<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
___________
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): May 17, 2000
CFW Communications Company
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Virginia 0-16751 54-1443350
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
P. O. Box 1990
Waynesboro, Virginia 22980
(Address of principal executive offices)
(540) 946-3500
(Registrant's telephone number, including area code)
Item 5. Other Events.
Merger with R&B Communications
On May 17, 2000, CFW Communications Company, a Virginia corporation
("CFW"), entered into a binding letter agreement with R&B Communications, Inc.
("R&B") providing for the merger of R&B with CFW. Under the letter agreement,
CFW will exchange 3.7 million shares of its common stock for all of R&B's
capital stock. The merger is subject to execution of a definitive agreement,
regulatory and shareholder approvals and other customary closing conditions.
CFW's board of directors will be expanded to include two current directors from
R&B.
1
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Acquisition of PrimeCo's Virginia Assets
On May 17, 2000, on behalf of Virginia RSA 6 Cellular Limited Partnership
("RSA 6"), CFW, as general partner of RSA 6, entered into a definitive asset
exchange agreement with PrimeCo PCS, L.P. ("PrimeCo") providing for the exchange
of certain PrimeCo licenses and assets in Richmond and Norfolk, Virginia for a
cash payment of $407 million, assumption of $20 million in lease obligations and
exchange of CFW's ownership interest and assets in two cellular properties. The
transaction is subject to the consummation of the Bell Atlantic-GTE merger and
regulatory approvals and other customary closing conditions.
In connection with the asset exchange agreement, each of Welsh, Carson,
Anderson & Stowe ("WCAS") and Morgan Stanley Dean Witter ("MSDW") have entered
into commitment letters to make certain equity investments in CFW. WCAS has
committed to purchase 100,000 shares of Senior Cumulative Convertible Preferred
Stock, Series B for $100.0 million, and MSDW has agreed to purchase 12,500
shares of Series B Preferred Stock for $12.5 million. The Series B Preferred
Stock is entitled to receive dividends at an annual rate of 8.5% of the stated
value and is convertible into shares of CFW common stock at any time at the
option of the holders at a conversion rate equal to the stated value divided by
$41.00. In connection with the issuance of the Series B Preferred Stock, CFW is
issuing to WCAS and MSDW warrants to purchase an aggregate of 500,000 shares of
common stock at an exercise price of $50.00 per share. The purchase of the
Series B Preferred Stock is subject to regulatory approvals and other customary
closing conditions.
WCAS also has committed to purchase 42,222 shares of Senior Cumulative
Convertible Preferred Stock, Series C for $42.2 million and 57,778 shares of
Senior Cumulative Convertible Preferred Stock, Series D for $57.8 million, and
MSDW has agreed to purchase 5,278 shares of Series C Preferred Stock for $5.3
million and 7,222 shares of Series D Preferred Stock for $7.2 million. The
Series C Preferred Stock is entitled to receive dividends at an annual rate of
8.5% of the stated value and is convertible into shares of CFW common stock at
the option of the holders at a conversion rate equal to the stated value divided
by $43.00. The Series D Preferred Stock is entitled to receive dividends at an
annual rate of 18.0% of the stated value and will be automatically converted
into shares of Series C Preferred Stock upon CFW shareholder approval of such
conversion. Upon such approval, the dividend rate on the Series C Preferred
Stock will decrease to 5.5%, and the conversion price will increase to $45.00.
The purchase of the Series C and Series D Preferred Stock is subject to the
closing of the acquisition of PrimeCo and customary closing conditions. The
proceeds of the sale of the Series C and Series D Preferred Stock will be used
to fund a portion of the purchase price of PrimeCo.
The holders of a majority of the Series B Preferred Stock are entitled to
elect in the aggregate two of CFW's directors and for so long as they are
entitled to do so, CFW's board will consist of no more than 11 directors. The
holders of the Series B and Series C Preferred Stock will be entitled to vote
with the holders of CFW common stock on an as-converted basis. Until CFW's
shareholders approve full voting rights, WCAS will exercise voting rights only
with respect to shares representing less than 20% of the issued and outstanding
shares of CFW common stock at the time of any such vote, and will vote any
remaining shares in the same proportion as CFW's other shareholders. The Series
D Preferred Stock will be non-voting.
2
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Morgan Stanley Senior Funding, Inc., an affiliate of MSDW ("Morgan
Stanley"), has committed to provide senior, secured credit facilities through a
syndicate of lenders headed by Morgan Stanley. These facilities comprise a $100
million revolving credit facility and $225 million in term loans and term loan
commitments, divided into a $75 million Term Loan A and a $150 million Term Loan
B. Term Loan B is expected to be used to finance, in part, the PrimeCo
acquisition. Borrowings under Term Loan A are available for one year after the
closing date under the credit agreement. These borrowings and borrowings under
the revolving credit facility may be used to refinance CFW's existing senior
debt and debt of the Virginia and West Virginia PCS Alliances (collectively, the
"Alliances"), as well as for working capital and general corporate purposes of
CFW and the Alliances (up to a limit of $250 million in total provided by CFW to
the Alliances). The revolving credit facility will be repayable in a single
payment on the seventh anniversary of closing. Amounts outstanding under Term
Loan A at the end of year one will be repayable beginning the fourth year after
closing in increasing quarterly installments, with a final maturity on the
seventh anniversary of closing. Term Loan B will be repayable beginning in the
third year after closing in quarterly installments equal to approximately 1% per
year of principal during each year through the seventh year, with the entire
balance of Term Loan B repayable between the seventh and eighth anniversaries of
closing. CFW may choose to have interest accrue on loans outstanding under the
senior credit facilities at the prime rate or the London interbank offered rate
(fully reserve adjusted), in either case, plus a margin. Depending on CFW's
operating results from time to time, the margins on revolving credit loans and
Term Loan A loans are expected initially to be 2% over prime or 3% over LIBOR.
Margins on Term Loan B loans are 0.5% higher than the margins on the other
loans.
CFW will seek to raise an additional $375 million in the private debt
markets in connection with the PrimeCo acquisition. Morgan Stanley & Co.
Incorporated (an affiliate of MSDW and Morgan Stanley) and WCAS have committed
to provide bridge financing in the form of $280 million of senior bridge notes
and $95 million of subordinated debt, respectively, in the event CFW does not
complete its private debt financing prior to the closing of the PrimeCo
acquisition.
Sale of Subsidiary to Telegate
On May 17, 2000, CFW also entered into a definitive stock purchase
agreement with Telegate AG ("Telegate"). Pursuant to the stock purchase
agreement, Telegate will acquire, through a wholly-owned subsidiary, 100% of the
outstanding capital stock of CFW Information Services, Inc., a wholly-owned
subsidiary of CFW, for a purchase price of $32 million in cash and $3.5 million
in Telegate stock. CFW will retain ownership of its three call center buildings
and lease the facilities to Telegate. The consummation of the transaction is
subject to regulatory approvals and customary closing conditions.
FORWARD-LOOKING STATEMENTS MADE BY CFW ARE BASED ON A NUMBER OF
ASSUMPTIONS, ESTIMATES AND PROJECTIONS. THESE STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES AND ANY SIGNIFICANT
DEVIATIONS FROM THESE ASSUMPTIONS COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS. CFW UNDERTAKES NO
OBLIGATION TO REVISE OR UPDATE SUCH STATEMENTS TO REFLECT CURRENT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
3
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
The following exhibits are filed herewith in accordance with the provisions
of Item 601 of Regulation S-K.
(10.1) Letter Agreement, dated May 17, 2000, between CFW and R&B
Communications, Inc.
(10.2) Asset Exchange Agreement, dated May 17, 2000, between RSA 6
Cellular Limited Partnership and PrimeCo PCS, L.P.
(10.3) Stock Purchase Agreement, dated May 17, 2000, between CFW and
Telegate AG.
(99.1) Press Release dated May 18, 2000.
(99.2) Press Release dated May 18, 2000
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.
CFW Communications Company
(Registrant)
By: /s/ Michael B. Moneymaker
----------------------------------------
Michael B. Moneymaker
Senior Vice President and Chief Financial
Officer, Treasurer and Secretary
Date: May 24, 2000
<PAGE>
Exhibit 10.1
PRIVILEGED AND CONFIDENTIAL
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CFW Communications Company
401 Spring Lane, Suite 300
P. O. Box 1990
Waynesboro, Virginia 22980
May 17, 2000
Board of Directors
R&B Communications, Inc.
P.O. Box 174
Daleville, Virginia 24083
Attention: J. Allen Layman
President
Ladies and Gentlemen:
CFW Communications Company ("CFW") is pleased to make this proposal set
forth in this letter of agreement to merge with R&B Communications Inc. ("R&B").
1. Merger and Share Exchange. CFW will acquire R&B by means of a merger (the
-------------------------
"Merger") of a special purpose, wholly-owned subsidiary of CFW with and into
R&B. R&B thereafter would be operated as a wholly-owned subsidiary of CFW. CFW
and R&B will use their best efforts to make the Merger effective as soon as
practicable following receipt of shareholder and regulatory approvals.
Shareholders of R&B will receive CFW common stock in exchange for their R&B
shares in the Merger. The transaction will be structured so as to be a tax-free
reorganization pursuant to the provisions of Section 368 of the Internal Revenue
Code and will be accounted for as a purchase. Following the Merger, CFW would
change its name to "Intelos" or other mutually agreeable name.
2. Consideration. On the terms and conditions set forth in the Merger Agreement,
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each outstanding share of R&B common stock shall be exchanged for 60.27 shares
of CFW common stock (the "Exchange Ratio"), provided that no more than 3.7
million shares of CFW common stock will be exchanged for all outstanding shares
of R&B common stock. As of the closing, R&B shall not have more than 61,389
shares of common stock outstanding and no stock options outstanding. The CFW
shares issued in the Merger shall be registered on Form S-4 with the Securities
and Exchange Commission.
3. Interim Operations. From the date the parties sign the Merger Agreement until
------------------
the closing of the Merger Agreement, R&B shall be operated solely in the
ordinary course,
<PAGE>
consistent with past practice, and, except as contemplated hereby and as
scheduled in the Merger Agreement, no dividends or distributions in respect of
R&B's capital stock, no capital expenditures (except as contemplated by a
schedule to be attached to the Merger Agreement and setting forth R&B's 2000
capital expenditure budget), bonuses, severance agreements or other adjustments
to compensation (except normally scheduled changes), employment agreements,
collective bargaining or similar agreements, incurrence of any debt, and no
changes in capital structure, shall be paid or made without prior written
approval of CFW. The schedule to be attached to the Merger Agreement will
include provisions for (i) year 2000 cash bonuses to be paid executive employees
prior to the closing of the Merger Agreement aggregating $625,000 in accordance
with Exhibit A hereto, (ii) immediately prior to the closing, payment of year
---------
2000 dividends of $260,903.25, (iii) execution and delivery by R&B of a lease
agreement with the Layman Family, LLC, upon the terms and conditions set forth
in Exhibit B, (iv) make Year 2000 profit sharing plan contributions consistent
---------
with past practice, (v) amendments to Salary Continuation Plan Agreements, by
execution of agreements in the form of Exhibit C, and (vi) contribution of 4,231
---------
shares of Illuminet stock to the R&B Telephone Foundation (which Foundation will
not be involved in the Merger).
4. Due Diligence. From and after the date hereof, CFW and its representatives
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will be provided with full access to R&B's books, records and premises upon
reasonable notice to R&B and during regular business hours and also will be
provided with copies of financial statements, tax returns, agreements and other
materials as requested, which shall be kept confidential in accordance with the
terms of the Confidentiality Agreement dated the date hereof between CFW and
R&B. From and after the date hereof, R&B and their representatives will be
provided with full access to CFW's books, records and premises upon reasonable
notice to CFW and during regular business hours and also will be provided with
copies of financial statements, tax returns, agreements and other materials as
requested, which shall be kept confidential.
5. Certain Fees. CFW and R&B each shall pay its own fees and expenses and those
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of its attorneys, agents and advisers, provided that CFW and R&B shall be
responsible for 80% and 20%, respectively, of the registration fee and related
printing costs associated with obtaining shareholder approval of the Merger
Agreement.
6. No Solicitation. R&B recognizes CFW will incur substantial expenses in
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conducting a due diligence investigation of R&B, and in consideration for CFW's
doing so, R&B agrees not to engage in, and to use its best efforts to cause its
directors, officers, employees, agents and representatives of advisors,
including counsel and financial advisors ("Representatives"), not to engage in,
any negotiations (other than with CFW) with respect to any proposals relating to
any business combination, tender offer or acquisition transaction involving the
acquisition by any third party of all or any material portion of the stock or
assets of R&B (any such proposal being a "Third-Party Offer" and any such
acquisition being a "Third-Party Acquisition"), from the date of this Agreement
and continuing through the earlier of (i) the termination of this letter of
agreement, (ii) the Closing Date, or (iii) the termination of the Merger
Agreement in accordance with its terms (the "Restricted Period"). In addition,
R&B agrees that during the Restricted Period, it will not, and will not
authorize or permit any of its Representatives, to directly or indirectly,
solicit, consider or encourage any inquiries or proposals for (or which may
reasonably be expected to lead to) any Third-Party Offer, or engage in
discussions, conversations, negotiations or other communications with or provide
any
<PAGE>
information to, or otherwise assist or cooperate with any person, entity or
group for the purpose of, directly or indirectly, soliciting, considering or
encouraging any Third-Party Offer. Immediately upon receipt of any Third-Party
Offer or related inquiry during such period, R&B agrees to inform CFW of the
fact of such Third-Party Offer or related inquiry, including, among other
things, the identity of the third-party making such offer or inquiry.
In consideration of the efforts and resources to be expended by CFW in
its due diligence investigation of R&B and related matters, R&B agrees that in
the event that it enters into a Third-Party Acquisition (or any letter of intent
or other agreement relating to a Third-Party Acquisition) during the Restricted
Period or within 12 months after the expiration of the Restricted Period with
any third party with whom R&B or any Representative had contact during the
Restricted Period in violation of this paragraph 6, R&B shall immediately become
liable to pay, and pay, to CFW $2,500,000. The parties hereby agree that CFW
would be substantially harmed as a result of such a violation of this paragraph
6, that the specific damages incurred by CFW would be difficult of
determination, and that this amount constitutes a reasonable estimate of such
damages to be incurred by CFW and shall constitute reasonable liquidated damages
for a breach of this paragraph 6.
CFW and R&B agree that the Merger Agreement shall set forth the terms
and conditions under which R&B may furnish information to a party who has made a
Third Party Offer. During the Restricted Period and prior to the execution of
the definitive Merger Agreement, R&B agrees to be bound by the provisions of
this paragraph 6.
7. Merger Agreement.
----------------
(a) CFW and R&B will negotiate in good faith to agree upon the
provisions of the Merger Agreement on the basis set forth in this proposal.
The Merger Agreement shall contain usual and customary representations and
warranties (and supporting disclosures), agreements pending closing and
conditions and indemnification and other matters typically found in
agreements relating to transactions of this type, size and complexity and
otherwise satisfactory to the parties in form and substance. The Merger
Agreement shall provide that CFW shall be indemnified for breaches of
representations contained in the Merger Agreement relating to tax,
environmental and employee matters. To fund this indemnification
obligation, 10% of the shares to be issued by CFW in the Merger shall be
placed in escrow (the "Escrowed Shares"). One-half of the Escrowed Shares
(to the extent not subject to pending claim notices) will be released at
the end of two years, and the balance will be released three years after
the filing of the federal income tax return for the last period covering
R&B's operations prior to the Merger. Notwithstanding the foregoing, CFW
shall not be indemnified unless and until the amount of all indemnifiable
losses exceeds the lesser of $100,000 per individual item or $500,000 in
the aggregate; except in the event of an individual indemnifiable loss of
$100,000 or more, CFW will be indemnified for the excess over $100,000 even
though aggregate indemnifiable losses have not exceeded $500,000 (which
excess shall not be counted against the $500,000 threshold).
(b) Conditions to closing under the Merger Agreement shall include
that, if required by the Virginia Stock Corporation Act, CFW's shareholders
shall have approved
<PAGE>
an increase in the size of CFW's Board of Directors, as contemplated by
this letter of agreement, and an increase in CFW's authorized shares of
common stock. CFW and R&B agree to use their best efforts, subject to the
terms of this letter of agreement, to have the Merger Agreement executed
and delivered by May 26, 2000 and in no event later than June 30, 2000.
Execution of the Merger Agreement by CFW shall be subject to the following:
(i) the approval of the Merger Agreement and the transactions
contemplated therein by the Board of Directors of R&B and by the Board
of Directors of CFW in compliance with paragraph 17 hereof;
(ii) R&B (i) shall have conducted its business only in the
ordinary course and in accordance with paragraph 3 of this letter of
agreement and shall have maintained and preserved its organization,
goodwill and properties, and (ii) shall not have made any material
change to its financial statements, except as required by the
operation of the business in the ordinary course or to conform to
generally accepted accounting principles, or prepaid any indebtedness,
changed depreciation or amortization methods, delayed incurring
budgeted expenses or deviated from usual and customary terms with
suppliers, lessors, customers or buyers;
(iii) each of the R&B employees shall have agreed to waive his
"change in control" rights under the Salary Continuation Plan
Agreement; and
(iv) there shall not have been any material adverse changes in
the assets, properties, liabilities, financial condition or results of
operations of R&B, excluding items identified in R&B's 2000 business
plan.
(c) Execution of the Merger Agreement by R&B shall be subject to the
following:
(i) approval of the Merger Agreement and the transactions
contemplated therein by the Board of Directors of CFW and by the Board
of Directors of R&B in compliance with paragraph 17 hereof.
(ii) there shall not have been any material adverse changes in
the assets, properties, liabilities, financial condition or results of
operations of CFW, excluding (i) changes relating to or resulting from
acquisitions or divestitures, (ii) changes consistent with current
trends disclosed in CFW's 1999 annual report to shareholders and its
reports previously filed with the Securities and Exchange Commission
and (iii) items identified in CFW's 2000 business plan.
8. Shareholder Approval. Following execution of the Merger Agreement, the
--------------------
Boards of Directors of each of CFW and R&B shall:
(a) proceed promptly to call a meeting of each of their shareholders,
to be held as soon as practicable, for the purpose of voting on the
transactions contemplated herein;
<PAGE>
(b) recommend approval by CFW's stockholders or R&B's shareholders, as
the case may be, of the transactions contemplated herein; and
(c) use each of their best commercially reasonable efforts to solicit
sufficient proxies to obtain such approval.
9. Regulatory Approvals. R&B and CFW will cooperate with each other in
--------------------
the preparation of all filings, if any, with respect to the transactions
contemplated herein required to be made with the Federal Communications
Commission (the "FCC"), the Virginia State Corporation Commission (the "SCC")
and with the Federal Trade Commission (the "FTC") and the Department of Justice
under the Antitrust Improvements Act of 1976. In the event that the FCC, the
SCC, the FTC or the Department of Justice requires any additional information
with respect to the transactions, CFW and R&B will cooperate with each other in
promptly obtaining and preparing such information and delivering it to the FCC,
the SCC, the FTC and the Department of Justice.
10. R&B Representations and Warranties. R&B represents and warrants to
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the CFW as follows:
(a) Organization; Standing and Power. R&B is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has the requisite corporate power and
authority to carry on its business as now being conducted. R&B is duly
qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified to do business or in
good standing (individually, or in the aggregate) would not have a material
adverse effect on R&B and its subsidiaries, taken as a whole.
(b) Authority. The execution, delivery and performance of this letter
---------
of agreement and of all of the other documents and instruments required
hereby by R&B are within the corporate power of R&B. The execution and
delivery of this letter of agreement and the consummation of the
transactions contemplated hereby have been duly authorized by R&B's Board
of Directors and no other corporate action on the part of R&B is necessary
to authorize this agreement or to consummate the transactions contemplated
herein, other than approval of the Merger Agreement by R&B's Board of
Directors and other than R&B shareholder approval of the Merger. This
letter of agreement and all other documents and instruments required to be
executed and delivered by R&B hereby have been or will be duly and validly
executed and delivered by R&B and constitute or will constitute valid and
binding agreements of R&B, enforceable against R&B in accordance with their
terms, except as enforceability may be restricted, limited or delayed by
applicable bankruptcy or other laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of
equity.
(c) No Violations. Assuming the required R&B shareholder approval is
-------------
obtained in order to consummate the transactions contemplated hereby,
neither the execution, delivery and performance of this letter of agreement
nor the consummation of
<PAGE>
the transactions contemplated hereby by R&B will (a) conflict with or
result in any breach of any provision of the Articles of Incorporation or
Bylaws of R&B, (b) subject to receipt of regulatory and other third-party
consents (which R&B has no reason to believe will not be readily
available), result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract or other instrument or obligation binding upon R&B, or (c) violate
any order, writ, injunction, decree or law in effect as of the date of this
letter of agreement and applicable to R&B, or any of its properties or
assets.
(d) Opinion of Financial Advisor. R&B has received an opinion from its
----------------------------
financial advisor to the effect that, as of the date this letter of
agreement is executed by R&B, the Exchange Ratio is fair to the R&B
shareholders from a financial point of view.
(e) State Takeover Statutes; Anti-Takeover Provisions. The provisions
-------------------------------------------------
of Article 14 and Article 14.1 of the Virginia Stock Corporation Act do not
apply to R&B. R&B has taken all actions with respect to any anti-takeover
provisions of R&B's Bylaws or Articles of Incorporation necessary to enter
into and consummate this letter of agreement.
11. CFW Representations and Warranties. CFW represents and warrants to R&B
----------------------------------
as follows:
(a) Organization; Standing and Power. CFW is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has the requisite corporate power and
authority to carry on its business as now being conducted. CFW is duly
qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified to do business or in
good standing (individually, or in the aggregate) would not have a material
adverse effect on CFW and its subsidiaries, taken as a whole.
(b) Authority. The execution, delivery and performance of this letter
---------
of agreement and of all of the other documents and instruments required
hereby by CFW are within the corporate power of CFW. The execution and
delivery of this letter of agreement and the consummation of the
transactions contemplated hereby have been duly authorized by CFW's Board
of Directors and no other corporate action on the part of CFW is necessary
to authorize this agreement or to consummate the transactions contemplated
herein, other than approval of the Merger Agreement by CFW's Board of
Directors and other than CFW shareholder approval of the issuance by CFW of
its Common Stock in the Merger and of an increase in CFW's authorized
shares of common stock sufficient to fund the Exchange Ratio. This letter
of agreement and all other documents and instruments required to be
executed and delivered by CFW hereby have been or will be duly and validly
executed and delivered by CFW and constitute or will constitute valid and
binding agreements of CFW, enforceable against CFW in accordance
<PAGE>
with their terms, except as enforceability may be restricted, limited or
delayed by applicable bankruptcy or other laws affecting creditors' rights
generally and except as enforceability may be subject to general principles
of equity.
(c) No Violations. Assuming the required CFW shareholder approval is
-------------
obtained in order to consummate the transactions contemplated hereby,
neither the execution, delivery and performance of this letter of agreement
nor the consummation of the transactions contemplated hereby by CFW will
(a) conflict with or result in any breach of any provision of the Articles
of Incorporation or Bylaw of CFW, (b) subject to receipt of regulatory and
other third party consents (which CFW has no reason to believe will not be
available), result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract or other instrument or obligation binding upon CFW, or (c) violate
any order, writ, injunction, decree or law in effect as of the date of this
letter of agreement and applicable to CFW, or any of its properties or
assets.
(d) Opinion of Financial Advisor. CFW has received an opinion from its
----------------------------
financial advisor to the effect that, as of the date of this letter of
agreement, the Exchange Ratio is fair to CFW from a financial point of
view.
12. Board Size. As of the closing of the Merger, CFW shall increase the
----------
number of its Board of Directors to include two designees of R&B (the "R&B
Designees"). The initial R&B Designees shall be J. Allen Layman and John B.
Williamson, III.
13. Employee Arrangements. CFW shall provide benefits for certain R&B
---------------------
employees substantially in accordance with the terms set forth in Exhibit D
attached hereto.
14. Other Agreements.
----------------
(a) If CFW's shareholders do not approve the Merger at the CFW
shareholders meeting called to consider the Merger, CFW shall reimburse R&B
for the reasonable out-of-pocket costs incurred in connection with this
letter of agreement, the Merger Agreement and the proposed Merger, not to
exceed $500,000.
(b) Each of the shareholders listed on Exhibit E shall agree, for a
---------
period of two years, not to transfer during any three-month period more
than that number of shares of CFW common stock shown on Exhibit E as the
---------
shareholder's "Quarterly Restriction."
(c) Following the Merger, for purposes of determining eligibility and
vesting under CFW's employee benefit plans (including health insurance and
vacation plans), an employee's period of employment with R&B will count as
service with CFW, but will not count in determining the level of benefits
under CFW's defined benefit pension plan.
15. Confidentiality. The parties hereto have executed a Confidentiality
---------------
Agreements dated as of the date hereof (a copy of which is attached hereto),
which shall remain in full force and effect. In addition, in the event that
either CFW or R&B decides to issue a press release or make a public statement
regarding this letter of agreement, the Merger Agreement or the
<PAGE>
proposed Merger, then the other party shall have the opportunity to review and
comment on such press release or statement prior to any public disclosure.
16. Termination. If the parties have not executed a Merger Agreement on or
-----------
before June 30, 2000, either party may terminate this letter of agreement by
providing the other party with written notice of such termination not less than
48 hours prior to the termination time. Upon termination in accordance with this
paragraph 16, all obligations of the parties (other than those obligations
provided for in paragraphs 5, 6 and 15 that are by their nature continuing)
shall terminate as of such termination time.
17. Binding Letter of Agreement. It is expressly understood and agreed that
---------------------------
this is a binding letter of agreement, legally committing the parties to
consummate the transactions contemplated herein, subject to satisfaction of the
terms and conditions set forth herein. The parties agree to negotiate in good
faith a definitive Merger Agreement, which will contain, without limitation, the
terms and conditions set forth in this letter agreement. Until execution of the
definitive Merger Agreement, the parties shall be under obligation to each other
as expressly set forth in this letter of agreement.
<PAGE>
If the foregoing accords with our mutual understandings and agreements,
kindly so indicate by signing a counterpart in the place indicated below and
returning it to me. This offer will expire if a signed counterpart of this
letter of agreement and an executed voting agreement by the shareholders listed
on Exhibit E representing at least a majority of R&B's outstanding common stock
---------
are not received by 5:00 p.m. Eastern Time on May 18, 2000. R&B shall use its
best efforts to promptly thereafter obtain the executed voting agreement of the
remaining shareholders listed on Exhibit E.
---------
Very truly yours,
CFW COMMUNICATIONS COMPANY
By:
--------------------------------
James S. Quarforth
Chairman of the Board
and Chief Executive Officer
AGREED TO AND ACCEPTED
AS OF MAY 17, 2000
PURSUANT TO APPROVAL OF
THE BOARD OF DIRECTORS
R&B COMMUNICATIONS, INC.
By:
-----------------------------------------
J. Allen Layman
President and Chief Executive Officer
<PAGE>
Exhibit 10.2
- --------------------------------------------------------------------------------
ASSET EXCHANGE AGREEMENT
between
PRIMECO PCS, L.P.
and
VIRGINIA RSA 6 CELLULAR LIMITED PARTNERSHIP
dated as of
May 17, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CERTAIN DEFINITIONS 2
1.1 Defined Terms.................................................................. 2
1.2 Other Definitional Provisions.................................................. 9
ARTICLE II THE TRANSACTION 10
2.1 Exchange of Assets............................................................. 10
2.2 Net Working Capital Adjustment................................................. 10
2.3 Closing........................................................................ 14
2.4 Deliveries and Proceedings at Closing.......................................... 14
2.5 Regarding Consents............................................................. 16
ARTICLE III REPRESENTATIONS AND WARRANTIES 18
3.1 Representations and Warranties of PrimeCoPCS................................... 18
3.1.1 PrimeCoPCS Existence................................................... 18
--------------------
3.1.2 The Company's Existence and Qualification............................. 18
-----------------------------------------
3.1.3 Compliance with Law; Authorizations................................... 18
-----------------------------------
3.1.4 Litigation............................................................ 19
----------
3.1.5 Contracts and Other Agreements........................................ 19
------------------------------
3.1.6 Validity of Contemplated Transactions, Etc............................ 21
------------------------------------------
3.1.7 Taxes................................................................. 21
-----
3.1.8 Environmental Matters................................................. 22
---------------------
3.1.9 Title; Real and Personal Property..................................... 23
---------------------------------
3.1.10 Condition of Tangible Assets.......................................... 24
----------------------------
3.1.11 Accounts Receivable................................................... 24
-------------------
3.1.12 Inventory............................................................. 24
---------
3.1.13 Material Changes...................................................... 24
----------------
3.1.14 Assets Necessary to Conduct of Company Businesses..................... 25
-------------------------------------------------
3.1.15 Intellectual Property Matters......................................... 25
-----------------------------
3.1.16 Books of Account; Financial Statements................................ 26
--------------------------------------
3.1.17 No Interest in Other Entities......................................... 26
-----------------------------
3.1.18 Availability of Documents............................................. 26
-------------------------
3.1.19 Brokers or Finders.................................................... 26
------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.1.20 Mobile Telephone Numbers; Form of Agreements......................... 26
--------------------------------------------
3.1.21 Labor Relations...................................................... 27
---------------
3.1.22 Employee Benefit Plans............................................... 27
----------------------
3.1.23 Insurance............................................................ 29
---------
3.1.24 No Undisclosed Liabilities........................................... 29
--------------------------
3.1.25 Communications Act................................................... 30
------------------
3.2 Representations and Warranties of VA-6LP..................................... 30
3.2.1 VA-6LP Existence, Etc................................................ 30
---------------------
3.2.2 Communications Act................................................... 30
------------------
3.2.3 VA-5 Partnership..................................................... 30
----------------
3.2.4 Compliance with Law; Authorizations.................................. 31
-----------------------------------
3.2.5 Litigation........................................................... 31
----------
3.2.6 Contracts and Other Agreements....................................... 32
------------------------------
3.2.7 Validity of Contemplated Transactions, Etc........................... 33
------------------------------------------
3.2.8 Taxes................................................................ 33
-----
3.2.9 Environmental Matters................................................ 34
---------------------
3.2.10 Title; Real and Personal Property.................................... 34
---------------------------------
3.2.11 Condition of Tangible Assets......................................... 35
----------------------------
3.2.12 Accounts Receivable.................................................. 35
-------------------
3.2.13 Inventory............................................................ 35
---------
3.2.14 Material Changes..................................................... 35
----------------
3.2.15 Assets Necessary to Conduct of VA-6 Partnership Business............. 36
--------------------------------------------------------
3.2.16 Intellectual Property Matters........................................ 36
-----------------------------
3.2.17 Books of Account; Financial Statements............................... 36
--------------------------------------
3.2.18 No Interest in Other Entities........................................ 37
-----------------------------
3.2.19 Availability of Documents............................................ 37
-------------------------
3.2.20 Brokers or Finders................................................... 37
------------------
3.2.21 Mobile Telephone Numbers; Form of Agreements......................... 37
--------------------------------------------
3.2.22 Employee Matters..................................................... 38
----------------
3.2.23 Insurance............................................................ 38
---------
3.2.24 No Undisclosed Liabilities........................................... 38
--------------------------
3.3 Survival of Representations and Warranties................................... 39
3.4 No Representations or Warranties Implied..................................... 39
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV COVENANTS AND AGREEMENTS...................................................... 39
4.1 Agreements of PrimeCoPCS Pending the Closing................................... 39
4.1.1 Conduct of the Company Businesses in the Ordinary Course............... 39
-------------------------------------------------------
4.1.2 Distributions.......................................................... 41
-------------
4.1.3 Access................................................................. 41
------
4.1.4 DOJ Approval........................................................... 41
------------
4.1.5 Casualty Insurance Proceeds............................................ 41
---------------------------
4.1.6 Company National Accounts.............................................. 41
-------------------------
4.1.7 PrimeCo National Outlet Agreements..................................... 42
----------------------------------
4.1.8 Non-Solicitation....................................................... 42
----------------
4.1.9 PrimeCo Name........................................................... 42
------------
4.1.10 PrimeCoPCS Cooperation................................................. 42
----------------------
4.1.11 Consents............................................................... 42
--------
4.1.12 Approvals and Disapprovals............................................. 42
--------------------------
4.1.13 Control of Systems Pending Closing..................................... 43
----------------------------------
4.1.14 Retention of Books and Records......................................... 43
------------------------------
4.1.15 Communications Act..................................................... 43
------------------
4.2 Agreements of VA-6LP.......................................................... 43
4.2.1 Conduct of VA-6LP's Business in the Ordinary Course.................... 43
---------------------------------------------------
4.2.2 Distributions.......................................................... 44
-------------
4.2.3 Access................................................................. 44
------
4.2.4 Casualty Insurance Proceeds............................................ 45
---------------------------
4.2.5 Non-Solicitation....................................................... 45
----------------
4.2.6 Consents............................................................... 45
--------
4.2.7 Approvals and Disapprovals............................................. 45
--------------------------
4.2.8 Control of Systems Pending Closing..................................... 45
----------------------------------
4.2.9 Retention of Books and Records......................................... 45
------------------------------
4.2.10 Communications Act..................................................... 45
------------------
4.2.11 Agreement Regarding DOJ Final Judgment................................. 46
--------------------------------------
4.3 Covenants of PrimeCoPCS and VA-6LP............................................ 46
4.3.1 FCC Authorizations..................................................... 46
------------------
4.3.2 HSR Act................................................................ 46
-------
4.3.3 DOJ Final Judgment..................................................... 46
------------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
4.3.4 Copies of Regulatory Filings................................................... 47
----------------------------
4.3.5 Confidentiality................................................................ 47
---------------
4.3.6 Cooperation.................................................................... 48
-----------
4.3.7 Other Regulatory Requirements.................................................. 48
-----------------------------
4.3.8 Litigation..................................................................... 48
----------
4.3.9 Section 1031 Exchange.......................................................... 50
---------------------
4.3.10 Updating of Schedules.......................................................... 50
---------------------
4.3.11 JLL Subleases.................................................................. 51
-------------
ARTICLE V CONDITIONS PRECEDENT TO CLOSING...................................................... 51
5.1 Conditions Precedent to Obligations of VA-6LP......................................... 51
5.1.1 Representations and Warranties True as of Closing.............................. 51
-------------------------------------------------
5.1.2 Compliance with this Agreement................................................. 52
------------------------------
5.1.3 CFW Shareholder Vote and CFW High-Yield Issuance............................... 52
------------------------------------------------
5.1.4 Closing Certificate............................................................ 52
-------------------
5.1.5 Other Agreements............................................................... 52
----------------
5.1.6 Regulatory Opinion............................................................. 52
------------------
5.2 Conditions Precedent to Obligations of PrimeCoPCS..................................... 52
5.2.1 Representations and Warranties True as of Closing.............................. 52
-------------------------------------------------
5.2.2 Compliance with this Agreement................................................. 53
------------------------------
5.2.3 Closing Certificate............................................................ 53
-------------------
5.2.4 Other Agreements............................................................... 53
----------------
5.2.5 Bell/GTE Merger................................................................ 53
---------------
5.2.6 Regulatory Opinion. Unless the Alternative Transaction is to be consummated,.. 53
------------------
5.3 Conditions Precedent to the Obligations of VA-6LP and PrimeCoPCS...................... 53
5.3.1 Regulatory and Other Approvals................................................. 54
------------------------------
5.3.2 No Pending Governmental Litigation............................................. 54
----------------------------------
ARTICLE VI INDEMNIFICATION...................................................................... 54
6.1 General Indemnification Obligation of PrimeCoPCS...................................... 54
6.2 General Indemnification Obligation of VA-6LP.......................................... 55
6.3 Limitations on Claims for Losses...................................................... 57
6.4 Indemnification Procedure as to Third-Party Claims.................................... 58
6.5 Adjustment For Insurance.............................................................. 59
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
6.6 Payment........................................................................ 59
6.7 Other Rights and Remedies...................................................... 59
ARTICLE VII MISCELLANEOUS................................................................ 60
7.1 Termination.................................................................... 60
7.2 Expenses....................................................................... 61
7.3 Tax Administration; Mutual Assistance.......................................... 61
7.4 Further Assurances............................................................. 62
7.5 Additional Post Closing Confidentiality Undertakings........................... 62
7.6 Contents of Agreement.......................................................... 62
7.7 Assignment and Binding Effect.................................................. 62
7.8 Waiver......................................................................... 63
7.9 Notices........................................................................ 63
7.10 Remedies....................................................................... 64
7.11 Knowledge...................................................................... 64
7.12 Applicable Law; Consent to Jurisdiction........................................ 65
7.13 No Benefit to Others........................................................... 65
7.14 Headings....................................................................... 65
7.15 Severability................................................................... 65
7.16 Counterparts................................................................... 65
</TABLE>
v
<PAGE>
EXHIBITS
- --------
Exhibit A - Company BTAs
Exhibit B - Company Assignment and Assumption
Exhibit C - VA-6 Bill of Sale
Exhibit D-1 - Form of Fuji Sublease
Exhibit D-2 - Form of Nomura Sublease
Exhibit D-3 - Form of Sublease Guaranty
Exhibit E-1 - Form of PrimeCo License Agreement
Exhibit E-2 - Form of CFW License Agreement
SCHEDULES
- ---------
Schedule A Transferred Assets
Schedule 2.1(b) VA-6 Excluded Assets and Liabilities
Schedule 2.2 Calculation of Assumed Closing Date Net Working Capital
Schedule 2.5(c) Consents for Transferred Assets
Schedule 3.1.2 Company Agreement
Schedule 3.1.3(a) Company FCC Authorizations
Schedule 3.1.3(b) Non-Compliance with Requirements of Law; Company
Authorizations
Schedule 3.1.4 Litigation
Schedule 3.1.5(a) Contracts and Other Agreements
Schedule 3.1.6 PrimeCoPCS Consents
Schedule 3.1.7 Tax Matters
Schedule 3.1.8 Environmental Matters
Schedule 3.1.9(a) Liens
Schedule 3.1.9(b) Real Property
Schedule 3.1.9(c) Title Exceptions
Schedule 3.1.10 Third Party Property
Schedule 3.1.11 Accounts Receivable
Schedule 3.1.13 Material Changes
Schedule 3.1.14 Assets Necessary to Conduct Company Businesses
Schedule 3.1.15 Claims of Infringement Relating to Intellectual Property
Schedule 3.1.16 Company Financial Statements
Schedule 3.1.18 Contracts Subject to Confidentiality Provisions
Schedule 3.1.19 PrimeCoPCS Brokers and Finders
Schedule 3.1.20 Standard Rate Plans; Products and Services Provided to
Subscribers; Forms of Customer Agreements
Schedule 3.1.21 Labor Matters
Schedule 3.1.22(c) PrimeCo Employee Benefit Plans
Schedule 3.1.22(h) Pending Actions Against PrimeCo Employee Benefit Plans
Schedule 3.1.22(j) Post-Employment Benefits
Schedule 3.1.24 Company Liabilities
Schedule 3.2.4(a) VA-6 FCC Authorizations
vi
<PAGE>
Schedule 3.2.4(b) Non-Compliance with Requirements of Law; VA-6
Authorizations
Schedule 3.2.5 Litigation
Schedule 3.2.6(a) Contracts and Other Agreements
Schedule 3.2.7 VA-6 Consents
Schedule 3.2.8 Tax Matters
Schedule 3.2.9 Environmental Matters
Schedule 3.2.10(a) Liens
Schedule 3.2.10(b) Real Property
Schedule 3.2.10(c) Title Exceptions
Schedule 3.2.11 Third Party Property
Schedule 3.2.12 Accounts Receivable
Schedule 3.2.14 Material Changes
Schedule 3.2.15 Assets Necessary to Conduct VA-6LP Business
Schedule 3.2.16 Claims of Infringement Relating to Intellectual Property
Schedule 3.2.17 VA-6 Financial Statements
Schedule 3.2.19 Contracts Subject to Confidentiality Provisions
Schedule 3.2.20 VA-6LP Brokers and Finders
Schedule 3.2.21 Standard Rate Plans; Products and Services Provided to
Subscribers; Forms of Customer Agreements
Schedule 3.2.24 Certain VA-6 Liabilities
Schedule 4.1.1(g) Planned Changes in Company Marketing and Promotions
Schedule 4.2.1(g) Planned Changes in VA-6 Marketing and Promotions
Schedule 5.3.1 Regulatory and Other Approvals
Schedule 7.11 Knowledge
vii
<PAGE>
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT ("Agreement"), dated as of May 17, 2000, is
---------
entered into between PRIMECO PCS, L.P., a Delaware limited partnership
("PrimeCoPCS"), and VIRGINIA RSA 6 CELLULAR LIMITED PARTNERSHIP, a Virginia
- ------------
limited partnership ("VA-6LP").
------
R E C I T A L S
WHEREAS, effective March 31, 2000, PrimeCo Personal Communications, L.P.
("PrimeCo") transferred the assets, properties and rights set forth on Schedule
- ---------
A hereto (the "Transferred Assets") to Richmond 20MHz, LLC, a Delaware limited
------------------
liability company (the "Company")
-------
WHEREAS, PrimeCoPCS owns the entire membership interest (the "Company
-------
Interest") in the Company;
- --------
WHEREAS, the Company is the holder of certain licenses granted by the
United States Federal Communications Commission ("FCC") for the Basic Trading
---
Areas ("BTAs") set forth on Exhibit A attached hereto (collectively, the
---- ---------
"Company BTAs");
- -------------
WHEREAS, the Company is the owner of wireless telecommunications systems in
the Company BTAs and, in connection therewith, is engaged in the business of
marketing, selling and providing Personal Communications Services in the Company
BTAs (such businesses, as conducted by Company and its predecessors in interest
which are or were Affiliates of PrimeCoPCS, are referred to herein collectively
as the "Company Businesses");
------------------
WHEREAS, subject only to the limitations and exclusions contained in this
Agreement, PrimeCoPCS desires to exchange, through the transfer of the Company
Interest on the terms and conditions set forth herein, certain assets,
properties and rights of the Company for cash, property of like kind to the
property to be transferred by PrimeCoPCS to VA-6LP on the Closing Date within
the meaning of Section 1031 of the Code, and other property;
WHEREAS, VA-6LP is the holder of certain licenses granted by the FCC for
Virginia RSA 6, and is the owner of wireless telecommunications systems in
Virginia RSA 6 and, in connection therewith, is engaged in the business of
marketing, selling and providing Cellular Services in Virginia RSA 6;
WHEREAS, subject only to the limitations and exclusions contained in this
Agreement, VA-6LP desires to exchange, on the terms and conditions set forth
herein, substantially all of the assets, properties and rights of VA-6LP for
other property of like kind within the meaning of Section 1031 of the Code;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, and intending to be legally bound, the parties hereto agree as
follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement (including the Schedules
-------------
hereto), the terms defined in this Agreement shall have the respective meanings
specified herein, and, in addition, the following terms shall have the following
meanings:
"Affiliate" or "affiliate" means, as to any Person, any other Person which,
--------- ---------
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. The term "control" (including, with correlative
-------
meanings, the terms "controlled by" and "under common control with"), as applied
------------- -------------------------
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or other ownership interest, by
contract or otherwise. Without limiting the foregoing, PrimeCo shall for all
purposes of this Agreement be deemed an Affiliate of PrimeCoPCS and, prior to
consummation of the purchase and sale of the Company Interest hereby
contemplated, of the Company.
"Agreement" means this Asset Exchange Agreement, and all Schedules and
---------
Exhibits hereto, as amended, modified or supplemented from time to time in
accordance with the terms hereof.
"Alternative Transaction" is defined in Section 2.1(b).
-----------------------
"Assumed Closing Date Net Working Capital" is defined in Section 2.2(a).
----------------------------------------
"Authorizations" means, as to any Person, all licenses, permits,
--------------
franchises, orders, approvals, concessions, registrations, qualifications and
other authorizations with or under all federal, state, local or foreign laws and
Governmental Authorities and all industry or other nongovernmental self-
regulatory organizations that are issued to such Person.
"Bell/GTE Merger" means the merger transaction contemplated by the
---------------
Agreement and Plan of Merger dated as of July 27, 1998 among Bell Atlantic
Corporation, Beta Gamma Corporation and GTE Corporation.
"BTAs" is defined in the Recitals.
----
"Business Day" means any day other than a Saturday, a Sunday or a day on
------------
which banks in the City of New York are authorized or required to close.
"Cash Component" is defined in Section 2.1(b).
--------------
"Cellular Services" means the provision of domestic cellular radiotelephone
-----------------
service pursuant to FCC licenses issued under Subpart H of Part 22 of the FCC's
rules and all activities reasonably ancillary thereto.
"CFW" means CFW Communications Company, a Virginia corporation.
