one party to the other within sixty
(60) days after such Tax is determined or determinable or is imposed by any
taxing jurisdiction. The Taxes shall be paid as follows:
(i) Buyer shall be responsible for, and shall indemnify and hold
Seller harmless from and against, the first fifty thousand dollars (U.S.
$50,000) of Taxes;
(ii) Seller and Buyer each shall share equally, and each shall
indemnify and hold the other harmless from and against, such portion of the
Taxes which exceeds the first fifty thousand dollars (U.S. $50,000) but is
less than one hundred thousand dollars (U.S. $100,000);
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(iii) Seller shall be responsible for, and shall indemnify and hold
Buyer harmless from and against, such portion of the Taxes which equals or
exceeds one hundred thousand dollars (U.S. $100,000) but it is less than three
hundred thousand (U.S. $300,000); and
(iv) Buyer shall be responsible for, and shall indemnify and hold
Seller harmless from and against, such portion of the Taxes which equals or
exceeds three hundred thousand dollars (U.S. $300,000). Nothing in this
Section 1.5 shall omit the obligations of the Seller to pay taxes arising
from a 1031 Transaction as provided in Section 6.1(B).
1.6 EXCLUSION OF LIABILITIES. Buyer shall not assume, pay, perform,
defend or discharge any, and Seller shall solely retain, pay, perform, defend
and discharge all, of Seller's liabilities and obligations of any kind
whatsoever, whether disclosed, undisclosed, direct, indirect, absolute,
contingent, secured, unsecured, accrued or otherwise, and whether known or
unknown, except for (i) obligations which arise following the Closing Date
under any agreement set forth in Schedule 6.1(C) and (ii) obligations which
arise under Article 4 and Article 7.5 of this Agreement. Without limiting the
generality of the foregoing, Buyer shall not assume or pay, perform or
discharge, nor shall Buyer be directly or indirectly responsible for any
obligation or liability of Seller with respect to (a) the breach of any
contract or commitment which is included in the Assets, and such breach
occurs prior to the Closing Date, (b) any claim, action, suit or proceeding
against Seller pending on the date hereof or on the Closing Date, or (c) any
claim,
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action, suit or proceeding made or filed after the closing Date which arises
from the Business or the operations of the Assets prior to the Closing Date.
ARTICLE 2
CLOSING
2.1 CLOSING. The Closing of the purchase and sale of the Assets (the
"Closing") shall take place at Seller's offices in Des Moines, Iowa, at 10:00
o'clock a.m., local time, on the second Thursday of the third month following
the satisfaction or waiver of all the conditions precedent to Closing set
forth in Article 3 or on such other date as the parties mutually agree (the
"Closing Date"), but in no event shall Closing occur later than the second
anniversary date of this Agreement, unless the parties shall mutually agree
to extend the Closing Date.
2.2 FURTHER ASSURANCE; CHANGE OF TELECOMMUNICATIONS SERVICE. Except as
otherwise provided herein, all instruments of conveyance, assignment or
transfer referred to herein, all sums of money, and all records and data to
be delivered as specified in this Agreement shall be delivered at Closing (or
if previously delivered so acknowledged). Unless otherwise mutually agreed no
later than thirty (30) days prior to the Closing Date, the specific date and
time for the change of telecommunications service to occur shall be at 11:59
p.m., Central Time, on the Closing Date.
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ARTICLE 3
CONDITIONS TO CLOSING
3.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the Transaction shall be subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may,
to the extent allowed by law, be waived by Buyer:
A. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Seller set forth in Section 5.2 shall be true and correct in
all material respects on and as of the Closing Date as though made at such
time, other than changes approved by Buyer in writing, and Seller shall have
delivered to Buyer a certificate to that effect, dated as of the Closing
Date, signed by an authorized officer of Seller.
B. COVENANTS. Seller shall have performed and complied in all
material respects with all covenants and agreements required or contemplated
by the Transaction Documents to be performed by it on or prior to the Closing
Date.
C. CONSENTS. All authorizations, consents and approvals of,
filings and registrations with, and notifications to (collectively
"Governmental Approvals") any United States, state, or local governmental
entity or municipality or subdivision thereof or any authority, department,
commission, Utilities Board, board, bureau, agency, court or instrumentality
thereof
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or the FCC (collectively, "Governmental Authorities"), necessary to
consummate the Transaction shall have been obtained or made, shall be
acceptable to Buyer in its reasonable discretion and shall be in full force
and effect. In the event that such Governmental Approvals are not obtained
or made, or if obtained or made, are not acceptable to Buyer, Buyer shall pay
all of Seller's fees and expenses incurred in connection with this Agreement
in an amount not to exceed two hundred thousand dollars ($200,000).
D. NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No
preliminary or permanent injunction or other order by any Governmental
Authority shall have been issued and remain in effect which prevents or
delays the Transaction, nor shall any Governmental Authority have threatened
or instituted any such action or proceeding nor shall there have been
instituted any action or proceeding by any other person challenging the
acquisition by Buyer or the transfer and sale by Seller of the Assets or
otherwise seeking to restrain or prohibit the consummation of the
Transaction, or seeking material damages in connection therewith or the right
to operate the wireline telecommunication service in the Exchanges.
E. HART-SCOTT-RODINO ACT. All filings required to be made under
the Hart-Scott-Rodino Act ("H-S-R") shall have been made, and the waiting
period thereunder shall have expired or early termination thereof shall have
been granted.
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F. SELLER'S OPINION OF COUNSEL. Seller shall have delivered an
opinion from counsel to Seller substantially in the form of the legal opinion
set forth in Exhibit 3.1(F).
G. NO MATERIAL ADVERSE CHANGES. Between the date of this
Agreement and the Closing Date, there shall not have occurred any damage to,
or destruction or loss of, any of the Assets (whether or not covered by
insurance) nor shall there have occurred any other event or condition, any of
which has had or may be expected to have a Material Adverse Effect, and
Seller shall have executed and delivered to Buyer a certificate to this
effect.
H. ALLOCATION OF PURCHASE PRICE. Buyer and Seller shall have
agreed on the allocation of the Purchase Price as provided in Section 1.4.
I. NO ENCUMBRANCES. Seller shall not have, in accordance with
Section 6.2(G), as of the Closing Date, mortgaged, pledged or subjected to
lien, charge, or other encumbrance any of the Assets, other than leases of
equipment in the ordinary course of business consistent with prior practice.
J. CLOSING OF RELATED TRANSACTIONS. The Agreements for the
Purchase and Sale of Exchanges, dated as of the date hereof, by and between
Seller and the parties, listed on Schedule 3.1(J), shall have closed or shall
close contemporaneously with the Closing of this Transaction.
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K. DOCUMENTS TO BE DELIVERED BY SELLER TO BUYER. At or prior to
the Closing, Seller will deliver or shall have delivered to Buyer:
(i) certified copies of all Seller's resolutions pertaining
to the authorizations of this Agreement and the consummation of the
Transaction by Seller;
(ii) duly executed bills of sale, assignments, and other
instruments of transfer, in form sufficient to convey to Buyer all of the
rights, title and interest of Seller in and to the Assets in the form
attached hereto as Exhibit 3.1(K)(ii).;
(iii) a certificate of Seller certifying as to the accuracy of
Seller's representations and warranties on and as of the Closing Date and
that Seller has materially performed and complied with all of the terms,
provisions and conditions to be performed and complied with on or before the
Closing;
(iv) such other certificates and documents as Buyer or its
counsel may reasonably request.
L. DOCUMENTS TO BE DELIVERED BY SELLER AND BUYER TO EACH OTHER.
At or prior to the Closing, Seller and Buyer will execute and deliver or
cause to be executed and
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delivered to each other the agreements set forth in Schedule 3.1(L), and such
other agreements as mutually agreed by the parties at least thirty (30) days
prior to the Closing Date.
3.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller to
consummate the Transaction shall be subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may,
to the extent allowed by law, be waived by Seller:
A. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Buyer set forth in Section 5.1 shall be true and correct in all
material respects on and as of the Closing Date as though made at such time,
other than changes approved by Seller in writing, and Buyer shall have
delivered to Seller a certificate to that effect, dated as of the Closing
Date, signed by an authorized officer of Buyer.