---
"CFW High-Yield Issuance" is defined in Section 4.3.3(b).
-----------------------
2
<PAGE>
"CFW License Agreement" means the Trademark and Trade Name License
---------------------
Agreement in the form set forth as Exhibit E-2 to this Agreement.
"CFW Shareholder Vote" is defined in Section 4.3.3(b).
--------------------
"Closing" and "Closing Date" are defined in Section 2.3.
------- ------------
"Closing Date Net Working Capital" is defined in Section 2.2(d).
--------------------------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Communications Act" is defined in Section 3.1.25.
------------------
"Company" is defined in the Recitals.
-------
"Company Advance Payments" means payments made by the Company for goods or
------------------------
services prior to the Closing Date relating to the Company Businesses, to the
extent such goods or services are not fully used or received by the Company as
of the Closing Date, including prepaid rent, prepaid insurance, prepaid Taxes
and prepaid advertising.
"Company Agreement" means the limited liability company agreement and other
-----------------
instruments, if any, between the parties to such limited liability company
agreement governing the Company.
"Company Assignment and Assumption" is defined in Section 2.4(a).
---------------------------------
"Company Authorizations" means all Authorizations relating to the Company
----------------------
Businesses including, without limitation, the Company FCC Authorizations.
"Company BTAs" is defined in the Recitals.
------------
"Company Businesses" is defined in the Recitals.
------------------
"Company Contracts" is defined in Section 3.1.5(b).
-----------------
"Company Current Balance Sheet" is defined in Section 3.1.16.
-----------------------------
"Company Customer Deposits" means deposits received by the Company from
-------------------------
customers and subscribers prior to the Closing Date relating to the Company
Businesses, including deposits by customers whose creditworthiness requires
payments in advance.
"Company Customer Prepayments" means payments received by the Company for
----------------------------
goods or services relating to the Company Businesses from customers and
subscribers where such goods or services are not fully delivered or performed by
the Company as of the Closing Date, including advance payments for debit cards
for a specified number of minutes.
"Company Deposits" means deposits paid by the Company to third parties
----------------
prior to the Closing Date relating to the Company Businesses, including deposits
with respect to property leased by the Company as tenant.
3
<PAGE>
"Company FCC Authorizations" means all permits, licenses, waivers and
--------------------------
authorizations issued by the FCC to the Company to construct, own and operate
Personal Communications Services, including all associated microwave facilities,
and all construction permits that have been applied for to the FCC or issued by
the FCC to the Company with respect to construction of Personal Communications
Services systems and related stations and facilities.
"Company Financial Statements" is defined in Section 3.1.16.
----------------------------
"Company Interest" is defined in the Recitals.
----------------
"Company Litigation" is defined in Section 4.3.8.
------------------
"Company Material Adverse Change" and "Company Material Adverse Effect"
------------------------------- -------------------------------
means any change, effect or circumstance that is materially adverse to the
business, assets, liabilities, properties, condition (financial or otherwise) or
results of operations of the Company Businesses, taken as a whole, but shall not
include any change, effect or circumstance arising from the execution, delivery
or performance of this Agreement or the effects of changes that are generally
applicable in (A) the wireless telecommunications industry generally including,
without limitation, the adoption or implementation of regulatory changes or the
issuance of additional licenses for the provision of wireless telecommunications
services in the Company BTAs, (B) the United States economy or the economy
generally prevailing in the Company BTAs, or (C) the United States securities
markets.
"Company National Account" is defined in Section 4.1.6.
------------------------
"Company National Account Agreement" is defined in Section 4.1.6.
----------------------------------
"Company Promotional Item" is defined in Section 4.3.8.
------------------------
"Damaged Assets" is defined in Section 4.1.5 and 4.2.4.
--------------
"Dispute Resolution Request" is defined in Section 2.2(e).
--------------------------
"Distribution" means the payment of cash or any other assets by the Company
------------
to its member.
"DOJ" means the United States Department of Justice.
---
"DOJ Final Judgment" means the proposed Final Judgment filed with the
------------------
United States District Court for the District of Columbia on December 6, 1999 in
United States of America v. Bell Atlantic Corporation, GTE Corporation and
Vodafone AirTouch Plc.
"DOJ Trust" means any trust created in accordance with the provisions of
---------
Section V of the DOJ Final Judgment to which the Company Interest (or all or
substantially all of the assets of the Company) is transferred.
"DOJ Trust Event" means the divestiture of the Company Interest (or all or
---------------
substantially all of the assets of the Company) to a trustee under a DOJ Trust.
4
<PAGE>
"DOJ Trustee" means the trustee or trustees of a DOJ Trust.
-----------
"Due Date" is defined in Section 6.6.
--------
"Employee Plan" is defined in Section 3.1.22(a).
-------------
"Employee Transfer Agreement" means the Employee Transfer Agreement, dated
---------------------------
as of the date hereof, between PrimeCo and VA-6LP relating to this Agreement, as
such Employee Transfer Agreement may be amended, modified or supplemented from
time to time.
"Environmental Claims" is defined in Section 3.1.8(e).
--------------------
"Environmental Laws" is defined in Section 3.1.8(e).
------------------
"Environmental Permits" is defined in Section 3.1.8(e).
---------------------
"ERISA" is defined in Section 3.1.22(a).
-----
"ERISA Affiliate" is defined in Section 3.1.22(a).
---------------
"Extended DOJ Trust Deadline" is defined in Section 4.3.3(b).
---------------------------
"FCC" is defined in the Recitals.
---
"GAAP" means generally accepted accounting principles in the United States
----
of America.
"Governmental Authority" means any nation or government, any state or other
----------------------
political subdivision thereof or any entity (including, without limitation, a
court) exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Governmental Order" means, as to any Person, any judgment, injunction,
------------------
decree, order or other determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property or assets
is subject.
"Hazardous Material" is defined in Section 3.1.8(e).
------------------
"HSR Act" is defined in Section 3.1.6.
-------
"Indemnitee" is defined in Section 6.4.
----------
"Indemnitor" is defined in Section 6.4.
----------
"Intellectual Property" means all copyrights, patents, trademarks, trade
---------------------
names, service marks, URLs and applications for the foregoing and all software,
firmware, trade secrets, and proprietary technologies, know-how, inventions,
discoveries, improvements, processes and formulas (secret or otherwise) and
other forms of intellectual property.
5
<PAGE>
"Inventory" means all inventory held for consumption by or sale to the
---------
public, including, without limitation, phones, spare parts and supplies, whether
or not obsolete.
"Knowledge" or "knowledge" is defined in Section 7.11.
--------- ---------
"Liable Party" is defined in Section 7.3.
------------
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest, preemptive right, existing or claimed right of first refusal, right of
first offer, right of consent, put right, default or similar right or other
adverse claim of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement and any financing lease
having substantially the same economic effect as any of the foregoing).
"Losses" is defined in Section 6.1(a).
------
"Objection Notice" is defined in Section 2.2(d).
----------------
"Other Party" is defined in Section 7.3.
-----------
"Party" or "party" means a party to this Agreement.
----- -----
"Permitted Company Liens" is defined in Section 3.1.9(a).
-----------------------
"Person" means an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity or enterprise of whatever
nature.
"Personal Communications Services" means radio communications that
--------------------------------
encompass mobile and ancillary fixed communication that provide services to
individuals and businesses and can be integrated with a variety of competing
networks, as such term is defined in 12 C.F.R Section 24.5.
"Post-Closing Period" is defined in Section 6.1(a)(v).
-------------------
"Pre-Closing Period" is defined in Section 6.1(a)(v).
------------------
"Preliminary Closing Date Net Working Capital" is defined in Section
--------------------------------------------
2.2(c).
"Preliminary Closing Date Net Working Capital Schedule" is defined in
-----------------------------------------------------
Section 2.2(c).
"PrimeCo" is defined in the Recitals.
-------
"PrimeCo Available Employee" has the meaning given to it in the Employee
--------------------------
Transfer Agreement.
"PrimeCo Employee Plans" is defined in Section 3.1.22(a).
----------------------
6
<PAGE>
"PrimeCo License Agreement" means the Trademark and Trade Name License
-------------------------
Agreement in the form set forth as Exhibit E-1 to this Agreement.
"PrimeCo National Outlet" is defined in Section 4.1.7.
-----------------------
"PrimeCo National Outlet Agreement" is defined in Section 4.1.7.
---------------------------------
"PrimeCo Systemwide Changes" is defined in Section 4.1.1(k).
--------------------------
"PrimeCoPCS Assumed Liabilities" is defined in Section 3.2.24.
------------------------------
"PrimeCoPCS Consents" is defined in Section 3.1.6.
-------------------
"PrimeCoPCS Indemnitee" is defined in Section 6.2.
---------------------
"Prime Rate" means the annual interest rate set forth as the Prime Rate in
----------
the "Money Rates" table of The Wall Street Journal.
-----------------------
"Property Taxes" is defined in Section 6.1(a)(v).
--------------
"Requirement of Law" means, as to any Person, any permit, license,
------------------
judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award in each case applicable to or binding upon such Person or any
of its property or assets or to which such Person or any of its property or
assets is subject.
"SEC" means the United States Securities and Exchange Commission.
---
"State Commission" means any applicable state public service or public
----------------
utility commission.
"Tax Return" means any return, declaration, report, claim for refund or
----------
information return or statement filed or required to be filed with any
Governmental Authority relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Taxes" or "Tax" means all taxes of any kind, including, without
----- ---
limitation, any federal, state, local and foreign income, profits, license,
severance, occupation, windfall profits, capital gains, capital stock, transfer,
registration, social security (or similar), production, franchise, gross
receipts, payroll, sales, employment, use, property, excise, value added,
estimated, stamp, alternative or add-on minimum, environmental, withholding and
any other tax or assessment, together with all interest, penalties and additions
imposed with respect to such amounts.
"Transaction Documents" is defined in Section 3.1.1.
---------------------
"Transferred Assets" is defined in the Recitals.
------------------
"Transition Services Agreement" means the Transition Services Agreement,
-----------------------------
dated as of the date hereof, among Cellco Partnership, VA-6LP and CFW relating
to this Agreement, as such Transition Services Agreement may be amended,
modified or supplemented from time to time.
7
<PAGE>
"VA-5 Interest" is defined in Section 2.1(b).
-------------
"VA-5 Partnership" is defined in Section 2.1(b).
----------------
"VA-6 Advance Payments" means payments made by VA-6LP for goods or services
---------------------
prior to the Closing Date relating to the VA-6 Business, to the extent such
goods or services are not fully used or received by VA-6LP as of the Closing
Date, including prepaid rent, prepaid insurance, prepaid Taxes and prepaid
advertising.
"VA-6 Assets" is defined in Section 2.1(b).
-----------
"VA-6 Assumed Liabilities" is defined in Section 3.1.24.
------------------------
"VA-6 Authorizations" means all Authorizations relating to the VA-6
-------------------
Business including, without limitation, the VA-6 FCC Authorizations.
"VA-6 Bill of Sale" is defined in Section 2.4(b).
-----------------
"VA-6 Business" means the business conducted by VA-6LP on and prior to the
-------------
date of this Agreement, including without limitation the business of marketing,
selling and providing Cellular Services in Virginia RSA 6, but excluding the
business of acquiring on a wholesale basis and reselling to customers Personal
Communications Services in Virginia RSA 6.
"VA-6 Consents" is defined in Section 3.2.3.
-------------
"VA-6 Contracts" is defined in Section 3.2.6(b).
--------------
"VA-6 Current Balance Sheet" is defined in Section 3.2.17.
--------------------------
"VA-6 Customer Deposits" means deposits received by VA-6LP from customers
----------------------
and subscribers prior to the Closing Date relating to the VA-6 Business,
including deposits by customers whose creditworthiness requires payments in
advance.
"VA-6 Customer Prepayments" means payments received by VA-6LP for goods or
-------------------------
services from customers and subscribers relating to the VA-6 Business where such
goods or services are not fully delivered or performed by VA-6LP as of the
Closing Date, including advance payments for debit cards for a specified number
of minutes.
"VA-6 Deposits" means deposits paid by VA-6LP to third parties prior to the
-------------
Closing Date relating to the VA-6 Business, including deposits with respect to
property leased by VA-6LP as tenant.
"VA-6 Excluded Assets" is defined in Section 2.1(b).
--------------------
"VA-6 Excluded Liabilities" is defined in Section 2.1(b).
-------------------------
"VA-6 FCC Authorizations" means as to VA-6LP all permits, licenses, waivers
-----------------------
and authorizations issued by the FCC to VA-6LP to construct, own and operate
Cellular Services, including all associated microwave facilities, and all
construction permits that have been applied
8
<PAGE>
for to the FCC or issued by the FCC to VA-6LP with respect to construction of
Cellular Services systems and related stations and facilities.
"VA-6 Financial Statements" is defined in Section 3.2.17.
-------------------------
"VA-6 Group" is defined in Section 4.1.3.
----------
"VA-6 Indemnitee" is defined in Section 6.1.
---------------
"VA-6 Liabilities" is defined in Section 2.1(b).
----------------
"VA-6 Material Adverse Change" and "VA-6 Material Adverse Effect" means any
---------------------------- ----------------------------
change, effect or circumstance that is materially adverse to the business,
assets, liabilities, properties, condition (financial or otherwise) or results
of operations of the VA-6 Business, but shall not include any change, effect or
circumstance arising from the execution, delivery or performance of this
Agreement or the effects of changes that are generally applicable in (A) the
wireless telecommunications industry generally including, without limitation,
the adoption or implementation of regulatory changes or the issuance of
additional licenses for the provision of wireless telecommunications services in
Virginia RSA 6, (B) the United States economy or the economy generally
prevailing in Virginia RSA 6, or (C) the United States securities markets.
"VA-6 Pro Forma Financial Statements" is defined in Section 3.2.17.
-----------------------------------
"VA-6 Transition Services Agreement" means the Transition Services
----------------------------------
Agreement, dated as of the date hereof, between CFW and Cellco Partnership
relating to this Agreement, as such VA-6 Transition Services Agreement may be
amended, modified or supplemented from time to time.
"VA-6LP Agreement" is defined in Section 3.2.3.
----------------
1.2 Other Definitional Provisions.
-----------------------------
(a) The words "hereof," "herein" and "hereunder" and words of
------ ------ ---------
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) References to the Company contained herein with reference to
the past or current ownership or operation of the assets of the Company or the
Company Businesses shall be deemed to include ownership or operation by
predecessors in interest which are or were Affiliates of PrimeCoPCS.
9
<PAGE>
ARTICLE II
THE TRANSACTION
2.1 Exchange of Assets.
------------------
(a) Subject to the terms and conditions hereinafter set forth and
on the basis of and in reliance upon the representations, warranties,
obligations and agreements set forth herein, at the Closing, PrimeCoPCS shall,
in exchange and in consideration for the VA-6 Assets, grant, sell, convey,
assign, transfer and deliver to VA-6LP, and VA-6LP shall receive, all of
PrimeCoPCS's right, title and interest in and to the Company Interest, free and
clear of all Liens, other than restrictions imposed by federal and state
securities laws and the provisions of the Company Agreement.
(b) Subject to the terms and conditions hereinafter set forth and
on the basis of and in reliance upon the representations, warranties,
obligations and agreements set forth herein, at the Closing, VA-6LP shall, in
exchange and in consideration for the Company Interest, grant, sell, convey,
assign, transfer and deliver to PrimeCoPCS, and PrimeCoPCS shall receive, all
right, title and interest in all of the assets of VA-6LP except for the assets
set forth on Schedule 2.1(b) (the "VA-6 Excluded Assets") (all such assets with
--------------- --------------------
the exception of the VA-6 Excluded Assets, the "VA-6 Assets"), and PrimeCoPCS
-----------
shall assume and agree to discharge as and when due all liabilities of VA-6LP
except for the liabilities set forth on Schedule 2.1(b) (the "VA-6 Excluded
--------------- -------------
Liabilities") (all such liabilities with the exception of the VA-6 Excluded
- -----------
Liabilities, the "VA-6 Liabilities"). Without limiting the foregoing, VA-6LP
----------------
agrees that in addition to the assets held by it on the date hereof, the VA-6
Assets will include (x) cash in the amount of $407,250,000 (Four Hundred Seven
Million Two Hundred Fifty Thousand Dollars), as such cash amount may be adjusted
pursuant to Section 2.2 (the "Cash Component"), and (y) the 21.98% limited
--------------
partnership interest (the "VA-5 Interest") in Virginia RSA 5 Limited Partnership
-------------
("VA-5 Partnership") currently held by CFW. The foregoing notwithstanding,
----------------
VA-6LP shall have the right, exercisable by notice to PrimeCoPCS not later than
the Business Day following the date upon which PrimeCoPCS notifies VA-6LP that
the FCC has granted approval for the Bell/GTE Merger, to increase the Cash
Component to $482,250,000 (Four Hundred Eighty-Two Million Two Hundred Fifty
Thousand Dollars), and to retain all of the VA-6 Assets and VA-6 Liabilities
other than the VA-5 Interest and the Cash Component (the "Alternative
-----------
Transaction").
- -----------
2.2 Net Working Capital Adjustment.
------------------------------
(a) The amount of the Cash Component set forth in Section 2.1(b)
was determined, in part, based upon the assumption that the Company Closing Date
Net Working Capital will be ($5,865,158) (Negative Five Million Eight Hundred
Sixty-Five Thousand One Hundred Fifty-Eight Dollars) (the "Assumed Company
---------------
Closing Date Net Working Capital") and that the VA-6 Closing Date Net Working
- --------------------------------
Capital will be $967,872 (Nine Hundred Sixty-Seven Thousand Eight Hundred
Seventy-Two Dollars) (the "Assumed VA-6 Closing Date Net Working Capital").
---------------------------------------------
The foregoing notwithstanding, in the event VA-6LP elects pursuant to Section
2.1(b) to effect the Alternative Transaction, the Assumed VA-6 Closing Date Net
Working Capital shall be deemed to be zero. Schedule 2.2 sets forth the manner
------------
in which the Assumed Company Closing Date Net Working Capital and the Assumed
VA-6 Closing Date Net
10
<PAGE>
Working Capital were calculated, which shall be the method used for calculating
the Preliminary Company Closing Date Net Working Capital, the Preliminary VA-6
Closing Date Net Working Capital, the Company Closing Date Net Working Capital
and the VA-6 Closing Date Net Working Capital. The amount by which the Assumed
Company Closing Date Net Working Capital exceeds the Assumed VA-6 Closing Date
Net Working Capital, namely ($6,833,030) (Negative Six Million Eight Hundred
Thirty-Three Thousand Thirty Dollars), is referred to as the "Assumed Net
-----------
Closing Date Net Working Capital". The foregoing notwithstanding, in the event
- --------------------------------
VA-6LP elects pursuant to Section 2.1(b) to effect the Alternative Transaction,
the Assumed Net Closing Date Net Working Capital shall be deemed to be equal to
the Assumed Company Closing Date Net Working Capital. The amount of Cash
Component payable at the Closing, and the amount of the Cash Component as
ultimately determined, shall be adjusted dollar for dollar (i) upward by the
amount by which the Preliminary Net Closing Date Net Working Capital or Net
Closing Date Net Working Capital, as applicable, as determined in accordance
with the provisions set forth below, exceeds the Assumed Net Closing Date Net
Working Capital or (ii) downward by the amount by which the Assumed Net Closing
Date Net Working Capital exceeds the Preliminary Net Closing Date Net Working
Capital or Net Closing Date Net Working Capital, as applicable. If the Cash
Component is adjusted upward from the amount paid at Closing, then, within 10
business days after such final determination of the Net Closing Date Net Working
Capital, VA-6LP shall pay to PrimeCoPCS an amount equal to the adjustment in
immediately available funds, plus interest on such amount from the Closing Date
until such date of payment at the Prime Rate on the Closing Date. If the amount
of the Cash Component is adjusted downward from the amount paid at Closing,
then, within 10 days after such final determination of the Net Closing Date Net
Working Capital, PrimeCoPCS shall pay to VA-6LP an amount equal to the
adjustment in immediately available funds, plus interest on such amount from the
Closing Date until such date of payment at the Prime Rate on the Closing Date.
(b) As used herein, the following terms shall have the respective
meanings assigned to them below:
(i) "Current Assets" shall include the following assets of the
--------------
Company or of VA-6LP relating to the VA-6 Business, as applicable, determined as
of the date of determination in accordance with GAAP consistent with the past
practice of PrimeCo (as reflected in the Company Financial Statements) or VA-6LP
(as reflected in the VA-6 Financial Statements), as applicable:
(A) all accounts receivable (whether billed or unbilled),
excluding any amounts receivable in respect of casualty
insurance claims, net of a reserve for collectibility
determined in accordance with GAAP consistent with
PrimeCo's or VA-6LP's past practice, as applicable;
(B) all Inventory of the Company or VA-6, as applicable;
and
(C) all Company Deposits and Company Advance Payments or
VA-6 Deposits and VA-6 Advance Payments, as applicable.
11
<PAGE>
(ii) "Current Liabilities" shall include the following liabilities of
-------------------
the Company or VA-6LP relating to the VA-6 Business, as applicable, determined
as of the date of determination in accordance with GAAP consistent with the past
practice of PrimeCo (as reflected in the Company Financial Statements) or VA-6LP
(as reflected in the VA-6 Financial Statements), as applicable:
(A) all accounts payable which were incurred in the
ordinary course of business;
(B) all Company Customer Deposits or VA-6 Customer
Deposits, as applicable;
(C) all Company Customer Prepayments or VA-6 Customer
Prepayments, as applicable;
(D) all accrued expenses which were incurred in the
ordinary course of business; and
(E) all deferred rent revenues.
(c) As promptly as practicable after the parties have determined
a projected Closing Date pursuant to Section 2.3 (but in no event later than
three Business Days prior to the Closing Date), (i) PrimeCoPCS shall prepare and
deliver to VA-6LP a schedule setting forth in reasonable detail PrimeCoPCS's
estimate (based on the most recent month-end financial information that is
available as of the date of such estimate) of the Current Assets and the Current
Liabilities of the Company as of the opening of business on the Closing Date and
the difference between them (the "Preliminary Company Closing Date Net Working
--------------------------------------------
Capital"), and (ii) VA-6LP shall prepare and deliver to PrimeCoPCS a schedule
- -------
setting forth in reasonable detail VA-6LP's estimate (based on the most recent
month-end financial information that is available as of the date of such
estimate) of the Current Assets and the Current Liabilities of VA-6LP as of the
opening of business on the Closing Date and the difference between them (the
"Preliminary VA-6 Closing Date Net Working Capital"). The foregoing
--------------------------------------------------
notwithstanding, in the event VA-6LP elects pursuant to Section 2.1(b) to effect
the Alternative Transaction, VA-6LP shall not prepare any such schedule and the
Preliminary VA-6 Closing Date Net Working Capital shall be deemed to be zero.
The positive or negative amount obtained by subtracting the Preliminary VA-6
Closing Date Net Working Capital from the Preliminary Company Closing Date Net
Working Capital is the "Preliminary Net Closing Date Net Working Capital".
------------------------------------------------
With respect to any disputed amounts concerning the Preliminary Company Closing
Date Net Working Capital or the Preliminary VA-6 Closing Date Net Working
Capital, (x) the parties shall cooperate with each other and negotiate in good
faith to resolve any such disputes in the time period available prior to the
Closing Date and (y) if any disputes cannot be resolved in the time period
available prior to the Closing Date, the determination of PrimeCoPCS with
respect to the amounts set forth on the Preliminary Closing Date Net Working
Capital Schedule shall control for purposes of Closing.
(d) Within 60 calendar days following the Closing Date, (i)
PrimeCoPCS shall prepare and deliver to VA-6LP a schedule setting forth in
reasonable detail the Current
12
<PAGE>
Assets and the Current Liabilities of the Company as of the Closing Date and the
differences between them ("Company Closing Date Net Working Capital"), and (ii)
----------------------------------------
VA-6LP shall prepare and deliver to PrimeCoPCS a schedule setting forth in
reasonable detail the Current Assets and the Current Liabilities of VA-6LP as of
the Closing Date and the differences between them ("VA-6 Closing Date Net
---------------------
Working Capital"). The foregoing notwithstanding, in the event VA-6LP elects
- ---------------
pursuant to Section 2.1(b) to effect the Alternative Transaction, VA-6LP shall
not prepare any such schedule and the VA-6 Closing Date Net Working Capital
shall be deemed to be zero. The positive or negative amount obtained by
subtracting the VA-6 Closing Date Net Working Capital from the Company Closing
Date Net Working Capital is the "Net Closing Date Net Working Capital". If VA-
------------------------------------
6LP objects to any amount reflected on the Company Closing Date Net Working
Capital schedule or PrimeCoPCS objects to any amount reflected on the VA-6
Closing Date Net Working Capital schedule, the objecting party must, within 10
calendar days after receipt of the relevant schedule, give written notice (the
"Objection Notice") to the other party specifying in reasonable detail
----------------
such objections. Any item included on either Closing Date Net Working Capital
schedule to which the receiving party does not object in its Objection Notice
(if any) shall be deemed to be accepted by such party and any amounts included
within such item shall be deemed to be final, binding and conclusive. If a party
does not give an Objection Notice within such time period, the other party's
determinations of the amounts on the relevant Closing Date Net Working Capital
schedule shall be final, binding and conclusive on the parties.
(e) With respect to any disputed amounts concerning the Closing
Date Net Working Capital schedules, the parties shall meet in person and
negotiate in good faith to resolve any such disputes during the 15 calendar day
period after the deadline for delivering an Objection Notice. If the parties are
unable to resolve all such disputes within such 15 calendar day period, then, at
the written request of either party (a "Dispute Resolution Request"), each party
--------------------------
shall appoint a knowledgeable, responsible representative to meet and negotiate
in good faith to resolve the Objection Notice(s). The parties intend that these
negotiations be conducted by experienced business representatives empowered to
decide the issues. The business representatives will meet and attempt to resolve
the Objection Notice(s) within 15 calendar days after the date of the Dispute
Resolution Request. If the business representatives resolve the dispute, such
resolution will be memorialized in a written settlement and release agreement,
executed within five calendar days thereafter. If the business representatives
do not resolve the dispute, it shall be submitted within five calendar days
after the expiration of such 15 calendar day period to binding arbitration in
Wilmington, Delaware. The parties shall select the arbitrator in good faith and
in a timely fashion in accordance with the rules governing the arbitration.
Except as otherwise provided in this Section 2.2(e), the arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration proceedings and all testimony, filings,
documents and information relating to or presented during the arbitration
proceedings shall be deemed to be information subject to the confidentiality
provisions of this Agreement. Any award rendered pursuant to this Section 2.2(e)
will be final, conclusive and binding upon the parties and any judgment thereon
may be entered and enforced in any court of competent jurisdiction. VA-6LP and
PrimeCoPCS shall bear equally the fees, costs and expenses of the arbitrator,
and notwithstanding any law to the contrary, each of VA-6LP and PrimeCoPCS will
bear all the fees, costs and expenses of its own attorneys, experts and
witnesses; provided, however, that in connection with any judicial proceeding to
compel arbitration pursuant to this Agreement or to confirm, vacate or enforce
any award rendered
13
<PAGE>
pursuant to this Section 2.2(e), the prevailing party in such a proceeding will
be entitled to recover reasonable attorneys' fees and expenses incurred in
connection with such proceeding, in addition to any other relief to which it may
be entitled.
(f) After delivery of the Closing Date Net Working Capital
schedules, the party that prepared the relevant schedule shall provide the other
party and its authorized representatives reasonable access during normal
business hours and without significant disruption to the Company Businesses or
the VA-6 Business, as applicable, to (1) all books, records and employees of
such party and its Affiliates having relevant information concerning the Closing
Date Net Working Capital schedule to the extent such information was used in
preparing the Closing Date Net Working Capital schedule and (2) such party's
accountants who assisted such party in preparing the Closing Date Net Working
Capital schedule and such accountants' relevant supporting workpapers, and the
non-preparing party shall provide the preparing party and its representatives
access to all books and records and employees of the non-preparing party and its
Affiliates having information directly relevant to the Closing Date Net Working
Capital schedule.
2.3 Closing. Unless this Agreement shall have been earlier terminated in
-------
accordance with the provisions of this Agreement, the closing of the exchanges
and transfers contemplated hereby (the "Closing") shall take place (a) at the
-------
Philadelphia , Pennsylvania offices of Morgan, Lewis & Bockius LLP at 10:00 a.m.
local time, on a date mutually agreed by VA-6LP and PrimeCoPCS but not later
than five Business Days after the Business Day on which the conditions precedent
set forth in Article V hereof have been satisfied or waived (other than the
conditions precedent that are not capable of being satisfied until the Closing,
but subject to the satisfaction or waiver of those conditions), or (b) if the
Company Interest (or all or substantially all of the Company's assets) has been
transferred to a DOJ Trust pursuant to Section 7.7, on a date to be mutually
agreed by the parties, which date shall not be later than the fifth business day
after the day on which the last condition precedent set forth in Article V
(other than such other conditions precedent that are not capable of being
satisfied until the Closing, but subject to the satisfaction or waiver of those
conditions) is satisfied or waived, or (c) on such other date as may be mutually
agreed upon in writing by the parties. The date of the Closing is referred to
herein as the "Closing Date." If the Closing extends over more than one
------------
consecutive day, the Closing Date shall be deemed to have occurred on the last
day of the Closing. If the Closing occurs, for purposes of this Agreement, the
Closing shall be deemed to have occurred at 12:01 a.m. on the Closing Date.
2.4 Deliveries and Proceedings at Closing. At the Closing and subject to
-------------------------------------
the terms and conditions herein contained:
(a) Deliveries by PrimeCoPCS. PrimeCoPCS shall deliver (or cause
------------------------
to be delivered) to VA-6LP:
(i) an executed instrument for the assignment and
assumption of the Company Interest in the form attached hereto as Exhibit B,
---------
duly executed by PrimeCoPCS (the "Company Assignment and Assumption");
---------------------------------
14
<PAGE>
(ii) written evidence of FCC approval of PrimeCoPCS's and
VA-6LP's application to transfer control of the Company FCC Authorizations if
necessary under Requirements of Law;
(iii) to the extent obtained, the PrimeCoPCS Consents in form
and substance reasonably satisfactory to VA-6LP;
(iv) unless the Alternative Transaction is consummated, the
VA-6 Bill of Sale and such other instruments of assumption as may be necessary
or desirable to evidence assumption of the VA-6 Assumed Liabilities;
(v) The PrimeCo License Agreement, duly executed by
PrimeCo, and unless the Alternative Transaction is consummated, the CFW License
Agreement, duly executed by PrimeCo or its Affiliate; and
(vi) a FIRPTA certificate as required by Section 1445 of the
Code and a completed IRS Form W-9.
(b) Deliveries by VA-6LP. VA-6LP shall deliver (or cause to be
--------------------
delivered) to PrimeCoPCS:
(i) unless the Alternative Transaction is consummated,
deeds in recordable form under which VA-6LP warrants title against all Persons
lawfully claiming title by, through or under VA-6LP for each parcel of owned
real property to be conveyed hereunder duly executed by VA-6LP;
(ii) unless the Alternative Transaction is consummated, a
Bill of Sale, Assignment and Assumption Agreement in the form attached hereto as
Exhibit C, duly executed by VA-6LP (the "VA-6 Bill of Sale"); or if the
-----------------
Alternative Transaction is consummated, an executed instrument for the
assignment and assumption of the VA-5 Interest in form and substance mutually
satisfactory to PrimeCoPCS and VA-6LP;
(iii) unless the Alternative Transaction is consummated, such
other instruments and documents of conveyance and transfer, duly executed by VA-
6LP and in a form reasonably satisfactory to PrimeCoPCS, as shall be necessary
and effective to transfer, convey and assign to, and vest in, PrimeCoPCS all of
VA-6LP's right, title and interest in and to the VA-6 Assets, including without
limitation, (A) good and valid title in and to all of the VA-6 Assets owned by
VA-6LP, (B) good and valid leasehold interests in and to all of the VA-6 Assets
leased by VA-6LP as lessee, and (C) all of VA-6LP's rights under all agreements,
contracts, commitments, leases, licenses, plans, bids, quotations, proposals,
instruments and other documents included in the VA-6 Assets to which VA-6LP is a
party or by which it has rights on the Closing Date, in all cases, subject to
Section 2.5(a) below;
(iv) unless the Alternative Transaction is consummated,
title certificates to any owned motor vehicles included in the VA-6 Assets duly
executed by VA-6LP (together with any other forms necessary to transfer title to
such vehicles);
15
<PAGE>
(v) unless the Alternative Transaction is consummated,
possession of the VA-6 Assets, including all of the assignable agreements,
contracts, commitments, leases, plans, bids, quotations, proposals, instruments,
data bases (whether in the form of computer tapes or otherwise), price books and
price lists, Inventory, customer and subscriber lists, supplier lists, sales
records, files, correspondences, and other documents, books, records, papers,
files, office supplies and data belonging to VA-6LP which are part of the VA-6
Assets;
(vi) the Cash Component in accordance with Section 2.1(b),
by wire transfer of immediately available funds to such account(s) as PrimeCoPCS
shall designate not later than two Business Days prior to the Closing Date;
(vii) unless the Alternative Transaction is consummated,
written evidence of FCC approval of PrimeCoPCS's and VA-6LP's application to
transfer control of the VA-6 FCC Authorizations if necessary under Requirements
of Law;
(viii) to the extent obtained, the VA-6 Consents in form and
substance reasonably satisfactory to PrimeCoPCS;
(ix) the Company Assignment and Assumption, duly executed
bY VA-6LP;
(x) the PrimeCo License Agreement, duly executed by CFW or
its Affiliate, and unless the Alternative Transaction is consummated, the CFW
License Agreement, duly executed by CFW; and
(xi) a FIRPTA certificate as required by Section 1445 of the
Code and a completed IRS Form W-9.
(c) Other Deliveries. The parties hereto shall also deliver to each
----------------
other the agreements, closing certificates and other documents and instruments
required to be delivered pursuant to this Agreement.
2.5 Regarding Consents.
------------------
(a) To the extent that VA-6LP's rights under any contract forming
part of the VA-6 Assets, any VA-6 Authorization or any other VA-6 Asset to be
assigned to PrimeCoPCS hereunder, may not be assigned without the consent of any
Person which has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful. VA-6LP, at its expense, shall use all
commercially reasonable efforts to obtain all such required consents as promptly
as possible. If any consent shall not be obtained or if any attempted assignment
would be ineffective or would impair PrimeCoPCS's rights under the asset in
question so that PrimeCoPCS would not acquire the benefit of all such rights,
VA-6LP, to the maximum extent permitted by law and the applicable asset, shall
act after the Closing as PrimeCoPCS's agent in order to preserve and obtain for
PrimeCoPCS the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and the applicable asset, with PrimeCoPCS in any other
reasonable arrangement designed to provide such benefits to PrimeCoPCS. Further,
VA-6LP
16
<PAGE>
shall continue after the Closing to use all commercially reasonable efforts to
obtain any such consent, at the expense of VA-6LP. To the extent preparation by
VA-6LP of any information or reports is required under this Section 2.5(a), the
parties will mutually agree as to the allocation of costs of such preparation.
PrimeCoPCS will cooperate with VA-6LP in its efforts under this Section 2.5(a).
(b) To the extent that the transfer of the Company Interest is deemed
to constitute an assignment of the Company's rights under any contract to which
the Company is a party or any Company Authorization or any other asset of the
Company, other than any contract, Company Authorization or other asset which the
Company is entitled pursuant to the terms of this Agreement to terminate or
Distribute prior to the Closing Date, and such contract, Company Authorization
or other asset may not be assigned without the consent of any Person which has
not been obtained, this Agreement shall not constitute an agreement to assign
the same if an attempted assignment would constitute a breach thereof or be
unlawful. PrimeCoPCS, at its expense, shall use all commercially reasonable
efforts to obtain all such required consents as promptly as possible. If any
consent shall not be obtained or if any attempted assignment would be
ineffective or would impair VA-6LP's rights under the asset in question so that
VA-6LP would not acquire the benefit of all such rights, PrimeCoPCS, to the
maximum extent permitted by law and the applicable asset, shall act after the
Closing as VA-6LP's agent in order to preserve and obtain for VA-6LP the
benefits thereunder and shall cooperate, to the maximum extent permitted by law
and the applicable asset, with VA-6LP in any other reasonable arrangement
designed to provide such benefits to VA-6LP. Further, PrimeCoPCS shall continue
after the Closing to use all commercially reasonable efforts to obtain any such
consent, at the expense of PrimeCoPCS. To the extent preparation by PrimeCoPCS
of any information or reports is required under this Section 2.5(b), the parties
will mutually agree as to the allocation of costs of such preparation. VA-6LP
will cooperate with PrimeCoPCS in its efforts under this Section 2.5(b).
(c) Except as set forth on Schedule 2.5(c), PrimeCo obtained all
---------------
required consents and approvals to transfer the Transferred Assets to the
Company. To the extent that any such consent or approval was not obtained,
PrimeCoPCS, at its expense, shall use all commercially reasonable efforts to
obtain such required consent as promptly as possible. If any consent shall not
be obtained, PrimeCoPCS, to the maximum extent permitted by law and the
applicable asset, shall act after the Closing to obtain the benefits thereunder
and shall cooperate, to the maximum extent permitted by law and the applicable
asset, with VA-6LP in any other reasonable arrangement designed to provide such
benefits to VA-6LP. Further, PrimeCoPCS shall continue after the Closing to use
all commercially reasonable efforts to obtain any such consent, at the expense
of PrimeCoPCS.
(d) Notwithstanding the foregoing Sections 2.5(a), 2.5(b) and
2.5(c), PrimeCoPCS and VA-6LP shall share equally the filing fees associated
with making all requisite applications with the FCC (or the State Commissions,
if any) for consent to the transactions contemplated by this Agreement, but not
any legal or other fees, costs and expenses related thereto, it being understood
and agreed that each party shall be responsible for all such other fees, costs
and expenses incurred by or on behalf of it under Section 2.5(a), 2.5(b) and
2.5(c).
17
<PAGE>
(e) The provisions of this Section 2.5 shall survive for one
year following the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of PrimeCoPCS. PrimeCoPCS represents
--------------------------------------------
and warrants to VA-6LP as follows:
3.1.1 PrimeCoPCS Existence. PrimeCoPCS is a duly formed, validly
--------------------
existing entity, and is in good standing under the laws of Delaware. PrimeCoPCS
has the requisite power, authority and legal right to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by PrimeCoPCS of this Agreement and all other
Transaction Documents have been duly authorized by all necessary action on the
part of PrimeCoPCS. As used herein, the term "Transaction Documents" means this
---------------------
Agreement, the Employee Transfer Agreement and the Transition Services Agreement
and all other agreements, documents and instruments required to be executed by
PrimeCoPCS or VA-6LP in accordance with the provisions of this Agreement. This
Agreement has been, and the other Transaction Documents have been, or when
executed will be, duly executed and delivered by PrimeCoPCS, and this Agreement
constitutes, and the other Transaction Documents do or will when executed and
delivered constitute, the legal, valid and binding obligations of PrimeCoPCS,
enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy laws and other similar laws
affecting creditors' rights generally, and except that the remedy of specific
performance and injunctive relief and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.1.2 The Company's Existence and Qualification. The Company is a
-----------------------------------------
limited liability company duly formed, validly existing, and in good standing
under the laws of Delaware and has all power and authority to carry on the
Company Businesses as now conducted. The Company is duly qualified to do
business as a foreign limited liability company in the Commonwealth of Virginia
and the State of North Carolina, which are the only jurisdictions where such
qualification is required. Schedule 3.1.2 is a true and correct copy of the
--------------
Company Agreement. The Company Interest is not evidenced by any certificate or
document other than the Company Agreement.
3.1.3 Compliance with Law; Authorizations.
-----------------------------------
(a) Except as disclosed on Schedule 3.1.3(a), the Company and
-----------------
PrimeCo have complied in all material respects with, and the Company is not in a
material violation of, any Requirement of Law of a Governmental Authority to
which the Company Businesses are subject, including, without limitation, rules,
regulations or orders of the FCC and any applicable State Commission. The
Company FCC Authorizations are listed on Schedule 3.1.3(a).
-----------------
(b) Except as disclosed on Schedule 3.1.3(b), the Company
-----------------
Authorizations are the only Authorizations which are necessary for the Company
to own, operate or construct the Company Businesses. Each of the Company
Authorizations is in full force and effect, is
18
<PAGE>
validly and exclusively held by the Company, is free and clear of any legal
disqualifications, conditions or other restrictions (other than those routinely
imposed in conjunction with such Authorizations), and is free and clear of all
Liens except for Permitted Company Liens. Except as set forth on Schedule 3.1.4,
--------------
there are no existing applications, petitions to deny or complaints or
proceedings pending before the FCC, or any of the State Commissions, or any
other tribunal or regulatory agency relating to the Company Authorizations or
the Company Businesses (other than proceedings affecting the wireless
telecommunications industry generally). The Company is not in default, nor has
it or PrimeCo received any notice of any claim of default, with respect to any
of the Company Authorizations, and no event has occurred with respect to any of
the Company Authorizations which permits, or after notice or lapse of time or
both would permit, revocation or termination thereof or would result in any
impairment of the rights of the holder of any Company Authorizations. The
Company and PrimeCo have paid all state and federal fees, charges and
assessments relating to the Company FCC Authorizations, including, but not
limited to, FCC regulatory fees and universal service contributions.
3.1.4 Litigation.
----------
(a) Except as set forth in Schedule 3.1.4, and except for
--------------
proceedings affecting the wireless telecommunications industry generally, there
is no litigation, arbitration, investigation or other proceeding of or before
any Governmental Authority pending against the Company, or against any Affiliate
of the Company and relating to the Company Businesses, nor to the Knowledge of
PrimeCoPCS is any such litigation, arbitration, investigation or other
proceeding threatened against the Company or its Affiliates the result of which,
alone or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect. Except for proceedings affecting the wireless
telecommunications industry generally, there is no litigation, arbitration,
investigation or other proceeding, or injunction or final judgment relating
thereto, pending against the Company, or, to the Knowledge of PrimeCoPCS, is any
such litigation, arbitration, investigation or other proceeding threatened
against the Company before any Governmental Authority, including, without
limitation, the FCC or any of the State Commissions, in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and,
to the Knowledge of PrimeCoPCS, no investigation that might result in any such
suit, action or proceeding is pending or threatened. Neither the Company nor
PrimeCo is a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any Governmental Authority which would reasonably
be expected to have a Company Material Adverse Effect.
(b) Schedule 3.1.4 lists all civil fines, penalties, and any
--------------
orders, writs, judgments, injunctions, decrees, determinations, or other awards
of any Governmental Authority which have been imposed or levied against the
Company, together with all settlements by the Company of any legal claims
actually brought or threatened against the Company, or against any Affiliate of
the Company and relating to the Company Businesses, from January 1, 1998, other
than individual claims, or series of related claims, for monetary damages which
in each case involve an amount of less than $100,000.
3.1.5 Contracts and Other Agreements.
------------------------------
19
<PAGE>
(a) Except as listed and described in Schedule 3.1.5(a), the
-----------------
Company is not a party and no Affiliate of PrimeCoPCS is a party to any of the
following agreements, whether written or oral, express or implied, relating
exclusively to the operation of the Company Businesses, which will continue to
bind or impose any liability on the Company after the Closing Date:
(i) agreement, contract, lease or commitment, or
series of related agreements, contracts, leases or commitments, other than
roaming agreements, which involves an amount in excess of $100,000 on an annual
basis;
(ii) agreement, contract or commitment limiting or
restraining the Company from engaging in any business or pursuing any strategic
initiative or competing in any manner nor, to the Knowledge of PrimeCoPCS, is
any Company Available Employee subject to any such agreement;
(iii) license or other agreement which relates in whole
or in part to any software, patent, trademark, trade name, service mark or
copyright owned by any Person other than the Company or PrimeCo, other than
software programs which are generally commercially available;
(iv) interconnection agreement or contour extension
agreement, other than those entered into in the ordinary course of business;
(v) management agreement;
(vi) confidentiality or non-disclosure agreement
pursuant to which the Company has agreed to keep confidential and/or not to use
or disclose information obtained from any other Person other than those entered
into in the ordinary course of the Company Businesses;
(vii) agreement, contract, commitment or arrangement
with any labor union or other representative of employees;
(viii) commission, reseller, distributorship or sales
agency agreement, contract or commitment;
(ix) agreement, contract, lease or commitment with
respect to the ownership or leasing of cell sites, space on towers, switches or
store locations; or
(x) other material agreement, contract or commitment
not made in the ordinary course of operation of the Company Businesses
consistent with past practice.
(b) Each of the agreements, contracts, commitments, leases,
plans and other instruments, documents and undertakings required to be listed in
Schedule 3.1.5(a) in response to the foregoing (collectively, "Company
- ----------------- -------
Contracts") is in full force and effect, and is a valid, legal and binding
- ---------
obligation of the Company and, to the Knowledge of PrimeCoPCS, any other party
thereto, enforceable against the Company and, to the Knowledge of PrimeCoPCS,
20
<PAGE>
against any other party thereto in accordance with its terms except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law). The
Company is not, and to the Knowledge of PrimeCoPCS no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained in the Company Contracts, and no
event caused by, relating to or affecting the Company or any of its Affiliates
has occurred which with or without the giving of notice or lapse of time, or
both, would constitute a default by the Company thereunder, and to the Knowledge
of PrimeCoPCS, no event caused by, relating to or affecting any other party
thereto has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default by such other party thereunder.
3.1.6 Validity of Contemplated Transactions, Etc. Upon the receipt of
-------------------------------------------
requisite consents, approvals and Authorizations from the FCC and other
Governmental Authorities as described in Section 4.3, compliance with any
applicable requirement of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") for the sale of the Company Interest to VA-6LP
-------
and the sale of the VA-5 Partnership Interest and the VA-6 Assets and VA-6
Liabilities to PrimeCoPCS, and the receipt of the consents set forth on Schedule
--------
3.1.6 (the "PrimeCoPCS Consents"), the transfer of the Company Businesses by
- ----- -------------------
PrimeCo to the Company and the execution, delivery and performance of this
Agreement and the other Transaction Documents by PrimeCoPCS do not and will not
violate, conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other Person under, (a) the charter
and other organizational documents of PrimeCoPCS or the Company, including the
Company Agreement, (b) any existing Requirement of Law to which PrimeCoPCS, the
Company or any of the Company Businesses is subject, (c) any judgment, order,
writ, injunction, decree or award of any Governmental Authority or any other
Governmental Order which is applicable to PrimeCoPCS or the Company, or (d) any
Company Contract or Company Authorization, or give any party with rights
thereunder the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of the Company thereunder. Except as aforesaid,
no Authorization and no filing or notification with any Governmental Authority
or any counterparty to any Company Contract or any other Person is required in
connection with the execution, delivery or performance of this Agreement or the
Transaction Documents or the consummation of the transactions contemplated
hereby by PrimeCoPCS, other than post-Closing notifications required by the FCC.
3.1.7 Taxes. Except as set forth on Schedule 3.1.7:
----- --------------
There are no Liens with respect to Taxes upon any of the assets or
properties of the Company, other than with respect to Taxes not yet due and
payable. All Tax Returns required to be filed by or with respect to the Company
or the Company Businesses have been timely filed in accordance with applicable
law, all such Tax Returns are complete and correct in all material respects, and
the Company or PrimeCo has timely paid all Taxes shown thereon as due or that
have been asserted in writing by any Governmental Authority to be due (whether
or not shown on any Tax Return). There are no unpaid Taxes due and payable the
non-payment of which could become a Lien upon, or otherwise could adversely
affect, the Company or any of its assets or the use thereof or could cause VA-
6LP to incur any liability. None of the Transferred Assets
21
<PAGE>
is subject to a "safe harbor lease" under Section 168(f)(8) of the Internal
Revenue Code, as amended before the Tax Reform Act of 1984. There is no
currently pending audit or administrative or judicial proceeding with respect to
Taxes of the Company. The Company is a disregarded entity for federal income Tax
purposes and has never made or been subject to (and PrimeCoPCS shall not cause
the Company to make or become subject to) an election under Treasury Regulation
(S) 1.7701-3 to be treated as a corporation for federal income Tax purposes.
3.1.8 Environmental Matters. Except as set forth in Schedule
--------------------- --------
3.1.8:
- -----
(a) All material Environmental Permits (as defined below)
required pursuant to any Environmental Law (as defined below) for operation of
the Company Businesses (i) have been obtained by the Company and (ii) are
currently in full force and effect. PrimeCoPCS will use commercially reasonable
efforts to cooperate with VA-6LP in seeking to obtain for the Company the
continued benefit of all such Environmental Permits. Neither PrimeCoPCS nor any
of its Affiliates has been notified by any relevant Governmental Authority that
any existing material Environmental Permit relating to the Company Businesses
will be suspended, canceled or revoked, or cannot be renewed. The Company is in
compliance in all material respects with all Environmental Permits required
pursuant to any Environmental Law for operation of the Company Businesses.
(b) The Company is in compliance in all material respects
with all Environmental Laws. To PrimeCoPCS's Knowledge there are no events,
conditions, circumstances, activities, practices, incidents, actions or plans in
any way related to the Company Businesses which will, or would reasonably be
expected to, give rise to any material Environmental Claim (as defined below).
(c) There is no material civil, criminal or
administrative action, suit, demand, Environmental Claim, hearing, notice or
demand letter, notice of violation, investigation known to PrimeCoPCS, or
proceeding pending against the Company or, to the Knowledge of PrimeCoPCS,
threatened against the Company relating in any way to any Environmental Permit
or any applicable Environmental Law or any plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
(d) Any underground storage tank owned or operated as
part of the Company Businesses is in compliance in all material respects with
Environmental Law.
(e) As used herein:
"Environmental Claims" means any and all administrative or judicial
--------------------
actions, suits, orders, claims, Liens, notices, violations or proceedings
related to any applicable Environmental Law or any Environmental Permit brought,
issued or asserted by: (i) a Governmental Authority for compliance, damages,
penalties, removal, response, remedial or other action pursuant to any
applicable Environmental Law or Environmental Permit; or (ii) a third party
seeking damages, contribution, remediation or other action for personal injury
or property damage resulting from the release of a Hazardous Material at, to or
from any facility of
22
<PAGE>
the Company or any real property upon which any current facility of the Company
is located or upon which the Company Businesses are operated.
"Environmental Laws" means all applicable federal, state and local
------------------
laws, statutes, ordinances, codes, rules and regulations related to protection
of the environment and/or the handling, presence, use, generation, treatment,
storage, transportation, release, discharge, emission or disposal of Hazardous
Materials in effect on or before the Closing Date.
"Environmental Permits" means all permits, licenses, approvals,
---------------------
authorizations, or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent orders or
binding agreements issued or entered into by a Governmental Authority under any
applicable Environmental Law.
"Hazardous Material" means any hazardous or toxic substance, material
------------------
or waste which is regulated as of the Closing Date by any Governmental
Authority, including, without limitation, any material or substance that is:
(i) defined as a "hazardous substance" under applicable state law; (ii)
petroleum; (iii) asbestos; (iv) designated as a "hazardous substance" pursuant
to Section 311 of the Federal Water Pollution Control Act, as amended, 33 U.S.C.
(S)1251 et seq. (33 U.S.C. (S)1321); (v) defined as a "hazardous waste" pursuant
to Section 1004 of the Federal Resource Conservation and Recovery Act, as
amended, 42 U.S.C. (S)6901 et seq. (42 U.S.C. (S)6903); (vi) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. (S)9601 et seq.;
(vii) defined as a "regulated substance" pursuant to Section 9001 of the Federal
Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S)6901 et seq.
(42 U.S.C. (S)6991); or (viii) otherwise regulated under the Toxic Substances
Control Act, 15 U.S.C. (S)2601, et seq., the Clean Air Act, as amended, 42
U.S.C. (S)7401, et seq., the Hazardous Materials Transportation Act, as amended,
49 U.S.C. (S)1801, et seq., or the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C. (S)136, et seq.
3.1.9 Title; Real and Personal Property.
---------------------------------
(a) The Company has good, valid and marketable or saleable
title, as applicable, to all of its material properties and assets, real,
personal and mixed, which it purports to own (other than leased properties),
including without limitation all properties and assets reflected in the Company
Current Balance Sheet and not sold, retired or otherwise disposed of since the
date thereof in the ordinary course of the Company Businesses consistent with
past practices, free and clear of all Liens, and other encumbrances and defects
of title of any nature whatsoever, except for (i) Liens for current real or
personal property taxes not yet due and payable, (ii) Liens Disclosed in
Schedule 3.1.9(a) attached hereto and (iii) Liens, such as utility easements,
- -----------------
mechanics' liens, landlord liens and the like, that are immaterial in character,
amount and extent, and which do not detract from the value or interfere with the
present use of the assets or properties they affect (the "Permitted Company
-----------------
Liens").
- -----
(b) Schedule 3.1.9(b) lists all real property and interests in
-----------------
real property, owned, leased or otherwise held by the Company.
23
<PAGE>
(c) Except as set forth on Schedule 3.1.9(c), PrimeCoPCS has
-----------------
good, valid and marketable or saleable title to the Company Interest to be
conveyed hereby free and clear of all Liens, and no current or former member nor
any other Person is contesting the rights of PrimeCoPCS or its predecessors in
interest relating to the Company Interest or any Distributions or contributions
relating thereto. The Company Interest represents PrimeCoPCS's entire right,
title and interest in and to the Company, and represents 100% of the equity
interests in the Company.
3.1.10 Condition of Tangible Assets. The buildings, structures,
----------------------------
facilities, equipment and other items of tangible property and assets (excluding
Inventory) of the Company, taken as a whole, are in all material respects in
satisfactory operating condition and repair, subject to normal wear and
maintenance, are useable in the regular and ordinary course of the Company
Businesses consistent with past practice, and conform in all material respects
to all applicable Requirements of Law. No Person other than the Company owns any
equipment or other tangible assets or properties situated on the premises of the
Company except for the leased and other items disclosed on Schedule 3.1.10.
---------------
3.1.11 Accounts Receivable. Except as set forth on Schedule 3.1.11,
------------------- ---------------
the accounts receivable as set forth on the Company Current Balance Sheet or
arising since the date thereof have arisen only in the ordinary course of
business out of performance of services or bona fide sales and deliveries of
goods. To the Knowledge of PrimeCoPCS, there exist no facts or circumstances
(other than general economic conditions) that are likely to result in any
material increase in the uncollectibility of accounts receivable. Schedule
--------
3.1.11 also includes a correct and complete listing as of March 31, 2000 of
- ------
accounts and notes receivable due the Company from customers which have been
outstanding for: (i) 30 days or less; (ii) more than 30 but less than 61 days;
(iii) more than 60 days but less than 91 days; and (iv) more than 90 days.
3.1.12 Inventory. The Inventory of the Company held on the Closing
---------
Date shall (a) be acquired and maintained in accordance with the regular
business practices of PrimeCo, (b) consist substantially of items of a quality
useable or saleable in the ordinary course of the Company Businesses consistent
with PrimeCo's past practice, and (c) be owned by the Company free and clear of
all Liens.
3.1.13 Material Changes. Except as disclosed on Schedule 3.1.13,
---------------- ---------------
since the date of the Company Current Balance Sheet:
(a) neither the Company nor PrimeCo has discharged or
satisfied any Lien or paid any liabilities, in each case other than in the
ordinary course of the operation of the Company Businesses consistent with past
practice, or failed to pay or discharge when due any liabilities, in each case
for which the failure to pay or discharge has caused or would reasonably be
expected to have a Company Material Adverse Effect;
(b) neither the Company nor PrimeCo has sold, encumbered,
assigned or transferred any assets or properties which the Company purports to
own as of the date of the Company Current Balance Sheet or on any date since
such date, except in the ordinary course of the operation of the Company
Businesses consistent with past practice;
24
<PAGE>
(c) the Company has not incurred any indebtedness for
borrowed money or subjected any of the assets or properties that it purports to
own to any Lien, except for Permitted Company Liens;
(d) neither the Company nor PrimeCo has made or suffered any
amendment or termination of any agreement, contract, commitment or lease to
which it is a party or by which it is bound, or canceled, modified or waived any
substantial debts or claims held by it or waived any rights of substantial
value, whether or not in the ordinary course of the Company Businesses, except
for any amendment, termination, cancellation, modification or waiver which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect;
(e) neither the Company nor PrimeCo has changed any of the
accounting principles followed by it or the methods of applying such principles;
the Company has not entered into any transaction other than in the ordinary
course of the operation of the Company Businesses consistent with past
practices;
(g) neither the Company nor PrimeCo has granted or otherwise
committed to make any increase in the compensation of the PrimeCo Available
Employees, except normal merit or promotional increases;
(h) the Company has not admitted any member or Distributed or
otherwise conveyed any of its property to any of its members or declared an
intention to do so (except as specifically contemplated in or permitted by this
Agreement);
(i) the Company has not dissolved or taken any action to do
so;
(j) neither the Company nor PrimeCo has agreed, orally or in
writing, or granted any other Person an option, to do any of the things
specified in subparagraphs (a) through (h) above; or
(k) the Company has not suffered any Material Adverse Change.
3.1.14 Assets Necessary to Conduct of Company Businesses. Except for
-------------------------------------------------
the Authorizations, rights, assets and property set forth on Schedule 3.1.14
---------------
(including, without limitation, those which are described by category on
Schedule 3.1.14), the Company owns or holds all Authorizations, rights, assets
- ---------------
and property necessary to the conduct of the Company Businesses by VA-6LP
materially in the manner conducted during the 12 month period preceding the date
of this Agreement. Except as described or referred to in Schedule 3.1.14 and
---------------
except for assets which have been or are after the date of this Agreement
disposed of as contemplated by Section 3.1.13 or 4.1.1, the Transferred Assets
constitute all of the assets owned by PrimeCo and its Affiliates which were used
in the Company Businesses as of immediately prior to the transfer of such assets
to the Company.
3.1.15 Intellectual Property Matters. Except as disclosed on Schedule
----------------------------- --------
3.1.15, (a) to the Knowledge of PrimeCoPCS, the Company and its Affiliates own,
- ------
or possess licenses or other valid rights to use, all of the Intellectual
Property necessary for the conduct of the
25
<PAGE>
Company Businesses as currently conducted, and (b) there are no claims or suits
pending or, to the Knowledge of PrimeCoPCS, threatened, alleging that the
activities of the Company or the conduct of the Company Businesses infringes
upon the Intellectual Property of a third party, or challenging the ownership,
validity or enforceability of any Intellectual Property necessary for the
conduct of the Company Businesses as currently conducted; and (c) to the
Knowledge of PrimeCoPCS, no Person is infringing upon any Intellectual Property
of the Company.
3.1.16 Books of Account; Financial Statements. The books of account
--------------------------------------
and related records of the Company fairly reflect in reasonable detail the
assets, liabilities and transactions of the Company. The Company has not engaged
in any transaction or used funds of the Company, except for transactions and
funds which have been and are reflected in its normally maintained books and
records. Schedule 3.1.16 sets forth for the Company BTAs, audited balance sheets
---------------
at December 31, 1998 and December 31, 1999 and statements of operations for the
years ended December 31, 1997, December 31, 1998 and December 31, 1999. The
financial statements described in this Section are referred to herein as the
"Company Financial Statements" and the balance sheet at December 31, 1999 is
----------------------------
referred to herein as the "Company Current Balance Sheet. "The Company Financial
-----------------------------
Statements (i) are in accordance with the books and records of the Company and
(ii) fairly present the financial position of the Company Businesses as of their
respective dates and the results of their operations for the periods covered
thereby and have been prepared in accordance with GAAP applied on a basis
consistent with PrimeCo's past practice. The principal accounting methodologies
and principles used in preparing the Company Financial Statements, including,
but not limited to, allocations of corporate overhead and other expenses arising
from transactions with Affiliates, are consistent with the methodologies and
principles generally used by PrimeCo in preparing the financial statements for
the other BTAs controlled by it prior to December 31, 1999.
3.1.17 No Interest in Other Entities. No shares of any corporation or
-----------------------------
any ownership or other investment interest, either of record, beneficially or
equitably, in any association, partnership, joint venture or other Person are
included in the assets of the Company.
3.1.18 Availability of Documents. PrimeCoPCS has made available to
-------------------------
VA-6LP copies of all documents listed in the Schedules hereto, except for the
contracts listed on Schedule 3.1.18 hereto, which are subject to confidentiality
---------------
provisions in favor of third parties. Such copies are complete and accurate and
include all amendments, supplements and modifications thereto or waivers
currently in effect thereunder.
3.1.19 Brokers or Finders. Except as set forth on Schedule 3.1.19,
------------------ ---------------
for which obligation PrimeCoPCS shall be responsible, PrimeCoPCS has incurred no
obligation or liability, contingent or otherwise, for brokers' or finders' fees
or agents commissions or other similar payments in connection with this
Agreement or the transactions contemplated hereby.
3.1.20 Mobile Telephone Numbers; Form of Agreements. As of December
--------------------------------------------
31, 1999, the aggregate number of active mobile telephone numbers in service
provided by the Company Businesses was approximately 79,000. Schedule 3.1.20
---------------
sets forth (a) a listing of the standard rate plans being offered by the Company
as of the date of this Agreement; (b) a description of the products and services
being provided to subscribers of the Company as of the date of this Agreement;
and (c) copies of the standard forms of subscriber agreements in use as
26
<PAGE>
of the date of this Agreement at the Company's retail stores located in the
Company BTAs or offered over the Internet.
3.1.21 Labor Relations. Except as set forth on Schedule 3.1.21: (a)
--------------- ---------------
no employee of the Company nor any PrimeCo Available Employee is represented by
any labor union or other labor organization; (b) there is no unfair practice
complaint against the Company pending or, to the Knowledge of PrimeCoPCS,
threatened before the National Labor Relations Board; (c) there is no labor
strike, dispute, slowdown, or stoppage actually pending or, to the Knowledge of
PrimeCoPCS, threatened against or involving the Company; (d) there is no
grievance or arbitration pending or, to the Knowledge of PrimeCoPCS, threatened
against the Company regarding unfair labor practices or collective bargaining;
(e) no private agreement expressly prohibits the Company from relocating,
closing or terminating any of the operations or facilities of its business; (f)
neither the Company nor PrimeCo has in the past three years experienced any work
stoppage or other labor difficulty; (g) to the Knowledge of PrimeCoPCS, no
organizational effort is being made or is threatened by or on behalf of any
labor union with respect to employees of the Company or PrimeCo Available
Employees; and (h) the Company is not a party to or currently bound by any
employment agreement.
3.1.22 Employee Benefit Plans.
----------------------
(a) Each Employee Plan maintained or sponsored by, or
contributed to by, the Company or PrimeCoPCS or any ERISA Affiliate of the
Company or PrimeCoPCS which covers any employee of the Company, PrimeCoPCS or
any ERISA Affiliate of either of them or any PrimeCo Available Employee or any
employee of PrimeCoPCS (the "PrimeCo Employee Plans") has been maintained and
----------------------
operated in all material respects in conformity with all applicable laws,
including but not limited to the Code and the Employee Retirement Income
Security Act of 1974 , as amended ("ERISA"), and in accordance with the terms of
-----
such Plan. For purposes of this Agreement, (x) "Employee Plan" means (i) any
-------------
"employee benefit plan," as defined in Section 3(3) of ERISA, and any other
employee benefit arrangement or payroll practice, including, without limitation,
any bonus plan, consulting, employment or other compensation agreement,
incentive, equity or equity-based compensation, or deferred compensation
arrangement, stock purchase, severance pay, sick leave, vacation pay, salary
continuation for disability, hospitalization, medical insurance, life insurance,
scholarship program, and (ii) any "employee pension plan", as defined in Section
3(2) of ERISA, subject to Title IV of ERISA or Section 412 of the Code and (y)
"ERISA Affiliate" means any entity or trade or business (whether or not
---------------
incorporated) which, together with the subject Person, would be treated as a
single employer or under common control under Section 414 of the Code or Section
4001 of ERISA and any general partnership of which any such entity is or has
been a general partner.
(b) Neither the Company, PrimeCoPCS nor any ERISA Affiliate
of the Company or of PrimeCoPCS has sponsored, contributed to, or had an
obligation to contribute to (i) a multiemployer plan, as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 4.4(f) of the Code; (ii) a multiple
employer plan subject to Sections 4063, 4064 or 4066 of ERISA or Section 413(c)
of the Code; or (iii) a multiple employer welfare arrangement, as defined in
Section 3(40) of ERISA.
27
<PAGE>
(c) Schedule 3.1.22(c) sets forth the name and general
------------------
description of each of the PrimeCo Employee Plans and indicates whether such
Plan has been terminated. To the extent requested by VA-6LP, PrimeCoPCS has made
available to VA-6LP true, complete and correct copies of the PrimeCo Employee
Plan documents, summary plan descriptions and related documents listed on
Schedule 3.1.22(c).
- ------------------
(d) The PrimeCo Employee Plans intended to qualify under
Section 401 of the Code are so qualified and the trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the Code,
and nothing has occurred with respect to the operation of such PrimeCo Employee
Plans which could cause the loss of such qualification or exemption or the
imposition of any liability, penalty or tax under ERISA or the Code.
(e) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any of the PrimeCo Employee Plans or by law (without regard to any waivers
granted under Section 412 of the Code) to any funds or trusts established
thereunder or in connection therewith have been made by the due date thereof
(including any valid extension), and all contributions for any period ending on
or before December 31, 1999 which are not yet due will have been paid no later
than the earlier of (i) May 31, 2000 or (ii) the time prescribed by law for
filing the applicable Tax Returns in which such contributions would be
deductible (including any valid extension). No accumulated funding deficiencies
(whether or not waived) exist in any PrimeCo Employee Plan and no ERISA
Affiliate has an outstanding funding waiver. Neither the Company nor any of its
subsidiaries has provided, or is required to provide, security to any Employee
Plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(f) Except as specifically set forth in this Agreement or in
the Employee Transfer Agreement, no event has occurred nor shall any event occur
as a result of the transactions contemplated by this Agreement and to the
Knowledge of PrimeCoPCS there exists no condition or set of circumstances which
will result in the imposition upon VA-6LP or any Affiliate of VA-6LP of any
liability directly or indirectly attributable to or relating to the PrimeCo
Employee Plans including, without limitation, liability under the Code, ERISA or
other applicable law.
(g) There is no material violation of ERISA with respect to
the filing of applicable reports, documents and notices regarding the PrimeCo
Employee Plans with the Secretary of Labor and the Secretary of the Treasury or
the furnishing of such documents to the participants or beneficiaries of the
PrimeCo Employee Plans.
(h) Except as set forth on Schedule 3.1.22(h), there are no
------------------
pending actions, claims or lawsuits which have been asserted or instituted
against the PrimeCo Employee Plans, the assets of any of the trusts under such
plans or the plan sponsor or the plan administrator, or against any fiduciary of
the PrimeCo Employee Plans with respect to the operation of such plans (other
than routine benefit claims), nor does PrimeCoPCS or any of its Affiliates have
Knowledge of any threatened litigation or of facts which could form the basis
for any such claim or lawsuit.
28
<PAGE>
(i) Neither the Company, PrimeCoPCS, any ERISA Affiliate of
the Company or PrimeCoPCS nor any "party in interest" or "disqualified person"
with respect to the PrimeCo Employee Plans has engaged in a non-exempt
"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA. No fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any PrimeCo Employee Plan.
(j) The PrimeCo Employee Plans provide for post-employment
life or health insurance, benefits or coverage for certain participants or
beneficiaries of participants as specified on Schedule 3.1.22(j). The Company
------------------
and any ERISA Affiliate which maintains a "group health plan" within the meaning
Section 5000(b)(1) of the Code has complied and will comply in all material
respects with respect to PrimeCo Available Employees with the notice and
continuation requirements of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended (and any similar state law), Section 4980B of the Code, and
Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder.
(k) Neither the assets of the Company nor the Company
Interest are or shall be subject to any Lien under Section 302(f) of ERISA or
Section 412 of the Code with respect to any PrimeCo Employee Plan.
3.1.23 Insurance. The Company and its property are covered by
---------
adequate insurance. All insurance policies are in full force and effect in
accordance with their terms, and no notice of cancellation of such polices has
been received.
3.1.24 No Undisclosed Liabilities. Except as set forth on Schedule
-------------------------- --------
3.1.24, the Company has no liabilities, whether accrued, contingent, absolute,
- ------
determined, determinable or otherwise, except:
(a) liabilities in respect of Company Authorizations and
Company Contracts (none of which arise from a breach thereof);
(b) liabilities of a type which are covered by the
representations and warranties contained in Section 3.1 which are either (i)
disclosed in the Schedules hereto or (ii) are not required to be disclosed in a
Schedule because of qualifications contained in such representations and
warranties;
(c) liabilities disclosed on the Company Current Balance
Sheet (including the notes thereto) and not heretofore paid or discharged;
(d) liabilities incurred, consistent with the past business
practice of the Company Businesses, in or as a result of the normal and ordinary
course of the business of the Company since the date of the Company Current
Balance Sheet, which would appear on the Closing Date Net Working Capital
schedule prepared by PrimeCoPCS; and
(e) liabilities to Affiliates of the Company that will be
paid or discharged at or before the Closing.
29
<PAGE>
The liabilities described in clauses (a) through (d) of this Section 3.1.24,
together with the liabilities set forth on Schedule 3.1.24, are referred to as
---------------
the "VA-6 Assumed Liabilities." For purposes of this Section 3.1.24, the term
------------------------
"liabilities" shall include any direct or indirect indebtedness, cost, expense
or obligation.
3.1.25 Communications Act. PrimeCoPCS is qualified under the
------------------
Communications Act of 1934, as amended (the "Communications Act"), and all
------------------
applicable rules and regulations thereunder to be a transferee of control of the
VA-6 FCC Authorizations.
3.2 Representations and Warranties of VA-6LP. VA-6LP represents and
----------------------------------------
warrants to PrimeCoPCS as follows:
3.2.1 VA-6LP Existence, Etc.
----------------------
(a) VA-6LP is a duly formed, validly existing entity, and is
in good standing under the laws of Virginia. VA-6LP has the requisite power,
authority and legal right to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by VA-6LP of this Agreement and all other Transaction Documents have
been duly authorized by all necessary action on the part of VA-6LP. This
Agreement has been, and the other Transaction Documents have been or will be,
duly executed and delivered by VA-6LP, and this Agreement constitutes, and the
other Transaction Documents do or will when executed and delivered constitute,
the legal, valid and binding obligations of VA-6LP, enforceable against it in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy laws and other similar laws affecting creditors' rights
generally, and except that the remedy of specific performance and injunctive
relief and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be
brought.
(b) VA-6LP is a telephone company or other person holding a
certificate of convenience and necessity granted by the Virginia State
Corporation Commission authorizing local exchange telephone service,
interexchange service, radio common carrier system or a cellular mobile radio
communications system; or a person authorized by the FCC to provide commercial
mobile service as defined in Section 332(d)(1) of the Communications Act of
1934, as amended, where such service includes cellular mobile radio
communications services or personal communications services; or a person holding
a certificate issued pursuant to Section 214 of the Communications Act of 1934,
as amended, authorizing telephone service; all within the meaning of section
58.1-400.1(D) of the Virginia Code.
3.2.2 Communications Act. VA-6LP is qualified under the
------------------
Communications Act, and all applicable rules and regulations thereunder to be a
transferee of control of the Company FCC Authorizations.
3.2.3 VA-5 Partnership. The VA-5 Partnership Interest is not
----------------
evidenced by any certificate or document other than the agreement of limited
partnership of VA-5 Partnership.
30
<PAGE>
3.2.4 Compliance with Law; Authorizations.
-----------------------------------
(a) Except as disclosed on Schedule 3.2.4(a), VA-6LP has
-----------------
complied in all material respects with, and VA-6LP is not in a material
violation of, any Requirement of Law of a Governmental Authority to which VA-6LP
or its business is subject, including, without limitation, rules, regulations or
orders of the FCC and any applicable State Commission. The VA-6 FCC
Authorizations are listed on Schedule 3.2.4(a).
-----------------
(b) Except as disclosed on Schedule 3.2.4(b), the VA-6
-----------------
Authorizations are the only Authorizations which are necessary for VA-6LP to
own, operate or construct its business. Each of the VA-6 Authorizations is in
full force and effect, is validly and exclusively held by VA-6LP, is free and
clear of any legal disqualifications, conditions or other restrictions (other
than those routinely imposed in conjunction with such Authorizations), and is
free and clear of all Liens except for Permitted VA-6 Liens. Except as set forth
on Schedule 3.2.5, there are no existing applications, petitions to deny or
--------------
complaints or proceedings pending before the FCC, or any of the State
Commissions, or any other tribunal or regulatory agency relating to the VA-6
Authorizations or the business of VA-6 (other than proceedings affecting the
wireless telecommunications industry generally). VA-6LP is not in default, nor
has it or any of its Affiliates received any notice of any claim of default,
with respect to any of the VA-6 Authorizations, and no event has occurred with
respect to any of the VA-6 Authorizations which permits, or after notice or
lapse of time or both would permit, revocation or termination thereof or would
result in any impairment of the rights of the holder of any Company. VA-6LP has
paid all state and federal fees, charges and assessments relating to the VA-6
FCC Authorizations, including, but not limited to, FCC regulatory fees and
universal service contributions.
3.2.5 Litigation.
----------
(a) Except as set forth in Schedule 3.2.5, and except for
--------------
proceedings affecting the wireless telecommunications industry generally, there
is no litigation, arbitration, investigation or other proceeding of or before
any Governmental Authority pending against VA-6LP, or against any Affiliate of
VA-6LP and relating to the VA-6 Business, nor to the Knowledge of VA-6LP is any
such litigation, arbitration, investigation or other proceeding threatened
against VA-6LP or its Affiliates the result of which, alone or in the aggregate,
would reasonably be expected to have a VA-6 Material Adverse Effect. Except for
proceedings affecting the wireless telecommunications industry generally, there
is no litigation, arbitration, investigation or other proceeding, or injunction
or final judgment relating thereto, pending against VA-6LP, or, to the Knowledge
of VA-6LP, is any such litigation, arbitration, investigation or other
proceeding threatened against VA-6LP before any Governmental Authority,
including, without limitation, the FCC or any of the State Commissions, in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and, to the Knowledge of VA-6LP, no investigation that
might result in any such suit, action or proceeding is pending or threatened.
Neither VA-6LP nor any of its Affiliates is a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
Governmental Authority which would reasonably be expected to have a VA-6
Material Adverse Effect.
31
<PAGE>
(b) Schedule 3.2.5 lists all civil fines, penalties, and any
--------------
orders, writs, judgments, injunctions, decrees, determinations, or other awards
of any Governmental Authority which have been imposed or levied against VA-6LP,
together with all settlements by VA-6LP of any legal claims actually brought or
threatened against VA-6LP from January 1, 1998, other than individual claims, or
series of related claims, for monetary damages which in each case involve an
amount of less than $100,000.
3.2.6 Contracts and Other Agreements.
------------------------------
(a) Except as listed and described in Schedule 3.2.6(a),
-----------------
VA-6LP is not a party and no Affiliate of VA-6LP is a party to any of the
following agreements, whether written or oral, express or implied, relating
exclusively to the operation of VA-6LP's business, which if included in the VA-6
Assets and VA-6 Liabilities will continue to bind or impose any liability on
PrimeCoPCS after the Closing Date:
(i) agreement, contract, lease or commitment, or
series of related agreements, contracts, leases or commitments, other than
roaming agreements, which involves an amount in excess of $100,000 on an annual
basis;
(ii) agreement, contract or commitment limiting or
restraining VA-6LP from engaging in any business or pursuing any strategic
initiative or competing in any manner;
(iii) license or other agreement which relates in
whole or in part to any software, patent, trademark, trade name, service mark or
copyright owned by any Person other than VA-6LP, other than software programs
which are generally commercially available;
(iv) interconnection agreement or contour extension
agreement, other than those entered into in the ordinary course of business;
(v) management agreement;
(vi) confidentiality or non-disclosure agreement
pursuant to which VA-6LP has agreed to keep confidential and/or not to use or
disclose information obtained from any other Person other than those entered
into in the ordinary course of VA-6LP's business;
(vii) agreement, contract, commitment or arrangement
with any labor union or other representative of employees;
(viii) commission, reseller, distributorship or sales
agency agreement, contract or commitment;
(ix) agreement, contract, lease or commitment with
respect to the ownership or leasing of cell sites, space on towers, switches or
store locations; or
(x) other material agreement, contract or commitment
not made in the ordinary course of operation of VA-6LP's business consistent
with past practice.
32
<PAGE>
(b) Each of the agreements, contracts, commitments, leases,
plans and other instruments, documents and undertakings required to be listed in
Schedule 3.2.6(a) in response to the foregoing (collectively, "VA-6 Contracts")
- ----------------- --------------
is in full force and effect, and is a valid, legal and binding obligation of VA-
6LP and, to the Knowledge of VA-6LP, any other party thereto, enforceable
against VA-6LP and, to the Knowledge of VA-6LP, against any other party thereto
in accordance with its terms except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law). VA-6LP is not, and to the Knowledge of VA-6LP
no other party thereto is, in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained in the
VA-6 Contracts, and no event caused by, relating to or affecting VA-6LP or any
of its Affiliates has occurred which with or without the giving of notice or
lapse of time, or both, would constitute a default by VA-6LP thereunder, and to
the Knowledge of VA-6LP, no event caused by, relating to or affecting any other
party thereto has occurred which with or without the giving of notice or lapse
of time, or both, would constitute a default by such other party thereunder.
3.2.7 Validity of Contemplated Transactions, Etc. Upon the receipt of
------------------------------------------
requisite consents, approvals and Authorizations from the FCC and other
Governmental Authorities as described in Section 4.3, compliance with any
applicable requirement of the HSR Act for the sale of the Company Interest to
VA-6LP and the sale of the VA-5 Partnership Interest and the VA-6 Assets and
VA-6 Liabilities to PrimeCoPCS, and the receipt of the consents set forth on
Schedule 3.2.7 (the "VA-6 Consents"), the execution, delivery and performance of
- -------------- -------------
this Agreement and the other Transaction Documents by VA-6LP do not and will not
violate, conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other Person under, (a) the charter
and other organizational documents of VA-6LP or VA-6LP, including the VA-6LP
Agreement, (b) any existing Requirement of Law to which VA-6LP or VA-6LP is
subject, (c) any judgment, order, writ, injunction, decree or award of any
Governmental Authority or any other Governmental Order which is applicable to
VA-6LP or VA-6LP, or (d) any VA-6 Contract or VA-6 Authorization, or give any
party with rights thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of VA-6LP thereunder. Except
as aforesaid, no Authorization and no filing or notification with any
Governmental Authority or any counterparty to any VA-6 Contract or any other
Person is required in connection with the execution, delivery or performance of
this Agreement or the Transaction Documents or the consummation of the
transactions contemplated hereby by VA-6LP, other than post-Closing
notifications required by the FCC.
3.2.8 Taxes. Except as set forth in Schedule 3.2.8:
----- --------------
There are no Liens with respect to Taxes upon any of the assets or
properties of VA-6LP, other than with respect to Taxes not yet due and payable.
All Tax Returns required to be filed by or with respect to VA-6LP or the VA-6
Business have been timely filed in accordance with applicable law, all such Tax
Returns are complete and correct in all material respects, and VA-6LP has timely
paid all Taxes shown thereon as due or that have been asserted in writing by any
Governmental Authority to be due (whether or not shown on any Tax Return).
There are no unpaid Taxes due and payable the non-payment of which could become
a Lien upon, or otherwise could adversely affect, any of the VA-6 Assets or the
use thereof or could
33
<PAGE>
cause PrimeCoPCS to incur any liability. None of VA-6LP's assets is subject to a
"safe harbor lease" under Section 168(f)(8) of the Internal Revenue Code, as
amended before the Tax Reform Act of 1984.
3.2.9 Environmental Matters. Except as set forth in Schedule 3.2.9:
--------------------- --------------
(a) All material Environmental Permits required pursuant to
any Environmental Law for operation of the business of VA-6LP (i) have been
obtained by VA-6LP and (ii) are currently in full force and effect. VA-6LP will
use commercially reasonable efforts to cooperate with PrimeCoPCS in seeking to
obtain for PrimeCoPCS the continued benefit of all such Environmental Permits.
Neither VA-6LP nor any Affiliate of VA-6LP has been notified by any relevant
Governmental Authority that any existing material Environmental Permit relating
to the VA-6 Business will be suspended, canceled or revoked, or cannot be
renewed. VA-6LP is in compliance in all material respects with all Environmental
Permits required pursuant to any Environmental Law for operation of the business
of VA-6LP.
(b) VA-6LP is in compliance in all material respects with all
Environmental Laws. To VA-6LP's Knowledge there are no events, conditions,
circumstances, activities, practices, incidents, actions or plans in any way
related to VA-6LP which will, or would reasonably be expected to, give rise to
any material Environmental Claim.
(c) There is no material civil, criminal or administrative
action, suit, demand, Environmental Claim, hearing, notice or demand letter,
notice of violation, investigation known to VA-6LP, or proceeding pending
against VA-6LP or, to the Knowledge of VA-6LP, threatened against VA-6LP
relating in any way to any Environmental Permit or any applicable Environmental
Law or any plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder.
(d) Any underground storage tank owned or operated by VA-6LP
is in compliance in all material respects with Environmental Law.
3.2.10 Title; Real and Personal Property.
---------------------------------
(a) VA-6LP has good, valid and marketable or saleable title,
as applicable, to all of its material properties and assets, real, personal and
mixed, which it purports to own (other than leased properties), including
without limitation all properties and assets reflected in the VA-6 Current
Balance Sheet and not sold, retired or otherwise disposed of since the date
thereof in the ordinary course of the business of VA-6LP consistent with past
practices, free and clear of all Liens, and other encumbrances and defects of
title of any nature whatsoever, except for (i) Liens for current real or
personal property taxes not yet due and payable, (ii) Liens disclosed in
Schedule 3.2.10(a) attached hereto and (iii) Liens, such as utility easements,
- ------------------
mechanics' liens, landlord liens and the like, that are immaterial in character,
amount and extent, and which do not detract from the value or interfere with the
present use of the assets or properties they affect (the "Permitted VA-6
--------------
Liens").
- -----
(b) Schedule 3.2.10(b) lists all real property and interests
------------------
in real property, owned, leased or otherwise held by VA-6LP.
34
<PAGE>
(c) Except as set forth on Schedule 3.2.10(c), VA-6LP has
------------------
good, valid and marketable or saleable title to the VA-6 Assets, the VA-6
Liabilities and the VA-5 Partnership Interest to be conveyed hereby free and
clear of all Liens, and no current or former partner nor any other Person is
contesting the rights of VA-6LP or its predecessors in interest relating to the
VA-6 Assets, the VA-6 Liabilities or the VA-5 Partnership Interest or any
Distributions or contributions relating thereto. The VA-5 Partnership Interest
represents VA-6LP's entire right, title and interest in and to VA-5 Partnership.
3.2.11 Condition of Tangible Assets. The buildings, structures,
----------------------------
facilities, equipment and other items of property and assets (excluding
Inventory) of VA-6LP, taken as a whole, are in all material respects in
satisfactory operating condition and repair, subject to normal wear and
maintenance, are useable in the regular and ordinary course of the business of
VA-6LP consistent with past practice, and conform in all material respects to
all applicable Requirements of Law. No Person other than VA-6LP owns any
equipment or other tangible assets or properties situated on the premises of VA-
6LP to be transferred pursuant to this Agreement except for the leased and other
items disclosed on Schedule 3.2.11.
---------------
3.2.12 Accounts Receivable. Except as set forth on Schedule 3.2.12,
------------------- ---------------
the accounts receivable as set forth on the VA-6 Current Balance Sheet or
arising since the date thereof have arisen only in the ordinary course of
business out of performance of services or bona fide sales and deliveries of
goods. To the Knowledge of VA-6LP, there exist no facts or circumstances (other
than general economic conditions) that are likely to result in any material
increase in the uncollectibility of accounts receivable. Schedule 3.1.12 also
---------------
includes a correct and complete listing as of April 3, 2000 of accounts and
notes receivable due VA-6LP relating to the VA-6 Business which have been
outstanding for: (i) 30 days or less; (ii) more than 30 but less than 61 days;
(iii) more than 60 days but less than 91 days; and (iv) more than 90 days.
3.2.13 Inventory. The Inventory of VA-6LP held on the Closing Date
---------
shall (a) be acquired and in accordance with the regular business practices of
VA-6LP, (b) consist substantially of items of a quality useable or saleable in
the ordinary course of the business of VA-6LP consistent with past practice, and
(c) be owned by VA-6LP free and clear of all Liens.
3.2.14 Material Changes. Except as disclosed on Schedule 3.2.14, and
---------------- ---------------
taking into account that the VA-6 Excluded Assets are not being transferred to
PrimeCoPCS hereunder, since the date of the VA-6 Current Balance Sheet:
(a) VA-6LP has not discharged or satisfied any Lien or paid
any liabilities, in each case other than in the ordinary course of the operation
of the business of VA-6LP consistent with past practice, or failed to pay or
discharge when due any liabilities, in each case for which the failure to pay or
discharge has caused or would reasonably be expected to have a VA-6 Material
Adverse Effect;
(b) VA-6LP has not sold, encumbered, assigned or transferred
any assets or properties which VA-6LP purports to own as of the date of the VA-6
Current Balance Sheet or on any date since such date, except in the ordinary
course of the operation of the business of VA-6LP consistent with past practice
and except for the VA-6 Excluded Assets;
35
<PAGE>
(c) VA-6LP has not incurred any indebtedness except in the
ordinary course of business consistent with past practice or subjected any of
the assets or properties that it purports to own to any Lien, except for
Permitted VA-6 Liens;
(d) VA-6LP has not made or suffered any amendment or
termination of any agreement, contract, commitment or lease to which it is a
party or by which it is bound, or canceled, modified or waived any substantial
debts or claims held by it or waived any rights of substantial value, whether or
not in the ordinary course of the business of VA-6LP, except for any amendment,
termination, cancellation, modification or waiver which, individually or in the
aggregate, would not reasonably be expected to have a VA-6 Material Adverse
Effect;
(e) VA-6LP has not changed any of the accounting principles
followed by it or the methods of applying such principles;
(f) VA-6LP has not entered into any transaction other than in
the ordinary course of the operation of the business of VA-6LP consistent with
past practices;
(g) VA-6LP has not admitted any partner or Distributed or
otherwise conveyed any of its property to any of its partners or declared an
intention to do so (except as specifically contemplated in or permitted by this
Agreement);
(h) VA-6LP has not dissolved or taken any action to do so;
(i) VA-6LP has not agreed, orally or in writing, or granted
any other Person an option, to do any of the things specified in subparagraphs
(a) through (h) above; or
(j) VA-6LP has not suffered any VA-6 Material Adverse Change.
3.2.15 Assets Necessary to Conduct of VA-6 Partnership Business.
--------------------------------------------------------
Except for the Authorizations, rights, assets and property set forth on Schedule
--------
3.2.15 (including, without limitation, those which are described by category on
- ------
Schedule 3.2.15), VA-6LP owns or holds all Authorizations, rights, assets and
- ----------------
property necessary to the conduct of the business of VA-6LP by PrimeCoPCS
materially in the manner conducted during the 12 month period preceding the date
of this Agreement.
3.2.16 Intellectual Property Matters. Except as disclosed on Schedule
----------------------------- --------
3.2.16, (a) to the Knowledge of VA-6LP, VA-6LP owns, or possesses licenses or
- ------
other valid rights to use, all of the Intellectual Property necessary for the
conduct of the business of VA-6LP as currently conducted, and (b) there are no
claims or suits pending or, to the Knowledge of VA-6LP, threatened, alleging
that the activities of VA-6LP or the conduct of the business of VA-6LP infringes
upon the Intellectual Property of a third party, or challenging the ownership,
validity or enforceability of any Intellectual Property necessary for the
conduct of the business of VA-6LP as currently conducted; and (c) to the
Knowledge of VA-6LP, no Person is infringing upon any Intellectual Property of
VA-6LP.
3.2.17 Books of Account; Financial Statements. The books of account
--------------------------------------
and related records of VA-6LP fairly reflect in reasonable detail the assets,
liabilities and transactions of VA-6LP. VA-6LP has not engaged in any
transaction or used funds of VA-6LP, except for
36
<PAGE>
transactions and funds which have been and are reflected in its normally
maintained books and records. Schedule 3.2.17 sets forth for VA-6LP, audited
---------------
balance sheets at December 31, 1997, December 31, 1998 and December 31, 1999 and
statements of operations for the years then ended, and a pro forma balance sheet
at December 31, 1999 and pro forma statements of operations for the years ended
December 31, 1997, December 31, 1998 and December 31, 1999 reflecting the
removal of the assets, liabilities and results of operations of VA-6LP's
business of acquiring on a wholesale basis and reselling to customers Personal
Communications Services in Virginia RSA 6. The historical financial statements
described in this Section are referred to herein as the "VA-6 Financial
--------------
Statements" and the historical balance sheet at December 31, 1999 is referred to
- ----------
herein as the "VA-6 Current Balance Sheet." The pro forma financial statements
--------------------------
described in this Section are referred to herein as the "VA-6 Pro Forma
--------------
Financial Statements." The VA-6 Financial Statements (i) are in accordance with
- --------------------
the books and records of VA-6LP and (ii) fairly present the financial position
of VA-6LP as of their respective dates and the results of VA-6LP's operations
for the periods covered thereby and have been prepared on a basis consistent
with past practice. The principal accounting methodologies and principles used
in preparing the VA-6LP Financial Statements, including, but not limited to,
allocations of corporate overhead and other expenses arising from transactions
with Affiliates, are consistent with the methodologies and principles generally
used by VA-6 in preparing its financial statements prior to December 31, 1999.