B. COVENANTS. Buyer shall have performed and complied in all
material respects with all covenants and agreements required by the
Transaction Documents to be performed by it on or prior to the Closing Date.
C. CONSENTS. All Governmental Approvals of any Governmental
Authority necessary to consummate the Transaction shall have been obtained or
made, shall be acceptable to Seller in its reasonable discretion and shall be
in full force and effect. The terms and conditions of such Governmental
Approvals shall be acceptable to Seller in all material respects,
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including, but not limited to regulatory treatment of the Gain which shall
allow for all of the Gain to be retained by Seller's shareholders and
preclude the Utilities Board from including the Gain, or any part of it, in
any further regulatory proceeding for ratemaking or any other purpose. In the
event that such Governmental Approvals are not obtained or made, or if
obtained or made are not acceptable to Seller, Seller shall pay all of
Buyer's fees and expenses incurred in connection with this Agreement in an
amount not to exceed two hundred thousand dollars ($200,000).
D. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No preliminary or
permanent injunction or other order by any Governmental Authority shall have
been issued and remain in effect which prevents or delays the Transaction,
nor shall any Governmental Authority have threatened or instituted any such
action or proceeding, nor shall there have been instituted any action or
proceeding by any other person challenging the acquisition by Buyer which
prohibits the Transaction or the transfer and sale by Seller of the Assets or
otherwise seeking to restrain or prohibit the consummation of the
Transaction, or seeking material damages in connection therewith the right to
operate the wireline telecommunication service in the Exchanges.
E. H-S-R ACT. All filings required to be made under the H-S-R
Act shall have been made, and the waiting period thereunder have expired or
early termination thereof shall have been granted.
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F. CORPORATE APPROVALS. The Transaction shall have received
approval of the MFJ Compliance Committee within thirty (30) days of the
execution date of this Agreement; provided, however, that Buyer shall have
the right to terminate this Agreement if such approvals are not received as
provided herein.
G. PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price
as required by Section 1.2.
H. OPINION OF COUNCIL. Buyer shall have delivered an opinion of
counsel substantially in the form set forth in Exhibit 3.2(H).
I. ALLOCATION OF PURCHASE PRICE. Buyer and Seller shall have
agreed on the allocation of the Purchase Price as provided in Section 1.4.
J. CLOSING OF RELATED TRANSACTIONS. The Agreements for the
Purchase and Sale of Exchanges, dated June 15, 1995, by and between Seller
and the parties, listed on Schedule 3.1(J), shall have closed or shall close
contemporaneously with the Closing of this Transaction.
K. DOCUMENTS OR OTHER ITEMS TO BE DELIVERED BY BUYER TO SELLER.
At or prior to the Closing, Buyer will deliver to Seller:
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(i) certified copies of all Buyer's resolutions to the
authorization of this Agreement and the consummation of the Transaction by
Buyer;
(ii) a certificate of Buyer certifying as to the accuracy of
Buyer's representations and warranties on and as of the Closing Date and that
Buyer has performed and complied with all of the terms, provisions and
conditions to be performed and complied with or before the Closing Date;
(iii) such other certificates and documents as Seller or its
counsel may reasonably request.
(iv) At or prior to the Closing, Seller and Buyer will
execute and deliver or cause to be executed and delivered to each other the
agreements set forth in Schedule 3.1(L), and such other agreements as
mutually agreed by the parties at least thirty (30) days prior to the Closing
Date.
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ARTICLE 4
ENVIRONMENTAL CONDITIONS;
EXCHANGES AND ASSETS "AS IS" AND "WHERE IS"
4.1 ASBESTOS; HAZARDOUS MATERIALS. Buyer acknowledges that it knows
that the central office buildings and adjacent structures, appurtenances,
facilities and improvements thereon (collectively, the "Central Offices") and
Outside Plant, of the Assets may have been found to contain
asbestos-containing materials, and that Buyer has independently investigated
the presence of asbestos-containing materials in the Central Offices. In
addition, Buyer acknowledges that it knows that the Central Offices,
equipment and Outside Plant contain underground storage tanks and other
Hazardous Materials. Buyer also acknowledges that it is aware based upon its
review of Seller's documents, the Phase I Site Assessments, and its own due
diligence that certain Hazardous Materials are used in maintenance and
operations related to the equipment and other Assets and that such Hazardous
Materials may be present in the Central Offices and Outside Plant. SELLER
HEREBY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESSED OR IMPLIED WITH REGARD TO
THE CONDITION OR SAFETY OF THE ASSETS OR THE PRESENCE OF HAZARDOUS MATERIALS
IN THE EXCHANGES AND ASSETS.
Except as specifically provided for in this Agreement, Buyer agrees to
take the Assets and Exchanges "AS IS" and "WHERE IS" and without any warranty
of merchantability or
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fitness or any other warranties expressed or implied as it relates to the
environmental condition of the Central Offices or any other Asset. Buyer
understands and agrees that any responsibility for compliance with
Environmental Laws applicable to the ownership or use of the Central Offices
and other Assets, including the costs of any remediation or cleanup
associated with the Central Offices or other Assets, or environmental Claim
or Liability associated with the Central Offices or other Assets, is assumed
by Buyer at the Closing. Except as set forth in this Agreement, BUYER
UNDERSTANDS THAT THE SELLER MAKES NO REPRESENTATIONS, WARRANTIES, OR
GUARANTEES, WHETHER EXPRESS OR IMPLIED, OF ANY KIND, NATURE OR TYPE
WHATSOEVER WITH RESPECT TO THE ASSETS, AS THEY RELATE TO ENVIRONMENTAL
MATTERS, INCLUDING, WITHOUT LIMITATION, THE APPURTENANCES, FACILITIES AND
IMPROVEMENTS THEREON, OR THE VALUE, SAFETY, MARKETABILITY, FEASIBILITY,
DESIRABILITY OR ADAPTABILITY THEREOF. Buyer has made all legal, factual and
other inquiries and investigations as Buyer deems necessary, desirable or
appropriate with respect to the Assets and facilities and improvements
thereon, and Buyer is purchasing the Assets based on Buyer's own inspection
and examination thereof and the representations and warranties of Seller set
forth herein. Buyer acknowledges that the Purchase Price of the Assets
reflects the presence of the asbestos-containing materials as well as
Hazardous Materials and environmental Claims known or Liabilities that may be
associated with the Assets. Nothing in this Article 4 shall apply to Claims
or Liabilities which are not related to environmental matters.
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4.2 DISCLAIMER OF WARRANTIES. SELLER HEREBY DISCLAIMS ANY AND ALL
REPRESENTATIONS OR WARRANTIES REGARDING THE ENVIRONMENTAL CONDITION OF THE
ASSETS, EXPRESSED OR IMPLIED, EXCEPT AS SPECIFICALLY SET FORTH IN SECTIONS
4.1 SELLER IS NOT WARRANTING THE CONDITION OR USEFULNESS OF THE ASSETS, OR
THEIR VALUE.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
A. ORGANIZATION. Buyer is a corporation duly incorporated in
Minnesota, validly existing and in good standing under the laws of the State
of Minnesota and authorized to do business in the State of Iowa. Buyer has
full power and authority to execute and deliver the Transaction Documents, to
consummate the Transaction and to perform all of its obligations under the
Transaction Documents. Buyer has obtained all corporate approvals necessary
to consummate the Transaction and authorize the execution, delivery and
performance of the Transaction Documents.
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B. CORPORATE AUTHORITY. When executed by Buyer, each of the
Transaction Documents shall be duly and validly executed and delivered by
Buyer. Each of the Transaction Documents, when executed and delivered by
Buyer, shall constitute a valid, legal and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to creditors' rights
generally and by principles of equity.
C. GOVERNMENTAL AUTHORIZATIONS. Except as set forth in Schedule
5.1(C), neither Buyer's execution and delivery of the Transaction Documents
nor Buyer's consummation of the Transaction require authorization or approval
of, or filing with, any Governmental Authority or other body or any other
third person.
D. LITIGATION. There are no actions, suits, proceedings, claims,
arbitrations or investigations, either at law or in equity, on or before any
Governmental Authority, of any kind now pending or threatened, or facts which
could reasonably form the basis of any such action, suit, proceeding, claim,
or investigation, involving Buyer or any of its properties or assets that (i)
question the validity of any of the Transaction Documents or the Transaction;
or (ii) seek to delay, prohibit or restrict in any manner any actions taken
or contemplated to be taken by Buyer under the Transaction Documents.