The VA-6LP Pro Forma Financial Statements fairly present the pro forma (after
giving effect to the exclusion of the assets, liabilities and results of
operations described above) financial position of VA-6LP as of their respective
dates and the results of VA-6LP's operations for the periods covered thereby,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
3.2.18 No Interest in Other Entities. No shares of any corporation or
-----------------------------
any ownership or other investment interest, either of record, beneficially or
equitably, in any association, partnership, joint venture or other Person are
included in the assets of VA-6LP.
3.2.19 Availability of Documents. VA-6LP has made available to
-------------------------
PrimeCoPCS copies of all documents listed in the Schedules hereto, except for
the contracts listed on Schedule 3.2.19 hereto, which are subject to
---------------
confidentiality provisions in favor of third parties. Such copies are complete
and accurate and include all amendments, supplements and modifications thereto
or waivers currently in effect thereunder.
3.2.20 Brokers or Finders. Except as set forth on Schedule 3.2.20,
------------------ ---------------
for which obligation VA-6LP shall be responsible, neither VA-6LP nor any of its
Affiliates has incurred any obligation or liability, contingent or otherwise,
for brokers' or finders' fees or agents commissions or other similar payments in
connection with this Agreement or the transactions contemplated hereby.
3.2.21 Mobile Telephone Numbers; Form of Agreements. As of December
--------------------------------------------
31, 1999, the aggregate number of active analog mobile numbers in service
provided by VA-6LP was approximately 17,700. Schedule 3.2.21 sets forth (a) a
---------------
listing of the standard rate plans being offered by VA-6LP as of the date of
this Agreement; (b) a description of the products and services being provided to
subscribers of VA-6LP as of the date of this Agreement;
37
<PAGE>
and (c) copies of the standard forms of subscriber agreements in use as of the
date of this Agreement at VA-6LP's retail stores or offered over the Internet.
3.2.22 Employee Matters. VA-6LP does not have, and never has had, any
----------------
employees. VA-6LP has no liabilities under ERISA or any other law or regulation
with respect to any employees of any Affiliate of VA-6LP who have provided
services to VA-6LP or to the businesses owned or operated by it, nor will any
such liabilities arise as a result of the transactions contemplated by this
Agreement. Except as specifically set forth in this Agreement or in the Employee
Transfer Agreement, no event has occurred nor shall any event occur as a result
of the transactions contemplated by this Agreement and there exists no condition
or set of circumstances which, to the Knowledge of VA-6LP, will result in the
imposition upon PrimeCoPCS or any Affiliate of PrimeCoPCS of any liability
directly or indirectly attributable to the operation of any Employee Plan
maintained or contributed to at any time by VA-6LP or any Affiliate including,
without limitation, liability under the Code, ERISA or other applicable law.
3.2.23 Insurance. VA-6LP and its property are covered by adequate
---------
insurance. All material insurance policies are in full force and effect in
accordance with their terms, and no notice of cancellation of such polices has
been received.
3.2.24 No Undisclosed Liabilities. Except as set forth on Schedule
-------------------------- --------
3.2.24, VA-6LP has no liabilities, whether accrued, contingent, absolute,
- ------
determined, determinable or otherwise, except:
(a) liabilities in respect of VA-6 Authorizations and VA-6
Contracts (none of which arise from a breach thereof);
(b) liabilities of a type which are covered by the
representations and warranties contained in Section 3.2 which are either (i)
disclosed in the Schedules hereto or (ii) are not required to be disclosed in a
Schedule because of qualifications contained in such representations and
warranties;
(c) liabilities disclosed on VA-6 Current Balance Sheet
(including the notes thereto) and not heretofore paid or discharged;
(d) liabilities incurred, consistent with past business
practice, in or as a result of the normal and ordinary course of the business of
VA-6LP since the date of VA-6 Current Balance Sheet, which would appear on the
Closing Date Net Working Capital schedule prepared by VA-6LP; and
(e) liabilities to Affiliates of VA-6LP that will be paid or
discharged at or before the Closing.
The liabilities described in clauses (a) through (d) of this Section 3.2.24,
together with the liabilities set forth on Schedule 3.2.24, but excluding the
---------------
VA-6 Excluded Liabilities, are referred to as the "PrimeCoPCS Assumed
------------------
Liabilities." For purposes of this Section 3.2.24, the term "liabilities" shall
- -----------
include any direct or indirect indebtedness, cost, expense or obligation.
38
<PAGE>
3.3 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made by the parties in this Agreement or in the certificates
delivered pursuant to Sections 5.1.3 or 5.2.3 shall survive until the expiration
of 18 months after the Closing Date, except that (a) any intentional
misrepresentation shall survive Closing without limitation, (b) any
representation or warranty contained in Sections 3.1.1, 3.1.2, 3.1.6 (except to
the extent that it relates to Company Contracts), 3.2.1, 3.2.3 and 3.2.7 (except
to the extent that it relates to VA-6 Contracts) shall survive the Closing
without limitation and (c) any representation or warranty contained in Sections
3.1.7, 3.1.22, 3.2.8 and 3.2.22 shall survive until the expiration of 60 days
after the expiration date of the relevant statute of limitations period
(including any applicable extensions thereof). Any claim by a party based upon
breach of any such representation or warranty made pursuant to Article VI below
must be submitted to the breaching party prior to or at the expiration of the
applicable survival period.
3.4 No Representations or Warranties Implied. The representations and
----------------------------------------
warranties contained herein constitute the only representations and warranties
made by the parties with respect to this Agreement and the transactions
contemplated hereby, and no other representations or warranties shall be
implied. Without limiting the foregoing, except as expressly set forth herein,
PrimeCoPCS makes no representation or warranty concerning the Company Interest
or the Company Businesses, and VA-6LP makes no representation or warranty
concerning the VA-5 Partnership Interest, the VA-6 Assets or the VA-6 Business,
and THERE ARE NO IMPLIED WARRANTIES OF ANY KIND, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Agreements of PrimeCoPCS Pending the Closing. PrimeCoPCS covenants
--------------------------------------------
and agrees that, from the date of this Agreement until the Closing and except as
otherwise consented to in writing by VA-6LP:
4.1.1 Conduct of the Company Businesses in the Ordinary Course.
--------------------------------------------------------
Subject to the terms of the Company Agreement and applicable Requirements of Law
and except as otherwise contemplated by this Article IV, PrimeCoPCS shall cause
the Company to conduct the Company Businesses in the ordinary course consistent
with past practice except as may be necessary in order to implement and perform
this Agreement and the other Transaction Documents. Without limiting the
generality of the foregoing, PrimeCoPCS shall cause the Company and any
Affiliate of PrimeCoPCS managing the Company Businesses to:
(a) use commercially reasonable efforts to keep available the
services of the Company's present employees and agents, provided that this
clause creates no requirement to pay additional compensation or give promotions
outside of the ordinary course of business;
(b) not sell, lease, license, or otherwise dispose of any
material part of the Company's assets other than in the ordinary course of
business, consistent with past practice of the Company Businesses;
39
<PAGE>
(c) use commercially reasonable efforts to maintain the
Company's relations and goodwill with the suppliers, customers, distributors and
any others having business relations with the Company and assist with any
transition of such relationships;
(d) use commercially reasonable efforts to maintain the
equipment, systems and other fixed assets of the Company Businesses as necessary
to maintain the Company's reliability standards, footprint coverage and network
capacity;
(e) comply in all material respects with all material
Requirements of Law applicable to the Company Businesses;
(f) keep in full force and effect the material insurance
policies covering the Company and the Company Businesses as of the date hereof
(or replacement policies providing substantially the same coverage);
(g) except as set forth on Schedule 4.1.1(g), continue in
-----------------
accordance with past practice all marketing and promotions relating to the
maintenance and growth of subscribers;
(h) not grant or otherwise commit to make any increase in the
compensation of the PrimeCo Available Employees, except normal merit or
promotional increases consistent with PrimeCo's past practice;
(i) not enter into any employment agreement with a PrimeCo
Available Employee, or agreement with a consultant, that is outside of the
ordinary course of business, consistent with past practice (other than retention
agreements for which PrimeCoPCS or its Affiliate other than the Company retains
all obligations and liabilities), unless such agreement terminates or is
terminable prior to the Closing Date and, if so terminated, would not impose any
liability or obligation on VA-6LP;
(j) continue in accordance with past practice to collect the
Company's accounts receivables and pay its trade payables;
(k) maintain customer service operations in a manner consistent
with past practice in all material respects and, with the exception of any
changes affecting all or substantially all of the wireless telephone systems
that are owned by PrimeCo, PrimeCoPCS and PrimeCoPCS's subsidiaries ("PrimeCo
-------
Systemwide Changes"), as to which changes PrimeCoPCS will give notice to
- ------------------
VA-6LP promptly after implementing them, refrain from changing in any material
respect any material policies or practices relating to customer service for the
Company Businesses;
(l) with the exception of PrimeCo Systemwide Changes and
changes necessary in the reasonable business judgment of PrimeCoPCS or its
Affiliates to respond to actions of competitors, as to which changes PrimeCoPCS
will give notice to VA-6LP promptly after implementing them, refrain from
implementing any material change in (i) the terms and conditions of the
Company's forms of customer and subscriber agreements or (ii) the types or
quality of products and services being provided by the Company to subscribers.
40
<PAGE>
4.1.2 Distributions. PrimeCoPCS shall not permit the Company to make
-------------
any Distributions to its except for Distributions payable solely in cash.
4.1.3 Access.Upon reasonable prior notice from VA-6LP, and subject to
------
obligations of confidentiality, nonuse and nondisclosure set forth in this
Agreement, PrimeCoPCS shall cause the Company to (a) give VA-6LP and its
authorized representatives (collectively, the "VA-6 Group") reasonable access
----------
during all reasonable times to the Company's books and records, facilities and
assets, (b) provide such financial and operating data and other information as
the VA-6 Group may reasonably request and which is reasonably available, and (c)
make available, at and for reasonable locations and times, the Company's
officers, employees, agents and Affiliates in order to facilitate transitional
matters.
4.1.4 DOJ Approval. PrimeCoPCS shall use commercially reasonable
------------
efforts to obtain the approval by the DOJ of VA-6LP as transferee of the Company
Interest pursuant to this Agreement, it being understood and agreed that the DOJ
has the right to approve any transferee of the Company Interest under the DOJ
Final Judgment. If a DOJ Trust Event occurs, PrimeCoPCS shall also use
commercially reasonable efforts to secure the agreement by the DOJ Trustee to
carry out PrimeCoPCS's obligations hereunder, to the extent permitted by the DOJ
Final Judgment and applicable law. PrimeCoPCS shall keep VA-6LP reasonably
apprised of any material developments, events or issues relating to the DOJ
Trust and PrimeCoPCS's efforts to obtain the approval by the DOJ of VA-6LP as
transferee of the Company Interest pursuant to this Agreement. PrimeCoPCS shall,
as soon as reasonably practicable prior to a DOJ Trust Event, notify VA-6LP of
the prospective DOJ Trust Event.
4.1.5 Casualty Insurance Proceeds. In the event that any of the
---------------------------
assets of the Company have been damaged prior to the Closing Date by a casualty
covered by insurance ("Damaged Assets"), the Company shall use commercially
--------------
reasonable efforts to collect amounts due (if any) in respect of such Damaged
Assets under the Company's insurance policies, which amounts if collected will
either be used to repair or replace the damaged assets or otherwise will be
retained in the Company and not Distributed to the Company's member.
4.1.6 Company National Accounts. In all cases in which the Company
-------------------------
Businesses provide Personal Communications Services to employees or other
designees of a Person (such Person, a "Company National Account") who are
------------------------
included under a national service agreement between PrimeCo and such Person (a
"Company National Account Agreement"), the following
- ----------------------------------
provisions shall be applicable:
(a) PrimeCo has transferred, or PrimeCoPCS will cause PrimeCo
to transfer on or before the Closing Date, to the Company all rights and
obligations with respect to the provision of service to the individual end users
with mobile telephone numbers originating in the Company BTAs covered by such
Company National Account Agreement; and
(b) Where the Company National Account is headquartered in one
of the Company BTAs and a majority of the individual customer accounts of such
Company National Account are located in Company BTAs, PrimeCoPCS shall cause
PrimeCo to make commercially reasonable efforts to transfer to the Company the
responsibility for overall account management and billing coordination under
such Company National Account Agreement.
41
<PAGE>
4.1.7 PrimeCo National Outlet Agreements. In cases in which PrimeCo
----------------------------------
is a party to a contract (a "PrimeCo National Outlet Agreement") with any Person
---------------------------------
Person (a "PrimeCo National Outlet") who serves as an outlet for selling or
-----------------------
marketing Personal Communications Services of the Company both in the Company
BTAs as well as in other areas, the Company will use, and will cause PrimeCo to
use, commercially reasonable efforts to assist VA-6LP in its efforts to enter
into an agreement with the PrimeCo National Outlet substantially similar to the
applicable PrimeCo National Outlet Agreement that will cover the Company BTAs on
behalf of VA-6LP on and after the Closing Date.
4.1.8 Non-Solicitation. PrimeCoPCS agrees that for the three month
----------------
period beginning on the Closing Date it shall not, and shall not permit any of
its Affiliates to, engage in any solicitation for purchase of Personal
Communications Services or Cellular Services targeted at persons who are
customers of the Company Businesses as of the Closing Date; provided that this
shall not prohibit solicitations made through general advertisements.
4.1.9 PrimeCo Name. From and after the Closing Date, PrimeCoPCS and
------------
its Affiliates shall cease using the name "PrimeCo" in the Company BTAs.
PrimeCoPCS and its Affiliates shall retain the right to license third parties to
use the name "PrimeCo" in the Company BTAs, provided that no such license shall
permit any third party to use such name in the Company BTAs earlier than the
first anniversary of the Closing Date. PrimeCoPCS and its Affiliates (a) shall
not use the "Primetheus" mark in the Company BTAs for the six-month period
immediately following the Closing Date and (b) shall not license any third party
to use the "Primetheus" mark in the Company BTAs for the twelve-month period
immediately following the Closing Date.
4.1.10 PrimeCoPCS Cooperation. PrimeCoPCS shall reasonably
----------------------
cooperate, and shall request its independent auditors to cooperate, at VA-6LP's
expense, with VA-6LP's auditors in connection with the preparation of such
audited financial statements of the Company for periods ending prior to the
Closing Date as may be required pursuant to the rules and regulations of the SEC
or as may otherwise be required to facilitate the financing of the Cash
Component. It is understood that the matters for which such cooperation by
PrimeCoPCS's auditors may be requested include, without limitation, providing
their consent for inclusion of their report on the Company Financial Statements
in CFW's proxy statements, offering memoranda and registration statements and
providing a review of the Company's quarterly financial statements for 1999 and
2000, revising the Company Financial Statements to comply with SEC regulations
and providing any comfort letters required by an underwriter or placement agent
in connection with CFW's equity and debt issuances contemplated by Section
4.3.3(b).
4.1.11 Consents. PrimeCoPCS shall use commercially reasonable
--------
efforts to obtain prior to Closing the consent of any party whose consent was
required but not obtained for the transfer of the Transferred Assets to the
Company or whose consent is required for the transfer of the Company Interest to
VA-6LP or is otherwise required in connection with the consummation of the
transactions contemplated hereby.
4.1.12 Approvals and Disapprovals. PrimeCoPCS agrees to approve or
--------------------------
disapprove in writing any action that requires its consent under Section 4.2
within five business days following written notice to PrimeCoPCS from VA-6LP
requesting such approval, and
42
<PAGE>
PrimeCoPCS agrees not to unreasonably withhold any such consent. If PrimeCoPCS
fails to approve or disapprove of any such action in writing within ten business
days after presentation by VA-6LP, then PrimeCoPCS shall be deemed to have
approved of such action.
4.1.13 Control of Systems Pending Closing. Prior to the Closing Date,
----------------------------------
PrimeCoPCS shall not, directly or indirectly, control, supervise or direct, or
attempt to control, supervise or direct, the operations of the business of VA-
6LP in any manner that is prohibited by FCC rules or policies.
4.1.14 Retention of Books and Records. PrimeCoPCS shall cause VA-6LP
------------------------------
and its subsidiaries to retain, until all applicable tax statutes of limitations
(including periods of waiver) have expired, all books, all records and other
documents pertaining to VA-6LP and its subsidiaries that relate to the period
prior to the Closing Date that are required to be retained under current
retention policies of PrimeCoPCS and its Affiliates and to make the same
available after the Closing Date for inspection at an office of PrimeCoPCS or
one of its Affiliates and copying by VA-6LP or its agents at VA-6LP's expense,
during regular business hours and upon reasonable request and upon reasonable
advance notice. After the expiration of such period, no such books and records
shall be destroyed by PrimeCoPCS if VA-6LP has previously requested in writing
that such books and records be preserved. VA-6LP agrees that such records will
be kept strictly confidential and used only for tax or litigation purposes.
4.1.15 Communications Act. PrimeCoPCS has not taken and shall not
------------------
take prior to the Closing any action to disqualify itself under the
Communications Act or other applicable laws, rules and regulations from
acquiring control of the VA-6 FCC Authorizations
4.2 Agreements of VA-6LP. VA-6LP covenants and agrees that, from the date
--------------------
of this Agreement except as otherwise consented to in writing by PrimeCoPCS:
4.2.1 Conduct of VA-6LP's Business in the Ordinary Course. Subject
---------------------------------------------------
to the terms of its agreement of limited partnership and applicable Requirements
of Law and except as otherwise contemplated by this Article IV, and taking into
account that the VA-6 Excluded Assets are not being transferred to PrimeCoPCS
hereunder, VA-6LP shall cause VA-6LP to conduct its business in the ordinary
course consistent with past practice except as may be necessary in order to
implement and perform this Agreement and the other Transaction Documents.
Without limiting the generality of the foregoing, VA-6LP shall, and shall cause
VA-6LP and any Affiliate of VA-6LP managing VA-6LP's business to:
(a) use commercially reasonable efforts to keep available the
services of VA-6LP's present agents;
(b) not sell, lease, license, or otherwise dispose of any
material part of VA-6LP's assets other than in the ordinary course of business,
consistent with past practice of VA-6LP;
(c) use commercially reasonable efforts to maintain VA-6LP's
relations and goodwill with the suppliers, customers, distributors and any
others having business relations with VA-6LP and assist with any transition of
such relationships;
43
<PAGE>
(d) use commercially reasonable efforts to maintain the
equipment, systems and other fixed assets of VA-6LP as necessary to maintain VA-
6LP's reliability standards, footprint coverage and network capacity;
(e) comply in all material respects with all material
Requirements of Law applicable to VA-6LP;
(f) keep in full force and effect the material insurance
policies covering VA-6LP and its business as of the date hereof (or replacement
policies providing substantially the same coverage);
(g) except as set forth on Schedule 4.2.1(g), continue in
-----------------
accordance with past practice all marketing and promotions relating to the
maintenance and growth of subscribers;
(h) not enter into any employment agreement, or agreement with
a consultant, that is outside of the ordinary course of business, consistent
with past practice (other than retention agreements for which VA-6LP or its
Affiliate other than VA-6LP retains all obligations and liabilities), unless
such agreement terminates or is terminable prior to the Closing Date and, if so
terminated, would not impose any liability or obligation on PrimeCoPCS;
(i) continue in accordance with past practice to collect VA-
6LP's accounts receivables and pay its trade payables;
(j) maintain customer service operations in a manner consistent
with past practice in all material respects and, with the exception of any
changes affecting all or substantially all of the wireless telephone systems
that are owned by VA-6LP and its Affiliates, ("VA-6LP Systemwide Changes"),
-------------------------
refrain from changing in any material respect any material policies or practices
relating to customer service for the business of VA-6LP;
(k) with the exception of VA-6LP Systemwide Changes and changes
necessary in the reasonable business judgment of VA-6LP or its Affiliates to
respond to actions of competitors, refrain from implementing any material change
in (i) the terms and conditions of the Company's forms of customer and
subscriber agreements or (ii) the types or quality of products and services
being provided by VA-6LP to subscribers.
4.2.2 Distributions. VA-6LP shall not permit VA-6LP to make any
-------------
Distributions to its partners, except for Distributions payable solely in cash.
4.2.3 Access. Upon reasonable prior notice from PrimeCoPCS, and
------
subject to obligations of confidentiality, nonuse and nondisclosure set forth in
this Agreement, PrimeCoPCS shall cause the Company to (a) give PrimeCoPCS and
its authorized representatives (collectively, the "PrimeCoPCS Group") reasonable
----------------
access during all reasonable times to VA-6LP's books and records, facilities and
assets, (b) provide such financial and operating data and other information as
the PrimeCoPCS Group may reasonably request and which is reasonably available,
and (c) make available, at and for reasonable locations and times, VA-6LP's
officers, agents and Affiliates in order to facilitate transitional matters.
44
<PAGE>
4.2.4 Casualty Insurance Proceeds. In the event that any of the
---------------------------
the assets of VA-6LP have been damaged prior to the Closing Date by a casualty
covered by insurance ("Damaged Assets"), VA-6LP shall use commercially
--------------
reasonable efforts to collect amounts due (if any) in respect of such Damaged
Assets under VA-6LP's insurance policies, which amounts if collected will either
be used to repair or replace the damaged assets or otherwise will be retained in
VA-6LP and not Distributed to VA-6LP's partners.
4.2.5 Non-Solicitation. VA-6LP agrees that for the three month
----------------
period beginning on the Closing Date it shall not, and shall not permit any of
its Affiliates to, engage in any solicitation for purchase of Personal
Communications Services or Cellular Services targeted at persons who are
customers of VA-6LP as of the Closing Date; provided that this shall not
prohibit solicitations made through general advertisements.
4.2.6 Consents. VA-6LP shall use commercially reasonable efforts to
--------
obtain prior to Closing the consent of any party whose consent is required for
the transfer of the VA-6 Assets, the VA-6 Liabilities or the VA-5 Partnership
Interest to PrimeCoPCS or is otherwise required in connection with the
consummation of the transactions contemplated hereby.
4.2.7 Approvals and Disapprovals. VA-6LP agrees to approve or
--------------------------
disapprove in writing any action that requires its consent under Section 4.1
within five business days following written notice to VA-6LP from PrimeCoPCS
requesting such approval, and VA-6LP agrees not to unreasonably withhold any
such consent. If VA-6LP fails to approve or disapprove of any such action in
writing within ten business days after presentation by PrimeCoPCS, then VA-6LP
shall be deemed to have approved of such action.
4.2.8 Control of Systems Pending Closing. Prior to the Closing Date,
----------------------------------
VA-6LP shall not, directly or indirectly, control, supervise or direct, or
attempt to control, supervise or direct, the operations of the Company
Businesses in any manner that is prohibited by FCC rules or policies.
4.2.9 Retention of Books and Records. VA-6LP shall cause the
------------------------------
Company and its subsidiaries to retain, until all applicable tax statutes of
limitations (including periods of waiver) have expired, all books, all records
and other documents pertaining to the Company Businesses and their respective
subsidiaries that relate to the period prior to the Closing Date that are
required to be retained under current retention policies of VA-6LP and its
Affiliates and to make the same available after the Closing Date for inspection
at an office of VA-6LP and copying by PrimeCoPCS or its agents at PrimeCoPCS's
expense, during regular business hours and upon reasonable request and upon
reasonable advance notice. After the expiration of such period, no such books
and records shall be destroyed by VA-6LP if PrimeCoPCS has previously requested
in writing that such books and records be preserved. PrimeCoPCS agrees that such
records will be kept strictly confidential and used only for tax or litigation
purposes.
4.2.10 Communications Act. VA-6LP has not taken and shall not take
------------------
prior to the Closing any action to disqualify itself under the Communications
Act or other applicable laws, rules and regulations from acquiring control of
the Company FCC Authorizations.
45
<PAGE>
4.2.11 Agreement Regarding DOJ Final Judgment. VA-6LP acknowledges
--------------------------------------
receipt of a copy of the DOJ Final Judgment and agrees to be bound by Section X
of the DOJ Final Judgment, both before and after the Closing.
4.3 Covenants of PrimeCoPCS and VA-6LP.
----------------------------------
covenant and agree that, except as otherwise agreed to in writing by PrimeCoPCS
and VA-6LP:
4.3.1 FCC Authorizations. Within five Business Days after the date
------------------
hereof, to the extent required by the rules of the FCC, PrimeCoPCS and VA-6LP
shall file applications with the FCC for consent to the transfer by PrimeCoPCS
to VA-6LP of control of, and of all of PrimeCoPCS's rights and interests in and
to, the Company FCC Authorizations, and for consent to the transfer by VA-6LP to
PrimeCoPCS of control of, and of all of VA-6LP's rights and interests in and to,
the VA-6 FCC Authorizations. VA-6LP acknowledges that such filing shall not
preclude PrimeCoPCS from thereafter filing an application with the FCC for
consent to the transfer of control of, and of all of PrimeCoPCS's rights and
interests in and to, the Company FCC Authorizations to a DOJ Trust or DOJ
Trustee. As soon as practicable thereafter, PrimeCoPCS and VA-6LP shall file
such other applications for all consents and approvals of each applicable State
Commission and other regulatory consents and approvals necessary for the
consummation of the transactions contemplated hereby, if any. PrimeCoPCS and VA-
6LP shall diligently and jointly prosecute all such applications and take all
such actions and give all such notice as may be required or requested by the FCC
or any other regulatory agency or as may be appropriate in an effort to expedite
the grant of such consent by the FCC or such regulatory agency.
4.3.2 HSR Act. PrimeCoPCS and VA-6LP shall cooperate with one another
-------
in the preparing and filing within 15 days of the date hereof any required
Notification and Report Forms under the HSR Act and furnishing information
required in connection therewith. Each of PrimeCoPCS and VA-6LP will be
responsible for paying all their respective costs and expenses (including filing
fees under the HSR Act) incurred by it in connection with such preparation and
filing.
4.3.3 DOJ Final Judgment.
------------------
(a) As promptly as reasonably practicable (but in no event
later than five Business Days after the date hereof), VA-6LP and PrimeCoPCS (or
their appropriate Affiliates) shall submit the notification to the DOJ required
under Section VI of the DOJ Final Judgment. Each of VA-6LP and PrimeCoPCS shall
use its reasonable best efforts to comply with the timing requirements relating
to requests for additional information set forth in Section B of Section VI of
the DOJ Final Judgment, and VA-6LP and PrimeCoPCS shall cooperate with each
other in complying with such timing requirements and in obtaining approval by
the DOJ of VA-6LP as transferee of the Company Interest pursuant to this
Agreement.
(b) VA-6LP has advised PrimeCoPCS that CFW, on behalf of VA-
6LP, will seek to raise a portion of the funds which it will use to pay the Cash
Component through an issuance of equity, and that a vote of CFW's shareholders
(the "CFW Shareholder Vote") may be required for such issuance (it being
--------------------
understood that neither such vote nor the issuance of such equity shall be a
condition to VA-6LP's obligations under this Agreement). VA-6LP has further
46
<PAGE>
advised PrimeCoPCS that CFW, on behalf of VA-6LP, will seek to raise a further
portion of the funds which it will use to pay the Cash Component through an
issuance of high-yield debt (the "CFW High-Yield Issuance") which may be
-----------------------
registered with the SEC (it being understood that neither the filing or
effectiveness of such registration nor the issuance of such high-yield debt
shall be a condition to VA-6LP's obligations under this Agreement). VA-6LP shall
use its best efforts, and shall cause CFW to use its best efforts, to cause the
CFW Shareholder Vote and the completion of all preparations (other than
marketing efforts) for the CFW High-Yield Issuance to occur as promptly as
possible and in any event prior to June 30, 2000, and shall promptly notify
PrimeCoPCS of the scheduled dates of the CFW Shareholder Vote and the CFW High-
Yield Issuance and of any changes in such scheduled dates. Section 4.3.1
obligates PrimeCoPCS and VA-6LP to take certain actions to expedite the grant of
the consent by the FCC and other applicable regulatory agencies for the transfer
of the Company FCC Authorizations and VA-6 FCC Authorizations and the other
transactions contemplated hereby (collectively, the "Regulatory Approvals"). In
--------------------
the event that, despite such best efforts and actions, as of the later to occur
of (i) the scheduled closing of the Bell/GTE Merger and (ii) June 30, 2000,
either the CFW Shareholder Vote or the CFW High-Yield Issuance shall be
scheduled to occur but shall not yet have occurred or the Regulatory Approvals
shall not have been obtained, then PrimeCoPCS agrees, upon written request from
VA-6LP, that PrimeCoPCS will request the DOJ to extend the deadline for
divestiture of the Company Businesses pursuant to section IV.A.2. of the DOJ
Final Judgment. If the DOJ so extends such deadline either once or twice
pursuant to section IV.A.2. of the DOJ Final Judgment, then the last of such
extended deadlines shall be referred to as the "Extended DOJ Trust Deadline". If
---------------------------
the DOJ shall not have extended such deadline as of the later to occur of (i)
the scheduled closing of the Bell/GTE Merger and (ii) June 30, 2000, then for
purposes of this Agreement it shall be deemed to have declined to extend such
deadline and there shall be no Extended DOJ Trust Deadline.
4.3.4 Copies of Regulatory Filings. Except to the extent prohibited
----------------------------
by Requirements of Law, each of the parties hereto shall provide to each of the
other parties hereto copies of all filings and material correspondence with all
Governmental Authorities with respect to the filings and consents described in
this Section 4.3.
4.3.5 Confidentiality. Other than pursuant to mutually agreed upon
---------------
public communications plans for investors and transferred employees, neither
PrimeCoPCS and its agents nor VA-6LP and its agents shall at any time prior to
the Closing Date disclose to the public (by public statement or release or
otherwise) or to any third party the fact that PrimeCoPCS and VA-6LP are
contemplating the transactions contemplated by this Agreement, the existence of
this Agreement or any of the transactions contemplated by this Agreement, or the
terms and conditions of this Agreement or any of the transactions contemplated
by this Agreement except:
(a) as required by applicable law or the rules of any relevant
stock exchange, by order or decree of a court or other Governmental Authority
having jurisdiction over such party, or in connection with such party's or its
affiliate's enforcement of any rights it may have at law or equity or as
requested by any Governmental Authority in connection with any review or
approval of, or consent to, the transactions contemplated by this Agreement;
47
<PAGE>
(b) on a "need-to-know" basis to Persons within such party's
organization (with the explicit understanding that Bell Atlantic Corporation,
Vodafone AirTouch Plc and GTE Corporation will be notified and informed from
time to time by PrimeCoPCS), or outside of such party's organization such as
attorneys, accountants, bankers, financial advisors, service providers and other
consultants who may be assisting such party in connection with the transactions
contemplated hereby and who agree to be bound by the nondisclosure obligations
of this Section 4.3.5;
(c) as expressly required by this Agreement or as is reasonably
necessary in connection with obtaining any required consent of a third party to
the transactions contemplated by this Agreement;
(d) with the express prior consent of the other party, which
shall not be unreasonably withheld;
(e) as reasonably required by VA-6LP in connection with its or
CFW's obtaining financing of the Cash Component; or
(f) after such information has become publicly available
without breach of this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, the
provisions of this Section 4.3.5 shall survive indefinitely. PrimeCoPCS and VA-
6LP specifically acknowledge and agree that the remedy at law for any breach of
the provisions of this Section 4.3.5 will be inadequate and that each party, in
addition to any other relief available to it, shall be entitled to seek
temporary and permanent injunctive relief without the necessity of proving
actual damages in the event of any breach or threatened breach of the provisions
of this Section 4.3.5 by the other party or such other party's agents.
4.3.6 Cooperation. PrimeCoPCS and VA-6LP shall cooperate with each
-----------
other and use commercially reasonable efforts to cause all of the conditions to
the obligations of VA-6LP and PrimeCoPCS under this Agreement to be satisfied on
or prior to the Closing Date.
4.3.7 Other Regulatory Requirements. PrimeCoPCS and VA-6LP agree to
-----------------------------
cooperate with each other in connection with either party's efforts to satisfy
applicable regulatory requirements in connection with the transactions
contemplated by this Agreement, each at its own cost and expense except as
expressly provided otherwise in this Agreement.
4.3.8 Litigation.
----------
(a) Anything herein to the contrary notwithstanding, under this
Agreement PrimeCoPCS shall retain responsibility and liability for any and all
actions, claims, proceedings or investigations that relate to the Company or the
Company Businesses that are brought by third parties against the Company or any
of the VA-6 Indemnitees, to the extent the event giving rise thereto occurred
prior to the Closing Date or which result from or arise out of the necessity or
failure to obtain consent of any Person required under any Company Authorization
or Company Contract in connection with the assignment of such Company
Authorization or Company Contract by PrimeCo to the Company or the transfer of
the Company Interest by PrimeCoPCS to
48
<PAGE>
VA-6LP or out of any action or inaction prior to the Closing Date of PrimeCoPCS,
any of its Affiliates, the Company, or any of their respective directors,
officers, members, employees, agents, representatives or subcontractors, other
than any such action or inaction taken at the express written request of VA-6LP
or its Affiliate. Such actions, claims, proceedings or investigations are
collectively referred to as the "Company Litigation" in this Agreement. VA-6LP
------------------
shall cooperate with PrimeCoPCS in its response, defense and settlement of the
Company Litigation. Without limiting the generality of the foregoing, VA-6LP
shall make available to PrimeCoPCS and its Affiliates (a) such personnel of VA-
6LP and its Affiliates who, by reason of their prior employment by the Company
or an Affiliate of the Company, have knowledge of facts relevant to the Company
Litigation, and (b) such documents and records of VA-6LP and its Affiliates that
are relevant to the Company Litigation. PrimeCoPCS shall make all requests for
access to such personnel, documents and records in a writing sent to the General
Counsel of VA-6LP (or such other Person designated by VA-6LP) reasonably in
advance of the desired access. PrimeCoPCS shall promptly reimburse VA-6LP for
the out-of-pocket costs and expenses incurred by VA-6LP and its Affiliates in
providing such access to such personnel, documents and records. If PrimeCoPCS
agrees or is required to provide any Company Promotional Items in settlement or
resolution of any Company Litigation, VA-6LP shall cooperate with PrimeCoPCS in
implementing the Company Promotional Items and shall honor and provide the
Company Promotional Items. Out-of-pocket cost, actual expense, and corporate
overhead or similar expenses incurred in implementing, honoring and providing
the Company Promotional Items shall be borne by PrimeCoPCS. For such purposes,
such cost and expense of providing the product, good or service constituting the
Company Promotional Item shall not be deemed to include any profit or markup
which might be obtained if such product, good or service was sold to a customer
of VA-6LP or its Affiliates. As used in this Agreement, the term "Company
-------
Promotional Item" means any non-monetary product, good or service provided in
- ----------------
settling or resolving any action, claim, proceeding or investigation or as the
result of an adjudication of any litigation, and shall include certificates for
free minutes of use of wireless telecommunications services, discounts on
minutes of use of wireless telecommunications services, discounts on handsets,
discounts on other products sold by the Company, and other products, goods,
services or rights to obtain any products, goods or services.
(b) Anything herein to the contrary notwithstanding, under this
Agreement VA-6LP shall retain responsibility and liability for any and all
actions, claims, proceedings or investigations that relate to VA-6LP or its
business that are brought by third parties against VA-6LP or any of the
PrimeCoPCS Indemnitees, to the extent the event giving rise thereto occurred
prior to the Closing Date or which result from or arise out of the necessity or
failure to obtain consent of any Person required under any VA-6 Authorization or
VA-6 Contract in connection with the transfer of the VA-6 Assets and the VA-6
Liabilities by VA-6LP to PrimeCoPCS or out of any action or inaction prior to
the Closing Date of VA-6LP, any of its Affiliates, VA-6LP, or any of their
respective directors, officers, members, employees, agents, representatives or
subcontractors, other than any such action or inaction taken at the express
written request of PrimeCoPCS or its Affiliate. Such actions, claims,
proceedings or investigations are collectively referred to as the "VA-6
----
Litigation" in this Agreement. PrimeCoPCS shall cooperate with VA-6LP in its
- ----------
response, defense and settlement of the VA-6 Litigation. Without limiting the
generality of the foregoing, PrimeCoPCS shall make available to VA-6LP and its
Affiliates (a) such personnel of PrimeCoPCS and its Affiliates who, by reason of
their prior employment by VA-6LP or an Affiliate of VA-6LP, have knowledge of
facts
49
<PAGE>
relevant to the VA-6 Litigation, and (b) such documents and records of
PrimeCoPCS and its Affiliates that are relevant to the VA-6 Litigation. VA-6LP
shall make all requests for access to such personnel, documents and records in a
writing sent to the General Counsel of PrimeCoPCS (or such other Person
designated by PrimeCoPCS) reasonably in advance of the desired access. VA-6LP
shall promptly reimburse PrimeCoPCS for the out-of-pocket costs and expenses
incurred by PrimeCoPCS and its Affiliates in providing such access to such
personnel, documents and records. If VA-6LP agrees or is required to provide any
VA-6 Promotional Items in settlement or resolution of any VA-6 Litigation,
PrimeCoPCS shall cooperate with VA-6LP in implementing the VA-6 Promotional
Items and shall honor and provide the VA-6 Promotional Items. Out-of-pocket
cost, actual expense, and any corporate overhead or similar expenses incurred in
implementing, honoring and providing the VA-6 Promotional Items shall be borne
by VA-6LP. For such purposes, such cost and expense of providing the product,
good or service constituting the VA-6 Promotional Item shall not be deemed to
include any profit or markup which might be obtained if such product, good or
service was sold to a customer of PrimeCoPCS or its Affiliates. As used in this
Agreement, the term "VA-6 Promotional Item" means any non-monetary product,
---------------------
good or service provided in settling or resolving any action, claim, proceeding
or investigation or as the result of an adjudication of any litigation, and
shall include certificates for free minutes of use of wireless
telecommunications services, discounts on minutes of use of wireless
telecommunications services, discounts on handsets, discounts on other products
sold by VA-6LP, and other products, goods, services or rights to obtain any
products, goods or services.
4.3.9 Section 1031 Exchange. PrimeCoPCS and VA-6LP agree to treat the
---------------------
transactions contemplated by this Agreement to the extent permissible by law as
an exchange of properties of a like kind within the meaning of Section 1031 of
the Code and not to take any position or action that is inconsistent with such
treatment. PrimeCoPCS and VA-6LP further agree that they shall cooperate with
each other in connection with their respective efforts to satisfy applicable
statutory requirements in connection with treatment of the exchanges of assets
hereunder as being exchanges pursuant to Section 1031 of the Code, each at its
own cost and expense except as expressly provided otherwise in this Agreement,
including, if requested by PrimeCoPCS, directing the Cash Component to be paid
to a "qualified intermediary" pursuant to Treasury Regulation Section 1.1031(k)-
1(g)(4) and taking such other actions as may be reasonably requested by
PrimeCoPCS in connection with a "qualified intermediary" transaction. Unless VA-
6LP elects to consummate the Alternative Transaction, the parties will, prior to
the Closing Date, prepare a schedule setting forth their mutual agreement as to
the values of the assets contained in each exchange group and the residual
group, as contemplated by Treasury Regulation Section 1.1031(j)-1(b)(2). At, or
as soon as practicable after, the Closing (but in no event later than 90 days
after the Closing), PrimeCoPCS and VA-6LP will update such schedule to reflect
the values of the assets as of the Closing. PrimeCoPCS and VA-6LP agree to
allocate consideration that is not transferred in exchange for property that is
part of a like-kind exchange in accordance with Section 1060 of the Code and the
Treasury Regulations thereunder and agree to timely file Form 8594 consistent
with such allocation. PrimeCoPCS and VA-6LP agree that, except as otherwise
required by Requirement of Law, they will not take, nor will they permit any of
their respective Affiliates to take, for income Tax purposes, any position
inconsistent with the allocations agreed to pursuant to this Section 4.3.9.
4.3.10 Updating of Schedules. Each party shall promptly notify the
---------------------
other of any changes, additions or events which would cause a change in the
information disclosed in any
50
<PAGE>
Schedule delivered by it under this Agreement and which would have a Company
Material Adverse Effect or a VA-6 Material Adverse Effect, as applicable. At or
prior to (but not more than 10 Business Days prior to) the Closing, each party
shall deliver to the other any information needed to cause the Schedules
delivered by it under this Agreement to be true and correct as of the date of
delivery of such information. Except as permitted by the last sentence of this
Section, no notification made pursuant to this Section shall be deemed to cure
any breach of any representation, warranty or covenant made in this Agreement or
to modify the Schedules for purposes of Section 5.1.1, Section 6.1.1 or Article
VI unless the party receiving such notification specifically agrees thereto in
writing, nor shall any such notification be considered to constitute or give
rise to a waiver by a party of any condition set forth in this Agreement.
4.3.11 JLL Subleases. On or before the Closing Date, PrimeCoPCS shall
-------------
cause the Company to enter into subleases in the forms set forth as Exhibit D-1
-----------
(Fuji) and Exhibit D-2 (Nomura), as such forms may be revised by mutual
-----------
agreement of the parties hereto (provided that proposed revisions which alter
the substantive provisions of the subleasing transaction embodied in such forms
may be accepted or rejected by each party in its sole discretion), covering the
equipment identified on Annexes 1 and 4 to Schedule 3.1.9(a) and Annexes 2 and 3
to Schedule 3.1.9(a), respectively, and CFW shall enter into guaranties in the
form set forth as Exhibit D-3 covering each sublease. PrimeCoPCS shall use
commercially reasonable efforts to obtain (i) the consent of the master lessor
and lenders' agent for each of the master leases covering such equipment to the
subleasing of such equipment pursuant to such forms of subleases, or (ii) an
opinion of Japanese legal counsel, as to each such sublease, that the execution
and performance of such sublease without the consent of the applicable master
lessor and lenders' agent will not constitute a Default or an Event of Default
under (and as defined in) such master lease (a "Japanese Legal Opinion"). In the
----------------------
event that, with respect to any applicable master lease, PrimeCoPCS is neither
able to secure the consent of the master lessor and lenders' agent to the
execution of the sublease nor a Japanese Legal Opinion with regard to the
proposed form of sublease, then PrimeCoPCS and VA-6LP shall attempt to amend the
applicable sublease so that it is both mutually agreeable to PrimeCoPCS and VA-
6LP and in a form as to which a Japanese Legal Opinion can be obtained, provided
that proposed revisions or amendments which alter the substantive provisions of
the subleasing transaction embodied in such subleases may be accepted or
rejected by each party in its sole discretion. If the parties are unable to
agree upon a revised form of sublease that achieves both of these objectives,
then PrimeCoPCS shall cause the Company to enter into the sublease in the
original form (Exhibit D-1 or Exhibit D-2, as applicable).
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of VA-6LP. All obligations of
---------------------------------------------
VA-6LP under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent, which
may be waived in writing in whole or in part by VA-6LP:
5.1.1 Representations and Warranties True as of Closing. All of the
-------------------------------------------------
representations and warranties of PrimeCoPCS contained in this Agreement shall
have been true and correct as of the date hereof and shall be true and correct
as of the Closing Date with the
51
<PAGE>
same effect as though all such representations and warranties had been made on
and as of the Closing Date, other than any such representations and warranties
made as of a specified date, which shall be true and correct as of such date,
except to the extent that the failure to be true and correct shall not have had
a Company Material Adverse Effect measured as of the Closing Date or, if the
Closing would have occurred earlier solely but for the failure of the condition
set forth in Section 5.1.3 to be satisfied, then measured as of the date the
Closing would have occurred in the absence of such condition.
5.1.2 Compliance with this Agreement. PrimeCoPCS shall have
------------------------------
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing,
except to the extent that the failure to do so shall not have had a Company
Material Adverse Effect measured as of the Closing Date or, if the Closing would
have occurred earlier solely but for the failure of the condition set forth in
Section 5.1.3 to be satisfied, then measured as of the date the Closing would
have occurred in the absence of such condition.
5.1.3 CFW Shareholder Vote and CFW High-Yield Issuance. The CFW
------------------------------------------------
Shareholder Vote shall have been taken (regardless of the outcome of such vote)
and the CFW High-Yield Issuance shall have occurred; provided, however, that
this condition shall be deemed satisfied if either or both of such events shall
not have occurred before the latest to occur of (i) the closing of the Bell/GTE
Merger, (ii) June 30, 2000, and (iii) the Extended DOJ Trust Deadline, if any.
5.1.4 Closing Certificate. VA-6LP shall have received a certificate
-------------------
from an authorized officer of PrimeCoPCS, dated the Closing Date, certifying
that the conditions specified in Sections 5.1.1 and 5.1.2 have been fulfilled.
5.1.5 Other Agreements. Each of the Employee Transfer Agreement, the
----------------
Transition Services Agreement and the VA-6 Transition Services Agreement shall
be in full force and effect in accordance with its terms unless the failure to
be in full force and effect is a result of a breach or default by VA-6LP or its
Affiliate.
5.1.6 Regulatory Opinion. VA-6LP shall have received an opinion from
------------------
regulatory counsel to PrimeCoPCS stating that the Company FCC Authorizations (i)
were held by PrimeCo pursuant to a final order of the FCC and (ii) have been
transferred to the Company in compliance with the FCC's forbearance procedure.
5.2 Conditions Precedent to Obligations of PrimeCoPCS. All obligations of
-------------------------------------------------
PrimeCoPCS under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent, which
may be waived in writing in whole or in part by PrimeCoPCS:
5.2.1 Representations and Warranties True as of Closing.
-------------------------------------------------
(a) Unless the Alternative Transaction is to be consummated,
all of the representations and warranties of VA-6LP contained in this Agreement
shall have been true and correct as of the date hereof and as of the Closing
Date with the same effect as though all such representations and warranties had
been made on and as of the Closing Date except to the extent
52
<PAGE>
that the failure to be true and correct shall not have had a VA-6 Material
Adverse Effect measured as of the Closing Date or, if the Closing would
have occurred earlier but for the failure of the condition set forth in
Section 5.2.5 to be satisfied, then measured as of the date the Closing
would have occurred in the absence of such condition.
(b) If the Alternative Transaction is to be
consummated, all of the representations and warranties of VA-6LP contained
in Sections 3.2.1, 3.2.2, 3.2.3, 3.2.4(a), 3.2.5 and 3.2.20 of this
Agreement shall have been true and correct as of the date hereof and shall
be true in all material respects as of the Closing Date with the same
effect as though all such representations and warranties had been made on
and as of the Closing Date.
5.2.2 Compliance with this Agreement.
------------------------------
(a) Unless the Alternative Transaction is to be
consummated, VA-6LP shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with
by it prior to or at the Closing except if the non-compliance shall not
have had a VA-6 Material Adverse Effect measured as of the Closing Date or,
if the Closing would have occurred earlier but for the failure of the
condition set forth in Section 5.2.5 to be satisfied, then measured as of
the date the Closing would have occurred in the absence of such condition.
(b) If the Alternative Transaction is to be
consummated, VA-6LP shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or at the Closing other than
those specified in Sections 4.2.1, 4.2.2, 4.2.3, 4.2.4 or 4.2.6.
5.2.3 Closing Certificate. PrimeCoPCS shall have
-------------------
received a certificate from an authorized officer of VA-6LP, dated the
Closing Date, certifying that the conditions specified in Section 5.2.1 and
5.2.2 have been fulfilled.
5.2.4 Other Agreements. Each of the Employee Transfer
----------------
Agreement, the Transition Services Agreement and the VA-6 Transition
Services Agreement shall be in full force and effect in accordance with its
terms unless the failure to be in full force and effect is a result of a
breach or default by PrimeCoPCS or its Affiliate.
5.2.5 Bell/GTE Merger. The Bell/GTE Merger shall have
---------------
occurred or shall be scheduled to occur substantially contemporaneously
with the Closing under this Agreement.
5.2.6 Regulatory Opinion. Unless the Alternative
------------------
Transaction is to be consummated, PrimeCoPCS shall have received an opinion
from regulatory counsel to VA-6LP stating that the VA-6 FCC Authorizations
are held by VA-6LP pursuant to a final order of the FCC.
5.3 Conditions Precedent to the Obligations of VA-6LP and
-----------------------------------------------------
PrimeCoPCS. All obligations of VA-6LP and PrimeCoPCS under this Agreement
-----------
are subject to the fulfillment or satisfaction, prior to or at the Closing,
of each of the following conditions precedent:
53
<PAGE>
5.3.1 Regulatory and Other Approvals. Any required
------------------------------
waiting period applicable to the consummation of the transactions
contemplated hereby under the HSR Act shall have expired or been earlier
terminated, and all required consents and approvals from the FCC and the
DOJ, and all of the required consents and approvals from other Governmental
Authorities that are specified on Schedule 5.3.1, shall have been obtained
--------------
free of any special conditions which would have a Company Material Adverse
Effect and no stay of any such consent or approval shall be in effect.
5.3.2 No Pending Governmental Litigation. On the
----------------------------------
Closing Date, no suit, action or other proceeding brought by any
Governmental Authority shall be pending in which it is sought to restrain
or prohibit the consummation of the transactions contemplated hereby.
ARTICLE VI
INDEMNIFICATION
6.1 General Indemnification Obligation of PrimeCoPCS. From and
------------------------------------------------
after the Closing, PrimeCoPCS shall reimburse, indemnify and hold harmless
VA-6LP, its Affiliates, and their respective directors, managers, officers,
agents, employees, successors and assigns (each, a "VA-6 Indemnitee" and
---------------
collectively, the "VA-6 Indemnitees"), against and in respect of:
----------------
(a) any and all damages, losses, deficiencies, liabilities,
costs, Taxes, and expenses (collectively, "Losses") incurred or suffered by
------
any VA-6 Indemnitee that result from, relate to or arise out of:
(i) any and all liabilities and obligations of
any nature whatsoever with respect or related to the Company Businesses
that arise before the Closing Date, except for the VA-6 Assumed
Liabilities;
(ii) any misrepresentation, breach of warranty
or nonfulfillment of any agreement or covenant on the part of PrimeCoPCS
under this Agreement or any Transaction Document, or any misrepresentation
in or omission from any certificate, schedule, exhibit, document or
instrument furnished to VA-6LP pursuant hereto or thereto, or in connection
with the execution or performance of this Agreement (including the
Schedules hereto and the certificate delivered pursuant to Section 5.1.3.
hereof) or any Transaction Document;
(iii) any representation or warranty of PrimeCoPCS
contained in this Agreement (other than any representation or warranty that
is expressly made as of a specified date prior to the date of this
Agreement) not being true and correct as of the Closing Date as if made as
of the Closing Date (without giving effect to any update or supplement to
the Schedules to this Agreement furnished by PrimeCoPCS except for changes
to Schedule 3.1.3(b), Schedule 3.1.5(a), Schedule 3.1.9(b) or Schedule
----------------- ----------------- ----------------- --------
3.1.10 as a result of activities after the date hereof not prohibited by
------
Article IV hereof);
(iv) any and all actions, suits, claims,
proceedings or investigations brought by a third party against any VA-6
Indemnitee that relate to (A) PrimeCoPCS or any of its Affiliates or the
Company Businesses to the extent the event giving rise thereto occurred
prior to the Closing Date or which result from or arise out of any action
or inaction prior to the Closing Date of PrimeCoPCS or any of its
Affiliates, or any of their
54
<PAGE>
respective directors, officers, members, employees, agents, representatives
or subcontractors, including the Company Litigation, , but excluding any
liabilities and obligations that arise out of any such action or inaction
taken at the express written request of VA-6LP or its Affiliate and
excluding the VA-6 Assumed Liabilities, or (B) VA-6LP to the extent that
the event giving rise thereto occurred on or after the Closing Date or
which result from or arise out of any action or inaction after the Closing
Date of PrimeCoPCS or any of its Affiliates or any of their respective
directors, officers, members, employees, agents, representatives or
subcontractors, or (C) the PrimeCoPCS Assumed Liabilities;
(v) any and all Taxes (A) of PrimeCoPCS or any of
its Affiliates other than the Company, (B) except to the extent reflected
as a liability in computing Company Closing Date Net Working Capital, of
the Company (excluding Taxes arising solely from the ownership or operation
of the Company after the Closing Date) or that arise from the ownership or
operation of the Company Businesses on or before the Closing Date, or (C)
that arise from the ownership or operation of the VA-6 Business after the
Closing Date or, to the extent reflected as a liability in computing VA-6
Closing Date Net Working Capital, on or before the Closing Date. For
purposes of this Section, ad valorem, real, and personal property Taxes
("Property Taxes") with respect to properties held by the Company
--------------
immediately before and immediately after the Closing (including, without
limitation, Property Taxes payable by the tenant or lessee under any lease)
will be prorated as of the Closing Date. In prorating any such Property
Taxes for any taxable period that includes the Closing Date, the Property
Tax for the entire taxable period shall be allocated ratably to each day
comprising the taxable period. The taxable period of any Property Tax shall
be the calendar year of the lien date, unless the relevant Tax law provides
otherwise. Notwithstanding any other provision of this Agreement, the
economic burden of any such Property Taxes will be borne by PrimeCoPCS for
all periods (or portions thereof) through the Closing Date (the "Pre-
---
Closing Period") and by VA-6LP for all periods (or portions thereof) after
--------------
the Closing Date (the "Post-Closing Period"); accordingly, (x) if
-------------------
PrimeCoPCS pays any such Property Tax with respect to a Post-Closing
Period, VA-6LP will reimburse PrimeCoPCS upon demand for the amount of such
Property Tax to the extent it is not reflected as an asset in computing
Company Closing Date Net Working Capital, and (y) if VA-6LP pays any such
Property Tax with respect to a Pre-Closing Period, PrimeCoPCS will
reimburse VA-6LP upon demand for the amount of such Property Tax to the
extent it is not reflected as a liability in computing Company Closing Date
Net Working Capital;
(vi) any brokerage fees due to any Person set
forth on Schedule 3.1.19; and
---------------
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and
other expenses incident to any of the foregoing or to the enforcement of
this Section 6.1.
6.2 General Indemnification Obligation of VA-6LP. From and after the
--------------------------------------------
Closing, VA-6LP shall reimburse, indemnify and hold harmless PrimeCoPCS,
its affiliates, and their respective directors, managers, officers, agents,
employees, successors and assigns (each, a "PrimeCoPCS Indemnitee" and
---------------------
collectively, the "PrimeCoPCS Indemnitees"), against and in respect of:
----------------------
55
<PAGE>
(a) any and all Losses incurred or suffered by any PrimeCoPCS
Indemnitee that result from, relate to or arise out of:
(i) any and all liabilities and obligations of any nature
whatsoever with respect or related to the VA-6 Business that arise before
the Closing Date, except for the PrimeCoPCS Assumed Liabilities;
(ii) any misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of VA-6LP under
this Agreement or any Transaction Document, or any misrepresentation in or
omission from any certificate, schedule, exhibit, document or instrument
furnished to PrimeCoPCS pursuant hereto or thereto, or in connection with
the execution or performance of this Agreement (including the Schedules
hereto and the certificate delivered pursuant to Section 5.2.3. hereof) or
any Transaction Document;
(iii) any representation or warranty of VA-6LP contained in
this Agreement (other than any representation or warranty that is expressly
made as of a specified date prior to the date of this Agreement) not being
true and correct as of the Closing Date as if made as of the Closing Date
(without giving effect to any update or supplement to the Schedules to this
Agreement furnished by PrimeCoPCS except for changes to Schedule 3.2.4(b),
-----------------
Schedule 3.2.6(a), Schedule 3.2.10(b) or Schedule 3.2.11 as a result of
----------------- ------------------ ---------------
activities after the date hereof not prohibited by Article IV hereof);
(iv) any and all actions, suits, claims, proceedings or
investigations brought by any third party that relate to (A) VA-6LP or any
of its Affiliates or VA-6LP to the extent the event giving rise thereto
occurred prior to the Closing Date or which result from or arise out of any
action or inaction prior to the Closing Date of VA-6LP or any of its
Affiliates, or any of their respective directors, officers, members,
employees, agents, representatives or subcontractors, including the Company
Litigation, but excluding any liabilities and obligations that arise out of
any such action or inaction taken at the express written request of
PrimeCoPCS or its Affiliate and excluding the PrimeCoPCS Assumed
Liabilities, (B) the Company to the extent that the event giving rise
thereto occurred on or after the Closing Date or which result from or arise
out of any action or inaction after the Closing Date of VA-6LP or any of
its Affiliates or any of their respective directors, officers, members,
employees, agents, representatives or subcontractors, or (C) the VA-6
Assumed Liabilities;
(v) any and all Taxes (A) of any Affiliates of VA-6LP,
(B) except to the extent reflected as a liability in computing VA-6 Closing
Date Net Working Capital, of VA-6LP (excluding Taxes arising solely from
the ownership or operation of the VA-6 Business after the Closing Date) or
that arise from the ownership or operation of the VA-6 Business on or
before the Closing Date, (C) that arise from the ownership or operation of
the Company Businesses by the Company, VA-6LP or any of its Affiliates
after the Closing Date or, to the extent reflected as a liability in
computing Company Closing Date Net Working Capital, from the ownership or
operation of the Company Businesses on or before the Closing Date, or (D)
attributable to, arising out of or relating to the VA-5 Interest for
taxable periods or portions thereof ending on or before the Closing Date.
For purposes of this Section, Property Taxes with respect to VA-6LP Assets
(including, without limitation, Property Taxes payable by the tenant or
lessee under any lease) or attributable to, arising out of or relating to
the VA-5 Interest will be
56
<PAGE>
prorated as of the Closing Date. In prorating any such Property Taxes for
any taxable period that includes the Closing Date, the Property Tax for the
entire taxable period shall be allocated ratably to each day comprising the
taxable period. The taxable period of any Property Tax shall be the
calendar year of the lien date, unless the relevant Tax law provides
otherwise. Notwithstanding any other provision of this Agreement, the
economic burden of any such Property Taxes will be borne by VA-6LP for the
Pre-Closing Period and by PrimeCoPCS for the Post-Closing Period;
accordingly, (x) if VA-6LP pays any such Property Tax with respect to a
Post-Closing Period, PrimeCoPCS will reimburse VA-6LP upon demand for the
amount of such Property Tax to the extent it is not reflected as an asset
in computing VA-6 Closing Date Net Working Capital, and (y) if PrimeCoPCS
pays any such Property Tax with respect to a Pre-Closing Period, VA-6LP
will reimburse PrimeCoPCS upon demand for the amount of such Property Tax
to the extent it is not reflected as a liability in computing VA-6 Closing
Date Net Working Capital; and
(vi) any brokerage fees due to any Person set
forth on Schedule 3.2.20.
---------------
(b) any and all actions, suits, claims,
proceedings, investigations, demands, assessments, audits, fines,
judgments, costs and other expenses incident to any of the foregoing or to
the enforcement of this Section 6.2.
6.3 Limitations on Claims for Losses. Claims for Losses caused by or
--------------------------------
arising out of breach of warranty or representation under Section
6.1(a)(ii) or Section 6.2(a)(ii) or the inaccuracy of any representation or
warranty under Section 6.1(a)(iii) or Section 6.2(a)(iii) may be made only
pursuant to Article VI hereof and only by written notice within the period
provided for survival of such representation and warranty in Article III.
Anything to the contrary contained herein notwithstanding:
(a) PrimeCoPCS shall not be liable for any Losses with
respect to any breach of warranty or representation under Section
6.1(a)(ii) or the inaccuracy of any representation or warranty under
Section 6.1(a)(iii) unless and until the total of all claims for indemnity
or damages with respect thereto exceeds $5,000,000 (the "PrimeCoPCS
----------
Deductible"), and then PrimeCoPCS shall be liable for all such claims in
----------
excess of the PrimeCoPCS Deductible. The aggregate liability of PrimeCoPCS
for misrepresentations or breaches of warranty or the inaccuracy of
representations and warranties under Section 6.1 hereof shall not exceed
$125,000,000.
(b) VA-6LP shall not be liable for any Losses with respect
to any breach of warranty or representation under Section 6.2(a)(ii) or the
inaccuracy of any representation or warranty under Section 6.2(a)(iii)
unless and until the total of all claims for indemnity or damages with
respect thereto exceeds $750,000 (the "VA-6 Deductible"), and then VA-6LP
---------------
shall be liable for all such claims in excess of the VA-6 Deductible. The
aggregate liability of VA-6LP for misrepresentations or breaches of
warranty or the inaccuracy of representations and warranties under Section
6.2 hereof shall not exceed $18,750,000.
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<PAGE>
(c) In no event shall either party hereto be liable for
indirect, special, consequential or punitive damages arising out of a
breach of this Agreement, even if advised at the time of breach of the
possibility of such damages.
6.4 Indemnification Procedure as to Third-Party Claims.
--------------------------------------------------
(a) Promptly after a VA-6 Indemnitee or a PrimeCoPCS
Indemnitee (individually, an "Indemnitee") obtains Knowledge of the
----------
commencement of any third-party claim, action, suit or proceeding or of the
occurrence of any event or the existence of any state of facts which may
become the basis of a third-party claim (any such claim, action, suit or
proceeding or event or state of facts being hereinafter referred to in this
Section 6.4 as a "Claim"), in respect of which an Indemnitee is entitled to
indemnification under this Agreement, such Indemnitee shall promptly notify
the indemnitor under this Agreement (the "Indemnitor") of such Claim in
----------
writing setting forth in reasonable detail the specific facts and
circumstances relating to such Claim and the amount of Losses subject to
the Claim (or an estimate thereof if the actual amount is not known or not
capable of reasonable calculation); provided, however, that any failure to
-------- -------
give such notice will not waive any rights of the Indemnitee except to the
extent that the rights of the Indemnitor are actually prejudiced thereby.
With respect to any Claim as to which such notice is given by the
Indemnitee to the Indemnitor, the Indemnitor shall, subject to the
provisions of Section 6.4 (b) below, be entitled to participate in and, if
it desires, to assume the defense and settlement of such Claim with counsel
reasonably satisfactory to the Indemnitee at the Indemnitor's sole risk and
expense, provided, however, that the Indemnitee (i) shall be permitted to
join in the defense and settlement of such Claim and to employ counsel at
its own expense (provided, however, that if the defendants include both the
Indemnitor and the Indemnitee and there are actual conflicts of interest
between the Indemnitor and the Indemnitee in connection with the defense of
such Claim and the Indemnitor shall have been advised of such conflicts in
writing by outside counsel, then Indemnitor shall be liable for the
reasonable fees and expenses of such counsel), (ii) shall reasonably
cooperate with the Indemnitor in the defense and any settlement of such
Claim in any manner reasonably requested by the Indemnitor and (iii) shall
have the right to pay or settle such Claim at any time in which event the
Indemnitee shall be deemed to have waived any right to indemnification
therefor by the Indemnitor. Following written notice from the Indemnitor to
the Indemnitee of its election to assume the defense of a Claim pursuant to
this Section 6.4(a), the Indemnitor will not be liable to the Indemnitee
for any other expenses subsequently incurred by the Indemnitee in
connection with the defense of the Claim, other than costs and expenses of
the Indemnitee incurred at the request of the Indemnitor or incurred
pursuant to Section 6.4(b). The assumption of the defense of any Claim by
the Indemnitor will not be deemed to be an admission by the Indemnitor of
liability for such Claim.
(b) If the Indemnitor fails to assume the defense of such
Claim or, having assumed the defense and settlement of such Claim, fails
reasonably to contest such Claim in good faith, the Indemnitee, without
waiving its right to indemnification, may assume the defense and settlement
of such Claim, provided, however, that (x) the Indemnitor shall be
permitted to join in the defense and settlement of such Claim and to employ
counsel at its own expense, (y) the Indemnitor shall cooperate with the
Indemnitee in the defense and settlement of such Claim in any manner
reasonably requested by the Indemnitee, and (z) the Indemnitee shall not
settle such Claim without soliciting the views of the Indemnitor and giving
them due consideration. If the remedy sought by the claimant with respect
to such Claim is not solely for money damages,
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<PAGE>
and would affect the operation of the Company Businesses after the Closing,
the Indemnitor shall not settle such Claim without the prior written
consent of VA-6LP, which consent shall not be unreasonably withheld. If the
Indemnitee provides the Indemnitor with written consent, the Indemnitee
agrees to be bound by the settlement of such Claim.
(c) As used in this Section 6.4, the term Indemnitee
shall be deemed to include the plural thereof where the rights or
obligations of more than one Indemnitee may be involved.
6.5 Adjustment For Insurance. Any indemnification payable
------------------------
pursuant to this Article VI shall be net of any amounts actually recovered
(after deducting related costs and expenses) by the indemnified party for
the Losses for which such indemnification payment is made, under any
insurance policy, warranty or indemnity from any third party.
6.6 Payment.
--------
(a) Upon a determination of liability in respect of
Article VI of this Agreement, the appropriate party shall pay the
indemnified party the amount so determined (subject to the limitations of
Section 6.3) within 10 business days after the date of determination (such
tenth business day, the "Due Date"). If there should be a dispute as to the
--------
amount or manner of determination of any indemnity obligation owed under
this Agreement, the party from which indemnification is due shall
nevertheless pay when due such portion, if any, of the obligation as shall
not be subject to dispute. Upon the payment in full of any claim, either by
setoff or otherwise, the party or entity making payment shall be subrogated
to the rights of the Indemnitee against any Person with respect to the
subject matter of such claim.
(b) If all or part of any indemnification obligation
under this Agreement is not paid when due, then the Indemnitor shall pay
the Indemnitee interest on the unpaid amount of the obligation for each day
from the Due Date until payment in full, payable on demand, at a rate per
annum equal to the Prime Rate on the Due Date.
(c) To the extent permitted by law, the parties agree
in good faith to treat any indemnification payable pursuant to this Article
VI as an adjustment to the Cash Component for U.S. Federal income tax
purposes.
6.7 Other Rights and Remedies. Following the Closing, the
-------------------------
sole and exclusive remedy at law (other than with respect to claims
involving intentional misrepresentation or fraud) for PrimeCoPCS or VA-6LP
for any claim (whether such claim is framed in tort, contract or otherwise)
arising out of a breach of any representation, warranty, covenant or other
agreement in this Agreement shall be a claim by PrimeCoPCS or VA-6LP for
indemnification pursuant to this Article VI, which claims are independent
of and in addition to any equitable rights or remedies.
59
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1 Termination.
-----------
(a) Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated at any time before the
Closing Date only as follows:
(i) by mutual consent of PrimeCoPCS and VA-
6LP;
(ii) by PrimeCoPCS, if there has been at any
time before the Closing (a) unless VA-6LP has irrevocably elected to
consummate the Alternative Transaction, a breach by VA-6LP of any
representation, warranty, covenant or agreement contained in this Agreement
that has had a VA-6 Material Adverse Effect, or (b) if VA-6LP has
irrevocably elected to consummate the Alternative Transaction, a material
breach of any representation, warranty, covenant or agreement contained in
Sections 3.2.1, 3.2.2, 3.2.3, 3.2.4(a), 3.2.5 and 3.2.20 of this Agreement,
in either case (a) or (b) that is not curable or, if curable, is not cured
within 60 calendar days after written notice of such breach is given by
PrimeCoPCS to VA-6LP or if assurances of cure reasonably acceptable to
PrimeCoPCS are not provided in such period;
(iii) by VA-6LP if there has been a breach
by PrimeCoPCS at any time before the Closing of any representation,
warranty, covenant or agreement contained in this Agreement that has had a
Company Material Adverse Effect that is not curable or, if curable, is not
cured within 60 calendar days after written notice of such breach is given
by VA-6LP to PrimeCoPCS or if assurances of cure reasonably acceptable to
VA-6LP are not provided in such period;
(iv) by VA-6LP or PrimeCoPCS upon notice
given to the other if the Closing shall not have taken place on or before
12:01 a.m. New York, New York time on October 2, 2000; provided that such
date shall be extended until the date which is seven months from the date
of this Agreement if as of 12:01 a.m. New York, New York time on October 2,
2000, the Bell/GTE Merger shall have occurred but the FCC shall not have
issued an order granting or denying such application; and provided further
that the right to terminate this Agreement under this Section 7.1(a)(iv)
shall not be available to the party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such date;
(v) by VA-6LP or PrimeCoPCS upon notice
given to the other if any Governmental Authority (i) shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree
or ruling or to take any other action, as applicable, and such denial of a
request to issue such order, decree, ruling or take such other action shall
have become final and nonappealable, in the case of each of (i) and (ii)
which is necessary to fulfill the conditions set forth in Article V;
provided, however, that the right to terminate this Agreement under this
-------- -------
Section 7.1(a)(v) shall not be available to any party whose
60
<PAGE>
failure to comply with any of Sections 4.3.1, 4.3.2, 4.3.3, 4.3.4, 4.3.5 or
4.3.7 has been the cause of such action or inaction; or
(vi) by PrimeCoPCS upon notice given to VA-
6LP if the DOJ advises PrimeCoPCS or its Affiliate in writing that the DOJ
does not approve VA-6LP as the transferee of the Company Interest on the
terms and conditions set forth in this Agreement; or by VA-6LP upon notice
given to PrimeCoPCS if such disapproval has occurred and either (x)
PrimeCoPCS and its Affiliates have exhausted all rights of appeal from such
disapproval without such disapproval having been reversed or retracted, or
(y) PrimeCoPCS has notified VA-6LP in writing that it does not intend to
contest or appeal such disapproval, or (z) the Closing shall not have taken
place on or before 12:01 a.m. New York, New York time on October 2, 2000.
(b) In the event of the termination of this Agreement
as provided in Section 7.1(a), this Agreement shall forthwith become wholly
void and of no further force and effect (except as set forth in this
Section, Section 4.3.5 and Section 7.2). Notwithstanding the foregoing,
nothing herein shall relieve a party from liability for any breach of the
representations, warranties, covenants or agreements set forth in this
Agreement where such breach has independently caused Losses to the other
party hereto. In the event that this Agreement is terminated pursuant to
Section 7.1(a)(iv) hereof solely because the condition set forth in Section
5.2.5 shall not have been satisfied, then PrimeCoPCS shall promptly pay to
VA-6LP a termination fee of $15,000,000 in cash.
7.2 Expenses. Except as otherwise provided in this Agreement,
--------
PrimeCoPCS and VA-6LP shall share equally the filing fees associated with
making all requisite applications with the FCC (and the State Commissions,
if any) for consent to the transactions contemplated by this Agreement, but
shall pay their own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
7.3 Tax Administration; Mutual Assistance. With respect to
-------------------------------------
Property Taxes, the owner of the property on the lien date, and with
respect to other Taxes, the Party that is liable for such Taxes under
Section 6.1(a)(v) or 6.2(a)(v) (the "Liable Party"), shall be responsible f
------------
or (i) administering the payment of, and filing Tax Returns with respect
to, such Taxes (ii) defending or pursuing any proceedings related thereto,
and (iii) paying any expenses related thereto. The Party other than the
Liable Party (the "Other Party") shall give prompt written notice to the
-----------
Liable Party of any examination or audit of the transactions contemplated
by this Agreement by any Governmental Authority with respect to any such
Taxes and of any proposed adjustment or assessment of any such Taxes. In
any proceedings, whether formal or informal, the Other Party shall permit
the Liable Party to participate and control the defense of such proceeding,
and shall take all actions and execute all documents required to allow such
participation. With respect to Property Taxes, the Liable Party shall not
negotiate a settlement or compromise of any such Property Taxes without the
written consent of the Other Party, which consent shall not be unreasonably
withheld. The parties shall provide each other such assistance as may
reasonably be requested by either of them in connection with the above
responsibilities and shall, upon request, provide each other with any
relevant records or information as are in their possession or subject to
their control. If, after the Closing Date, the Company or VA-6LP or any of
its Affiliates receives a refund of Taxes relating to Taxes described in
Section 6.1(a)(v) (excluding any refund reflected as an asset in computing
the Company Closing Date Net Working Capital), VA-6LP shall immediately
pay, or cause the Company to pay, to PrimeCoPCS the amount of such refund.
If, after the Closing Date, PrimeCoPCS or any of its Affiliates receives a
refund of Taxes relating to Taxes described in Section 6.2(a)(v) (excluding
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<PAGE>
any refund reflected as an asset in computing the VA-6 Closing Date Net
Working Capital), PrimeCoPCS shall immediately pay to VA-6LP the amount of
such refund. The amount of any refund payable under this Section 7.3 shall
be reduced by the amount of any federal or state income Tax required to be
paid by the recipient as a result of the receipt of such refund (including
any amount payable pursuant to this sentence).
7.4 Further Assurances. PrimeCoPCS and VA-6LP shall from time to
------------------
time after the Closing Date, at the request of the other party, execute,
acknowledge and deliver to such other party such other instruments of
conveyance and transfer or assumption and will take such other actions and
execute and deliver such other documents, certifications and further
assurances as such other party may reasonably require in order to vest more
effectively in VA-6LP, or to put VA-6LP more fully in possession of, the
Company Interest to be transferred to it pursuant to the provisions of this
Agreement. To the extent that the PrimeCoPCS has not obtained any Company
Consent at the Closing, the PrimeCoPCS, at its expense, shall continue to
use all commercially reasonable efforts to obtain all such Company
Consents. The provisions of the preceding sentence shall survive for 18
months following the Closing Date. Each of the parties hereto will
cooperate with the other and execute and deliver to the other party such
other instruments and documents and take such other actions as may be
reasonably requested from time to time by such other party as necessary to
carry out, evidence and confirm the intended purposes of this Agreement.
Each of the parties will cause their respective Affiliates to comply with
this Section to the extent necessary or desirable to fulfill the purposes
thereof.
7.5 Additional Post Closing Confidentiality Undertakings. From
----------------------------------------------------
and after the Closing Date, PrimeCoPCS shall not use or take any action
whatsoever which would result in disclosure to any third party of any
information about the Company Businesses, provided that PrimeCoPCS shall
not be required to maintain confidential any information which: (a) is
known or available to the public prior to the date hereof or becomes known
or available to the public after the date hereof through no fault of
PrimeCoPCS; (b) is obtained from a third party which had the right to
disclose such information; (c) is subsequently disclosed or made public by
VA-6LP or any of its Affiliates, or a Governmental Authority; or (d) is
disclosable pursuant to a Requirement of Law.
7.6 Contents of Agreement. This Agreement and the other
---------------------
Transaction Documents, including their respective Schedules and Exhibits,
which are specifically incorporated herein, sets forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes any and all previous agreements and
understandings, oral or written, between or among the parties regarding the
transactions contemplated hereby. This Agreement shall not be amended or
modified except by written instrument duly executed by each of the parties
hereto.
7.7 Assignment and Binding Effect. (a) This Agreement may not be
-----------------------------
assigned prior to the Closing by PrimeCoPCS or by VA-6LP without the prior
written consent of the other; provided, that notwithstanding anything to
the contrary herein (a) a party shall have the right to assign all
62
<PAGE>
or any portion of this Agreement to an Affiliate, provided that such party
shall remain liable for any failure of such assignee to perform, and (b)
subject to Section 4.3.3, PrimeCoPCS may transfer the entire Company
Interest (or all or substantially all of the assets of the Company) and
assign this Agreement to a DOJ Trust. In the event that PrimeCoPCS assigns
this Agreement to a DOJ Trust: (i) if the Closing does not occur and
PrimeCoPCS would have been entitled to terminate this Agreement pursuant to
any of clauses (ii), (iv), (v) or (vi) of Section 7.1(a), then this
Agreement will be deemed to have been so terminated by PrimeCoPCS; and (ii)
if PrimeCoPCS would not have been entitled to terminate this Agreement
pursuant to any of clauses (ii), (iv), (v) or (vi) of Section 7.1(a) and
the DOJ Trust sells the Company Interest (or all or substantially all of
the Company's assets) to a Person other than VA-6LP or an Affiliate of VA-
6LP, then PrimeCoPCS shall promptly pay VA-6LP a termination fee of
$15,000,000 in cash and shall have no further liability or obligation to
VA-6LP under this Agreement or any other Transaction Documents. VA-6LP
agrees that if at any time after a DOJ Trust Event it receives from the DOJ
Trust any asset to which VA-6LP is not entitled under the terms of this
Agreement or under any other agreement between (x) PrimeCoPCS or an
Affiliate of PrimeCoPCS and (y) VA-6LP or an Affiliate of VA-6LP, VA-6LP
shall promptly after such receipt remit or transfer (without interest) such
asset to PrimeCoPCS. Nothing contained herein shall be deemed to limit or
restrict in any manner the distribution to PrimeCoPCS of property held by
the DOJ Trust, including this Agreement and the rights and obligations
arising hereunder, upon termination of the DOJ Trust. Any purported
assignment in violation of this Section shall be void.
7.8 Waiver. No waiver of any term or provision of this
------
Agreement shall be effective unless in writing, signed by the party against
whom enforcement of the same is sought. The grant of a waiver in one
instance does not constitute a continuing waiver in all similar instances.
No failure to exercise, and no delay in exercising, by any party, any
right, remedy, power or privilege hereunder shall operate as a waiver
thereof.
7.9 Notices. Any notice, request, demand, waiver, consent,
-------
approval or other communication which is required or permitted hereunder
shall be in writing and shall be deemed given only if delivered personally
or sent by registered or certified mail or by Federal Express or other
overnight mail service, postage prepaid, or by telefacsimile, with written
confirmation to follow, as follows:
If to PrimeCoPCS, to:
PrimeCo PCS, L.P.
c/o Bell Atlantic Corporation
1717 Arch Street, 29th Floor
Philadelphia, PA 19103
Attention: Stephen E. Smith
Facsimile Number: (215) 557-7249
63
<PAGE>
With a required copy to:
Bell Atlantic Corporation
1717 Arch Street, 32nd Floor
Philadelphia, PA 19103
Attention: Stephen B. Heimann, Esquire
Facsimile Number: (215) 963-9195
If to VA-6LP, to:
Virginia RSA 6 Cellular Limited Partnership
c/o CFW Communications Company
401 Spring Lane, Suite 300
Waynesboro, VA 22980
Attention: Warren Catlett
Facsimile Number: (540) 956-3595
With a required copy to:
Hunton & Williams
600 Peachtree Street, NE
Suite 4100
Atlanta, GA 30308
Attention: David Carter, Esquire
Facsimile Number: (404) 888-4190
or to such other address or facsimile numbers as the addressee may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, demand, waiver, consent, approval or other communication will be deemed
to have been given as of the date so delivered or, if such date is not a
Business Day, on the next Business Day.
7.10 Remedies. Notwithstanding the provisions of Section 6.7, the parties
--------
acknowledge and agree that the Company Interest is unique and that, prior to
Closing, remedies at law, including monetary damages, will be inadequate in the
event of a breach by PrimeCoPCS or VA-6LP, respectively, in the performance of
its obligations under this Agreement. Accordingly, the parties agree that in the
event of any such breach, prior to Closing, the non-breaching party shall be
entitled to a decree of specific performance pursuant to which the breaching
party is ordered to affirmatively carry out its pre-closing obligations under
this Agreement. The foregoing shall not be deemed to be or construed as a waiver
or election of remedies by the non-breaching party and the non-breaching party
expressly reserves any and all rights and remedies available to it at law or in
equity in the event of any breach or default by the breaching party under this
Agreement prior to Closing.
7.11 Knowledge. "Knowledge" or "knowledge" when used with respect to any
--------- --------- ---------
party or its Affiliates means the actual knowledge of the applicable individuals
listed in Schedule
--------
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7.11(a) or successors to their positions, after due inquiry with the individuals
- -------
listed in Schedule 7.11(b).
----------------
7.12 Applicable Law; Consent to Jurisdiction. This Agreement shall be
---------------------------------------
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to such State's laws and principles regarding the conflict
of laws. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in connection with any dispute that arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in the State of Delaware or a Delaware state court unless venue would not be
proper under rules applicable in such courts.
7.13 No Benefit to Others. The representations, warranties, covenants and
--------------------
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Article VI hereof, the other indemnified parties, and
their heirs, executors, administrators, legal representatives, successors and
assigns, and they shall not be construed as conferring any rights on any other
Persons.
7.14 Headings. All section headings contained in this Agreement are for
--------
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement.
7.15 Severability. Any provision of this Agreement which is invalid or
------------
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
7.16 Counterparts. This Agreement may be executed in any number of
------------
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by all of the parties. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
[Remainder of page intentionally blank]
65
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Exchange Agreement on the date first written above.
PRIMECO PCS, L.P.
By: /Michael J. Polosky/
--------------------------
Name: Michael J. Polosky
Title: President & CEO
VIRGINIA RSA 6 CELLULAR LIMITED PARTNERSHIP
By: /James S. Quarforth/
--------------------------
Name: James S. Quarforth
Title: CEO, CFW Communications Company,
General Partner
<PAGE>
GUARANTY BY PRIMECO PERSONAL COMMUNICATIONS, L.P.
-------------------------------------------------
PrimeCo Personal Communications, L.P. ("PrimeCo") hereby unconditionally
and absolutely guarantees the performance and observance by PrimeCoPCS of each
and every obligation, covenant and agreement of PrimeCoPCS contained in the
foregoing Asset Exchange Agreement between PrimeCo PCS, L.P. and Virginia RSA 6
Cellular Limited Partnership or any Transaction Document and any extension,
renewal or modification thereof. The obligation of PrimeCo pursuant to this
Guaranty is a continuing guaranty and shall remain in effect, and the
obligations of PrimeCo shall not be affected, modified or impaired upon the
happening from time to time of any of the following events, whether or not with
notice or consent of PrimeCo:
(a) the compromise, settlement, release change,
modification or amendment (except to the extent of such compromise, settlement,
release change, modification or amendment) of any or all of the obligations,
duties, covenants or agreements under any Transaction Document; or
(b) the extension of the time for performance or
payment of money pursuant to this Agreement, or of the time for performance of
any other obligations, covenants or agreements under or arising out of any
Transaction Document the extension, renewal or modification hereof or thereof.
PrimeCo hereby represents and warrants that (i) it has the requisite
power, authority and legal right to execute, deliver and perform this Guaranty;
(ii) the execution, delivery and performance by PrimeCo of this Guaranty have
been duly authorized by all necessary action on the part of PrimeCo; (iii) this
Guaranty has been duly executed and delivered by PrimeCo and constitutes the
legal, valid and binding obligation of PrimeCo, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy laws and other similar laws affecting creditors' rights generally,
and except that the remedy of specific performance and injunctive relief and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
The provisions of this Guaranty shall be binding on PrimeCo and its
successors. If PrimeCo transfers in any manner (including by distribution to its
partners) more than 50% of its assets in a single transaction or a series of
transactions other than transactions in which PrimeCo receives fair
consideration for such assets, then PrimeCo shall substitute as guarantor
hereunder an entity with equal or greater credit quality than PrimeCo. The
determination of whether such substitute guarantor is of equal or greater credit
quality than PrimeCo shall be subject to confirmation by VA-6LP, which shall not
be unreasonably withheld.
Terms used in this Guaranty and not otherwise defined shall have the
meanings given to them in the foregoing Asset Exchange Agreement.
PRIMECO PERSONAL COMMUNICATIONS, L.P.
By: /L.C. McAdam/
------------------------
Name: Lowell C. McAdam
Title: President & CEO
<PAGE>
GUARANTY BY CFW COMMUNICATIONS COMPANY
--------------------------------------
CFW Communications Company ("CFW") hereby unconditionally and absolutely
guarantees the performance and observance by VA-6LP of each and every
obligation, covenant and agreement of VA-6LP contained in the foregoing Asset
Exchange Agreement between PrimeCo PCS, L.P. and Virginia RSA 6 Cellular Limited
Partnership or any Transaction Document and any extension, renewal or
modification thereof. The obligation of CFW pursuant to this Guaranty is a
continuing guaranty and shall remain in effect, and the obligations of CFW shall
not be affected, modified or impaired upon the happening from time to time of
any of the following events, whether or not with notice or consent of CFW:
(a) the compromise, settlement, release change, modification or
amendment (except to the extent of such compromise, settlement, release change,
modification or amendment) of any or all of the obligations, duties, covenants
or agreements under any Transaction Document; or
(b) the extension of the time for performance or payment of
money pursuant to this Agreement, or of the time for performance of any other
obligations, covenants or agreements under or arising out of any Transaction
Document the extension, renewal or modification hereof or thereof.
CFW hereby represents and warrants that (i) it has the requisite
power, authority and legal right to execute, deliver and perform this Guaranty;
(ii) the execution, delivery and performance by CFW of this Guaranty have been
duly authorized by all necessary action on the part of CFW; (iii) this Guaranty
has been duly executed and delivered by CFW and constitutes the legal, valid and
binding obligation of CFW, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy laws and other
similar laws affecting creditors' rights generally, and except that the remedy
of specific performance and injunctive relief and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
The provisions of this Guaranty shall be binding on CFW, its
successors, and any transferee of substantially all of its assets.
Terms used in this guaranty and not otherwise defined shall have the
meanings given to them in the foregoing Asset Exchange Agreement.
CFW COMMUNICATIONS COMPANY
By: /James S. Quarforth/
---------------------------
Name: James S. Quarforth
Title: President & CEO
<PAGE>
EXHIBIT A
To Asset Exchange Agreement dated as of May 17, 2000
COMPANY BTAS
------------
BTA/Market Band
- ---------- ----
BTA 374 - Richmond - Petersburg B
(except for Brunswick and
Mecklenburg Counties)
BTA 324 - Norfolk - Virginia Beach B
<PAGE>
Exhibit 10.3
______________________________________________________________________________
STOCK PURCHASE AGREEMENT
among
TELEGATE, INC.
TELEGATE AG
CFW COMMUNICATIONS COMPANY
and
CFW INFORMATION SERVICES INC.
______________________________________________________________________________
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of May 17,
2000 among Telegate, Inc., a Delaware corporation ("Buyer"), Telegate AG, a
Federal Republic of Germany corporation ("Telegate"), CFW Communications
Company, a Virginia corporation ("Seller") and CFW Information Services Inc., a
Virginia corporation (the "Company").
PREAMBLE:
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to
sell to Buyer all of the outstanding capital stock of the Company on the terms
and conditions set forth herein; and
WHEREAS, the Board of Directors of Seller has (i) determined that the
sale of the outstanding capital stock of the Company is fair to the shareholders
of Seller common stock and is in the best interests of such shareholders and
(ii) approved and adopted this Agreement and the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms shall have the following meanings for the
-----------
purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, (1) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(2) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
its equity securities of the specified Person or a Person described in clause
(1) of this paragraph, (3) another Person of which the specified Person is a
director, officer or partner or is, directly or indirectly, the beneficial owner
of ten percent (10%) or more of any class of equity securities, or (4) any
relative or spouse of the specified Person or any of the foregoing Persons.
"Agreement" shall mean the Stock Purchase Agreement, together with the
Exhibits and Schedules attached hereto, as the same may be amended from time to
time.
"AT&T Directory Assistance Agreement" means the agreement dated
February 25, 2000, between AT&T Corporation and Seller for Seller and the
Company to provide directory assistance services to AT&T, including the Letter
of Authorization providing that AT&T will pay Seller to make certain upgrades to
the network of the Company, all as amended.
<PAGE>
"AT&T Reimbursement Amount" has the meaning set forth in Section
5.16(b) hereof.
"Audit" means any audit, assessment of Taxes, reassessment of Taxes,
or other examination by any taxing authority or any judicial or administrative
proceedings or appeal of such proceedings.
"Base Date Net Working Capital" shall mean the negative amount of
$41,383, which is an amount equivalent to cash and cash equivalents, accounts
receivable (excluding Tax refunds), and prepaid expenses minus accounts payable,
accrued payroll and other accrued liabilities (excluding accrued Taxes) on the
books of the Company as of December 31, 1999, as set forth on Exhibit A hereto.
"Benefit Plans" has the meaning set forth in Section 3.15(b) hereof.
"Business Day" means any day of the year other than (i) any Saturday
or Sunday or (ii) any other day on which commercial banks located in New York
City are generally closed for business.
"Buyer" shall mean Telegate, Inc., a Delaware corporation.
"Buyer Confidential Information" means all confidential information
concerning Buyer or its Affiliates, excluding any information which Seller can
demonstrate (1) was previously known by Seller without any obligation to hold it
in confidence; (2) was received from a third party free to disclose such
information without restriction; (3) was independently developed by Seller
without the use of Buyer Confidential Information; (4) was approved for release
by written authorization of Buyer, but only to the extent of such authorization;
(5) is required by law or regulation to be disclosed, but only to the extent and
for the purposes of such required disclosure; (6) is disclosed in response to a
valid order of a court or other governmental body of the United States or any
political subdivision thereof, but only to the extent of and for the purposes of
such order, and only if Seller first notifies Buyer of the order to permit Buyer
to seek an appropriate protection order; or (7) is or becomes available to the
public through no breach of this Agreement.
"Buyer Savings Plan" has the meaning set forth in Section 5.13(b)
hereof.
"Call Centers Lease Agreements" means those agreements to be entered
into between Seller and the Company in the form of Exhibits B, C, D and E
hereto.
"Cash Consideration" shall have the meaning set forth in Section
2.2(a).