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E. INVESTIGATION. Buyer, through its accountants, attorneys,
agents, employees, and others, has made prior to the Closing, such
investigations of the Assets and of the financial, legal, and other condition
and location of the Assets that it deems necessary with respect to the
Transaction. Buyer has reviewed all information which it has deemed
pertinent, necessary or appropriate to an evaluation of the Transaction, and
has conducted a thorough and independent investigation. Buyer has not
received from the Seller, or from anyone acting or claiming to act on behalf
of the Seller, any accounting, tax, legal, or other advice with respect to
the Transaction, and Buyer is relying solely on advice of its own accounting,
tax, legal, and other advisors. Buyer has such knowledge, experience and
sophistication in financial and business matters as to enable to evaluate all
of the merits and risks associated with the Transaction.
F. ACCOUNTING PRACTICES. Buyer shall comply with all FCC and
state regulatory accounting practices. Buyer will not seek recovery of an
acquisition adjustment through its regulated interstate or intrastate rates
including any from federal or state Universal Service Funds.
G. EXTENDED AREA SERVICE ("EAS") ARRANGEMENT. Buyer agrees to
implement any EAS Arrangements in the Exchanges pursuant to Utilities Board
order.
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H. EXCHANGES AND ASSETS "AS IS, WHERE IS". BUYER ACKNOWLEDGES
THAT EXCEPT AS OTHERWISE PROVIDED HEREIN, IT IS ACQUIRING THE ASSETS IN THEIR
"AS IS, WHERE IS" CONDITION, AND WITHOUT ANY WARRANTY OF MERCHANTABILITY OR
FITNESS OR ANY OTHER WARRANTIES EXPRESSED OR IMPLIED.
5.2 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Buyer that:
A. ORGANIZATION. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Colorado
and has full power and authority to execute and deliver the Transaction
Documents, to consummate the Transaction and to perform all of its
obligations under the Transaction Documents. Except as set forth in Section
3.2(F), Seller has obtained all corporate approvals necessary to consummate
the Transaction and to authorize the execution, delivery and performance of
the Transaction Documents.
B. AUTHORIZATION, EXECUTION AND DELIVERY. When executed by
Seller, each of the Transaction Documents shall be duly and validly executed
and delivered by Seller. Each of the Transaction Documents, when executed by
Seller, shall constitute a valid, legal, and binding agreement of Seller
enforceable against Seller in accordance with its terms, except to the extent
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that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to creditors' rights
generally and by principles of equity.
C. CONFLICTS. Except as referred to on Schedule 5.2(C), as of the
Closing Date the execution and delivery of the Transaction Documents and the
consummation of the Transaction will not result in any violation of or
conflict with, constitute a default under, or require any consent under any
term of the charter or by-laws of the Seller or any instrument, law,
ordinance, rule, regulation, order, judgment or decree by which Seller is
bound or result in the creation of (or impose any obligation on the Seller to
create) any mortgage, lien, charge, security interest or other encumbrance
upon any of the Assets.
D. LITIGATION.
(i) Except as set out in Schedule 5.2(D), there are no
Claims pending, or to the knowledge of Seller, threatened against or
affecting the Assets except Claims which would not have a Material Adverse
Effect.
(ii) Seller is not in default under any order of any court,
arbitrator or Governmental Authority to which Seller is a named party, or
under any licenses from any Governmental Authority which would have, directly
or indirectly, a Material Adverse Effect.
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(iii) Seller is not in violation and has not been notified of
any potential violation of any statute or other rule or regulation of any
Governmental Authority, the violation of which, whether individually or in
the aggregate, would result in a Material Adverse Effect.
(iv) Except as set out in Schedule 5.2(D), as of the date of
execution of this Agreement there are not any Claims, either at law or in
equity of any kind, pending or threatened nor at Closing will there be any
Claims, either at law or in equity, of any kind, involving Seller or any of
the Assets that: (a) question the validity of the Transaction; or (b) seek to
delay, prohibit or restrict in any manner any actions taken or contemplated
to be taken by Seller under the Transaction Documents.
E. TAX MATTERS. All taxes of any kind whatsoever due and payable
by the Seller with respect to the Assets through the Closing Date will have
been paid in full by the Seller. There are no liens for federal, state or
local taxes upon the Assets, except for statutory liens for taxes or
assessments not yet due or delinquent or the validity of which is being
contested in good faith by appropriate proceedings, all of which are fully
disclosed on Schedule 5.2(E).
Seller has filed, or will cause to be filed, all federal, state and
local tax returns and reports of any kind (including, without limitation,
returns or reports due with respect to income, franchise, sales, use, excise,
employment and real and personal property taxes) which Seller is
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obligated to file with respect to the ownership or operations of the Assets
for all periods up to and including the Closing Date and shall pay taxes when
due on such returns. On the Closing Date all centrally assessed and collected
taxes which Seller shall pay when due shall be allocated between Buyer and
Seller as of the Closing Date based on the current year's or, if unavailable,
on the prior year's valuation and mill levies, which proportion shall be
adjusted in accordance with the final determination (if any) of the relevant
tax authority within sixty (60) days of any such determination. Seller shall
collect Buyer's portion of such taxes at the Closing.
F. INFORMATION. To the best of Seller's knowledge, the factual
statements contained in Seller's Confidential Offering Memorandum dated as of
September 13, 1994 regarding 1993 end of year access lines in service and
minutes of use, and updates thereto, were true and correct in all material
respects at the time provided.
G. ABSENCE OF CHANGES OR EVENTS. From the date of the Offering
Memorandum until the date hereof, except as described in Schedule 5.2(G),
Seller has not:
(i) Incurred any obligation or liability which has or is
expected to have a Material Adverse Effect, other than current liabilities in
the ordinary course of business consistent with prior practice;
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(ii) Failed to replenish its inventories and supplies with
respect to the Assets in a normal and customary manner consistent with prior
practice or made any material purchase commitment with respect to the Assets
in excess of normal, ordinary and usual requirements consistent with prior
practice; or
(iii) Entered into or assumed any contract, agreement,
obligation, lease, license or commitment with respect to the Assets other
than in the ordinary course of business consistent with prior practice.
H. LEASES AND SUBLEASES. Seller has previously made available to
the Buyer a complete and accurate copy of each lease and sublease pursuant to
which Seller leases or sublets real property with respect to Assets. Each
such lease and sublease is valid and in full force and effect and enforceable
in accordance with its terms, assuming due execution and authorization by all
other parties thereto, and has not been further supplemented, amended or
modified. There exists no material event of default or event, occurrence,
condition or act, (including without limitation, the execution and delivery
of the Transaction Documents and the consummation of the Transaction) which
constitutes or would constitute (with notice of lapse of time or both) a
default in any material respect under any such leases or subleases. Seller
has not received notice of any event of default or any event, condition or
act (including without limitation, the execution and delivery of the
Transaction Documents and the consummation of the
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Transaction) which constitutes or would constitute (with notice of lapse of
time or both) a default in any respect under any of the such leases.
I. MATERIAL CONTRACTS
(i) At Closing Schedule 6.1(C) shall include a true and
correct list of the following:
(a) All contracts, agreements, leases and other
understandings to which Seller is a party and which are part of the Assets or
by or under which Seller has any rights or obligations with respect thereto,
except those involving an income to or an expenditure by the Seller of less
than forty thousand dollars (U.S. $40,000) per annum, and except those made
by Seller in the ordinary course of business consistent with prior practice
(hereinafter, the "Material Contracts").
(b) All Material Contracts which create or constitute
any claim, lien, charge or Encumbrance against, or right of any third party
with respect to the Assets;
(c) All Material Contracts by which the Seller leases
Assets and all other leases of personal property involving the Seller as
lessee or lessor of Assets; and
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(d) All Material Contracts which are licenses
(regardless of annual payment amounts), including but not limited to all
software licenses, distribution, agency or supply agreement of Seller with
respect to the Assets, whether as licensor, manufacturer, supplier, licensee,
distributor, agent or customer.
(ii) Except as set forth in Schedule 5.2(I), the Material
Contracts at Closing shall be in full force and effect and Seller has no
liabilities arising from any breach or default thereto and to best of
Seller's knowledge, no event has occurred which would constitute a breach or
default by any other party thereto.
J. GOVERNMENTAL AUTHORIZATIONS. Except as set forth in Schedule
5.2(J), neither Seller's execution and delivery of the Transaction Documents
nor Buyer's consummation of the Transaction require authorization or approval
of, or filing with, any Governmental Authority or other body or any other
third person.
ARTICLE 6
COVENANTS
6.1 COVENANTS OF BUYER. Buyer hereby covenants and agrees that from the
execution date hereof to the Closing Date:
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A. CONTINUED EFFORTS. Buyer will use its best efforts to: (i)
cause to be fulfilled and satisfied all of the conditions to the Closing to
be performed or satisfied by Buyer; (ii) cause to be performed all of the
matters required of Buyer at the Closing; and (iii) take such steps and do
all such acts as may be necessary to make all of its warranties and
representations true and correct as of the Closing Date with the same effect
as if the same had been made, and this Agreement had been dated, as of the
Closing Date.
B. COOPERATION. Buyer agrees to cooperate with Seller with
respect to (i) Seller's assignment to Buyer and Buyer's assumption of the
Assets hereunder, and (ii) Seller's structuring of the Transaction to comply
with the requirements of a like-kind exchange under Section 1031 of the
Internal Revenue Code of 1986, as amended (a "1031 Transaction"), at no cost
or expense of any kind whatsoever to Buyer; such cooperation to include,
without limitation, purchase of the Assets from an intermediary corporation
of Seller's choice, and execution of an Old Property Assignment and such
other documents in connection with the Transaction as Seller may reasonably
request. If Seller elects to pursue the Transaction as a 1031 Transaction,
then notwithstanding anything in this Agreement to the contrary, Seller shall
fully indemnify, defend and hold Buyer harmless from and against any and all
costs, expenses and liabilities resulting therefrom, including, but not
limited to any tax impacts on Buyer or the Assets, and Seller shall remain
directly and primarily bound by all other conditions, representations,
warranties and covenants contained herein and remedies related thereto.
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C. CONTRACTS. From and after the Closing Date, Buyer shall
assume, honor and fully and completely perform all of Seller's obligations
under the agreements set forth in Schedule 6.1(C) which shall include all
Material Contracts and all similar contracts of Seller entered into in the
ordinary course of business prior to the execution date of this Agreement or
entered into after the execution date hereof in accordance with Section
6.2(E). Schedule 6.1(C) shall be finalized, updated and provided to Buyer no
later than thirty (30) days prior to the Closing Date.
D. FILINGS WITH GOVERNMENTAL AUTHORITIES FOR MULTIPLE STUDY
AREAS. Seller acknowledges that Buyer shall have the option to include the
Exchanges into its existing Study Area (if any) or establish multiple Study
Areas for Federal purposes; but Buyer and Seller acknowledge and agree that
Buyer's ability or inability to establish multiple Study Areas shall not be a
condition precedent to the Closing of the Transaction. In the event that a
Governmental Authority disallows Buyer's establishment of multiple Study
Areas, Buyer shall revise its filing with the Governmental Authority and
submit a single Study Area. Buyer's failure to resubmit a single Study Area
shall result in a forfeiture of the Earnest Money, and interest accrued
thereon (if any); provided, however, that a disallowance of the single Study
Area after a resubmission shall not result in the forfeiture of the Earnest
Money.
6.2 COVENANTS OF SELLER. Seller hereby covenants and agrees that from
the execution date hereof to the Closing Date:
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A. ACCESS TO INFORMATION AND FACILITIES. Seller will afford Buyer
and its representatives reasonable access during normal business hours to all
facilities, personnel, properties, books, accounts, records, contracts and
documents and any and all other items of or relating to the Assets in
Seller's possession or control. Seller shall exercise its reasonable efforts
to furnish promptly or cause to be furnished promptly to Buyer and its
representatives all data and information concerning the Assets and shall
reasonably be requested by Buyer.
B. CONTINUED EFFORTS. Seller will use its best efforts to: (i)
cause to be fulfilled and satisfied all of the conditions to the Closing to
be performed or satisfied by Seller; (ii) cause to be performed all of the
matters required of Seller at the Closing; and (iii) take such steps and do
all such acts as may be necessary to make all of its warranties and
representations true and correct as of the Closing Date with the same effect
as if the same had been made, and this Agreement had been dated, as of the
Closing Date. Seller shall cooperate with Buyer with respect to the
consummation of the Transaction contemplated by this Agreement, including but
not limited to cooperation with the Buyer to obtain waivers or other remedial
relief from any Governmental Authorities in connection with the decision of
the United States District Court for the District of Columbia, U.S. v.
WESTERN ELECTRIC, 552 F.Supp. 131, 1982; provided, however, it is expressly
agreed that such cooperation in seeking waivers shall not delay Closing nor
shall the ability to obtain a waiver constitute a condition precedent to
Closing. Without limiting the
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generality of the foregoing, cooperation as used in this Section 6.2(B) shall
not require Seller to become a party to any filing made by Buyer to any
Governmental Authorities.
C. MAINTENANCE OF BUSINESS. Seller shall maintain its books and
records in the normal and usual manner. Seller shall keep the Assets, taken
as a whole, in a normal state of repair and operating efficiency to permit
the conduct of the business as it is currently being conducted.
D. REAL PROPERTY. At Closing Seller shall convey by Quit Claim
deed the Realty identified in the CPRs to Buyer, together with the
right-of-ways which are by their terms assignable; provided, however, that in
the event that Seller's facilities which are to be retained by Seller are
located in any right-of-way to be transferred hereunder, the right-of-way
shall be treated as joint use property.
E. ABSENCE OF CHANGES OR EVENTS. From the date hereof until the
Closing Date, Seller shall not, without the prior written consent of Buyer:
(a) Incur any obligation or liability which has or is
expected to have a Material Adverse Effect, other than current liabilities in
the ordinary course of business consistent with prior practice;
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(b) Sell, transfer, license or otherwise dispose of or
transfer or encumber any Assets with a fair market value exceeding one
hundred thousand dollars (U.S. $100,000) in the aggregate, except for sales
from inventory made in the ordinary course of business consistent with prior
practice;
(c) Fail to replenish its inventories and supplies with
respect to the Assets in a normal and customary manner consistent with prior
practice or make any material purchase commitment with respect to the Assets
in excess of normal, ordinary and usual requirements consistent with prior
practice.
(d) Enter into or assume any contract, agreement,
obligation, lease, license or commitment with respect to the Assets other
than in the ordinary course of business consistent with prior practice;
(e) Entered into any agreement or make any commitment to do
any of the things described in the preceding subsections (a) through (d) of
this Section 6.2(E).
F. CONSENTS TO ASSIGNMENT.
(a) To the extent that the assignment of any contract agreed
to be assumed by Buyer shall require the consent of another person, this
Agreement shall not
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constitute an agreement to assign the contract if an attempted assignment
would constitute a breach thereof. Seller shall use its reasonable efforts to
obtain the consent of any other party to a contract, of the assignment
thereof to Buyer. If any such consent is not obtained, at Buyer's option and
only to the extent permitted by applicable law, this Agreement shall
constitute an equitable assignment by Seller to Buyer of all of the Seller's
right, title and interest in and to such contracts, and Buyer shall be deemed
Seller's agent for the sole purposes of completing, fulfilling, and
discharging all of Seller's rights and liabilities arising after the Closing
Date under such assigned contracts.
(b) To the extent that the assignment of any necessary
permit shall require the consent of a Governmental Authority, this Agreement
shall not constitute an agreement to assign the permit if an attempted
assignment would constitute a violation thereof. Seller shall use its
reasonable efforts to obtain the consent of the issuer of a permit or the
assignment thereof to Buyer at Seller's expense. If any such consent is not
obtained, to the extent permitted by applicable law, this Agreement shall
constitute an equitable assignment by Seller to Buyer of all of the Seller's
right, title, and interest in and to such permits, and Buyer shall be deemed
Seller's agent for the sole purposes of completing, fulfilling, and
discharging all of Seller's rights and liabilities arising after the Closing
Date under such assigned permits.