"Closing" means the consummation of the transactions contemplated
herein.
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Closing Date Net Working Capital" shall mean an amount equivalent to
cash and cash equivalents, accounts receivable (excluding Tax refunds), and
prepaid expenses minus accounts payable, accrued payroll and other accrued
liabilities (excluding accrued Taxes) on the
2
<PAGE>
books of the Company as of the Closing Date, as determined in accordance with
Section 2.3 of this Agreement.
"Closing Date Statement" shall mean a statement of the Closing Date
Net Working Capital prepared consistent with the statement of Base Date Net
Working Capital set forth on Exhibit A and in accordance with GAAP.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended or (as appropriate in the context used) any predecessor statute.
"Company" shall mean CFW Information Services Inc., a Virginia
corporation.
"Company Employees" has the meaning set forth in Section 5.13(b)
hereof.
"Company Shares" means the 10 shares of common stock, $0 par value per
share, of the Company.
"Computer System" means all computer hardware and software and related
materials used by Company in its business.
"Consent" has the meaning set forth in Section 3.3(a).
"Consideration" has the meaning set forth in Section 2.2.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Delivery Price" has the meaning set forth in Section 2.2(b) hereof.
"Directory Assistance Agreement" means that agreement to be entered
into between Seller and the Company in the form of Exhibit F hereto.
"Directory Assistance Business" shall mean the directory assistance
services that each of the Seller and the Company provide, or are contractually
obligated to provide, as of the Closing Date.
"Dollars" or numbers preceded by the symbol "$" means amounts in
United States Dollars.
"Environmental Law" shall mean any Law which relates to or otherwise
imposes liability or standards of conduct concerning discharges, emissions,
releases or threatened releases of noises, odors or any pollutants, contaminants
or hazardous or toxic wastes, substances or materials, whether as matter or
energy, into ambient air, water, or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants, or
hazardous or toxic wastes, substances or materials, including the Comprehensive
Environmental Response, Compensation and Liability
3
<PAGE>
Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Toxic Substances Control Act of 1976, as amended, the Federal Water
Pollution Control Act Amendments of 1972, the Clean Water Act of 1977, any
so-called "Superfund" or "Superlien Law" including those already referred to in
this definition, as amended, and any other Law of any Governmental Authority
having a similar subject matter in effect as of the Execution Date.
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, each
corporation, trade or business that is, along with such Person, part of the same
controlled group of corporations, trades or businesses under common control
within the meaning of sections 414(b) or (c) of the Code.
"Escrow Agreement" means that agreement to be entered into between
Seller and Buyer in the form of Exhibit G hereto.
"Escrowed Amount" has the meaning set forth in Section 5.16(b) hereof.
"Execution Date" means the date this Agreement is signed by the
parties hereto.
"Final Price" has the meaning set forth in Section 2.2(b) hereof.
"Financial Statements" shall have the meaning set forth in Section 3.5
hereof.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States of America at the time of the preparation of the
subject financial statements.
"Gibson Employment Agreement" shall mean the agreement between David
L. Gibson and the Company dated the date hereof and attached as Exhibit H
hereto.
"Governmental Authority" means the government of the United States or
the Federal Republic of Germany or any state or political subdivision thereof
and any entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hazardous Substance" means any material or substance which, as of the
Execution Date (i) constitutes a hazardous substance, toxic substance or
pollutant (as such terms are defined by or pursuant to any applicable
Environmental Law) or (ii) is regulated or controlled as a hazardous substance,
toxic substance, pollutant or other regulated or controlled material, substance
or matter pursuant to any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
4
<PAGE>
"Income Tax" means any tax based on or measured by net income.
"Income Tax Return" means any Tax Return of or relating to any Income
Tax.
"Indemnified Person" means the Person or Persons entitled to, or
claiming a right to, indemnification pursuant to this Agreement.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification pursuant to this
Agreement.
"Intellectual Property" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations, applications,
licenses or rights relating to any of the foregoing), technology, trade secrets,
inventions, know-how, designs, computer programs, processes, formulas and all
other intangible assets, properties and rights.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, or imposed by any Governmental
Authority.
"Leased Property" means all real property and interests in real
property leased by the Company.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet
due and payable), charge, restriction, pledge, security interest, option, lease
or sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Loss" or "Losses" means any and all liabilities, losses, costs,
claims, damages, penalties and expenses (including attorneys' fees and expenses
and costs of investigation and litigation). In the event any of the foregoing
are indemnifiable hereunder, the terms "Loss" and "Losses" shall include any and
all attorneys' fees and expenses and costs of investigation and litigation
incurred by the Indemnified Person in enforcing such indemnity. Without
limitation, "Loss" and "Losses" shall include fees and disbursements of counsel
incurred by any Indemnified Party in an action or proceeding between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party or otherwise.
"LSSI" has the meaning set forth in Section 3.6(b) hereof.
"Major Customers" has the meaning set forth in Section 3.23(a) hereof.
"Major Suppliers" has the meaning set forth in Section 3.23(b) hereof.
"Material Adverse Change" means a change in the business, assets,
liabilities, cash flows or financial condition of the Company or the Directory
Assistance Business which is materially adverse to the Company; provided,
however, that for purposes of determining whether there shall have been any such
Material Adverse Change, there shall be disregarded (i) any adverse change
resulting from or relating to general business or economic conditions, (ii) any
adverse change resulting from or relating to conditions generally affecting the
industry in which the Company competes, and (iii) any adverse change resulting
from or relating to the disclosure
5
<PAGE>
of the transactions contemplated hereby to any of the Company's or Seller's
customers or suppliers, provided, however, that any adverse change resulting
from or relating to the disclosure of the transactions contemplated hereby to
AT&T Corp. shall not be disregarded for purposes of determining whether there
shall have been any such Material Adverse Change.
"Material Adverse Effect" means an effect on the business, assets,
liabilities, cash flows, or financial condition of the Company or the Directory
Assistance Business which is materially adverse to the Company; provided,
however, that for purposes of determining whether there shall have been any such
Material Adverse Effect, there shall be disregarded (i) any adverse effect
resulting from or relating to general business or economic conditions, (ii) any
adverse effect resulting from or relating to conditions generally affecting the
industry in which the Company competes, and (iii) any adverse effect resulting
from or relating to the disclosure of the transactions contemplated hereby to
any of the Company's or Seller's customers or suppliers, provided, however, that
any adverse effect resulting from or relating to the disclosure of the
transactions contemplated hereby to AT&T Corp. shall not be disregarded for
purposes of determining whether there shall have been any such Material Adverse
Effect.
"NCO" shall mean the NCO Group, Inc.
"Owned Property" means all real property and interests in real
property owned in fee by the Company.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity, including
a government or government department, agency or instrumentality.
"Post-Closing Short Year" has the meaning set forth in Section 5.12(b)
hereof.
"Pre-Closing Short Year" has the meaning set forth in Section 5.12(b)
hereof.
"Providing Party" has the meaning set forth in Section 5.12 hereof.
"Referee" shall have the meaning set forth in Section 2.3(b) hereof.
"Related Agreement" means any Contract which is to be entered into at
the Closing or otherwise pursuant to this Agreement, including, without
limitation, (i) the Directory Assistance Agreement, (ii) the Call Centers Lease
Agreements, (iii) the Telecommunications Services and Collocation Lease
Agreement, (iv) the Transitional Services Agreement, (v) the Escrow Agreement,
(vi) the Stock Escrow Agreement; (vii) the Gibson Employment Agreement, (viii)
the Bill of Sale, and (ix) the Assignment and Assumption Agreement. The Related
Agreements executed by a specified Person shall be referred to as "such Person's
Related Agreements," "its Related Agreements" or another similar expression.
"Requesting Party" has the meaning set forth in Section 5.12 hereof.
"Section 338(h)(10) Election" has the meaning set forth in Section
5.12(g) hereof.
"Section 338(h)(10) Election Form" has the meaning set forth in
Section 5.12(g)
6
<PAGE>
hereof.
"Seller" shall mean CFW Communications Company, a Virginia
corporation.
"Seller Confidential Information" means all confidential information
concerning the Seller or its Affiliates, excluding any information which Buyer
can demonstrate (1) was previously known by Buyer without any obligation to hold
it in confidence; (2) was received from a third party free to disclose such
information without restriction; (3) was independently developed by Buyer
without the use of Seller Confidential Information; (4) was approved for release
by written authorization of Seller, but only to the extent of such
authorization; (5) is required by law or regulation to be disclosed, but only to
the extent and for the purposes of such required disclosure; (6) is disclosed in
response to a valid order of a court or other governmental body of the United
States or the Federal Republic of Germany or any political subdivision thereof,
but only to the extent of and for the purposes of such order, and only if Buyer
first notifies Seller of the order to permit Seller to seek an appropriate
protection order; or (7) is or becomes available to the public through no breach
of this Agreement.
"Seller Directory Assistance Assets" means those (a) trade receivables
due from customers for directory assistance services provided including billed
and unbilled amounts, (b) other receivables due to Seller from third parties
relating to directory assistance activities, (c) inventory of Seller's directory
assistance equipment and supplies, (d) prepayments to Seller for services or
other purchases relating to directory assistance operations, and (e) equipment
and assets used exclusively in connection with the Directory Assistance Business
and contractual rights arising out of, in any way connected with, or related to
the Directory Assistance Business, including but not limited to the AT&T
Directory Assistance Agreement and equipment and other assets purchased by
Seller in connection therewith, but excluding such switching and transmission
equipment as will be leased to the Company pursuant to, and as set forth in, the
Telecommunications Services and Collocation Lease Agreement.
"Seller Directory Assistance Liabilities" means, those trade payables,
equipment leases, software licenses, and related contractual obligations of the
Seller arising directly out of the Directory Assistance Business, in each case,
as of the Closing Date.
"Seller Pension Plan" shall have the meaning set forth in Section
5.13(b) hereof.
"Seller Savings Plan" has the meaning set forth in Section 5.13(b)
hereof.
"Special Service Period" has the meaning set forth in Section 5.13(c)
hereof.
"Stock Consideration" shall have the meaning set forth in Section
2.2(b).
"Stock Escrow" has the meaning set forth in Section 2.2(b) hereof.
"Stock Escrow Agreement" has the meaning set forth in Section 2.2(b)
hereof.
"Subsidiaries" means any Person more than 50% of the voting power of
which is controlled by another Person.
7
<PAGE>
"Tax Indemnified Party" has the meaning set forth in Section 10.10(b)
hereof.
"Tax Indemnifying Party" has the meaning set forth in Section 10.10(b)
hereof.
"Tax Indemnity" has the meaning set forth in Section 10.10(a) hereof.
"Tax Loss" has the meaning set forth in Section 10.10(b) hereof.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments which are imposed by any Governmental Authority, including any
interest, penalties and additions to tax attributable thereto. "Tax" means any
of such Taxes.
"Tax Return" means any report, return or other information (including
schedules, attachments and disclosures) required to be supplied to a
Governmental Authority in connection with any Taxes.
"Telecommunications Services and Collocation Lease Agreement" has the
meaning set forth in Section 5.21 hereof.
"Telegate Reports" has the meaning set forth in Section 4.8 hereof.
"Telegate Shares" shall mean shares of common stock of Telegate AG
traded on the Neuer Markt of the Frankfurt Stock Exchange.
"Telegate Shares Closing Value" shall mean the product of the sum of
the closing price of shares of the common stock of Telegate AG on the Neuer
Markt of the Frankfurt Stock Exchange for each of the last twenty (20) trading
days that the Neuer Markt of the Frankfurt Stock Exchange is open preceding the
date that is two days preceding the Closing Date, divided by twenty (20); such
amount to be converted to equivalent dollar value based upon the mid-range
exchange rate between euros and dollars as quoted at 4:00 p.m. Eastern Time in
New York on the date that is two days preceding the Closing Date, as published
in the Wall Street Journal on the date that is the day before the Closing Date.
"Transitional Services Agreement" means that agreement to be entered
into between Seller and Company in the form of Exhibit I hereto.
"Transition Services Period" means the one hundred twenty (120) days
after the Closing Date, unless further extended by the mutual agreement of
Seller and Buyer.
8
<PAGE>
ARTICLE II
SALE AND PURCHASE OF SHARES
2.1. Sale and Purchase. Upon the terms and subject to the conditions of
-----------------
this Agreement, on the Closing Date Seller hereby agrees to sell to Buyer the
Company Shares, which Company Shares in the aggregate represent 100% of the
issued and outstanding shares of capital stock of the Company, free and clear of
all Liens, and Buyer hereby agrees to purchase all such Company Shares for an
aggregate purchase price of $35,500,000, subject to adjustment as set forth in
Section 2.3.
2.2. Payment of Purchase Price. In consideration for the Company Shares,
-------------------------
Buyer, at Closing, will:
(a) pay in cash to Seller Thirty-Two Million and No/100s Dollars
($32,000,000) (the "Cash Consideration"); and
(b) convey (or cause Telegate to convey at Buyer's direction) to
Seller such number of Telegate Shares as are equal to Three Million Five Hundred
Thousand (3,500,000) divided by the Telegate Shares Closing Value (the "Stock
Consideration") (such Stock Consideration, along with the Cash Consideration to
be paid pursuant to subsection (a) shall be referred to as the "Consideration");
provided, however, that if Buyer or Telegate does not convey such Stock
Consideration to Seller at the Closing, then Buyer shall place into an escrow
account, pursuant to the terms of an escrow agreement (the "Stock Escrow
Agreement") to be entered into at Closing, the sum of US $3,500,000 (the "Stock
Escrow"). The Stock Escrow Agreement shall provide that:
(i) if the Stock Consideration is delivered by Buyer or Telegate
to Seller on or before the 180th day following Closing, the Stock
Escrow (plus interest thereon) shall be paid to Buyer upon delivery of
such Stock Consideration to Seller; provided, however, that if the
closing price of the Telegate Shares as reported on the Neuer Markt of
the Frankfurt Stock Exchange on the date that is two days before the
date of such delivery (the "Delivery Price") is less than the Telegate
Shares Closing Value (without conversion to equivalent dollar value),
the Stock Consideration shall be adjusted to equal the number of
Telegate Shares equal to 3,500,000 divided by the Delivery Price
(prior to dividing 3,500,000, the Delivery Price shall be first
converted to equivalent dollar value based upon the mid-range exchange
rate between euros and dollars as quoted at 4:00 p.m. Eastern Time in
New York on the date that is two days preceding such delivery, as
published in the Wall Street Journal on the date that is the date
before delivery of the Stock Consideration);
(ii) if the Stock Consideration is not delivered by Buyer or
Telegate to Seller on or before the 180th day following Closing, the
Stock Escrow (plus interest thereon) shall be paid to Seller; and
9
<PAGE>
(iii) all expenses of the escrow agent shall be the sole
responsibility of Buyer and Telegate.
The Cash Consideration shall be paid to Seller on the Closing Date by
means of wire transfer of immediately available funds to a bank account as
designated by Seller to Buyer no later than the third Business Day prior to the
Closing Date. The Stock Consideration shall be paid by delivery of certificates
duly endorsed in the name of the Seller.
2.3. Purchase Price Adjustment.
-------------------------
(a) The Consideration is subject to adjustment, upward or downward,
based upon the difference between Base Date Net Working Capital and Closing Date
Net Working Capital; provided, however, that there shall be no adjustment unless
and until the difference between Base Date Net Working Capital and Closing Date
Net Working Capital first exceeds $1,000,000, in which event the Consideration
shall be adjusted for any such difference exceeding $1,000,000, on the basis of
one dollar in adjustment, upward or downward, for every two dollars in
difference between Base Date Net Working Capital and Closing Date Net Working
Capital. Within five (5) Business Days after the Closing Date Net Working
Capital is finally determined in accordance with Section 2.3(b), and subject to
the preceding sentence, (i) if Closing Date Net Working Capital is less than
Base Date Net Working Capital, Seller shall pay to Buyer in cash by wire
transfer of immediately available funds the amount by which Closing Date Net
Working Capital is less than Base Date Net Working Capital or (ii) if Closing
Date Net Working Capital is more than Base Date Net Working Capital, Buyer shall
pay to Seller in cash by wire transfer of immediately available funds the amount
that Closing Date Net Working Capital is more than Base Date Net Working
Capital.
(b) In order to confirm the Closing Date Net Working Capital, Seller
and McGladrey & Pullen, LLP, Seller's independent public accounts, shall prepare
and deliver to Buyer the Closing Date Statement, along with a review report with
respect thereto as promptly as practicable after the Closing Date, but in any
event within thirty (30) days of the Closing Date.
Buyer and its independent public accountants, PriceWaterhouseCoopers,
LLP, shall be entitled to review McGladrey & Pullen, LLP's workpapers within
thirty (30) days after receipt by Buyer of the Closing Date Statement. If Buyer
shall have any objections to such draft Closing Date Statement, it will deliver
a detailed statement describing its objections to Seller within forty (40) days
after receipt thereof. Seller and Buyer will use their reasonable best efforts
to resolve any such objections. If a final resolution is not obtained within
ten (10) days after Seller has received the statement of objections, Buyer and
Seller will select an accounting firm mutually acceptable to them to resolve any
remaining objections. If Buyer and Seller are unable to agree on the choice of
an accounting firm, they will select a "Big 5" firm (the "Referee") by lot after
excluding PriceWaterhouseCoopers, LLP. The Referee will be engaged to render
within thirty (30) days from the date of such engagement an opinion regarding
the issue or issues in dispute and such opinion (absent manifest error) shall be
binding on the parties hereto. Seller will revise the draft Closing Date
Statement, as appropriate, to reflect the resolution of all objections (as
agreed upon by the parties or directed by such Referee) and deliver them to
Buyer within five (5) days after the resolution of such objections. Such
revised statement shall constitute the "Closing Date Statement."
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(c) Buyer shall pay the fees and expenses of PriceWaterhouseCoopers,
LLP incurred in connection with this Section 2.3 and Seller shall pay the fees
and expenses of McGladrey & Pullen, LLP. Buyer and Seller shall each pay one
half of the fees and expenses of the Referee, if any.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1. Due Incorporation. The Seller and the Company each is duly organized,
-----------------
validly existing and in good standing under the laws of their respective
jurisdictions of organization, with all requisite corporate powers and authority
to own, lease and operate their respective properties and to carry on their
respective businesses as they are now being owned, leased, operated and
conducted. Except where the failure to be so qualified would not have a Material
Adverse Effect on the business or properties of the Company (separately or in
combination with other such failures), the Company is not required to be
licensed or qualified to do business as a foreign corporation in any
jurisdiction. True, correct and complete copies of the Articles of Incorporation
and Bylaws, as amended, and excerpts of all minutes of meetings (or written
consents in lieu of meetings) of the Board of Directors (and all committees
thereof) and stockholders of the Company with respect to all material actions
taken or discussed by the Board of Directors and stockholders of the Company
have been made available to Buyer. Except as set forth on Schedule 3.1, all
------------
material actions taken by the Board of Directors and stockholders of the Company
are reflected in such minutes and consents. Except as set forth on Schedule 3.1,
------------
the Company does not have any direct or indirect subsidiaries, either wholly or
partially owned, and does not hold any direct or indirect economic, voting or
management interest in any Person or directly or indirectly own any security
issued by any Person, except that as of Closing the Company shall own 2,500,000
shares of LSSI in accordance with Section 5.18 hereof.
3.2. Due Authorization. The Seller and the Company have full power and
-----------------
authority to enter into this Agreement and the Related Agreements to which each
is a party and to consummate the transactions contemplated hereby and thereby.
The Seller and the Company have duly and validly executed and delivered this
Agreement and each of them has duly and validly executed and delivered (or prior
to or at the Closing will duly and validly execute and deliver) their respective
Related Agreements. This Agreement constitutes legal, valid and binding
obligations of the Seller and the Company and each Related Agreement upon
execution and delivery by the parties signatory thereto will constitute legal,
valid and binding obligations of the signatories thereof, in each case,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies.
11
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3.3. Consents and Approvals; Authority Relative to this Agreement.
------------------------------------------------------------
(a) Except as set forth on Schedule 3.3(a) and filings required under
---------------
the HSR Act, no consent, permit, authorization or approval of, filing or
registration with, or cooperation from, any Governmental Authority or any other
Person not a party to this Agreement (individually and collectively a "Consent")
is necessary in connection with the execution, delivery and performance by the
Seller and the Company of this Agreement, the Related Agreements or the
consummation of the transactions contemplated hereby or thereby.
(b) Except as set forth on Schedule 3.3(b), the execution, delivery
---------------
and performance by Seller and the Company of this Agreement and their respective
Related Agreements does not and will not, and the consummation of the
transactions contemplated hereby and thereby does not and will not, (i) violate
any Law applicable to the Company or the Seller; (ii) violate or conflict with,
result in a breach or termination of, constitute a default or give any third
party any additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon any of the assets or
properties of the Company or Seller's Directory Assistance Assets under, or
result in or constitute a circumstance which, with or without notice or lapse of
time or both, would constitute any of the foregoing under, (x) any Contract to
which the Company is a party or by which the Company or any of its assets or
properties are bound, or (y) any Contract to which the Seller is a party or by
which the Seller or any of its assets or properties are bound, but only to the
extent such Contract arises from or is related to the Directory Assistance
Business or is included in the Seller's Directory Assistance Assets or Seller's
Directory Assistance Liabilities; (iii) permit the acceleration of the maturity
of any (x) indebtedness of the Company or indebtedness secured by its assets or
properties, or (y) any indebtedness of Seller, but only to the extent such
indebtedness arises from or is related to the Directory Assistance Business, or
indebtedness secured by Seller's assets or properties, but only to the extent
such assets or properties are included in the Seller's Directory Assistance
Assets; or (iv) violate or conflict with any provision of any of the articles of
incorporation, charters, bylaws or similar organizational instruments of each of
the Seller or the Company, except as would not have a Material Adverse Effect.
3.4. Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 25,000
shares of common stock, $0 par value per share, 10 shares of which are currently
issued and outstanding. All of the Company Shares (i) are validly issued, fully
paid and non-assessable and (ii) are, and when issued were, free of preemptive
rights. Seller owns, or as of the Closing will own, (legally and beneficially)
all of the Company Shares, free and clear of any and all Liens. No shares of
capital stock of the Company are currently reserved for issuance for any purpose
or upon the occurrence of any event or condition.
(b) There are no shares of capital stock or other securities (whether
or not such securities have voting rights) of the Company issued or outstanding
or any subscriptions, options, warrants, calls, rights, convertible securities
or other agreements or commitments of any character obligating, or obligating
either or any of Seller, the Company or any of their Affiliates to issue,
transfer or sell, or cause the issuance, transfer or sale of, any shares of
capital stock or other securities (whether or not such securities have voting
rights) of the Company. There are no
12
<PAGE>
outstanding contractual obligations of either Seller or the Company which relate
to the purchase, sale, issuance, repurchase, redemption, acquisition, transfer,
disposition, holding or voting of any shares of capital stock or other
securities of the Company. Except for Seller's rights as a holder of the Company
Shares, no Person has any right to participate in, or receive any payment based
on any amount relating to, the revenue, income, value or net worth of the
Company or any component or portion thereof, or any increase or decrease in any
of the foregoing.
(c) The assignments, endorsements, stock powers and other instruments
of transfer delivered by Seller to Buyer at the Closing will be sufficient to
transfer such Seller's entire interest, legal and beneficial, in the Company
Shares. Seller has, and on the Closing Date will have, full power and authority
to convey good title to all of the Company Shares, and upon transfer to Buyer of
the certificates representing such Company Shares, Buyer will receive good title
to such Company Shares, free and clear of all Liens.
3.5. Financial Statements. Attached hereto as Exhibit J is a copy of (a)
--------------------
the unaudited balance sheet and statement of income of the Company for each of
the fiscal years ended December 31, 1998 and December 31, 1999, respectively;
and (b) the audited financial statements of the Seller for the twelve months
ended December 31, 1999, including the balance sheet, statement of income and
statement of the shareholders' equity and statement of cash flows, and the notes
thereto, accompanied by the report of McGladrey & Pullen, LLP, independent
certified public accountants (collectively, the "Financial Statements"). Except
as set forth on Schedule 3.5, the Financial Statements present fairly in all
------------
material respects the financial position, assets (including without limitation
cash on hand and accounts receivable), liabilities (including without limitation
accounts payable), results of operations, and changes in financial position of
the Company or the Seller, as the case may be, as of the respective dates and
for the respective periods indicated, reflect in all material respects all
necessary accruals required by GAAP, and have been prepared in all material
respects in accordance with GAAP consistently applied.
3.5. No Adverse Effects or Changes. Except as set forth on Schedule 3.5,
----------------------------- ------------
since December 31, 1999 and until the Execution Date, the Company has conducted
its business and operations in all respects only in the ordinary course and
consistent with past practices. Without limiting the foregoing, except as set
forth on Schedule 3.5, since December 31, 1999 and until the Execution Date, the
------------
Company, and the Seller in connection with the Directory Assistance Business,
have not:
(a) suffered any Material Adverse Change;
(b) suffered any material damage, destruction or Loss to any of its
assets or properties (whether or not covered by insurance);
(c) incurred any obligation or entered into any Contract which either
(i) required a payment by any party in excess of, or a series of payments which
in the aggregate exceed, $50,000 or provides for the delivery of goods or
performance of services, or any combination thereof, having a value in excess of
$50,000, or (ii) has a term of, or requires the performance of any obligations
by the Company over a period in excess of, six months and is not terminable
within 90 (ninety) days without payment of a termination fee or similar payment
in
13
<PAGE>
excess of $25,000;
(d) taken any action or entered into or authorized any Contract or
transaction other than in the ordinary course of business and consistent with
past practice;
(e) sold, transferred, conveyed, assigned or otherwise disposed of any
of its assets or properties, except sales of inventory in the ordinary course of
business and consistent with past practice;
(f) waived, released or canceled any claims against third parties for
debts owing to it for amounts in excess of $25,000, or any rights which have a
value in excess of $25,000;
(g) made any material changes in its accounting systems, policies,
principles, or practices;
(h) entered into, authorized or permitted any transaction with Seller
or any Affiliate of Seller;
(i) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the issuance or granting of
options, warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise) any shares of its capital stock
or any other securities, or amended any of the terms of any such securities;
(j) split, combined, or reclassified any shares of its capital stock,
declared, set aside or paid any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeemed or otherwise acquired any of its securities.
(k) made any borrowing, incurred any debt (other than trade payables
in the ordinary course of business and consistent with past practice), or
assumed, guaranteed, endorsed (except for the negotiation or collection of
negotiable instruments in transactions in the ordinary course of business and
consistent with past practice) or otherwise become liable (whether directly,
contingently or otherwise) for the obligations of any other Person, or made any
payment or repayment in respect of any indebtedness (other than trade payables
and accrued expenses in the ordinary course of business and consistent with past
practice);
(l) made any loans, advances or capital contributions to, or
investments in, any other Person;
(m) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans, funds
or other arrangements for the benefit or welfare of any director, officer,
consultant or employee, or increased in any manner the compensation or fringe
benefits of any director, officer, consultant or employee or paid any benefit
not required by any existing plan and arrangement or entered into any contract,
agreement, commitment or
14
<PAGE>
arrangement to do any of the foregoing;
(n) except for capital expenditures contemplated by clause (o),
acquired, leased or encumbered any assets outside the ordinary course of
business or any assets which are material to the Company;
(o) authorized or made any capital expenditures which individually or
in the aggregate are in excess of $50,000;
(p) made any Tax election (other than routine elections made on Tax
Returns filed in the ordinary course of business consistent with past practice
that will not, in the aggregate have a Material Adverse Effect on the taxable
income or loss of the Company for any taxable year ending after the Closing
Date) or settled or compromised any federal, state, local or foreign Tax
liability, or waived or extended the statute of limitations in respect of any
such Taxes, or filed a ruling request or a request for change of accounting
method with any Governmental Authority;
(q) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits or
claims of liability against the Company or any of their respective directors,
officers, employees or agents;
(r) terminated or materially modified, amended or otherwise altered or
changed any of the terms or provisions of any Contract, or paid any amount in
excess of $25,000 not required by Law or by any Contract;
(s) agreed, whether orally or in writing to do any of the foregoing;
or
(t) written up any accounts receivable or other asset previously
written down or written off.
3.6. Properties.
----------
(a) Except as set forth on Schedule 3.7, the Company has good and
------------
valid record title to, and is the lawful owner of, all of the tangible and
intangible assets, properties and rights used in connection with its business
and all of the tangible and intangible assets, properties and rights reflected
in the Financial Statements or Schedule 3.8 or 3.9 (other than assets leased
------------ ---
under the leases set forth in Schedule 3.8 or 3.9 and assets disposed of in the
------------ ---
ordinary course of business since the date of the Financial Statements), free
and clear of any Lien. As of the Execution Date, to the extent any assets
listed on Schedule 3.6 are held by Seller, Seller has good and valid record
------------
title to, and is the lawful owner of, all such tangible and intangible assets,
properties and rights, free and clear of any Lien.
(b) As of the Closing, the Company will have good and valid record
title to, and be the lawful owner of, 2,500,000 shares of the common stock of
Listing Services Solutions, Inc. ("LSSI") (such number of LSSI shares to be
adjusted to reflect any stock split, stock dividend, merger, or similar
transaction to which LSSI is a party between December 31, 1999 and the Closing
Date), free and clear of any Lien.
15
<PAGE>
3.7. Condition and Sufficiency of Assets. All of the tangible assets and
-----------------------------------
properties of the Company with a value over $10,000, whether real or personal,
owned or leased, are free from defects other than normal wear and tear in the
ordinary course of business and such non-material defects as do not interfere
with the intended use thereof in the conduct of normal operations.
Immediately after the Closing, the Company shall own or have a contractual
right to use all the assets, properties, rights, know how, key personnel,
processes and ability which are required for or currently used in connection
with the operation of its businesses as it is currently conducted. Such assets,
properties and rights, except for changes in the ordinary course of business
together with the Seller Directory Assistance Assets, were sufficient to produce
the income of the Company for the twelve (12) month period ended December 31,
1999 as shown on the Financial Statements.
3.8. Real Property.
-------------
(a) Schedule 3.9(a) sets forth a complete list of all real property
---------------
owned or leased by the Company. As of the Execution Date, the Company or Seller
has good, valid and marketable title to the real property listed on Schedule
--------
3.9(a) as respectively owned by Company or Seller. As of the Closing Date (but
- ------
not as of the Execution Date), the Company has or will have valid and subsisting
leasehold estates in the real property listed on Schedule 3.9(a), free and clear
---------------
of all Liens, except (i) such as are set forth in Schedule 3.9(a), (ii)
---------------
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business that individually or in the
aggregate would not have a Material Adverse Effect, and (iii) other immaterial
imperfections of title or encumbrances, if any, which, individually or in the
aggregate would not have a Material Adverse Effect. The properties set forth on
Schedule 3.8(a) constitute all the land held or used by the Company in the
- ---------------
conduct of its business.
(b) The activities carried on in all buildings, plants, facilities,
installations, fixtures and other structures or improvements included as part
of, or located on any property owned, leased or occupied by the Company, and the
buildings, plants, facilities, installations, fixtures and other structures or
improvements on such properties are not in violation of, or in conflict with,
any applicable zoning, environmental or health regulations or ordinance or any
other similar Law that individually or in the aggregate would have a Material
Adverse Effect. Except as set forth on Schedule 3.9(b), no asbestos, asbestos-
---------------
containing materials, PCB compounds or other pollutants, contaminants or
Hazardous Substances have been used in, on, or are otherwise located on, any
property owned, leased, or occupied by the Company.
(c) None of the properties owned, leased, or occupied by the Company
relies on or regularly makes use of access to the nearest public road or right-
of-way over land owned by others, except where such access is by means of one or
more valid recorded easements. All covenants or other restrictions (if any) to
which any of such properties is subject are being in all respects properly
performed and observed and neither Seller nor the Company has received any
notice of violation (or claimed violation) thereof.
(d) Except as set forth on Schedule 3.9(d), to the knowledge of Seller
---------------
and Company, there is no pending, threatened or proposed proceeding or
governmental action to modify the zoning classification of, or to condemn or
take by the power of eminent domain (or to
16
<PAGE>
purchase in lieu thereof), or to classify as a landmark, or to impose special
assessments on, or otherwise to take or restrict in any way the right to use,
develop or alter, all or any of the properties owned, leased, or occupied by the
Company.
(e) As of the Closing Date (but not as of the Execution Date), all of
the leases for property occupied by the Company are in full force and effect,
valid and enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies.
3.9. Personal Property. Schedule 3.9 sets forth a true, accurate and
----------------- ------------
complete list of all of the tangible personal property used by the Company in
its business having a present book value of $20,000 or more, other than items
acquired by the Company in the ordinary course of business from the date hereof
through the Closing Date. Schedule 3.9 also sets forth a true, accurate and
------------
complete list of all leases of personal property binding upon the Company or any
of the respective assets or properties obligating the Company to pay in excess
of $10,000 annually or exceeding one year. All of such tangible personal
property is presently utilized by the Company in the ordinary course of
business. Seller has made available to Buyer true, accurate and complete copies
of all such personal property leases.
3.10. Accounts Receivable and Advances. Except as set forth on Schedule
-------------------------------- --------
3.10, each of the accounts receivable of the Company or of the Seller arising
- ----
from the Directory Assistance Business represents (a) a sale made in the
ordinary course of business and which arose pursuant to an enforceable written
or oral Contract for a bona fide sale of goods or for services performed, and
the Company has performed all of its obligations to produce the goods or perform
the services to which such account receivable relates, and (b) except as
adequately reserved against in the balance sheet included in the Financial
Statements, amounts owed which are not more than one hundred twenty (120) days
past due and which are not subject to any claim or reduction, counterclaim, set-
off, recoupment or other claim for credit, allowances or adjustments by the
obligor owing such amount, and each of which, together with each miscellaneous
receivable to be included in the Closing Date Statement, is collectible in full
within one hundred twenty (120) days of their origination. No advance is subject
to any claim for reduction, counterclaim, set-off, recoupment or other claim for
credit, allowances or adjustments by the obligor thereof, and, except as
reserved against in the Financial Statements, all advances are collectible in
full within one hundred twenty (120) days of their origination.
3.11. Intellectual Property. To the knowledge of Seller and the Company,
---------------------
the products and services produced and sold by the Company do not infringe any
Intellectual Property right of another Person. The Company possesses adequate
rights in and to all Intellectual Property necessary to conduct its business as
presently conducted.
3.12. Contracts. Schedule 3.13(a) sets forth a true, accurate and complete
--------- ----------------
list of all Contracts and arrangements of the following types to which either
(i) the Company or (ii) Seller (to the extent arising from the Directory
Assistance Business) is a party or by which any of them is bound, or to which
any of their respective assets or properties is subject:
17
<PAGE>
(a) any Contract which involves the future payment or receipt of (i)
cash (ii) other property, (iii) an unperformed commitment, or (iv) goods or
services, in each case having a value in excess of $25,000;
(b) any collective bargaining agreement;
(c) any Contract with any employee, officer or director of the Company
or any respective Affiliates of such individuals or any Contract with Seller or
any affiliate of Seller (other than those contemplated to be entered into
pursuant to this Agreement and those set forth on Schedule 3.14 and Schedule
------------- --------
3.15);
- ----
(d) any Contract with a sales representative, sales agency,
advertising agency or other Person engaged in sales, or promotional activities,
or any Contract to act as one of the foregoing on behalf of any Person;
(e) any Contract or arrangement pursuant to which the Company has made
or will make loans or advances, or has or will have incurred debts or become a
guarantor or surety or pledged its credit on or otherwise become responsible
with respect to any undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course of
business);
(f) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of personal property, loan commitment or other
Contract or arrangement relating to the borrowing of funds, an extension of
credit or financing;
(g) any Contract or arrangement involving a partnership, joint venture
or other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business of
the Company;
(i) any power of attorney or agency agreement or arrangement with any
Person pursuant to which such Person is granted the authority to act for or on
behalf of the Company, or the Company is granted the authority to act for or on
behalf of any Person;
(j) any Contract relating to the Computer System;
(k) any Contract for which the full performance thereof may extend
beyond one hundred twenty (120) days from the Execution Date and is not
terminable within ninety (90) days without payment of a termination fee or
similar payment in excess of $25,000;
(l) any Contract not made in the ordinary course of business which is
to be performed in whole or in part at or after the Execution Date;
(m) any Contract, whether or not fully performed, relating to any
acquisition or disposition of the Company or any predecessor in interest of it,
or any acquisition or disposition of any subsidiary, division, line of business,
or real property of the Company; and
18
<PAGE>
(n) any Contract not specified above that is material to the Company.
Except as set forth on Schedule 3.13(b), Seller has made available to Buyer
----------------
true, accurate and complete copies of each document set forth on Schedule
--------
3.13(a) and a written description of each oral arrangement so listed. Except as
- -------
set forth on Schedule 3.13(c), all such Contracts to which Seller or the Company
----------------
is a party have been entered into by it in the ordinary course of business and
are on terms that are no less favorable to Seller or the Company than the terms
which could be obtained from an unrelated third party. All such Contracts to
which Seller or the Company is a party are in full force and effect and neither
the Company nor Seller has terminated or received notice of termination with
respect to such contracts.
3.13. Insurance.
---------
(a) Seller has heretofore made available to Buyer a true, accurate
and complete copy of all policies of fire, liability, workmen's compensation,
title and other forms of insurance owned, held by or applicable to the Company
(and its business and assets) for the three (3) years preceding the Execution
Date. All such policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the Closing Date have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for compliance with (i)
all requirements of Law, (ii) all Contracts to which the Company is a party, and
(iii) all Contracts related to the Directory Assistance Business to which Seller
is a party, and are valid, outstanding and enforceable policies.
(b) For the three (3) years preceding the Execution Date, neither
Seller nor the Company has been refused any insurance with respect to the assets
or operations of the Company, and coverage has not been limited by any insurance
carrier to which the Company or Seller has applied for any such insurance or
with which the Company or Seller has carried insurance. There are no pending
claims which have been made by the Company under any workmen's compensation,
general liability, property or other insurance policy applicable to the Company
or any of their respective properties.
3.14. Employee Benefit Plans and Employment Agreements.
------------------------------------------------
(a) General. Except as set forth on Schedule 3.15, neither the
------- -------------
Company nor any ERISA Affiliate of the Company is a party to or participates in
or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension
benefit plan" as those terms are respectively defined in sections 3(1)
and 3(2) of ERISA, including a "multi-employer plan" (as defined in
section 3(37) of ERISA),
(ii) any other plan, agreement, commitment, program or policy
including, without limitation, any retirement or deferred compensation
plan, incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, sick pay, bonus or
benefit arrangement, insurance or hospitalization program or any other
material fringe benefit arrangement offered
19
<PAGE>
to, contributed to, or required to be contributed to or for the
benefit of any current or former employee, director, consultant or
agent, whether pursuant to contract, arrangement, custom or informal
understanding, whether oral or written, which does not constitute an
"employee benefit plan" (as defined in section 3(3) of ERISA), or
(iii) any employment agreement to which the Company is a party.
(b) Plan Documents and Reports. A true, accurate and complete copy of
--------------------------
each of the plans, arrangements, and agreements set forth on Schedule 3.15
-------------
(collectively, the "Benefit Plans"), and all Contracts relating thereto, or to
the funding thereof, including all trust agreements, insurance contracts,
administration contracts, investment management agreements, subscription and
participation agreements, and record keeping agreements, each as in effect on
the date hereof, has been made available to Buyer. In the case of any Benefit
Plan which is not in written form, a true, accurate and complete description of
such Benefit Plan, as in effect on the date hereof has been made available to
Buyer. A true, accurate and complete copy of (i) all summary plan descriptions
relating to the Benefit Plans; (ii) actuarial and financial reports prepared
with respect to the Benefit Plans during the past three years; (iii) all United
States and other governmental filing relating to the Benefit Plans for the last
three years including, but not limited to, annual reports, excise tax returns,
and events reportable to the Pension Benefit Guaranty Corporation; (iv) all
rulings and the most recent determination letter, all requests for ruling or
determination letters and all correspondence associated with requests for ruling
and determination letters relating to the Plans; (v) all records concerning
Internal Revenue Service ("IRS") and/or Department of Labor ("DOL") audits or
any other internal or external audits of the Benefit Plans; (vi) all union
contracts relating to the Benefit Plans; and (vii) written summaries of each
oral Benefit Plan have been made available to the Buyer.
(c) Compliance with Laws; Liabilities. As to all Benefit Plans, except
---------------------------------
as set forth on Schedule 3.15:
-------------
(i) All Benefit Plans comply and have been administered in form
and in operation in all material respects with all requirements of Law
applicable thereto, and there has been no notice issued by any
Governmental Authority questioning or challenging such compliance.
(ii) All Benefit Plans that are employee pension benefit plans
(as defined in section 3(2) of ERISA) comply in form and in operation
with all applicable requirements of sections 401(a) and 501(a) of the
Code and there have been no corrections, whether self-corrections or
corrections instigated or addressed by the IRS or DOL, of any
violations of such sections; and there have been no amendments to such
Benefit Plan and no other event has occurred which will or could give
rise to disqualification of any such Benefit Plan under such sections
or to a tax under section 419A or 511 of the Code.
(iii) None of the assets of any Benefit Plan is invested in
employer securities or employer real estate.
20
<PAGE>
(iv) There have been no "prohibited transactions" (which shall
mean any transaction in violation of section 406 of ERISA and not
exempt under section 408 of ERISA or defined in Section 4975(c)(1) of
the Internal Revenue Code and not exempt under Section 4975(d)) with
respect to any Benefit Plan.
(v) There has been no act or omission which has given rise to
or to the knowledge of Seller and the Company may give rise to fines,
penalties, taxes, or related charges under sections 502(c), 502(i),
502(l) or 4071 of ERISA or Chapters 43, 47 or 68 of the Code for which
either the Company or any ERISA Affiliate of the Company may be
liable.
(vi) None of the payments for any employee contemplated by the
Benefit Plans would, in the aggregate, constitute excess parachute
payments as defined in Section 280G of the Code.
(vii) There are no actions, suits or claims (other than routine
claims for benefits) pending or to the knowledge of Seller and the
Company threatened involving such Benefit Plans or the assets thereof,
and to the Seller's and the Company's knowledge no facts exist which
could give rise to any such actions, suits, or claims (other than
routine claims for benefits).
(viii) No Benefit Plan is subject to Title IV of ERISA and the
Company does not have any existing, threatened, contingent, assessed
or unassessed liability with respect to any plan that is or has been
subject to Title IV of ERISA.
(ix) Each Benefit Plan which constitutes a "group health plan"
(as defined in section 607(1) of ERISA or section 4980B(g)(2) of the
Code), including any Benefit Plans of current and former affiliates
which must be taken into account under section 4980B and 414(t) of the
Code or section 601 of ERISA, has been operated in compliance with
applicable law in all material respects, including the group health
plan continuation coverage requirements of section 4980B of the Code
and section 601 of ERISA to the extent such requirements are
applicable.
(x) The Seller, Company and any ERISA Affiliate do not receive
services from any individuals who are leased employees within the
meaning of Code Section 414(n) and to the knowledge of Seller and the
Company, none of the persons performing services for Seller, the
Company or any ERISA Affiliate has been improperly classified as an
independent contractor or a leased employee, or as being exempt from
the payment of wages for overtime, other than such improper
classifications which, in the aggregate, would not have a Material
Adverse Effect.
(xi) The Company has no liability or contingent liability under
any Benefit Plan or otherwise for providing post-retirement medical or
life insurance
21
<PAGE>
benefits, other than statutory liability for providing group health
plan continuation coverage under Part 6 of Title I of ERISA and
section 4980B (or any predecessor section thereto) of the Code.
(xii) None of the Benefit Plans that are employee pension
benefit plans maintained by Seller which is a defined benefit plan has
incurred any "accumulated funding deficiency" for which an excise tax
is due; no such Plan has receive a waiver of accumulated funding
deficiency under Section 412 of the Internal Revenue Code; and no
employer reversion within the meaning of Section 4980 of the Internal
Revenue Code has occurred with respect to any such Plan. The funding
method used in connection with any defined benefit pension Plan
maintained by Seller is acceptable under ERISA, and the actuarial
assumptions used in connection with funding any such plan, in the
aggregate, are reasonable.
(xiii) No welfare benefit fund maintained by Seller, Company or
an ERISA Affiliate that is a Benefit Plan has provided any
disqualified benefit within the meaning of Section 4976 of the
Internal Revenue Code for which a material excise tax would be
imposed.
(xiv) All contributions due with respect to any Benefit Plan,
whether qualified or non-qualified, for any plan year or portion
thereof ending on or before the Closing Date shall have been accrued
or contributed to the respective plan funding vehicles.
(xv) Neither the Company nor any ERISA Affiliate of the Company
contributes to or has any liability or contingent liability to any
"multi-employer plan" (as defined in section 3(37) of ERISA).