G. TITLE TO ASSETS.
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(a) PERSONAL PROPERTY. Except as disclosed in Schedule
6.2(G), the personal property portion of the Assets at Closing will be owned
by Seller free and clear of all Encumbrances of any kind whatsoever, except
for Taxes not yet due and payable which shall be paid in full by Seller when
due (whether such payment is due on or before the Closing Date). Except as
set forth on Schedule 6.2(G) or in Article 4 of this Agreement and except for
those matters which do not materially and adversely affect their use, all
machinery, equipment, supplies, and other tangible property operations of the
Assets have been operated in substantial conformity with applicable laws and
regulations.
(b) REALTY. As of the Closing Date, the owned portion of
the Realty will be owned by Seller free and clear of any mortgages or other
monetary liens.
H. 1031 TRANSACTION. Notwithstanding the provisions of Section
6.1(B), Seller shall neither require nor cause any delay in a Closing Date
for purposes of meeting the requirements for a 1031 Transaction. If necessary
to meet a Closing Date, Seller will complete the transfer contemplated by
this Agreement and then resort to the "deferred exchange" procedures of
Section 1.1031(k)-1 of the Treasury Regulations promulgated under the
Internal Revenue Code of 1986.
I. WIRELINE TELECOMMUNICATIONS. Seller shall not provide or
assist in providing in the Exchanges, any local exchange wireline
telecommunications services
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comparable to those local exchange wireline telecommunication services which
are in place on the execution date of this Agreement, for a period of three
(3) years from the Closing provided, however, that without limiting the
generality of the foregoing, (i) that Seller may install and operate fiber
optic or other telecommunication facilities which transit through the
Exchanges; and provided further that (ii) that nothing in this section shall
be deemed to grant to Seller a right of way or easement in Buyer's property
in the Exchanges without the prior written consent of Buyer; and (iii) that
such consent of Buyer shall not be required for a right of way of easement on
Buyer's property where such rights of easements are given to Seller pursuant
to a joint right of way or any other agreement.
6.3 MUTUAL COVENANTS
A. CONFIDENTIALITY. Each party to this Agreement agrees to hold
all Confidential Information, whether received before or after entering into
this Agreement, in confidence for a period of two (2) years from the date of
the execution of this Agreement or the Closing Date, whichever is later, and
agrees that during such period each party will use the same solely for the
purposes of this Agreement. Each party agrees that it will not make
disclosure of any such Confidential Information received from the other party
to anyone except as specifically permitted by this Agreement and as required
by law. Each party may disclose Confidential Information to its employees to
whom disclosure is necessary for the purposes set forth above, provided that
the disclosing party shall notify each such employee that disclosure is made
in
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confidence and instruct such employees that such Confidential Information
shall be kept in confidence by such employee in accordance with this
Agreement. Furthermore, each party may disclose such Confidential Information
to consultants and attorneys engaged by such party, to partners and
prospective partners, and to lenders so long as the disclosing party is and
remains liable for any breach of confidentiality requirements of this
Agreement by any consultant, attorney, partner, prospective partner or
lender. No further disclosure of the Confidential Information shall be
permitted. Each party also agrees that it will make requests for Confidential
Information of the other only if necessary to accomplish the purposes set
forth in this Agreement. The obligations set forth herein shall be satisfied
by each party through the exercise of the same degree of care used to protect
its own information of like importance. Notwithstanding the foregoing, the
Buyer shall no longer be obligated to hold any information classified as
Confidential Information in confidence after the Closing Date to the extent
that such Confidential Information relates to the Assets.
If the Transaction is not consummated for any reason, each party agrees
to return to the other party all such Confidential Information, including all
copies thereof, immediately on request. The obligations arising under this
section shall survive any termination or abandonment of this Agreement.
This Agreement will be filed on a confidential basis with the Utilities
Board in a manner and time mutually agreed to by the parties.
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<PAGE>
B. PUBLIC ANNOUNCEMENTS. No public announcement of the execution
of this Agreement, except as necessary to obtain regulatory approval or as
otherwise required by law, shall be made before the Closing without the
mutual prior approvals of both Seller and Buyer, which approval shall not be
unreasonably withheld; provided, however, that upon prior written notice to
and consultation with the other party's legal counsel, each party shall be
permitted to make such disclosure to the public or to any Governmental
Authority, including, but not limited to, the Securities and Exchange
Commission or similar state securities regulators, necessary to comply with
any applicable laws and to obtain approval from regulatory and financial
authorities necessary to consummate the Transaction.
C. COOPERATION. Each party covenants to use all reasonable
efforts, commencing promptly on the execution and delivery of this Agreement,
to take, or cause to be taken in good faith, all actions, and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws
and regulations, expeditiously and practicably to consummate and make
effective the Transaction, including, but not limited to, using its
reasonable efforts to obtain all necessary actions, waivers, consents and
approvals from third parties or governmental or regulatory bodies, and to
effect all necessary filings with Governmental Authorities and to consummate
the agreements required in Schedule 3.1(L).
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D. UTILITIES BOARD FILINGS. Within thirty (30) days after the
execution of this Agreement, or on such other date as the parties shall
mutually agree, Seller and Buyer agree to jointly file any required
application and to take such reasonable action as may be necessary or helpful
(including, but not limited to, making available witnesses, information,
documents, and data requested by the Utilities Board) to apply for and
receive approval by the Utilities Board for the transfer of Assets and
Certificate of Public Convenience and Necessity to Buyer.
E. FCC FILINGS. Within sixty (60) days after the execution of
this Agreement or on such other date as the parties mutually agree, the
parties agree to jointly file such applications and to take such reasonable
actions as may be necessary or appropriate to apply for and receive approval
by the FCC for the transfer of Assets and change in the provider of
telecommunications services in the Exchanges to Buyer. The FCC approval
includes, but is not limited to, Section 214 approval, Study Area approval,
and Price Cap Waiver approval and radio license approval.
F. TAX LIABILITIES. Buyer and Seller agree that Seller will be
liable for all tax liabilities accrued or imputed by any tax or regulatory
authority for periods prior to Closing and Buyer will be liable for all tax
liabilities accrued or imputed by any tax or regulatory authority for periods
after Closing, except as specifically set forth in Sections 1.5 and 6.1(B).
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G. COSTS. Except as otherwise specifically provided herein, each
party shall bear its own costs incurred in connection with the Transaction
Documents and the Transaction.
H. ENVIRONMENTAL ASSESSMENT. Seller agrees that in the event any
of the Phase I Environmental Site Assessment indicates, in accordance with
ASTM Standards, that a Phase II environmental assessment be performed, Seller
shall at its cost, have such Phase II environmental assessment done on the
recommended site(s) by an independent environmental consultant (the
"Environmental Consultant"). In the event the Environmental Consultant
thereafter determines that remediation is appropriate (provided that Buyer
and Seller acknowledge and agree that Seller shall not remediate or abate any
asbestos containing materials from Central Office buildings in the Exchange),
Seller shall perform, at its sole expense, such remediation in conformance
with the recommendations of the Environmental Consultant and state and
federal requirements. In the event any occurrence between the execution date
of this Agreement, and Closing which violates any Environmental Law or
requires, under any Environmental Law, clean up and which would constitute a
Material Adverse Effect, Seller may either remediate at its cost in
conformance with state and federal requirements or, at Seller's option,
terminate this Agreement (in which latter case, the Earnest Money shall be
returned to Buyer); provided, however, before Seller can terminate, Seller
shall first consult with Buyer regarding other mutually agreeable
resolution(s).
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ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY BUYER. From and after the Closing Date, Buyer
shall indemnify, defend and hold Seller harmless from and against any and all
Claims and Liabilities that may be incurred by Seller arising from (i) any
breach by Buyer of any representation or warranty contained in any
Transaction Document, (ii) any breach by Buyer of any covenant, obligation or
agreement of Buyer contained in any Transaction Document, or (iii) any and
all Claims or Liabilities arising out of or relating to the ownership or
operation of the Assets, or the Business by Buyer following the change in
telecommunications service provided in Section 2.2.
7.2 INDEMNIFICATION BY SELLER. Except as set forth in this Section 7.2
or in Sections 7.3, or 7.5 below, from and after the Closing Date, Seller
shall indemnify, defend and hold Buyer harmless from and against any and all
Claims and Liabilities that may be incurred by Buyer arising from (i) any
breach by Seller of any representation or warranty contained in any
Transaction Document, (ii) any breach by Seller of any covenant, obligation
or agreement of Seller contained in any Transaction Document, or (iii) any
and all Claims or Liabilities arising out of or relating to the ownership or
operation of the Assets or the Business by Seller prior to the change in
telecommunications services provided in Section 2.2.