3.15. Employment and Labor Matters.
----------------------------
(a) Seller has made available to Buyer the name, title, and annual
compensation at the then current rate of the employees of the Company employed
as of February 22, 2000. To the knowledge of Seller and Company, the Company has
and currently is conducting its business in full compliance with all Laws
relating to employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination in employment.
(b) There has been no labor strike, dispute, slow-down, work stoppage
or other labor difficulty actually pending or, to the knowledge of Seller or
Company, threatened against or involving the Company and the relationships of
the Company with its employees are good. No grievance or arbitration proceeding
arising out of or under any collective bargaining agreement between the Company
and its employees is pending and, to the knowledge of Seller or Company, no
claim therefor has been asserted.
(c) Except as set forth in Schedule 3.15, none of the employees of the
-------------
Company is covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated, and, to the knowledge of
Seller, no attempt is currently being made
22
<PAGE>
to organize any employees of the Company to form or enter a labor union. Seller
has made available to Buyer a true, accurate and complete copy of any collective
bargaining agreement referenced in Schedule 3.15.
-------------
3.16. Capital Improvements. Schedule 3.16 sets forth a true, accurate and
-------------------- -------------
complete list of all of the capital improvements or purchases or other capital
expenditures in excess of $10,000 since December 31, 1999 to which the Company
has committed or for which they have contracted and which in any event have not
been completed prior to the Execution Date and the cost and expense reasonably
estimated to complete such work and purchases.
3.17. Taxes. Except as set forth in Schedule 3.18:
----- -------------
(a) All Tax Returns required to be filed by or with respect to the
Company through the Closing Date with respect to all Taxes have been or will be
accurately prepared, and have been or will be duly and timely filed, and all
Taxes with respect to any taxable period or partial taxable period of the
Company ending on or before the Closing Date have been or will be timely paid,
to the extent due and payable on or before the Closing Date, or to the extent
any such Taxes are not due and payable as of the Closing Date, adequate
provision for the payment thereof has been or will be made on the Financial
Statements or the books of account of the Company. The Company is not obligated
to file any state or local Tax Return for Income Tax, except in the Commonwealth
of Virginia.
(b) the Company has not been audited (either separately or as a
member of the affiliated group of which Seller is the parent) by any
Governmental Authority; (ii) the Company has not been a member of an affiliated
group (as defined in Section 1504(a) of the Code) or filed or been included in a
combined, consolidated or unitary income tax return other than the affiliated
group of which Seller is the parent; (iii) no material issue has been raised by
any Governmental Authority with respect to the Company in any audit or
examination which, by application of similar principles, could reasonably be
expected to result in a proposed material adjustment to the liability for Taxes
(other than Income Tax) for any period not so examined; (iv) the Company is not
liable for the Taxes of any taxpayer other than itself for any taxable period
beginning before the Closing Date, other than by virtue of Treas. Reg. (S)
1.1502-6 (or any similar provision of Virginia Tax law, as it may relate to
several liability for Income Tax owed by Seller and its affiliated
subsidiaries); (v) the Company is not obligated to make, and as a result of any
event connected with the transactions contemplated by this Agreement will not
become obligated to make, any "excess parachute payment" within the meaning of
Section 280G of the Code; (vi) the Company is not a party to any safe harbor
lease within the meaning of section 168(f)(8) of the Code, as in effect prior to
amendment by the Deficit Reduction Act of 1984; (vii) none of the assets of the
Company secures any debt the interest on which is tax exempt under Section 103
of the Code; (viii) the Company is not a party to an interest rate swap,
currency swap or other similar transaction; (ix) the Seller is not a "foreign
person" as defined in Section 1445(f)(3) of the Code; (x) the Company is not
required to disclose involvement in a "reportable transaction" as defined in
Treas. Reg. (S) 1.6011-4T; and (xi) the Company is not a party to any tax
sharing, tax allocation or similar agreement.
3.18. No Defaults or Violations. Except as set forth on Schedule 3.18:
------------------------- -------------
23
<PAGE>
(a) the Company has not breached any material provision of, nor is it
in default under the terms of, any Contract to which it is a party or under
which it has any rights or by which it is bound, and, to the knowledge of Seller
or the Company, no other party to any such Contract has breached any material
provision of such Contract or is in default thereunder;
(b) and except as set forth on Schedule 3.21, the Company, all of its
-------------
properties and assets and all of Seller's Directory Assistance Assets are in
material compliance with, and no violation exists under, any and all Laws
applicable to the Company and to such properties and assets; and
(c) no notice from any Governmental Authority has been received by the
Company or by the Seller with respect to the Seller's Directory Assistance
Assets claiming any violation of any Law (including any building, zoning or
other ordinance) or requiring any work, construction or expenditure.
3.19. Environmental Matters. Except as set forth on Schedule 3.19:
--------------------- -------------
(a) the business and operations of the Company are in compliance in
all material respects with all applicable Environmental Laws, and, to the
knowledge of Seller, no condition exists or event has occurred which, with or
without notice or the passage of time or both, would constitute a material
violation of, or give rise to any Lien under, any applicable Environmental Law;
(b) the Company is in possession of all Environmental Permits required
for the conduct or operation of its business (or any part thereof), and is in
compliance in all material respects with all of the requirements and limitations
included in such Environmental Permits;
(c) Seller and the Company have not used or stored any Hazardous
Substances in, on, or at any of the properties or facilities of the Company, and
Seller and the Company has not contracted for the use of Hazardous Substances in
the construction or repair of, or any alterations or additions to, any of the
properties or facilities owned, leased, or occupied by the Company;
(d) neither Seller or the Company has received any notice from any
Governmental Authority or any other Person that any aspect of the business,
operations or facilities of the Company is in violation of any Environmental Law
or Environmental Permit, or that any of them is responsible (or potentially
responsible) for the cleanup or remediation of any Hazardous Substance at any
location;
(e) the Company has not deposited or incorporated any Hazardous
Substances into, on, beneath, or adjacent to any property except as may be
permitted by law;
(f) the Company is not the subject of any pending or, to the knowledge
of Seller or the Company, threatened litigation or proceedings in any forum,
judicial or administrative, involving a demand for damages, injunctive relief,
penalties, or other potential liability with respect to violations of any
applicable Environmental Law;
24
<PAGE>
(g) the Company has timely filed all reports and notifications
required to be filed with respect to all of their properties and facilities and
has generated and maintained all required records and data under all applicable
Environmental Laws; and
(h) to the knowledge of Seller or the Company, no condition has
existed or event has occurred with respect to any property that was at any time
owned, leased, or occupied by the Company, which property has been sold,
transferred or disposed or for which the lease has terminated, that in any case
could, with or without notice, passage of time or both, give rise to any present
or future liability of the Company pursuant to any Environmental Law.
3.20. Litigation.
----------
(a) Except as set forth on Schedule 3.20, there are no actions, suits,
-------------
arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the knowledge of Seller or the
Company threatened against the Company or any of its respective officers,
directors, employees, agents or stockholders thereof in their capacity as such
or against any of the properties or businesses of the Company, and neither
Seller nor the Company is aware of any facts or circumstances for which there is
a reasonable possibility that such facts or circumstances could give rise to any
of the foregoing. The Company is not subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
Governmental Authority. The Company has not entered into any agreement to settle
or compromise any proceeding pending or threatened against it which has involved
any obligation other than the payment of money or for which the Company has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings or, to the
knowledge of Seller or the Company, investigations pending or threatened by or
against Seller or the Company with respect to this Agreement or the Related
Agreements, or in connection with the transactions contemplated hereby or
thereby, and Seller has no reason to believe there is a valid basis for any such
claim, action, suit, proceeding, or investigation.
3.22. Bank Accounts. The Company does not have an account or safe deposit
-------------
box at any bank or financial institution.
3.23. Customer and Suppliers.
----------------------
(a) Schedule 3.23 sets forth the five (5) largest customers of the
-------------
Company or the Directory Assistance Business, in terms of balances due during
the most recent completed month (collectively, the "Major Customers"); and
(b) Schedule 3.23 sets forth the ten (10) largest suppliers of the
-------------
Company or the Directory Assistance Business, in terms of purchases during the
most recently completed month (collectively, the "Major Suppliers").
Except as set forth on Schedule 3.23, there is no material dispute
-------------
between the Company or Seller and any Major Customer or Major Supplier, and, to
the knowledge of Seller and Company, no Major Customer or Major Supplier has
informed the Company or Seller of its intent to materially reduce its purchases
from, or sales to, respectively, the Company or Seller
25
<PAGE>
(with respect to the Directory Assistance Business).
3.24. No Other Agreement. Seller has no Contract or arrangement with
------------------
respect to the sale or other disposition of the Company Shares, except as set
forth in this Agreement.
3.25. Brokers. Neither Buyer nor any Affiliate of Buyer has or shall have
-------
any liability or otherwise suffer or incur any Loss as a result of or in
connection with any brokerage or finder's fee or other commission of any Person
retained by Seller or the Company in connection with any of the transactions
contemplated by this Agreement.
3.26 Due Diligence Materials. Seller has made available to Buyer or its
-----------------------
representatives, in accordance with the terms of Section 5.5, all documents
reasonably requested by Buyer in connection with its "due diligence"
investigation of the Company and the Directory Assistance Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND TELEGATE
Buyer and Telegate represent and warrant to Seller as follows:
4.1. Due Incorporation. Buyer is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of the State of Delaware, with all
requisite power and authority to own, lease and operate its properties and to
carry on its business as they are now being owned, leased, operated and
conducted. Telegate is a corporation duly organized under the laws of the
Federal Republic of Germany, with all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
owned, leased, operated and conducted.
4.2. Due Authorization. Buyer and Telegate have full power and authority
-----------------
to enter into this Agreement and the Related Agreements to which each is a party
and to consummate the transactions contemplated hereby and thereby. Buyer and
Telegate have duly and validly executed and delivered this Agreement and each of
them has duly and validly executed and delivered (or prior to or at the Closing
will duly and validly execute and deliver) their respective Related Agreements.
This Agreement constitutes legal, valid and binding obligations of Buyer and
Telegate and each Related Agreement upon execution and delivery by the parties
signatory thereto will constitute legal, valid and binding obligations of the
signatories thereof, in each case enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies.
4.3. Consents and Approvals; Authority Relative to This Agreement.
------------------------------------------------------------
(a) Except as set forth on Schedule
--- --------
(b) 4.3(a) and filings required under the HSR Act, no Consent is
---
necessary
26
<PAGE>
in connection with the execution, delivery and performance by Buyer and Telegate
of this Agreement, the Related Agreements or the consummation of the
transactions contemplated hereby and thereby.
(c) The execution, delivery and performance by Buyer and Telegate of
this Agreement and its Related Agreements do not and will not, and the
consummation of the transactions contemplated hereby and thereby does not and
will not, (i) violate any Law applicable to Buyer or Telegate or any of their
respective properties or assets; or (ii) violate or conflict with any provision
of the certificate of incorporation, charter, bylaws or similar organizational
instruments of Buyer or Telegate.
4.4. Investment Intent. Buyer is acquiring the Company Shares for its own
-----------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933 and regulations and rules issued pursuant to
that Act.
4.5. Telegate Common Stock. Upon consummation of the transactions
---------------------
contemplated hereby and the issuance and delivery of certificates representing
the Stock Consideration, as provided in this Agreement, the Stock Consideration
will be validly issued, fully paid, non-assessable shares. The Stock
Consideration to be delivered to Seller pursuant to Section 2.2 will be free of
any restrictions on transfer and will be tradable on the Neuer Market of the
Frankfurt Stock Exchange. The assignments, endorsements, stock powers and other
instruments of transfer delivered by Buyer or Telegate to Seller pursuant to
Section 2.2 will be sufficient to transfer Telegate's or Buyer's entire
interest, legal and beneficial, in the Stock Consideration. Telegate or Buyer
have, and on the Closing Date will have, full power and authority to convey good
title to all of the Stock Consideration, and upon transfer to Seller of the
certificates representing such Stock Consideration, Seller will receive good
title to such Stock Consideration, free and clear of all Liens.
4.6. Capitalization. The authorized capital stock of Telegate consists of
--------------
of 12,930,000 shares of common stock. As of December 31, 1999, 12,730,000 shares
of common stock were validly issued and outstanding.
4.7. Brokers. Neither Seller nor any Affiliate of Seller has or shall have
-------
have any liability or otherwise suffer or incur any Loss as a result of or in
connection with any brokerage or finder's fee or other commission of any Person
retained by Buyer or Telegate in connection with any of the transactions
contemplated by this Agreement.
4.8. Reports and Financial Statements. From December 31, 1998 to the date
--------------------------------
hereof, except where failure to have done so did not and would not have a
material adverse effect on Telegate, Telegate has filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with the Bundesaufsichtsamt fur den
Wertpapierhandel (German Securities and Exchange Commission) and the Deutsche
Borse AG, Frankfurt (Frankfurt Stock
27
<PAGE>
Exchange) (collectively, the "Telegate Reports"). As of their respective dates
(but taking into account any amendments filed prior to the date of this
Agreement), the Telegate Reports complied in all material respects with all the
rules and regulations promulgated by the Bundesaufsichtsamt fur den
Wertpapierhandel (German Securities and Exchange Commission) and the Deutsche
Borse AG, Frankfurt (Frankfurt Stock Exchange) and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS
5.1. Implementing Agreement. Subject to the terms and conditions hereof,
----------------------
each party hereto shall take all action required of it to fulfill its
obligations under the terms of this Agreement and shall otherwise use their best
efforts to facilitate the consummation of the transactions contemplated hereby.
Seller agrees that unless this Agreement is terminated in accordance with the
provisions of Section 9.1, Seller will not sell the Company Shares to any Person
other than Buyer (or an Affiliate of Buyer), and no party hereto will take any
action which would have the effect of preventing or disabling the performance of
its obligations under this Agreement.
5.2. Seller Directory Assistance Assets and Liabilities Conveyance and
-----------------------------------------------------------------
Assumption. Prior to the Closing, Seller shall assign, transfer or convey the
- ----------
Seller Directory Assistance Assets, including, but not limited to those listed
on Schedule 5.2, as may change in the ordinary course of business, and shall
------------
assign, transfer and convey the Seller Directory Assistance Liabilities,
including, but not limited to those listed on Schedule 5.2, as may change in the
------------
ordinary course of business, to the Company, pursuant to a Bill of Sale and
Assignment and Assumption Agreement in form reasonably acceptable to Buyer.
5.3. Company Assumption of Liability. Prior to the Closing, the Company
-------------------------------
shall assume those Seller Directory Assistance Liabilities assigned, transferred
or conveyed to the Company, including, but not limited to those listed on
Schedule 5.2, as may change in the ordinary course of business.
5.4. Forgiveness of Amounts Due by or to Company to or from Seller and its
---------------------------------------------------------------------
Affiliates. At or before Closing, the Seller and its Affiliates shall release
- ----------
the Company from all amounts due and payable at Closing or in the future (other
than pursuant to this Agreement or a Related Agreement) by the Company to Seller
or its Affiliates, and the Company shall release the Seller and its Affiliates
from all amounts due and payable at Closing or in the future (other than
pursuant to this Agreement or a Related Agreement) by Seller or its Affiliates
to the Company. Such releases, and the amounts forgiven thereunder, shall not be
considered in determining Base Date Net Working Capital and Closing Date Net
Working Capital for purposes of Section 2.3 hereof.
5.5. Access to Information and Facilities.
------------------------------------
(a) From and after the date of this Agreement or such earlier time as
Buyer and Seller shall have mutually agreed through the Closing Date, Seller
shall, and shall cause the Company to, give Buyer and Telegate and Buyer's and
Telegate's representatives and advisors reasonable access during normal business
hours to all of the facilities, properties, books,
28
<PAGE>
Contracts, commitments and records of Seller and the Company and shall make the
officers and employees of Seller and the Company available to Buyer and Telegate
and Buyer's and Telegate's representatives as Buyer and Telegate and Buyer's and
Telegate's representatives shall from time to time request. Buyer and Telegate
and Buyer's and Telegate's representatives will be furnished with any and all
information concerning the Seller or the Company which Buyer and Telegate and
Buyer's and Telegate's representatives reasonably request.
(b) Buyer will not, will cause its Affiliates not to, and will
instruct its and its Affiliates' agents and financing sources not to disclose
any Seller Confidential Information to any Person other than Buyer's employees,
agents and financing sources without the prior consent of the Seller, unless
compelled to disclose any such Seller Confidential Information by judicial or
administrative process or, in the opinion of Buyer's counsel, by other
requirements of law.
(c) From and after the date of this Agreement or such earlier time as
Buyer and Seller shall have mutually agreed through the Closing Date, Buyer
shall, and shall cause Telegate to, give Seller and Seller's representatives and
advisors reasonable access during normal business hours to all of the
facilities, properties, books, Contracts, commitments and records of Buyer and
Telegate and shall make the officers and employees of Buyer and Telegate
available to Seller and its representatives as Seller and its representatives
shall from time to time request.
(d) Seller will not, will cause its Affiliates not to, and will
instruct its and its Affiliates' agents and financing sources not to disclose
any Buyer Confidential Information to any Person other than Seller's or the
Company's employees, agents and financing sources without the prior consent of
Buyer, unless compelled to disclose any such Buyer Confidential Information by
judicial or administrative process or, in the opinion of Seller's counsel, by
other requirements of law.
5.6. Consents and Approvals.
----------------------
(a) As soon as practicable after the execution of this Agreement but
no later than five (5) business days following the Execution Date, Seller shall
use its best efforts, and shall cause the Company to use its best efforts, to
obtain all consents, approvals, certificates and other documents required in
connection with the performance by any such parties of this Agreement and their
respective Related Agreements and the consummation of the transactions
contemplated hereby and thereby, including all consents and approvals by each
party to any of the Contracts referred to in Schedule 3.13(a). As soon as
----------------
practicable after the execution of this Agreement, Seller shall, and shall cause
the Company to, make all filings, applications, statements and reports to all
Governmental Authorities and other Persons which are required to be made prior
to the Closing Date by or on behalf of Seller, the Company or any of their
respective Affiliates pursuant to any applicable Law or Contract in connection
with this Agreement or any Related Agreement and the transactions contemplated
hereby and thereby, including prompt filings under the HSR Act and expedited
submission of all materials required by any Governmental Authority in connection
with such filings.
(b) As soon as practicable after the execution of this Agreement, but
no later than five (5) business days following the Execution Date, Telegate
shall use its best efforts,
29
<PAGE>
and shall cause Buyer to use its best efforts, to obtain all consents,
approvals, certificates and other documents required in connection with the
performance by any such parties of this Agreement and their respective Related
Agreements and the consummation of the transactions contemplated hereby and
thereby. As soon as practicable after execution of this Agreement, Buyer shall
make all filings, applications, statements and reports to all Governmental
Authorities and other Persons which are required to be made prior to the Closing
Date by or on behalf of Buyer or any of its Affiliates pursuant to any
applicable Law in connection with this Agreement or any Related Agreement and
the transactions contemplated hereby and thereby, including prompt filings under
the HSR Act and expedited submission of all materials required by any
Governmental Authority in connection with such filings.
5.7. Resignation of Officers and Directors. Seller shall cause each
-------------------------------------
officer and member of the board of directors of the Company, but only if so
requested by Buyer, to tender his or her resignation from such position
effective as of the Closing. Seller hereby assumes all liability for and shall
make payment of all amounts payable arising out of the resignation or removal of
the officers and members of the board of directors of the Company called for in
this Section 5.7.
5.8. Preservation of Business.
------------------------
(a) Until the Closing, Seller shall cause the Company to incur and pay
expenses and otherwise operate only in the usual, regular and ordinary course
and in a manner consistent with past practice, and Seller shall use commercially
reasonable efforts to (i) preserve intact the present business organization and
personnel of the Company, (ii) preserve the good will and advantageous
relationships of the Company with customers, suppliers, independent contractors,
employees and other Persons material to the operation of its business, (iii)
prevent any event which could have a Material Adverse Effect, and (iv) not
permit any action or omission which would cause any of the representations or
warranties of Seller contained herein to become inaccurate or any of the
covenants of Seller to be breached.
(b) Without limiting the generality of clause (a), until the Closing,
except as set forth on Schedule 5.8, or as contemplated by this Agreement or any
------------
Related Agreement, or with the prior written consent of Buyer, Seller will not
permit the Company to:
(i) incur any obligation or enter into any Contract which
either (x) requires a payment by any party in excess of, or a series
of payments which in the aggregate exceed, $25,000 or provides for the
delivery of goods or performance of services, or any combination
thereof, having a value in excess of $25,000, or (y) has a term of, or
requires the performance of any obligations by the Company over a
period in excess of six months and is not terminable within ninety
(90) days without payment of a termination fee or similar payment in
excess of $25,000,
(ii) take any action, or enter into or authorize any Contract or
transaction, other than in the ordinary course of business and
consistent with past practice,
(iii) do any act or omit to do any act, or permit any act or
omission to
30
<PAGE>
act, which would cause a material breach of any of the Contracts set
forth on Schedule 3.13 or any other Contract or obligation the breach
-------------
of which could have a Material Adverse Effect,
(iv) sell, lease, abandon, transfer, convey, assign or
otherwise dispose of any of its assets or properties with a value in
excess of $25,000,
(v) suffer or permit the creation of any Lien over any of its
assets or properties other than in the ordinary course of business and
consistent with past practice,
(vi) waive, release or cancel any claims against third parties
or debts owing to it in excess of $25,000, or any rights which have a
value in excess of $25,000,
(vii) make any changes in its accounting systems, policies,
principles or practices,
(viii) enter into, authorize or permit any transaction with
Seller or any Affiliate of Seller,
(ix) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any
shares of capital stock or any other securities of the Company, or
amend any of the terms of any such capital stock or other securities,
(x) split, combine, or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any
capital stock or other securities of the Company,
(xi) make any borrowing, incur any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assume, guarantee, endorse (except for the negotiation
or collection of negotiable instruments in the ordinary course of
business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of
any other Person, or make any payment or repayment in respect of any
indebtedness (other than trade payables and accrued expenses in the
ordinary course of business and consistent with past practice),
(xii) make any loans, advances or capital contributions to, or
investments in, any other Person,
(xiii) enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension,
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retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer,
consultant or employee, or increase in any manner the compensation or
fringe benefits of any director, officer, consultant or employee or
pay any benefit not required by any existing plan and arrangement or
enter into any contract, agreement, commitment or arrangement to do
any of the foregoing, provided, however, that the Company shall use
its best efforts to obtain the agreement of the United Paperworkers
International Union Local 437 to such retirement benefits as may be
acceptable to Buyer, including an agreement that following the Closing
the Company shall not be obligated to provide for a retirement benefit
program in the form of a defined benefit retirement plan,
(xiv) enter into or amend any employment or severance agreement
which increases in any manner the salary, wages, bonus, commission, or
other compensation or benefits of any director or officer of the
Company,
(xv) increase in any manner the salary, wage, bonus,
commission or other compensation or benefits of any director or
officer of the Company,
(xvi) pay any benefit not required by any plan and arrangement
as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights or performance
units),
(xvii) except for capital expenditures contemplated by clause
(xviii), acquire, lease or encumber any assets outside the ordinary
course of business or any assets which are material to the Company,
(xviii) authorize or make any capital expenditures which
individually or in the aggregate are in excess of $50,000,
(xix) make any Tax election (other than routine elections made
on Tax Returns filed in the ordinary course of business consistent
with past practice that will not, in the aggregate, have a Material
Adverse Effect on the taxable income or loss of the Company for any
taxable year ending after the Closing Date), settle, compromise or
enter in any closing agreement with respect to any federal, state,
local or foreign income Tax liability, or waive or extend the statute
of limitations in respect of any such Taxes, or file with any
Governmental Authority a ruling request or a request for change of
accounting method,
(xx) pay any amount, perform any obligation or agree to pay
any amount or perform any obligation, in settlement or compromise of
any suits or claims of liability against the Company, or any of their
respective directors, officers, employees or agents,
(xxi) terminate, rescind, modify, amend or otherwise alter or
change any of the terms or provisions of any Contract, pay any amount
in excess of $25,000 not required by Law or by any Contract, or
reduce, discount, waive or forego any material payment or right
thereunder, or agree to any compromise or settlement
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<PAGE>
with respect thereto, or
(xxii) write up any accounts receivable or other asset
previously written down or written off except in accordance with GAAP.
(c) Without limiting the generality of clause (a), until the Closing,
except as set forth on Schedule 5.8, Seller shall cause the Company to:
------------
(i) maintain its books, accounts and records in the usual,
regular and ordinary manner, and on a basis consistent with the
Company's past practices,
(ii) continue to carry its existing insurance through the
Closing Date, and shall not allow any breach, default, termination or
cancellation of such insurance policies or agreements to occur or
exist, and
(iii) duly comply with all Laws applicable to their respective
businesses and operations.
5.9. Supplemental Information. From time to time prior to the Closing,
------------------------
Seller will promptly disclose in writing to Buyer any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement would have
been required to be disclosed to Buyer or which would render inaccurate any of
the representations, warranties or statements set forth in Article III hereof.
No information provided to Buyer pursuant to this Section shall be deemed to
cure any breach of any representation, warranty or covenant made in this
Agreement or in any Related Agreement.
5.10. Exclusivity. Until Closing or until this Agreement is terminated in
-----------
accordance with the provisions of Section 9.1, none of Seller or the Company or
any of their respective directors, officers, employees, representatives, agents
or Affiliates shall, directly or indirectly, solicit, initiate, encourage,
respond favorably to, permit or condone inquiries or proposals from, or provide
any confidential information to, or participate in any discussions or
negotiations with any Person (other than Buyer, its directors, officers,
employees, representatives and agents) concerning (a) any merger, sale of assets
not in the ordinary course of business, acquisition, business combination,
change of control or other similar transaction involving the Company, or (b) any
purchase or other acquisition by any Person of the Company Shares, or (c) any
sale or issuance by the Company of any shares of its capital stock. Until
Closing or until this Agreement is terminated in accordance with the provisions
of Section 9.1, Seller will promptly advise Buyer of, and communicate to Buyer
the terms and conditions of (and the identity of the Person making), any such
inquiry or proposal received.
5.11. Excluded Liabilities. Prior to the Closing Date, Seller shall pay,
--------------------
discharge or assume, or provide the Company with sufficient funds to pay and
discharge in full, all indebtedness of the Company for borrowed money.
5.12. Tax Matters.
-----------
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<PAGE>
(a) Seller and Buyer recognize that the Company has joined with Seller
in filing consolidated Income Tax Returns. Seller shall include (to the extent
required by law) the taxable income or loss, and all other items, of the Company
(including any taxable gain or loss arising out of the transactions contemplated
by this Agreement, any deferred items triggered by the Treasury Regulations
related to consolidated returns, and any excess loss accounts taken into income
under Treas. Reg. (S)1.1502-19) for periods ending before or on the Closing
Date, in its unitary, consolidated or combined Tax Returns covering such
periods.
(b) For any taxable year of the Company that does not end on, and
would otherwise extend beyond, the Closing Date, there shall be a deemed short
taxable year ending on and including such date ("Pre-Closing Short Year") and a
second deemed short taxable year beginning on and including the date after such
date ("Post-Closing Short Year"). The allocation on Tax Returns measured by
income between deemed short taxable years shall be consistent with Federal
income Tax Returns and in all other cases shall be pro rata except for items of
income or loss arising from an extraordinary event, which shall be reflected in
the period in which such event occurred. Seller shall prepare a schedule
allocating, on a basis consistent with the "closing of the books" of the Company
on the Closing Date, the taxable income or loss, and all other items, of the
Company, between the Pre-Closing Short Year and the Post-Closing Short Year.
(c) Seller shall be responsible for, and shall have ultimate
discretion with respect to, (i) all Tax Returns required or permitted by
applicable law to be filed by the Company (or by Seller on its behalf) with
respect to periods that end on or before the Closing Date, including the Pre-
Closing Short Year, (ii) any elections related to such Tax Returns and (iii) any
Audit (including the execution of any waiver of limitation with respect to any
Audit) relating to any such Tax Returns; provided, however, that in the event
that any Audit for which the Seller is responsible pursuant to this Section
5.12(c) could reasonably be expected to result in a material increase in Tax
liability for which Buyer or the Company would be liable, Seller shall so inform
Buyer and the Company, as set forth in Section 5.12(f), and shall consult with
Buyer and the Company regarding such matters, but Seller shall retain full
control over such Audit and the disposition of all issues. Buyer and the Company
shall cooperate with Seller for the purpose of making any election under
applicable law.
(d) Buyer and the Company shall be responsible for, and shall have
ultimate discretion with respect to, (i) all Tax Returns required to be filed by
the Company with respect to periods that begin after the Closing Date, including
the Post-Closing Short Year and (iii) any Audit (including the execution of any
waiver of limitations with respect to any Audit) relating to any such Tax
Returns; provided, however, that in the event that any Audit for which the Buyer
and the Company are responsible pursuant to this Section 5.12(d) could
reasonably be expected to result in a material increase in Tax liability for
which Seller would be liable, Buyer shall so inform Seller, as set forth in
Section 5.12(f), and shall consult with Seller regarding such matters, but Buyer
and the Company shall retain full control over such Audit and the disposition of
all issues.
(e) After the Closing Date, Buyer and the Company, on the one hand,
and Seller, on the other hand, shall (i) to the extent any such Audit or
adjustment could result in liability to the other party under this Agreement,
annually provide to the other party notice of the
34
<PAGE>
status of any Audits and taxable periods that shall remain open for adjustments
with respect to the Company and of any such Audits or taxable periods that shall
have closed during said annual period, (ii) provide, or cause to be provided, to
each other's respective subsidiaries, officers, employees, representatives and
Affiliates, such assistance as may reasonably be requested, including making
available employees and the books and records of the Company, by any of them in
connection with the preparation of any Tax Return or any Audit of the Company in
respect of which Buyer, the Company or Seller, as the case may be, is
responsible pursuant to Sections 5.12(c) or (d) hereof and (iii) retain, or
cause to be retained, for so long as any such taxable periods or Audits shall
remain open for adjustments, any records or information which may reasonably be
relevant to any such Tax Returns or Audits. Upon the reasonable request of the
other party, the party in possession of any such records shall either retain
such records for longer time periods or turn such records over to the possession
of the other party.
(f) Buyer and the Company, on the one hand, and Seller, on the other
hand, shall promptly inform, keep regularly apprised with respect to, and notify
the other party in writing not later than (10) ten business days after the
receipt of any notice of any Audit for which it was responsible pursuant to
Section 5.12(c) or (d) hereof which could affect the Tax liability of such other
party for any taxable period.
(g) Seller and Buyer agree that the purchase of Company Shares by
Buyer is intended to constitute a "qualified stock purchase" within the meaning
of section 338(d)(3) of the Code and comparable provisions under Virginia Tax
law. Seller acknowledges that the Company is a member of its consolidated group
for Income Tax purposes. After the Closing Date, Buyer and Seller shall make a
valid election under Section 338(h)(10) of the Code and a comparable election
under Virginia Tax Law with respect to the Company (collectively, the "Section
338(h)(10) Election" or the "Election"). Buyer and Seller shall cooperate fully
with each other in the making of the Section 338(h)(10) Election. Buyer shall
submit to Seller, in unsigned draft, an Internal Revenue Service Form 8023 (or
equivalent form then in effect), and comparable forms required by Virginia Tax
authorities (collectively, the "Section 338(h)(10) Election Forms" or the
"Forms"). Such draft Section 338(h)(10) Election Forms provided by Buyer to
Seller shall be complete, with any required attachments, except that Seller
shall provide the information relating to itself on such Forms (Section F of
Form 8023 and comparable provisions in any Virginia forms). If Seller does not
provide such information within fifteen (15) business days after receipt of the
draft Forms, Buyer may complete such sections of the Form to the best of its
ability. Upon completion of the drafts, Buyer shall prepare the final Section
338(h)(10) Election Forms and shall submit such Forms (with any information
schedules and other material necessary to make the Section 338(h)(10) Election)
to Seller for Seller's signature no later than sixty (60) days prior to the due
date for such Election. Seller shall sign such Section 338(h)(10) Election Forms
and return such Forms to Buyer within fifteen (15) days after receiving them.
Buyer shall file all Section 338(h)(10) Election Forms in a timely and proper
manner, and Seller and Buyer each shall take any other actions necessary to
ensure the effectiveness of the Election (including filing copies of the Section
338(h)(10) Election Forms with their respective Tax Returns), and shall file all
Tax Returns in a manner consistent with the Section 338(h)(10) Election.
35
<PAGE>
(h) The Consideration and other deemed asset purchase price items
(such as liabilities of the Company and acquisition and selling costs) shall be
computed and allocated by the parties in accordance with applicable Treasury
Regulations. Buyer shall prepare an allocation of the Consideration and such
items and, no later than one hundred twenty (120) days after the Closing Date,
shall submit it to Seller for review, together with such schedules, work papers
and other background information that Seller shall reasonably request. Seller
shall adopt this allocation (with adjustments for the parties' transaction costs
and the like), unless it reasonably objects thereto no later than thirty (30)
days after receipt of such allocation, in which event Seller and Buyer shall
negotiate in good faith in an effort to agree upon an allocation; provided,
however, that, irrespective of any disagreement on allocation or any other
matter, Buyer and Seller shall take all necessary steps to ensure the
effectiveness of the Section 338(h)(10) Election.
(i) Seller shall be liable for, and shall indemnify, defend and hold
Buyer harmless from and against, and shall be entitled to any reductions in or
refunds of, any and all Taxes (excluding any Taxes reflected in Closing Date Net
Working Capital), imposed on or with respect to Seller, the Company or their
respective assets, operations or activities for any Tax period that ends on or
before the Closing Date (including the Pre-Closing Short Year), including any
liability for Taxes imposed on the Company under Treas. Reg. (S) 1.1502-6 (or
any similar provision of state, local, foreign law), as a transferee or
successor to any person, by contract or otherwise and including any liability
for Taxes arising from making the Section 338(h)(10) Elections; provided,
however, that Seller shall not be liable for any Taxes resulting from any action
taken by the Company or Buyer after the Closing without Seller's written consent
(including, without limitation, the filing of any amended Tax Return for any
period ending on or before the Closing Date, any action inconsistent with
Seller's rights under Section 5.12(c), and any action taken outside the ordinary
course of business and occurring on the Closing Date).
(j) Buyer shall be liable for, and shall indemnify, defend and hold
Seller harmless from and against, and shall be entitled to any reductions in or
refunds of, any and all Taxes imposed on or with respect to the Company or its
operations, ownership, assets or activities for any periods that begin after the
Closing Date (including the Post-Closing Short Year) and for any Taxes resulting
from any action taken by the Company or Buyer after the Closing without Seller's
written consent (including, without limitation, the filing of any amended Tax
Return for any period ending on or before the Closing Date, any action
inconsistent with Seller's rights under Section 5.12(c), and any action taken
outside the ordinary course of business and occurring on the Closing Date).
(k) Notwithstanding anything to the contrary in this Agreement, Seller
shall be liable for and pay (x) any and all transfer Taxes arising out of the
transfer of the stock of the Company hereunder and (y) any sales, use or other
transfer Taxes that are not included in Closing Date Net Working Capital but
which arise out of any transactions reflected in the Company's accounts
receivable that are included in Closing Date Net Working Capital. Seller shall
indemnify, defend and hold Buyer and the Company harmless against any and all
such transfer Taxes.
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<PAGE>
(l) Seller shall be responsible for, and shall indemnify Buyer and the
Company and hold each of them harmless from and against, all Taxes of the
Company and its successors (and any related costs, including accounting and
attorneys' fees) attributable to any failure of the Section 338(h)(10) Election
to be effective by reason of any action or failure to act on the part of the
Seller or any of its Affiliates.
(m) Buyer shall be responsible for, and shall indemnify Seller and hold Seller
harmless from and against all Taxes of Seller (and any related costs, including
accounting and attorneys' fees) attributable to any failure of the Section
338(h)(10) Election to be effective by reason of any action or failure to act on
the part of Buyer.
(n) As of the Closing Date, any and all tax-sharing or similar
agreements to which (i) the Company and (ii) the Seller or any of the Seller's
Affiliates are parties shall terminate. Neither the Company, the Seller, nor any
Affiliate thereof shall have any obligation or right with respect to each other
under any such prior agreement after the Closing.
5.13. Employment and Employee Benefit Matters.
---------------------------------------
(a) As of the Closing Date, Buyer shall have in place employee
benefits plans, policies, and procedures substantially similar to those that are
available to the employees of the Company and are listed on Schedule 3.15,
-------------
provided that the Buyer's group health plan shall not contain a preexisting
condition limitation or exclusion applicable to the employees of the Company
participating in the Company's group health plan as of the Closing Date, and
provided further that the Buyer shall have no obligation to establish any
defined benefit pension plan, as defined in section 3(35) of ERISA, or to
establish any stock option plan, stock purchase plan, stock appreciation rights
plan, or any other type of plan awarding benefits based directly or indirectly
on any forms of equity in the Buyer or any Affiliate of the Buyer, or to
establish any program providing discounted communications services.
(b) Savings Plan. As soon as administratively feasible after the
------------
Closing Date, Seller shall cause all contributions on behalf of all employees of
the Company as of the Closing Date (the "Company Employees") to be made to the
CFW Communications Company Savings and Security Plan (hereinafter referred to as
the "Seller Savings Plan") for payroll periods covering the period through the
Closing Date. As of the Closing Date, the Buyer shall establish a defined
contribution plan (hereinafter referred to as the "Buyer Savings Plan"). Buyer
shall cause the Buyer Savings Plan to recognize the past service of the Company
Employees with the Company or any other ERISA Affiliate for purposes of
eligibility and vesting to the extent such service was recognized for such
purposes under the Seller Savings Plan immediately prior to the Closing Date.
Seller shall transfer to the Buyer, as soon as administratively feasible
following the Closing Date, any payroll or other records necessary to calculate
such prior service. Buyer shall cause the Buyer Savings Plan to permit the
rollover of any "eligible rollover distributions" (as defined in section 402(c)
of the Code) from the Seller Savings Plan, to the extent permitted under section
402(c) of the Code and the rules and regulations promulgated thereunder.
(c) Pension Plan. Effective as of the Closing Date, all "affected
------------
employees," as provided under section 411(d)(3) of the Code, shall be fully
vested in benefits accrued under the Revised Retirement Plan for the Employees
of CFW Communications Company (hereinafter
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<PAGE>
referred to as the "Seller Pension Plan") as of the Closing Date. Effective as
of the Closing Date, the Seller shall amend the Seller Pension Plan with respect
to participants who are represented by the United Paperworkers International
Union Local 437. Such amendment shall cause the Seller Pension Plan to recognize
as service with the Seller for all purposes under the Seller's Pension Plan
based on such participant's regular work schedule the period, if any, after the
Closing Date in which such participants are entitled to participate in a defined
benefit retirement plan; provided, however, that such period shall end no later
than December 31, 2000 (the "Special Service Period"). Such amendment shall also
provide that, in computing such participant's "monthly highest average
compensation" (as defined in the Seller's Pension Plan), such participant shall
be deemed to have been compensated during the Special Service Period at the rate
equal to the participant's "monthly highest average compensation" (as defined in
the Seller's Pension Plan) as of the Closing Date. As soon as administratively
feasible after the end of the Special Service Period, the Seller will advise the
Buyer of the present value of the benefits accrued under the Seller Plan by such
participants during the Special Service Period using the actuarial assumptions
and methods used by the Seller Pension Plan for funding purposes. Buyer shall
pay such amount to the Seller within sixty days after Seller advised the Buyer
of such present value. Seller shall retain sole liability and responsibility for
satisfaction of any funding requirements, Pension Benefit Guaranty Corporation
insurance premiums, taxes or penalties, or any other obligations relating to the
Seller Pension Plan and the vesting of the affected employees in benefits under
the Seller Pension Plan.
(d) Group Health Plan. Seller shall retain sole liability and
-----------------
responsibility for payment of and shall pay all claims of Company Employees
under any group health plan sponsored by the Seller to the extent such claims
are incurred prior to the Closing Date. For purposes of this section, claims
incurred prior to the Closing Date shall mean all such costs for medical
services performed prior to the Closing Date.
(e) COBRA. Seller will be responsible for satisfying obligations under
-----
Section 601 et seq of ERISA and Section 4980B of the Code, to provide
continuation coverage to or with respect to any Company Employee in accordance
with the law with respect to any "qualifying event" occurring on or before the
Closing Date.
(f) Flexible Spending Accounts. Buyer agrees to establish a cafeteria
--------------------------
plan arrangement under Section 125 of the Code with a flexible spending account
arrangement substantially similar to the program maintained by the Seller as of
the Closing Date. Seller will cause to be transferred as soon as
administratively feasible following the Closing Date to the Buyer's cafeteria
plan the outstanding account balances as of the date of the transfer of Company
Employees under the Seller's flexible spending account arrangement, reduced (but
not below zero) by the aggregate amount by which the benefits paid to any
Employee under the Seller's flexible spending account arrangement for the
current plan year through the Closing Date exceed such Employee's contributions
to the Seller's flexible spending account arrangement for the current plan year
through the Closing Date. Buyer agrees upon completion of the transfer that it
will cause the Buyer's cafeteria plan to provide benefits in the form of
payments from the affected employee's flexible spending accounts.
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<PAGE>
(g) Disability and Workers' Compensation. Seller shall assume
------------------------------------
responsibility for all disability benefits payable after the Closing Date with
respect to those Company Employees who are on sick leave on the Closing Date and
who subsequently qualify for short-term and/or long-term disability benefits.
Seller shall be responsible for all workers' compensation claims, occupational
diseases claims and employer liability claims incurred on or before the Closing
Date, whether reported or unreported on the Closing Date, brought by or in
respect of any Company Employees regardless of when notice of such claims are
filed.
(h) Employment Agreements. Seller hereby assumes all obligations under
---------------------
and all liability for and shall make payment of all amounts payable under any
employment agreement between the Company and any employee thereof under any
provisions in any such employment agreement relating to change in ownership,
management or employment responsibilities or compensation, or change in control
that are applicable in connection with the instant transaction.
(i) Benefits Payable. Seller shall retain sole liability and
----------------
responsibility for payment (and all expenses associated therewith) of all
amounts (whether cash, stock or other property) payable to employees of the
Company under all Benefit Plans sponsored by the Seller, including, but not
limited to, any awards of equity based compensation (including, without
limitation, options on Seller's Capital Stock) under any employment agreement,
and further shall indemnify the Buyer for any claims against Buyer or the
Company for any and all amounts due under any such Benefit Plan maintained by
the Seller.
(k) (j) Prior to or at Closing, Seller shall cause to vest any
unvested options to purchase stock of Seller granted prior to the Execution Date
to David L. Gibson under any existing stock option agreement of Seller or the
Company.
5.14. Non-Competition.
---------------
(a) Except as Buyer may expressly agree in writing, and except to the
extent Seller will continue to provide directory assistance services to
customers of and using Seller's existing incumbent local exchange carrier
business, Seller agrees that for a period of three (3) years after the Closing
Date (the "Non-Competition Period"), Seller shall not, and shall not permit any
of its Affiliates (except for officers, directors, and employees outside of
their capacity as such) to, directly or indirectly:
(i) engage in, control, advise, manage, or act as a consultant to
any business which conducts activities the same as those conducted by
the Company as of the Closing Date;
(ii) solicit, divert or attempt to solicit or divert any party
who is, was, or was solicited to become, a customer or supplier of the
Company for directory assistance services at any time prior to the
Closing Date;
(iii) employ David L. Gibson or solicit for employment any person
who is employed in a capacity providing directory assistance services
or related services on behalf of the Company, provided, however, that
Seller may offer employment and/or
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<PAGE>
early retirement to the following former employees of Seller: Jean Ann
Alexander, Ruth S. Keith, Donald E. Lafferty, William B. Reid and
Cynthia K. Wright.
For purposes of this Section, the phrase "directly or indirectly" shall include
acts or omissions as partner, joint venture, employer, agent, consultant, or
owner of any interest in, any Person.
(a) Except as Seller may expressly agree in writing, Buyer agrees that
during the Non-Competition Period, Buyer shall not, and shall not permit any of
its Affiliates to, directly or indirectly, solicit for employment any person who
is employed by the Seller; provided, however, that Buyer and its Affiliates
shall (i) be permitted but not required to employ the following persons employed
by Seller: one person currently employed by Seller primarily providing human
resources services, one person currently employed by Seller primarily providing
engineering services, and one person employed by Seller primarily providing
accounting services, and (ii) be permitted to solicit employees of Seller in
connection with the foregoing clause (i).
(b) If at any time any of the provisions of this Section 5.14 shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then this
Section 5.14 shall be considered divisible (with the other provisions to remain
in full force and effect) and the invalid or unenforceable provisions shall
become and be deemed to be immediately amended to include only such time, area,
scope of activity and other restrictions, as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter, and Seller and Buyer expressly agree that this Agreement, as so
amended, shall be valid and binding as though any invalid or unenforceable
provision had not been included herein.
(c) The parties hereto agree that any damage caused to Buyer or
Seller, as the case may be, by reason of the breach by Seller or Buyer, as the
case may be, or any of its Affiliates of this Section 5.14 would cause
irreparable harm that could not be adequately compensated for in monetary
damages alone; therefore, each party agrees that, in addition to any other
remedies, at law or otherwise, the Buyer or Seller, as the case may be, shall be
entitled to an injunction issued by a court of competent jurisdiction
restraining and enjoining any violation by Seller or Buyer, as the case may be,
or any of their Affiliates of this Section 5.14
5.15 Sale of Telegate Shares. Seller shall consult with and involve
-----------------------
Telegate, and such bankers or other representatives as are or shall be
designated by Telegate, prior to and in connection with selling such Telegate
Shares acquired by Seller as payment of the Stock Consideration.
5.16. AT&T Reimbursement.
------------------
(a) Prior to or at Closing, Seller shall transfer to the Company all
monies paid by AT&T to Seller for upgrades to the Company's network and
enhancements to the Company's directory assistance capabilities to the extent
that at Closing such payments by AT&T exceed capital expenditures (and related
non-capital expenditures) made by Seller for such network upgrades and
enhancements to the Company's directory assistance capabilities.
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<PAGE>
(b) To the extent that at Closing such payments by AT&T to Seller for
such upgrades and enhancements are less than the capital expenditures (and
related non-capital expenditures) made by Seller for such upgrades and
enhancements (the "AT&T Reimbursement Amount"), Buyer and Seller shall mutually
agree prior to Closing on the estimated AT&T Reimbursement Amount. At Closing,
Buyer shall deliver to the escrow agent, pursuant to the terms of the Escrow
Agreement, an amount in cash equal to the estimated AT&T Reimbursement Amount
(the "Escrowed Amount"). The Escrowed Amount shall be held in escrow to cover
payment of the AT&T Reimbursement Amount and shall be paid to the Seller
pursuant to the terms thereof. The transfer to the Company by Seller of monies
paid by AT&T, or the reimbursement of Seller by Buyer pursuant to the Escrow
Agreement, as the case may be, shall be disregarded for purposes of calculating
the Closing Date Net Working Capital. Seller shall permit Buyer and its
representatives, during business hours and upon reasonable notice, to review the
records of Seller's expenditures for upgrades to the Company's network and
enhancements to the Company's directory assistance capabilities.
5.17. NCO Litigation. Seller shall purchase from the Company for cash at
--------------
Closing the account receivable owed by NCO and at Closing Seller shall assume
responsibility for the NCO litigation, including Seller paying any and all costs
and attorney's fees incurred in collecting outstanding monies owed by NCO and
Seller receiving any monies recovered from NCO. The purchase price for such
receivable shall equal the net amount of such receivable as reflected on the
Company's December 31, 1999 balance sheet.
5.18. LSSI Stock. Prior to or at Closing, Seller shall convey to the
----------
Company all of Seller's right, title, and interest in and to 2,500,000 shares of
common stock of LSSI, which shares represent all of the LSSI shares owned by
Seller. The transfer to the Company by Seller of such LSSI shares shall be
disregarded for purposes of calculating the Closing Date Net Working Capital.
Seller shall assign to the Company any contractual rights it may possess, by
shareholders' agreement or otherwise, to participate in the management of, or
control any appointment to the board of directors of, LSSI, but only if such
rights may be assigned. If consent from any third party is required to assign
such rights, Seller agrees to use best efforts to obtain such consent.
5.19. Company Real Property Distribution. Prior to or at Closing, the
----------------------------------
Company shall distribute to Seller the call centers owned by the Company as of
the date hereof in Clifton Forge, Virginia and Waynesboro, Virginia. Seller
shall pay all costs, including any applicable taxes, associated with such
distribution.
5.20. Call Centers Lease Agreements. Prior to or at Closing, Seller and the
-----------------------------
Company shall execute the Call Centers Lease Agreements.
5.21. Telecommunications Services and Collocation Lease Agreement. Prior to
-----------------------------------------------------------
or at Closing, Seller and the Company shall execute the Telecommunications
Services and Collocation Lease Agreement. The Telecommunications Services and
Collocation Lease Agreement shall be negotiated between Buyer and Seller and
shall provide for Seller to provide Company with such telecommunications
services and facilities and collocation space as are currently provided by
Seller to the Company, and as may be reasonably requested by the Company in the
future, on reasonable rates, terms, and conditions. The reasonableness of such
41
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rates, terms, and conditions shall be determined with reference to the amounts
paid by telecommunications carriers to incumbent local exchange carriers for
such services, facilities, and space.
5.22. Directory Assistance Agreement. Prior to or at Closing, Seller
------------------------------
and the Company shall execute the Directory Assistance Agreement.
5.23. Transitional Services Agreement. Prior to or at Closing, Seller and
-------------------------------
the Company shall execute the Transitional Services Agreement.
5.24. LSSI Agreement. Prior to Closing, the Company shall execute an
--------------
agreement with LSSI, in a form reasonably acceptable to Buyer, reflecting the
arrangements existing as of the date hereof for the Company to use LSSI's
database, and for LSSI to locate its database in space provided as of the date
hereof by Seller to LSSI.
5.25. AT&T Agreement. Following Closing, Seller shall use reasonable
--------------
efforts to cause AT&T to continue using the Company as a provider of directory
assistance services.
5.26. Name Change. At Closing, Seller shall cause the Company to change its
-----------
corporate name to a name designated by the Buyer, such name not to include "CFW"
or any other Intellectual Property of the Seller.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under Article II of this Agreement are
subject to the satisfaction or waiver by Buyer of the following conditions
precedent on or before the Closing Date:
6.1. Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Seller contained herein and qualified as to
materiality shall have been accurate, true and correct, and those not so
qualified shall be true and correct in all material respects, in each case, on
and as of the date of this Agreement, and shall also be accurate, true and
correct to the same extent on and as of the Closing Date with the same force and
effect as though made by Seller on and as of the Closing Date.
6.2. Compliance with Agreements and Covenants. Seller and the Company
----------------------------------------
shall have performed and complied with all of their respective covenants,
obligations and agreements contained in this Agreement to be performed and
complied with by them on or prior to the Closing Date.
6.3. Consents and Approvals. Buyer shall have received written evidence
----------------------
reasonably satisfactory to it that all Consents for the consummation of the
transactions contemplated hereby or the ownership and operation by Buyer of the
Company have been received.
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6.4. Expiration of HSR Waiting Period. The applicable waiting period under
--------------------------------
the HSR Act shall have expired or been earlier terminated without action by the
Justice Department or the Federal Trade Commission to prevent consummation of
the transactions contemplated by this Agreement.
6.5. Documents. Buyer shall have received all of the agreements, documents
---------
and items specified in Section 8.2.
6.6. Company Material Adverse Change. No Material Adverse Change shall
-------------------------------
have occurred and no event shall have occurred which is likely to have a
Material Adverse Effect.
6.7. Actions or Proceedings. No action or proceeding by any Governmental
----------------------
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of any provision of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated hereby.
6.8. AT&T Agreement. The AT&T Directory Assistance Agreement shall be
--------------
valid and in effect and neither the Company nor AT&T shall have breached any
material provision of, nor be in default under a material term of, such
contract. AT&T shall have continued to fulfill its commitment to pay for such
upgrades to the Company's network as are contemplated in the AT&T Directory
Assistance Agreement.
6.9. Gibson Employment Agreement. The Gibson Employment Agreement shall be in
---------------------------
full force and effect and there shall have been no default thereunder by David
L. Gibson.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
subject to the satisfaction or waiver by Seller of the following conditions
precedent on or before the Closing Date:
7.1. Warranties True as of Both Present Date and Closing Date. The
--------------------------------------------------------
representations and warranties of Buyer and Telegate contained herein and
qualified as to materiality, shall have been accurate, true and correct, and
those not so qualified shall be true and correct in all material respects in
each case, on and as of the date of this Agreement, and shall also be accurate,
true and correct to the same extent on and as of the Closing Date with the same
force and effect as though made by Buyer and Telegate on and as of the Closing
Date.
7.2. Compliance with Agreements and Covenants. Buyer and Telegate shall
----------------------------------------
have performed and complied with all of their covenants, obligations and
agreements contained in this Agreement to be performed and complied with by it
on or prior to the Closing Date.
7.3. Consents and Approvals. Seller shall have received written evidence
----------------------
reasonably satisfactory to it that all Consents for the consummation of the
transactions contemplated hereby
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have been received.
7.4. Expiration of HSR Waiting Period. The applicable waiting period under
--------------------------------
the HSR Act shall have expired or have been earlier terminated without action by
the Justice Department or the Federal Trade Commission to prevent consummation
of the transactions contemplated by this Agreement.
7.5. Documents. Seller shall have received all of the agreements,
---------
documents and items specified in Section 8.3.
7.6. Actions or Proceedings. No action or proceeding by any Governmental
----------------------
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated hereby.
ARTICLE VIII
CLOSING
8.1. Closing. The Closing shall occur at the offices of Hunton & Williams,
-------
951 East Byrd Street, Riverfront Plaza, East Tower, Richmond, Virginia, at 10:00
a.m. on the tenth Business Day after the conditions precedent to Closing
specified in Articles VI and VII shall have occurred or been waived or such
prior date mutually agreed upon by the parties hereto (the "Closing Date"). The
Closing, and all transactions to occur at the Closing, shall be deemed to have
taken place at, and shall be effective as of, 12:01 a.m. on the Closing Date.
8.2. Deliveries by Seller. At the Closing, in addition to any other
--------------------
documents or agreements required under this Agreement, Seller shall deliver to
Buyer the following:
(a) Certificates evidencing all of the Company Shares, which
certificates shall be duly endorsed in blank or accompanied by duly executed
stock powers;
(b) The resignations of the persons listed in Schedule 8.2(b) as
---------------
directors and officers of the Company;
(c) Except for those Liens specified on Schedule 8.2(c), a written
---------------
statement from each Person holding a Lien upon any of the assets of the Company,
or upon any Company Shares, confirming the repayment of the indebtedness secured
thereby and the release as of the Closing Date of (i) such Lien and (ii) all
obligations under any and all Contracts relating thereto;
(d) Certificates dated the Closing Date of an executive officer of
each of the Seller and the Company certifying as to the compliance by Seller and
the Company, as the case may be, with Sections 6.1, 6.2, 6.3 and 6.4;
(e) The Articles of Incorporation of the Company certified by the
44
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Secretary of State or equivalent Person of the jurisdiction of incorporation of
the Company, and Bylaws or similar instrument of the Company, certified by the
Secretary of the Company;
(f) An opinion as to the matters set forth in Sections 3.1 (first and
second sentence), 3.2, 3.3, 3.4 and 3.7 (but only with respect to whether the
assets of the Company and the Seller Directory Assistance Assets are free and
clear of any lien and whether the Company has good and valid title to the LSSI
shares), dated the Closing Date, of Hunton & Williams, counsel for Seller and
the Company, which opinion shall not be governed or qualified by, or otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991);
(g) Certificates of the Secretaries of the Seller and the Company
certifying resolutions of the Boards of Directors of the Seller and the Company
approving this Agreement, the Seller's and Company's respective Related
Agreements and the transactions contemplated hereby and thereby (together with
an incumbency and signature certificate regarding the officer(s) signing on
behalf of the Seller and the Company);
(h) Duly executed originals of each of the Related Agreements; and
(i) A duly executed certificate of Seller in the form specified by
Treas. Reg. (S)1.1445-2(b)(2).
8.3. Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller
-------------------
the following:
(a) The Cash Consideration, payable by wire transfer of immediately
available funds and the Stock Consideration or evidence that the Stock Escrow
has been delivered pursuant to the Stock Escrow Agreement, as the case may be,
payable by delivery of certificates evidencing the number of Telegate Shares
determined in accordance with Section 2.2(b) of this Agreement, which
certificates shall be duly endorsed in the name of the Seller;
(b) Certificates, dated the Closing Date, of an executive officer of
each of Buyer and Telegate, certifying as to compliance by Buyer and Telegate as
the case may be, with Sections 7.1, 7.2, 7.3 and 7.4;
(c) A certificate of the Secretary of the Buyer and Telegate
certifying resolutions of the Board of Directors of the Buyer and Telegate
approving this Agreement and the Buyer's and Telegate's Related Agreements and
the transactions contemplated hereby and thereby (together with an incumbency
and signature certificate regarding the officer(s) signing on behalf of Buyer
and Telegate);
(d) An opinion as to the matters set forth in Sections 4.1, 4.2 and
4.3 dated the Closing Date, of Harris, Wiltshire & Grannis LLP, counsel for
Buyer and Telegate, and an opinion as to the matters set forth in Section 4.5 of
German counsel to Telegate (which opinion shall be delivered with the Stock
Consideration and not at Closing if the Stock Consideration is delivered
subsequent to Closing), which opinions shall not be governed or qualified by, or
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law
45
<PAGE>
(1991). Harris, Wiltshire & Grannis LLP shall be entitled to reply upon an
opinion of German counsel as to matters of German law.
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any time on or prior
-----------
to the Closing Date:
(a) With the mutual consent of Seller and Buyer;
(b) By Seller or Buyer, if the Closing shall not have taken place on
or before July 14, 2000;
(c) By Buyer, if there shall have been a material breach of any
material representation or warranty or any material covenant or other agreement
of Seller or of the Company hereunder, and such breach shall not have been
remedied within fifteen (15) Business Days after receipt by Seller of a notice
in writing from Buyer specifying the breach and requesting such be remedied; or
(d) By Seller, if there shall have been a material breach of any
material representation or warranty or any material covenant or other agreement
of Buyer hereunder, and such breach shall not have been remedied within fifteen
(15) Business Days after receipt by Buyer of notice in writing from Seller
specifying the breach and requesting such be remedied.
9.2. Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 9.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Sections 5.4(b), (d) and 11.1, which shall
survive the termination of this Agreement, except that no such termination shall
relieve any party from liability for any prior willful breach of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1. Survival. Except as otherwise specified, the representations and
--------
warranties of Seller contained herein shall survive a period expiring eighteen
(18) months after the Closing Date, except that (a) the representations and
warranties contained in Section 3.20 shall survive until the close of business
on the 90th day after the expiration of the applicable statute of limitations
with respect to applicable Environmental Laws, and (b) the representations and
warranties contained in Sections 3.2 and 3.4 shall survive forever. The
representations and warranties of Buyer and Telegate contained herein shall
survive the Closing for a period expiring at the close of business on the date
that is eighteen (18) months after the Closing Date except that
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the representations and warranties set forth in Sections 4.2, 4.5 and 4.6 hereof
shall survive forever.
10.2. Indemnification by Seller. Seller agrees to indemnify Buyer, and its
-------------------------
Affiliates (including, after the Closing, the Company), and their respective
officers, directors, employees, agents and representatives (excluding, in any
event, Seller), against, and agrees to hold them harmless from, any and all
Losses incurred or suffered by them relating to or arising out of or in
connection with any of the following; provided, however, that such
indemnification shall be the sole remedy for Buyer for any and all such Losses:
(a) any breach of or any inaccuracy in any representation or warranty
made by Seller or the Company in this Agreement or any Related Agreement to
which Seller or the Company is a party, or any document delivered by Seller or
the Company at the Closing. Buyer's claim shall have been made in writing to
Seller not later than the expiration of the time periods set forth in Section
10.1; or
(b) arising out of the ongoing dispute and litigation (including
without limitation any future claims or counterclaims) between NCO and LSSI; or
(c) arising out of the Company's participation in any Benefit Plan
sponsored by the Seller, including without limitation the Seller's Savings Plan
and the Seller's Pension Plan, and also including without limitation any Losses
associated with the partial termination of the Seller's Pension Plan; or
(d) any breach of or failure by Seller or the Company to perform any
covenant or obligation set out or contemplated in this Agreement or any Related
Agreement or any document delivered by Seller or the Company at the Closing.
10.3. Indemnification by Buyer. Buyer and Telegate agree, jointly and
------------------------
severally, to indemnify Seller and its Affiliates, and their respective
officers, directors, employees, agents and representatives, against, and agree
to hold it harmless from, any and all Losses incurred or suffered by it relating
to or arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Buyer or Telegate in this Agreement or any Related Agreement to which
Buyer or Telegate is a party, or any document delivered by Buyer at Closing.
Seller's Claim shall have been made in writing to Buyer or Telegate not later
than the expiration of the time periods set forth in Section 10.1; or
(b) any breach of or failure by Buyer to perform any covenant or
obligation set out or contemplated in this Agreement or any Related Agreement or
any document delivered at the Closing.
10.4. Claims. The provisions of this Section shall be subject to Section
------
10.6. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement, the Indemnified Person shall promptly give
notice to the indemnifying person of such claim and the amount the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person;
provided that the failure of the Indemnified Person to promptly give notice
47
<PAGE>
shall not relieve the Indemnifying Person of its obligations except to the
extent (if any) that the Indemnifying Person shall have been prejudiced thereby.
If the Indemnifying Person does not object in writing to such indemnification
claim within thirty (30) days of receiving notice thereof, the Indemnified
Person shall be entitled to recover, on the thirty-fifth day after such notice
was given, from the Indemnifying Person the amount of such claim, and no later
objection by the Indemnifying Person shall be permitted; if the Indemnifying
Person agrees that it has an indemnification obligation but objects that it is
obligated to pay only a lesser amount, the Indemnified Person shall nevertheless
be entitled to recover, on the thirty-fifth day after such notice was given,
from the Indemnifying Person the lesser amount, without prejudice to the
Indemnified Person's claim for the difference.
10.5. Notice of Third-Party Claims; Assumption of Defense. The Indemnified
---------------------------------------------------
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto in respect of which
indemnity may be sought under this Agreement; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. The Indemnifying Person may, at its
own expense, (a) participate in the defense of any claim, suit, action or
proceeding and (b) upon notice to the Indemnified Person and the Indemnifying
Person's delivering to the Indemnified Person a written agreement that the
Indemnified Person is entitled to indemnification for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any
such claim, suit, action or proceeding, assume the defense thereof; provided,
however, that (i) the Indemnifying Person's counsel is reasonably satisfactory
to the Indemnified Person, and (ii) the Indemnifying Person shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for such consultation from time to time with respect to such claim,
suit, action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines in its judgment that representation by the Indemnifying
Person's counsel of both the Indemnifying Person and the Indemnified Person
would present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent or defend it in any such claim,
action, suit or proceeding and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person
chooses to defend or prosecute any such claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.
10.6. Settlement or Compromise. Any settlement or compromise made or caused
------------------------
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any claim, suit, action or proceeding shall also be binding upon the
Indemnifying Person or the Indemnified Person, as the case may be, in the same
manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise; provided, however,
that no obligation, restriction or Loss shall be imposed on the Indemnified
Person as a result of such settlement without its prior written consent. The
Indemnified Person will give the Indemnifying
48
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Person at least thirty (30) days' notice of any proposed settlement or
compromise of any claim, suit, action or proceeding it is defending, during
which time the Indemnifying Person may reject such proposed settlement or
compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or proceeding
and any and all Losses in connection therewith in excess of the amount of
unindemnifiable Losses which the Indemnified Person would have been obligated to
pay under the proposed settlement or compromise. Notwithstanding the foregoing,
Seller shall not enter into any settlement or compromise of any claim, action or
proceeding relating to Taxes imposed with respect to the operations of the
Company which could effect taxable period(s) of the Company after the Closing
Date without consulting Buyer.
10.7. Failure of Indemnifying Person to Act. In the event that the
-------------------------------------
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
10.8. Tax Character. Seller and Buyer agree that any indemnity payments
-------------
pursuant to this Agreement will be treated for federal and state income tax
purposes as adjustments to the purchase price of the Company Shares, and that
they will report such payments on all Tax Returns consistently with such
characterization.
10.9. Basket; Cap. Seller shall not be required to indemnify Buyer under
-----------
Section 10.2(a) or (d) hereof and Buyer and Telegate shall not be required to
indemnify Seller under Section 10.3(a) or (b) hereof (i) unless and until the
amount of all Losses for which indemnification is sought by the indemnified
party hereunder first exceeds $200,000, in which event the party seeking
indemnification may recover all of its Losses, other than the initial $200,000;
or (ii) from and after such time that the aggregate amount of Losses for which
the indemnified party has been indemnified under Sections 10.2 or 10.3 hereof,
as the case may be, exceeds $7,100,000.
10.10. Tax Indemnity
-------------
(a) In the case of any indemnity described in Section 10.10(b),
regardless of whether the Taxes for which indemnity is being claimed result from
the breach of a representation in Section 3.18 or breach of a covenant in
Section 5.12 hereof ("Tax Indemnity"), obligations and rights shall be governed
by this Section 10.10 to the extent inconsistent with the remainder of this
Article X.
(b) From and after the Closing Date, subject to the terms and
conditions of this Agreement, Seller, on the one hand, and Buyer, on the other
hand (each, as a party from whom indemnification is sought pursuant to the terms
of this Agreement, referred to as a "Tax Indemnifying Party"), respectively
agrees to indemnify and hold the other party (each, as a party that is seeking
indemnification pursuant to the terms of this Agreement, referred to as a "Tax
Indemnified Party") harmless from and against any damages, liabilities, losses
and expenses (including but not limited to, reasonable accounting and attorneys'
fees incurred in defending any claim by a third person) (collectively, "Tax
Loss" or "Tax Losses") which may be sustained or suffered by the Tax Indemnified
Party to the extent directly resulting from or directly arising out
49
<PAGE>
of a breach by the Tax Indemnifying Party of the representations, warranties,
covenants or other agreements of the Tax Indemnifying Party contained in this
Agreement relating to the respective liabilities of the parties and their
Affiliates for Taxes.
(c) The representations, covenants and warranties set forth in Section
3.18 and Section 5.12 of this Agreement shall survive the Closing Date and shall
continue in full force and effect until ninety (90) days after all applicable
statutes of limitations, including any waivers and extensions thereof, have
expired with respect to the respective Tax period addressed therein.
(d) In the event that a Tax Indemnified Party believes that it has
suffered or will suffer any Tax Loss for which a Tax Indemnifying Party is
obligated to indemnify it under this Section 10.10, it shall promptly notify
such Tax Indemnifying Party in writing of the Claim (which notice in any event
shall be given to the Tax Indemnifying Party within thirty (30) calendar days of
the Tax Indemnified Party becoming aware of such Claim), specifying therein the
reason why the Tax Indemnified Party believes that the Tax Indemnifying Party is
or will be obligated to indemnify the amount, if liquidated, to be indemnified
and the basis on which the Tax Indemnified Party has calculated such amount; if
not yet liquidated, the notice shall so state; provided, however, that the
failure of a Tax Indemnified Party to give notice to the Tax Indemnifying Party
as required under this subsection shall relieve the Tax Indemnifying Party of
its tax indemnity obligations hereunder but only to the extent that the Tax
Indemnifying Party shall have been prejudiced thereby.
(e) Notwithstanding this Article X, indemnification payments with
respect to Tax liabilities are not subject to any minimum or maximum limitation.
10.11. No Duplication. The parties agree that the provisions of this
--------------
Agreement relating to indemnities shall be interpreted to avoid any duplication
of indemnity payment or other remedy.
10.12 Tax Effected Indemnity. The parties agree that indemnity payments
----------------------
under this Agreement shall be computed in a manner to make the Indemnified
Person whole on an after-tax basis, taking into account the Income Tax
consequences pertaining to the Loss and the indemnity payment and, to the extent
practicable, the timing and time value of money relating to such Income Tax
consequences.
ARTICLE XI
MISCELLANEOUS
11.1. Expenses. Seller shall pay all expenses of Seller and the Company
--------
(including attorney's fees and expenses) and Buyer shall pay all expenses of
Buyer (including attorney's fees and expenses), in each case incurred in
connection with this Agreement and the transactions contemplated hereby. Buyer
shall be responsible for and pay all sales, use, stamp, transfer, service,
recording, real estate and like taxes or fees, if any, imposed by any
Governmental Authority in connection with the transfer and assignment of the
Company Shares.
11.2. Amendment. This Agreement may be amended, modified or supplemented
---------
but
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only in writing signed by each of the parties hereto.
11.3. Notices. Any notice, request, instruction or other document to be
-------
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) six (6) Business Days after being deposited in the U.S.
mail, certified or registered mail, postage prepaid:
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If to Seller, addressed as follows:
CFW Communications Company
401 Spring Lane
Waynesboro, Virginia 22980
Attention: James S. Quarforth
Facsimile No.: (540) 946-3595
with a copy to:
Hunton & Williams
Bank of America Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: David M. Carter
Facsimile No.: (404) 888-4190
If to Buyer, addressed as follows:
Telegate, Inc.
1600 Wilson Boulevard, Suite 200
Arlington, VA 22016
Attention: Brett Haan
Facsimile No.: (703) 224-1511
with a copy to:
Harris, Wiltshire & Grannis LLP
1200 Eighteenth Street, N.W.
Suite 1200
Washington, D.C. 20036
Attention: Jonathan B. Mirsky
Facsimile No.: (202) 730-1301
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4. Waivers. The failure of a party hereto at any time or times to
-------
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term,
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covenant, representation or warranty.
11.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument.
11.6. Interpretation. The headings preceding the text of Articles and
--------------
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender herein shall not limit any provision of
this Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. Underscored references to Articles, Sections, Subsections or
Schedules shall refer to those portions of this Agreement. Consummation of the
transactions contemplated herein shall not be deemed a waiver of a breach of or
inaccuracy in any representation, warranty or covenant or of any party's rights
and remedies with regard thereto. No specific representation, warranty or
covenant contained herein shall limit the generality or applicability of a more
general representation, warranty or covenant contained herein. A breach of or
inaccuracy in any representation, warranty or covenant shall not be affected by
the fact that any more general or less general representation, warranty or
covenant was not also breached or inaccurate.
11.7. Applicable Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the internal laws of the Commonwealth of
Virginia without giving effect to the principles of conflicts of law thereof.
11.8. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective estates, heirs, legal
representatives, successors and assigns; provided, however, that no assignment
of any rights or obligations shall be made by any party hereto without the
written consent of each other party hereto, except that Buyer may assign its
rights to purchase all or any portion of the Company Shares to one or more of
its Affiliates without the prior written consent of Seller; provided, further
that no such assignment shall (i) limit or affect the Buyer's obligations
hereunder, (ii) impair Seller's rights or remedies, or (iii) contravene or
violate any law applicable to or impede the transaction contemplated herein.
11.9. No Third-Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of the parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, former employees, agents and representatives, and no provision of
this Agreement shall be deemed to confer upon other third parties any remedy,
claim, liability, reimbursement, cause of action or other right.
11.10. Publicity. Prior to the Closing Date, except as required by Law or
---------
the rules of any stock exchange, no public announcement or other publicity
regarding the transactions referred to herein shall be made by Buyer, Seller,
the Company or any of their respective Affiliates, officers, directors,
employees, representatives or agents, without the prior written agreement of
Buyer and Seller, in any case, as to form, content, timing and manner of
distribution or publication; provided, however, that nothing in this Section
shall prevent such parties from having joint discussions regarding such
transactions with those Persons whose approval, agreement or
53
<PAGE>
opinion, as the case may be, is required for consummation of such particular
transaction or transactions.
11.11. Effect of Investigation. Any due diligence review, audit or other
-----------------------
investigation or inquiry undertaken or performed by or on behalf of Buyer or
Seller, as the case may be, shall not limit, qualify, modify or amend the
representations, warranties or covenants of Seller or Buyer, as the case may be,
made or undertaken pursuant to this Agreement, irrespective of the knowledge and
information received (or which should have been received) therefrom by Buyer or
Seller, as the case may be.
11.12. Further Assurances. Upon the reasonable request of Buyer or Seller,
------------------
as the case may be, and at such party's expense, Seller or Buyer, as the case
may be, will on and after the Closing Date execute and deliver to Buyer or
Seller, as the case may be, such other documents, releases, assignments and
other instruments as may be required to carry out the purposes of this
Agreement.
11.13. Severability. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
11.14. Remedies Cumulative. Unless otherwise specified, the remedies
-------------------
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
11.15. Entire Understanding. This Agreement and the Related Agreements set
--------------------
forth the entire agreement and understanding of the parties hereto and supersede
any and all prior agreements, arrangements and understandings among the parties.
11.16. Jurisdiction of Disputes; Waiver of Jury Trial. In the event any
----------------------------------------------
party to this Agreement commences any litigation, proceeding or other legal
action in connection with or relating to this Agreement, any Related Agreement
or any matters described or contemplated herein or therein, with respect to any
of the matters described or contemplated herein or therein, the parties to this
Agreement hereby (a) agree under all circumstances absolutely and irrevocably to
institute any litigation, proceeding or other legal action in a federal court of
competent jurisdiction located within the city of Alexandria, Virginia, (b)
agree that in the event of any such litigation, proceeding or action, such
parties will consent and submit to personal jurisdiction in any such court
described in clause (a) of this Section and to service of process upon them in
accordance with the rules and statutes governing service of process; (c) agree
to waive to the full extent permitted by law any objection that they may now or
hereinafter have to the venue of any such litigation, proceeding or action in
any such court or that any such litigation, proceeding or action was brought in
an inconvenient forum; (d) designate, appoint and direct CT Corporation Systems
as its authorized agent to receive on its behalf service of any and all process
and documents in any legal proceeding in Alexandria, Virginia; (e) agree to
notify the other parties to this Agreement immediately if such agent shall
refuse to act, or be prevented from acting, as agent and, in such event,
promptly to designate another agent in the city of Alexandria, Virginia,
satisfactory to Seller and Buyer, to serve in place of such agent and deliver to
the other parties
54
<PAGE>
written evidence of such substitute agent's acceptance of such designation; (f)
agree as an alternative method of service to service of process in any legal
proceeding by mailing of copies thereof to such party at its address set forth
here in for communications to such party; (g) agree that any service made as
provided herein shall be effective and binding service in every respect; and (h)
agree that nothing herein shall affect the rights of any party to effect service
of process in any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
THE REMAINDER OF THE PAGE IS LEFT BLANK INTENTIONALLY
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
TELEGATE, INC. CFW COMMUNICATIONS COMPANY.
By: By:
-------------------------------- ------------------------------------
Name: Name:
-------------------------------- ------------------------------------
Title: Title:
-------------------------------- ------------------------------------
TELEGATE AG CFW INFORMATION SERVICES, INC.
By: By:
-------------------------------- ------------------------------------
Name: Klaus Harisch Name:
-------------------------------- ------------------------------------
Title: Title:
-------------------------------- ------------------------------------
By:
--------------------------------
Name: Dirk Roesing
--------------------------------
Title:
--------------------------------
56
<PAGE>
Exhibit 99.1
CFW
COMMUNICATIONS
- --------------------------------------------------------------------------------
401 Spring Lane 540 946-3500
Suite 300 FAX: 540 946-3599
PO Box 1990
Waynesboro, VA 22980-7590
For Immediate Release
- ---------------------
Contacts:
CFW Communications Citigate Sard Verbinnen R&B Communications
Michael B. Moneymaker George Sard/Kim Polan J. Allen Layman
540-946-3531 212-687-8080 540-966-2200
CFW Communications TO MERGE With R&B Communications;
WILL ACQUIRE PRIMECO PCS operAtions IN VIRGINIA
Combination Creates A Major Digital PCS Provider And
A Leading Integrated Communications Provider In The Mid-Atlantic;
New Company Will Operate Largest CDMA Network In Region With 8.3 Million POPs
CFW Receives Financing Commitments Totaling $925 Million
From Welsh, Carson, Anderson & Stowe And Morgan Stanley Dean Witter
------------------------------------------------------------------------
Waynesboro AND DALEville, VA, May 18, 2000 -- CFW Communications Company
(NASDAQ: CFWC) and closely held R&B Communications, Inc., two Integrated
Communications Providers (ICPs) in the Mid-Atlantic region, today announced a
binding letter agreement to merge. CFW also announced a definitive agreement to
acquire PrimeCo's PCS licenses, assets and operations in Richmond and Norfolk,
Virginia.
Together, the two transactions will establish the combined company as a
major digital personal communications services (PCS) provider and a leading ICP
in the Mid-Atlantic region.
R&B is an ICP supplying local and long distance telephone service, and
dial-up and high-speed internet service to business and residential customers in
Roanoke, Virginia and the surrounding area as well as in the New River Valley of
Virginia. R&B also holds significant stakes in the Virginia and West Virginia
PCS Alliances, which are
--more--
<PAGE>
CFW Communications/R&B/PrimeCo
2-2-2
partnerships between CFW, R&B and third parties providing digital PCS service to
a potential customer base of 3.6 million people in Virginia and West Virginia.
As a result of the merger, the combined company will have ownership interests in
the PCS Alliances of 91% in Virginia and 78% in West Virginia, enabling it to
consolidate the Alliances' financial results. CFW and R&B also own licenses
covering another 1.8 million people, bringing the total potential digital PCS
customer base to 5.4 million.
CFW will exchange 60.27 shares of its common stock for each outstanding
share of R&B, or an aggregate of 3.7 million CFW shares, valuing this
transaction at approximately $131 million based on CFW's closing price yesterday
of $35.50 per share. The transaction will be a tax-free reorganization accounted
for as a purchase and is subject to the execution of a definitive agreement and
regulatory and shareholder approvals. Holders of a majority of R&B's shares have
agreed to vote in favor of the transaction.
The PrimeCo PCS operations, which are being divested in connection with
Bell Atlantic's pending merger with GTE, include PCS licenses and assets with
more than 86,000 current subscribers and a potential customer base of 2.9
million people in central and eastern Virginia, including Richmond, Norfolk and
the Tidewater region, and in the Outer Banks of North Carolina, a service area
contiguous to the combined company's current PCS service area.
CFW will purchase the PrimeCo PCS operations for a cash payment of $407
million to PrimeCo PCS, assumption of $20 million in lease obligations and
exchange of CFW's ownership interests and assets in two cellular properties. The
transaction is subject to closing of the Bell Atlantic/GTE merger and regulatory
approvals.
With this acquisition, the combined company, which will be renamed at a
later date, will have a digital PCS customer base of over 140,000, and will be
positioned to market its digital PCS services over the largest CDMA network in
its operating region, encompassing a potential customer base of 8.3 million
people.
--more--
<PAGE>
CFW Communications/R&B/PrimeCo
3-3-3
"Together, these complementary strategic transactions will accelerate the
combined company's strategy of becoming a major digital PCS provider in the
Mid-Atlantic region," said James S. Quarforth, Chairman and Chief Executive
Officer of CFW. "The R&B merger also enhances the combined company's position as
a leading ICP in the region by significantly expanding our footprint in local
telephony. We will now have approximately 50,500 ILEC access lines, 13,300 CLEC
access lines and 56,300 internet customers, supported by a fiber-optic network
throughout the region."
CFW and R&B have partnered in the Virginia and West Virginia communications
markets for a number of years, resulting in several joint investments including
ValleyNet, a fiber optic consortium, the Virginia and West Virginia PCS
Alliances and several other digital PCS and LMDS wireless spectrum licenses. The
combined company will also own significant MMDS wireless spectrum licenses
throughout the region.
J. Allen Layman, President and Chief Executive Officer of R&B, commented,
"Our companies have worked together for a long time, and we believe this merger
represents the continuation of our growth strategies. The combination of CFW and
R&B's financial and human resources will offer many benefits to our customers,
employees and shareholders."
Mr. Quarforth will be Chief Executive Officer of the merged company and Mr.
Layman will become President and Chairman of the Board. Carl A. Rosberg,
President and Chief Operating Officer of CFW, will become Executive Vice
President and Chief Operating Officer and Michael B. Moneymaker, Chief Financial
Officer of CFW, will be Chief Financial Officer.
CFW Receives Financing Commitments Totaling $925 Million
Welsh, Carson, Anderson & Stowe (WCAS) will invest a total of $200 million
and affiliates of Morgan Stanley Dean Witter (MSDW) will invest $25 million in
preferred equity in the combined company. Upon receipt of regulatory approval,
WCAS will initially invest $100 million and MSDW will invest $12.5 million in
the form of
--more--
<PAGE>
CFW Communications/R&B/PrimeCo
4-4-4
convertible preferred stock with a conversion price of $41 per share and an
accretion rate of 8.5%. WCAS and MSDW will also receive 500,000 warrants
exercisable at a price of $50 per share. Proceeds from the investment will be
used to fund the continued buildout of CFW's communications network.
Upon closing of the acquisition of the PrimeCo PCS operations, WCAS and
MSDW will invest an additional $100 million and $12.5 million respectively in
the form of convertible preferred stock which, upon receipt of shareholder
approval, will have a conversion price of $45 per share and an accretion rate of
5.5%. Proceeds will be used to partially fund the acquisition.
WCAS and MSDW have also committed to provide $700 million in debt
financing. MSDW will provide $605 million in the form of $325 million in senior
bank debt and $280 million in senior bridge notes. WCAS will provide $95 million
in the form of subordinated debt. Proceeds will be used to complete funding of
the acquisition of the PrimeCo PCS operations, refinance certain debt of both
CFW and the Virginia and West Virginia PCS Alliances, and fund the continued
buildout of the combined company's communications network.
"We are very excited to have world-class firms like Welsh, Carson,
Anderson, & Stowe and Morgan Stanley Dean Witter as partners in our expanding
digital PCS and ICP franchise," said Mr. Quarforth. "Both of these blue-chip
partners have extensive communications experience, market credibility, and
significant capital resources that will greatly enhance our ability to execute
our long-term growth strategy."
"We are very enthusiastic about the opportunity to partner with CFW and R&B
in this series of company-transforming transactions which create a leading ICP
and digital PCS provider in the Mid-Atlantic region," said Anthony J. de Nicola,
a WCAS general partner.
Reflecting the R&B merger and WCAS' substantial equity investment, CFW's
seven-member Board of Directors will be expanded to include two current
directors from R&B and two directors from WCAS: Mr. Layman of R&B; John
Williamson III, President and
--more--
<PAGE>
CFW Communications/R&B/PrimeCo
5-5-5
CEO of RGC Resources; and Anthony J. de Nicola and Lawrence B. Sorrel, general
partners of WCAS.
The R&B merger and the PrimeCo PCS acquisition are both expected to close
in the third quarter of 2000.
Banc of America Securities LLC (BAS) acted as financial advisor to CFW in
connection with the R&B merger and the PrimeCo PCS acquisition. BAS advised CFW,
and MSDW advised WCAS, in connection with the private equity investment.
About CFW Communications
CFW Communications Company, doing business as CFW Intelos and Intelos, is an
Integrated Communications Provider with headquarters in Waynesboro, Virginia.
CFW provides a broad range of products and services to customers in Virginia,
West Virginia, Kentucky and Tennessee including digital PCS, dial-up Internet
access, high-speed data transmission, DSL (high-speed Internet access), and
local telephone service to businesses and long distance telephone services to
business and residential customers. Detailed information about CFW
Communications and Intelos is available at www.cfw.com and www.intelos.com.
About R&B Communications
R&B Communications, Inc. is an Integrated Communications Provider headquartered
in Daleville, Virginia. R&B provides a broad range of products and services to
customers in Roanoke and the surrounding communities and the New River Valley of
Virginia. These services include digital PCS, dial-up Internet access,
high-speed data transmission, DSL, and local telephone service to businesses and
long distance telephone services to business and residential customers. Detailed
information about R&B Communications is available at www.rbnet.com.
About Welsh, Carson, Anderson, & Stowe
Welsh, Carson, Anderson, & Stowe, a New York based private equity firm founded
in 1979, has organized 11 partnerships with total capital of $8 billion. WCAS
focuses on three industries: telecommunications, information services and
healthcare.
About Morgan Stanley Dean Witter
Morgan Stanley Dean Witter & Co. is a pre-eminent global financial services firm
that maintains leading market positions in each of its three business segments -
Securities, Asset Management and Credit Services. Morgan Stanley Dean Witter
combines global strength in investment banking and institutional sales and
trading with strength in providing full-service and online brokerage services,
investment and global asset
--more--
<PAGE>
CFW Communications/R&B/PrimeCo
6-6-6
management services and, primarily through its Discover Card brand, quality
consumer credit products. Morgan Stanley Dean Witter provides its products and
services to a large and diversified group of clients and customers, including
corporations, governments, financial institutions and individuals.
Forward-looking statements made by the Companies are based on a number of
assumptions, estimates and projections. These statements are not guarantees of
future performance and involve risks and uncertainties and any significant
deviations from these assumptions could cause actual results to differ
materially from those in forward-looking statements. The Companies undertake no
obligation to revise or update such statements to reflect current events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ CFW'S REGISTRATION STATEMENT ON
FORM S-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS RELATING TO THE MERGER TRANSACTION DESCRIBED ABOVE, WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. WHEN THESE AND OTHER
DOCUMENTS RELATING TO THE TRANSACTION ARE FILED WITH THE COMMISSION, INVESTORS
AND SECURITY HOLDERS MAY OBTAIN A FREE COPY AT THE COMMISSION'S WEB SITE AT
WWW.SEC.GOV. THE DOCUMENTS FILED WITH THE COMMISSION BY CFW MAY ALSO BE OBTAINED
FOR FREE FROM CFW BY DIRECTING A REQUEST TO CFW COMMUNICATIONS COMPANY, P. O.
BOX 1990, WAYNESBORO, VIRGINIA 22980, ATTN: INVESTOR RELATIONS, TELEPHONE: (540)
946-3500. CERTAIN OF THESE DOCUMENTS MAY ALSO BE AVAILABLE ON CFW'S WEBSITE AT
WWW.CFW.COM OR WWW.INTELOS.COM. WHEN THEY BECOME AVAILABLE, READ THE DEFINITIVE
REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE
MAKING A DECISION CONCERNING THE MERGER.
--end--
<PAGE>
Exhibit 99.2
CFW
COMMUNICATIONS
- --------------------------------------------------------------------------------
401 Spring Lane 540 946-3500
Suite 300 FAX: 540 946-3599
PO Box 1990
Waynesboro, VA 22980-7590
Contact: Michael B. Moneymaker
Vice President & CFO
CFW Communications
Phone: (540) 946-3531
Fax: (540) 946-3595
For Immediate Release
- ---------------------
CFW Communications To Sell Directory Assistance
Operations to Telegate AG
WAYNESBORO, Va. - CFW Communications (NASDAQ: CFWC) announced today that
telegate AG, a provider of directory assistance services throughout Germany,
will purchase the Company's directory assistance operations for $35.5 million.
The purchase price consists of $32.0 million in cash and $3.5 million in stock
of telegate AG, a public company traded on the Frankfurt Stock Exchange, in
exchange for the Company's ownership interest in CFW Information Services Inc.
(CFW ISI), a wholly owned subsidiary. CFW ISI provides directory assistance (DA)
for several communications companies, and responds to an average of 180,000
directory assistance requests every business day. Services are provided via
three regional call centers in Waynesboro, Clifton Forge, and Winchester, VA.
The Company will retain ownership of the three call center buildings and lease
the facilities to telegate AG. Closing on the sales transaction will occur after
receipt of customary regulatory approvals.
James S. Quarforth, Chairman and CEO of CFW Communications, said, "This
transaction is consistent with the Company's integrated communications
-- more --
<PAGE>
CFW COMMUNICATIONS/TELEGATE AG
2-2-2
provider (ICP) strategy, and the re-shaping of Company resources to focus on the
development and deployment of key strategic services, including digital PCS,
competitive local telephone, Internet, and high speed data services. Proceeds
from this sale will enable other strategic opportunities that more closely align
with our regional ICP strategy." He continued, "telegate has solid directory
assistance experience in Europe, and we are pleased that they will be using the
CFW ISI infrastructure to launch their initial service operations in the United
States."
telegate AG was founded in 1996, and currently has more than 2,500
employees. The company provides directory assistance and other value-added DA
services from 8 call centers throughout Germany. "This is obviously an important
milestone for telegate" stated Dr. Klaus Harisch, co-founder and CEO. "This
acquisition represents our first entry into the U.S. market, and provides for a
stable base of operations, excellent facilities, and employees with a proven
track record. We are very excited about this opportunity."
CFW Communications (NASDAQ: CFWC), doing business as CFW Intelos and
Intelos, is an integrated communications provider with headquarters in
Waynesboro, Virginia. CFW provides a broad range of products and services to
customers in Virginia, West Virginia, Kentucky and Tennessee including digital
PCS, dial-up Internet access, high-speed data transmission, DSL (high-speed
Internet access), and local telephone and long distance telephone services.
Detailed information about CFW Communications and Intelos is available online at
www.cfw.com and www.intelos.com.
- ----------- ---------------
###