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7.3 INDEMNIFICATION THRESHOLD. Except for liabilities referenced in
Section 6.1(B), neither party shall be required to indemnify, defend or hold
the other harmless from and against any Claim or Liability arising under
Sections 7.1 or 7.2 or Section 7.5 unless and until the aggregate amount of
any such Claims or Liabilities insured by the other party exceeds one hundred
thousand dollars (U.S. $100,000) (the "Indemnity Threshold"), and the
indemnifying party shall only be obligated to indemnify the other with
respect to amounts that exceed the Indemnity Threshold and then only to the
extent provided herein; provided, however, that Seller shall not indemnify
Buyer for any Claim or Liability arising out of the operation of the Business
or the use or ownership of the Assets after the Closing Date. The maximum
aggregate amount payable by either party pursuant to this Section 7.3 shall
not exceed in the aggregate ten percent (10%) of the Purchase Price.
7.4 TIME LIMITATION. The respective rights of Seller and Buyer to
indemnification for liabilities arising under Sections 7.1 or 7.2, as the
case may be, shall apply only to those claims for indemnification, notice of
which is given pursuant to this Agreement to the other party on or before the
expiration of the twenty-four (24) month period following the Closing Date,
provided however, that the indemnification which relates to tax matters shall
remain in effect until expiration of the applicable statute of limitations.
In addition, upon expiration of the time limitations set forth in this
Section 7.4, it shall be conclusively presumed that the Buyer has accepted
and assumed all responsibilities for all Claims or Liabilities.
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<PAGE>
7.5 ENVIRONMENTAL INDEMNIFICATION. Buyer agrees after the Closing Date
to indemnify and hold Seller harmless from and against any and all
environmental Claims and Liabilities arising after the Closing Date (whether
or not the incidents or exposures giving rise thereto occurred before or
after the Closing Date), under any Environmental Law which is based on
incidents or exposures occurring in connection with, related to, arising from
or associated with any environmental condition on, in or near the Exchanges
or the Assets.
7.6 NOTICE OF INDEMNIFICATION. Notwithstanding any other provision
contained in this Agreement, any party entitled to indemnification hereunder
(the "Indemnified Party") shall be deemed to have waived any right thereto
unless such party gives to the party from whom indemnification is sought (the
"Indemnifying Party") written notice of the Claim or Liability within one
hundred twenty (120) Business Days, and, when known, the facts constituting
the basis for such Claim, but only if and to the extent that the Indemnifying
Party's rights with respect to such Claim or Liability have been compromised
or prejudiced by such delay. In the event that any notice of a right for
indemnification is made hereunder as a result of or in connection with any
Claim or Liability by a person who is not a party to this Agreement, the
notice to the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the Claim or Liability arising therefrom.
7.7 DEFENSE BY INDEMNIFYING PARTY. In connection with any Claim or
Liability giving rise to indemnity hereunder resulting from or arising out of
any Claim or legal proceeding by a
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<PAGE>
person who is not a party to this Agreement, the Indemnifying Party at its
sole cost and expense may (but shall not be required to), upon written notice
to the Indemnified Party, assume the defense of any such Claim or Liability
if it acknowledges to the Indemnified Party in writing prior to such
assumption its obligation to indemnify the Indemnified Party with respect to
such Claim or Liability. The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such Claim or Liability resulting therefrom, (a) the
Indemnified Party may defend against such Claim or Liability, in such manner
as it may deem appropriate, including, but not limited to, settling such
Claim or Liability (after giving five (5) Business Days prior written notice
of the same to the Indemnifying Party) on such terms as the Indemnified Party
may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its own
counsel and at its own expense. The Indemnified Party shall not settle or
compromise any Claim or Liability by a third party for which it is entitled
to indemnification hereunder without the prior written consent of the
Indemnifying Party, unless suit shall have been instituted against the
Indemnified Party and the Indemnifying Party shall not have taken control of
such suit after notification thereof as provided in Section 7.6
7.8 MANNER OF INDEMNIFICATION. All indemnification payments under this
Article 7 shall be effected by payment of cash or delivery of a certified or
official bank check or, at payee's request, by wire transfer of immediately
available funds, no later than five (5) Business
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Days after the Indemnified Party notifies the Indemnifying Party of the
amount of such payment, to an account designated by payee, in the amount of
the indemnified liability.
7.9 REMEDIES. Except as provided in Sections 1.2(A) and 6.1(B), the
indemnity rights under this Article 7 shall be the sole remedy for any breach
of the representations and warranties of Seller or Buyer (as the case may
be), provided, however, that in the event of a breach, or a threatened or
attempted breach, of Section 6.3(A) and 6.2(I) of this Agreement by either
party, the other party shall, in addition to the indemnification provisions
set forth in this Article 7 and the arbitration provision of Article X, be
entitled to (i) a temporary or permanent injunction against such breach
without the necessity of showing any actual damages, and (ii) a decree for
the specific performance of this Agreement.
7.10 INSURANCE. In addition to asserting any claim under this Agreement
(other than with respect to Taxes), each Indemnified Party shall (if
permitted by its insurance policy) file, or cause to be filed, a claim with
respect to the indemnified Claims or Liabilities in question under any
insurance policies that may be maintained by such Indemnified Party or any
subsidiary, division or affiliate thereof. The allowance or disallowance of
such a claim shall not be a condition precedent to the Indemnifying Party's
obligation under this Article 7. In the event that any insurance policies
maintained by the Indemnified Party has made payment thereto on account of
any indemnified Claims or Liabilities, then the Indemnified Party's
indemnification for Claims or Liabilities shall be reduced thereby; provided
however, that nothing in this Section 7.10 shall
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<PAGE>
limit the rights or obligation of an Indemnified Party to subrogate a claim
or liability in favor of its insurer if required by such Indemnified Party's
applicable insurance policy.
ARTICLE 8
TERMINATION
8.1 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, this Agreement shall terminate except as set forth in Sections
1.2(A), 3.1(C), 3.2(C) and for the provisions of Sections 6.3(A), 6.3(B), and
6.3(C), without further liability on the part of any party hereto or its
respective shareholders, directors, officers or employees in respect thereof,
except as follows: (i) nothing herein shall relieve any party from liability
for any breach of this Agreement prior to termination, and (ii) the
obligations of the parties hereto set forth in Section 11.6 shall not be
affected by a termination of this Agreement.
ARTICLE 9
POST CLOSING MATTERS
9.1 POST CLOSING. In order to effectuate an orderly transition in the
providing of telecommunications services to customers in the Exchanges, Buyer
and Seller agree to carry out the following:
49
<PAGE>
A. COLLECTION OF ACCOUNTS RECEIVABLE. Buyer agrees to exercise
its best efforts to assist Seller, from and after the Closing Date, in
recovering all Accounts Receivables due to Seller from customers in the
Exchanges.
B. NOTICE TO CUSTOMERS. Seller shall provide written notification
in its final bill to each customer affected by this Agreement that Seller is
no longer the customer's telecommunications provider and advising the
customer of the name, address and telephone number of the Buyer.
C. CUSTOMER DEPOSITS. As of the Closing Date, all customer
deposits and advance payments for future services made to Seller by
residential and business customers in the Exchanges, which are allocable to
Seller and which have not previously been refunded to those customers, shall
be retained by Seller and applied to such customer's outstanding, unpaid
balance with any remaining balance remitted to Buyer within sixty (60)
business days after the Closing Date, unless Seller is required under the
rules of the Utilities Board to refund said deposits to the customer.
D. CUSTOMER RELATIONS. From and after the Closing, any service
related customer complaint due to telephone service provided prior to Closing
which can be reasonably resolved by Buyer, shall be resolved by Buyer,
without contribution or adjustment from Seller; provided, in the event that
Buyer cannot reasonably resolve such complaints, with thirty (30)
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days Buyer shall refer those customers to Seller and Buyer shall promptly
advise Seller in writing, of the steps it took to resolve the complaint in a
manner permitted by applicable law.
ARTICLE 10
ARBITRATION
10.1 ARBITRABILITY. All claims by Buyer or Seller by one against the
other arising out of or related in any manner to this Agreement or any of the
Exchanges or Assets or the Transaction shall be resolved by arbitration, as
prescribed herein. The Federal Arbitration Act, 9 U.S.C. Section 1 to 15, not
state law, will govern the arbitrability of all claims.
10.2 RULES. A single arbitrator engaged in the practice of law, who is
knowledgeable about the telecommunications industry, telecommunications law
and who has at least eight (8) years of experience litigating in federal
district court shall conduct the arbitration under the then current
commercial arbitration rules of the American Arbitration Association ("AAA"),
unless otherwise provided herein. The arbitrator shall be selected in
accordance with AAA procedures. The arbitration shall be conducted in the AAA
office in Minneapolis, unless otherwise mutually agreed by the parties.
10.3 DISCOVERY; DAMAGES; EXPENSES. The Buyer and Seller shall allow and
participate in discovery in accordance with the Federal Rules of Civil
Procedure. The arbitrator shall rule
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on unresolved discovery disputes. The arbitrator shall only have authority to
award contractual damages and shall not have the authority to award punitive
or exemplary damages, other non-compensatory damages or any other form of
relief. Each party shall bear its own costs and attorneys' fees. The
arbitrator's decision and award shall be final and binding, and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
10.4 JUDICIAL OR ADMINISTRATIVE ACTION. If any party files a judicial or
administrative action asserting claims subject to arbitration, as prescribed
herein, and the other party successfully stays such action and/or compels
arbitration of said claims, the party filing said action shall pay the other
party's costs and expenses incurred in seeking such stay and/or compelling
arbitration, including reasonable attorneys' fees.
A. The Federal and State courts located in the State of Colorado
and the State of Iowa are hereby given nonexclusive jurisdiction to enter
judgment upon, and to enforce, an arbitration award, and the parties hereto
hereby expressly consent and submit to the jurisdiction of such courts.
B. Each party hereto hereby agrees that the arbitration procedure
provided herein shall be the sole and exclusive method of resolving any of
the aforesaid disputes, controversies or claims including, without
limitation, all questions, claims and other matters
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arising, related to or in connection with this Agreement and the
transactions, agreements and instruments contemplated hereby.
ARTICLE 11
GENERAL
11.1 TIME OF THE ESSENCE. Time is of the essence with respect to each
and every term, condition, obligation and provision hereof, and failure to
timely perform or remedy any of the terms, conditions, obligations or
provisions hereof by either party shall constitute a material breach of and a
noncurable default under this Agreement by the party so failing to perform
(but which may be waived by the nonbreaching party).
11.2 BULK SALES. Buyer hereby waives compliance with the provisions of
any applicable laws relating to bulk transfers in connection with the
transactions contemplated by this Agreement, including without limitation the
provisions of Iowa Code Annotated regarding bulk transfers. Seller shall
indemnify and hold buyer harmless from and against and claims which may be
asserted by third parties against Buyer by reason of such non-compliance with
any bulk sales law.
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11.3 NOTICES. All notices hereunder shall be in writing and served by
certified mail, return receipt requested. Notice shall be deemed to have been
duly given on the date mailed by the notifying party. Notices shall be sent
as follows:
If to Seller: U S WEST Communications, Inc.
1600 Bell Plaza, Room 1806
Seattle, Washington 98191
Manager-Exchange Carrier Properties,
Exchange Carrier Services
with a copy (which shall not constitute notice) to:
U S WEST, Inc.
----------------------------------
----------------------------------
7800 East Orchard Road
Englewood, CO 80111
Attention: Associate General Counsel
Corporate Transactions
If to Buyer: Hickory Tech Corporation
ATTN: Robert D. Alton
221 East Hickory Street
P.O. Box 3248
Mankato, Minnesota 56001
EBSco Limited
ATTN: Mr. Edwin B. Spievack
5818 Madaket
Bethesda, MD 20816
11.4 WAIVERS. No failure of a party to enforce a provision of this
Agreement will be construed as a general or a specific waiver of the
provision, or of a party's right to enforce that
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provision, or of a party's right to enforce any other provision of this
Agreement. No waiver of any breach of any covenant or other provision herein
contained shall be deemed to be a waiver of any preceding or succeeding
breach, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed to be an
extension of the time for performance of any other obligation or act.
11.5 COMMISSIONS. Each party represents and warrants that it has dealt
with no broker or finder in connection with this Agreement and, insofar as it
knows, no broker or other person is entitled to any commission or finder's
fee in connection with the consummation of the Transaction.
11.6 PAYMENT OF EXPENSES. Except as otherwise provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it
in the negotiation and preparation of this Agreement and in consummating and
carrying out the Transaction, whether or not the Transaction is consummated.
11.7 HEADINGS. The subject headings of the sections and subsections of
this Agreement are included only for purposes of convenience, and shall not
affect the construction or interpretation of any of its provisions.
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11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and when each of the
parties hereto has executed and delivered to the other party one or more
counterparts this Agreement shall be binding and effective, even though no
single counterpart has been executed by both of the parties.
11.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their permitted
successors and assigns; provided, however, that no assignment shall be
permitted except as provided for in this Agreement.
11.10 ASSIGNMENT. Except as set forth in Section 6.1(B), the rights and
obligations of the parties to this Agreement or any interest in this
Agreement shall not be assigned, transferred, hypothecated, pledged or
otherwise disposed of without the prior written consent of the non-assigning
party, which consent may be withheld in such party's sole discretion;
provided, however, the (i) Seller may, without the prior consent of Buyer,
assign its rights under this Agreement to any parent or affiliated entity or
lender, as long as Seller guarantees the obligations of such assignee; (ii)
Seller may assign its rights or delegate its duties under this Agreement to a
qualified intermediary chosen by Seller to structure the Transaction as a
1031 Transaction; (iii) the Buyer without the prior consent of the Seller,
may assign its rights or obligations under this Agreement as long as (a)
Hickory Tech Corporation or its affiliates continues to maintain a
significant equity and management interest in the assignee; (b) and Buyer
guarantees the
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obligations of assignee; and (c) any such assignment will not materially
delay the regulatory process.
11.11 ADDITIONAL INSTRUMENTS AND ASSISTANCE. Each party hereto shall
from time to time execute and deliver such further instruments, provide
additional information and render such further assistance as the other party
or its counsel may reasonably request in order to complete and perfect the
Transaction.
11.12 SELLER'S CONTROL OVER AUTHORIZED FACILITIES. No provision of this
Agreement shall be construed to abrogate Seller's control of and
responsibility for the operation of the authorized facilities of the Business
prior to the actual transfer of control of those facilities hereunder to the
Buyer as approved by the FCC and the Utilities Board.
11.13 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Iowa.
11.14 SEVERABILITY. If any term or provision of this Agreement is, to
any extent, held or deemed to be invalid or unenforceable when applied to any
person or circumstance, the remaining provisions of this Agreement and the
enforcement of such provision to other persons or circumstances, or to
another extent, shall not be affected thereby, and each provision of this
Agreement shall be enforced to the fullest extent allowed by law.
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11.15 AMENDMENTS. This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived by a
party, except by written instrument signed by the party to be charged or by
its agent duly authorized in writing or as otherwise expressly permitted
herein.
11.16 NO CONSTRUCTION AGAINST THE DRAFTING PARTY. Each party hereto
acknowledges that such party and its counsel have reviewed this Agreement and
participated in its drafting. This Agreement shall not be construed against
either party for having prepared it.
11.17 INTEGRATION. This Agreement, including all schedules and exhibits
attached hereto, constitutes the entire agreement between the parties, and
there are no agreements, understandings, warranties or representations
between the parties except as set forth or noted herein. This Agreement is
not made for the benefit of any person, firm, corporation or association
other than the parties hereto. The parties do not intend to confer any
benefit hereunder on any person, firm or corporation other than the parties
hereto.
IN WITNESS WHEREOF, the parties to this Agreement have executed it as of
the date first above written.
BUYER: SELLER:
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Hickory Tech Corporation, U S WEST COMMUNICATIONS, INC.,
a Minnesota corporation, a Colorado corporation
By: /s/ Robert D. Alton, Jr. By: /s/ JT Helvig/for
-------------------------------- --------------------------------
Chairman, President, C.E.O. A. Gary Ames
President
Date: 6/15/95 Date: 6/14/95
------------------------ ------------------------
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LIST OF EXHIBITS AND SCHEDULES
------------------------------------------------------------------------------
|Glossary Terms Glossary Terms |
|------------------------------------------------------------------------------|
|Schedule 1.1 List of Assets - Continuous Property Records |
|------------------------------------------------------------------------------|
|Schedule 3.1(J) Closing of Related Transactions |
|------------------------------------------------------------------------------|
|Schedule 3.1(L) Operating Agreements |
|------------------------------------------------------------------------------|
|Schedule 5.1(C) Buyer Governmental Authorizations |
|------------------------------------------------------------------------------|
|Schedule 5.2(C) Conflicts |
|------------------------------------------------------------------------------|
|Schedule 5.2(D) Litigation |
|------------------------------------------------------------------------------|
|Schedule 5.2(E) Tax Matters |
|------------------------------------------------------------------------------|
|Schedule 5.2(G) Offering Memorandum - no material adverse |
| effects |
|------------------------------------------------------------------------------|
|Schedule 5.2(I) Material Contracts in full force except: |
|------------------------------------------------------------------------------|
|Schedule 5.2(J) Seller Governmental Authorizations |
|------------------------------------------------------------------------------|
|Schedule 6.1(C) Agreements from Market Units, Rights of Way, |
| Joint Use, CATV, Land Development |
|------------------------------------------------------------------------------|
|Schedule 6.2(G) Personal Property of Assets free and clear |
|------------------------------------------------------------------------------|
|Schedule Excluded Assets Excluded Assets |
------------------------------------------------------------------------------
------------------------------------------------------------------------------
|Exhibit A Escrow Agreement |
|------------------------------------------------------------------------------|
|Exhibit 1.2(A) Irrevocable Standby Letter of Credit |
|------------------------------------------------------------------------------|
|Exhibit 3.1(F) Opinion of Counsel for Seller |
|------------------------------------------------------------------------------|
|Exhibit 3.1(K)(ii) Bill of Sale, Assignments and other |
| instruments of transfer |
|------------------------------------------------------------------------------|
|Exhibit 3.2(H) Opinion of Counsel for Buyer |
|------------------------------------------------------------------------------|
|Exhibit D Exchange Area |
|------------------------------------------------------------------------------|
|Exhibit E List of Exchanges |
|------------------------------------------------------------------------------|
|Exhibit F Old Property Assignment |
|------------------------------------------------------------------------------|
* The above mentioned exhibits and schedules have been omitted. The
Registrant agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
<PAGE>
Exhibit 2(b)
FIRST AMENDMENT TO AGREEMENT
FOR PURCHASE AND SALE OF EXCHANGES
HICKORY TECH CORPORATION PURCHASE AGREEMENT
THIS FIRST AMENDMENT is made and entered into as of the 21st day of
February, 1996, by and among U S WEST Communications, Inc., a Colorado
Corporation ("USWC"), and Tritech Communications, L.C., an Iowa Limited
Liability Company ("Tritech"), Alpine Communications, L.C., an Iowa Limited
Liability Company ("Alpine"), and Hickory Tech Corporation, a Minnesota
Corporation ("HTC").
WHEREAS, USWC, HTC, and EBSCo Limited, a District of Columbia
Corporation ("EBSco") collectively negotiated, but separately executed on
June 15, 1995, two separate Purchase and Sale Agreements providing for the
purchase of certain telephone exchanges in the state of Iowa (collectively,
the "Purchase Agreements"). The Purchase Agreements are identified as
follows: (i) the EBSco Purchase Agreement, as assigned, the Alpine Purchase
Agreement; and (ii) the HTC Purchase Agreement.
WHEREAS, under the HTC Purchase Agreement, HTC intends to purchase
certain Iowa Exchanges as listed on Exhibit E.
WHEREAS, the parties desire to amend the HTC Purchase Agreement in the
manner hereinafter set forth so that it will include certain Iowa exchanges
that are the subject of the EBSco Purchase Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements set forth in the HTC Purchase Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, USWC, Tritech, Alpine and HTC agree as follows:
1. Pursuant to Section 1.2, HTC shall pay to USWC as consideration for
the sale and transfer set forth in Section 1.1, a total Purchase Price of
thirty-five million, two hundred seventy one thousand eight hundred seventy
and 00/100 dollars (U.S. $35,271,870).
2. Section 1.2(A)(iii) shall be amended to extend the time for HTC to
obtain a written commitment letter(s) to November 30, 1995. USWC does hereby
acknowledge receipt of the commitment letters and that they meet the
requirements of Section 1.2(A)(iii).
3. Pursuant to Section 1.2(A)(ii) EARNEST MONEY. That certain Letter of
Credit #S300471 dated June 23, 1995 in the total amount of $600,000.00, as
amended, was provided by Alpine on behalf of HTC for the benefit of USWC and
shall hereafter be the "Earnest Money".
4. Exhibit D to the HTC Purchase Agreement shall be amended by the
attached AMENDED EXHIBIT D to the HTC Purchase Agreement to reflect only the
Exchange Boundary Maps to be purchased by HTC.
<PAGE>
5. Exhibit E to the HTC Purchase Agreement shall be amended by the
attached AMENDED EXHIBIT E to the HTC Purchase Agreement to reflect those
Exchanges that will be purchased by HTC.
6. Schedule 3.1(L) to the HTC Purchase Agreement shall be amended by the
attached Amended Schedule 3.1(L) to the HTC Purchase Agreement to provide for
a Switched Access Rate Schedule that blends the access rate for the Exchanges
originally covered by the HTC Purchase Agreement and the access rate for the
Exchanges being acquired by HTC from the EBSco Purchase Agreement.
7. Schedule A to Schedule 3.1(L) to the HTC Purchase Agreement shall be
amended by the attached AMENDED SCHEDULE A TO SCHEDULE 3.1(L).
8. Schedule 6.1(C) shall be amended by the attached AMENDED SCHEDULE
6.1(C) which reflects a change of Exchanges to be purchased by Buyer and does
not constitute an update to the Schedule 6.1(C).
9. Pursuant to Section 3.1(J) of the HTC Purchase Agreement, Schedule
3.1(J) shall be amended by the attached AMENDED SCHEDULE 3.1(J) - Related
Transactions to the HTC Purchase Agreement.
10. Within 30 days following the execution of this Amendment, USWC Agrees
to deliver to HTC an amended Schedule 1.1 which reflects a change of
Exchanges to be purchased by Buyer and does not constitute an update to the
Schedule 1.1.
11. Section 1.2(A)(v) is amended by deleting the first sentence thereof.
12. Section 1.2(B) is amended to read as follows:
"B. Purchase Price. On the Closing Date, the Purchase Price shall be
payable to Seller by wire transfer of immediately available funds to such
bank account(s) as Seller shall designate no later than three (3) business
days prior to Closing."
13. Pursuant to Section 11.3 of the HTC Purchase Agreement, the Notice
Provision shall be amended to read:
If to Buyer: Hickory Tech Corporation
Attn: Robert D. Alton, Jr.
221 E. Hickory Street
Mankato, MN 56001
Alpine Communications, L.C.
Attn: Jay R. Eliason, Secretary
4428 Northwest 114th Street
Des Moines, IA 50322
-2-
<PAGE>
14. Except as amended hereby, the HTC Purchase Agreement shall continue
in full force and effect.
IN WITNESS WHEREOF, the parties to this First Amendment have executed it
as of the date first above written.
U S WEST COMMUNICATIONS, INC. TRITECH COMMUNICATIONS, L.C.
/s/ Solomon D. Trujillo /s/ Robert D. Alton, Jr.
- ----------------------------- ----------------------------
By: Solomon D. Trujillo By: Robert D. Alton, Jr.
Title: President and Chief Executive Officer -------------------------
Title: President
----------------------
HICKORY TECH CORPORATION ALPINE COMMUNICATIONS, L.C.
/s/ Robert D. Alton, Jr. /s/ Jay R. Eliason
- ----------------------------- ---------------------------
By: Robert D. Alton, Jr. By: Jay R. Eliason
-------------------------- -----------------------
Title: President Title: Secretary
----------------------- ---------------------
* The amended exhibits and schedules mentioned in the First Amendment to
Agreement For Purchase and Sale of Exchanges have been omitted. The
Registrant agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
