<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 1999
CONTINENTAL CHOICE CARE, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
New Jersey 0-24542 22-3276736
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(State or other jurisdiction of incorporation) Commission File Number (IRS Employer Identification No.)
</TABLE>
P.O. Box 99, Florham Park, NJ 07932-0099
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 593-0500
N/A
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(Former name or former address, if changed since last report)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
- ----------------------
On May 15, 1999, Continental Choice Care, Inc., a New Jersey corporation
("CCCI"), entered into a stock purchase agreement (the "Stock Purchase
Agreement") with Pine Tree Telephone and Telegraph Company, a Maine corporation
("Pinetree") and Mr. Tim Hutchison, the 95% stockholder of Pinetree (the
"Seller") to purchase from the Seller all of the Pinetree capital stock owned by
the Seller.
Upon the terms and subject to the conditions set forth in the Stock Purchase
Agreement, at the Closing (as defined in the Stock Purchase Agreement) CCCI will
purchase, for cash consideration of $14,225.74 per share, subject to adjustment,
all of the capital stock of Pinetree held by the Seller, and any shares offered
by the minority shareholders on identical price terms. The Seller owns 2,029 of
the 2,144 issued and outstanding shares of common stock of Pinetree. CCCI
<PAGE>
intends to finance the purchase price with proceeds derived from bank debt and
the issuance of additional shares of CCCI capital stock.
Upon execution of the Stock Purchase Agreement, CCCI deposited the sum of
$915,000 (the "Deposit") into escrow with the Maine Bank & Trust Company, who
shall act as escrow agent (the "Escrow Agent") with respect to such deposit,
pursuant to a certain escrow agreement (the "Escrow Agreement") entered into by
the Seller, CCCI and the Escrow Agent. The Deposit shall be forfeited by CCCI in
the event the transaction does not close provided the transaction's failure to
close is not due to certain reasons articulated in the Stock Purchase Agreement,
including but not limited to CCCI's failure to obtain regulatory approval for
the transfer of the Pinetree business from the Seller to CCCI.
At Closing, CCCI shall deliver to the Seller the Deposit, plus the adjusted
aggregate purchase price less the sum of $2,900,000 (the "Closing Escrow") which
CCCI shall deposit into escrow to be released to the Seller upon the first
anniversary of the Closing, after adjustments are made to the Purchase Price, if
adjustments are necessary. The Purchase Price shall be adjusted in certain
instances, including the following: (i) to reflect capital expenditures made by
Pinetree prior to Closing, (ii) upon settlement of litigation or (iii) in the
event of a breach, warranty or covenant by any of the parties under the Stock
Purchase Agreement.
The Closing shall occur subsequent to CCCI obtaining written notification
of approval of the Seller's transfer of ownership by the Public Utilities
Commission of the State of Maine ("PUC"). CCCI believes that the regulatory
approval process could take up to six months or more. The parties to the Stock
Purchase Agreement are obligated to consummate the transactions contemplated
thereby, unless one of two specific events occurs: (i) CCCI fails, after
exhaustion of the appeals process, to obtain the requisite regulatory approval
of the PUC, or (ii) Pinetree becomes subject to litigation with a damage claim
in excess of $1 million. In effect, therefore, the Stock Purchase Agreement does
not give the parties a right to terminate (and therefore avoid closing) in the
event of a breach, but rather, compels a Closing by providing an adjustment to
the Purchase Price as necessary.
CCCI has agreed to employ the Seller pursuant to a certain employment
agreement to commence upon closing until the Seller reaches the age of sixty-
five (the "Employment Agreement"). Pursuant to such employment agreement, the
Seller will provide various management services to the Company's management. As
consideration for performing such services, the Seller will receive an annual
salary of $20,000, the use of an automobile and other medical and retirement
benefits.
CCCI's rights as purchaser under the Stock Purchase Agreement were obtained
from TelaLink Network, Ltd. ("TelaLink") pursuant to a letter agreement between
CCCI and TelaLink. CCCI and TelaLink are parties to a merger agreement the
terms of which were described in a current report on Form 8-K event dated
February 5, 1999.
A copy of the Stock Purchase Agreement, the Employment Agreement and Escrow
Agreement are filed herewith as Exhibits 2.1, 4.1 and 4.2 respectively, and are
incorporated herein
<PAGE>
by reference. The foregoing descriptions are qualified in their entirety by
reference to the full text of such agreements.
Item 7. Financial Statements and Exhibits.
- ------------------------------------------
(a) Financial statements of business acquired.
(4) Financial statements of Pine Tree Telephone and Telegraph Company will
be filed by amendment to this Form 8-K not later than sixty (60) days
from the filing of this report.
(b) Pro forma financial information.
(2) Pro forma financial information regarding Pine Tree Telephone and
Telegraph Company will be filed by amendment to this Form 8-K not
later than sixty (60) days from the filing of this report.
(c) Exhibits.
Exhibit 2.1 Stock Purchase Agreement dated as of May 15, 1999, among CCCI,
Pine Tree and Tim Hutchison.
Exhibit 4.1 Employment Agreement between CCCI and Tim Hutchison.
Exhibit 4.2 Escrow Agreement.
SIGNATURE
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.
CONTINENTAL CHOICE CARE, INC.
(Registrant)
Date: May 28, 1999 By: /s/ Steven L. Trenk
______________________________________
Steven L. Trenk, President
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
By and Among
Continental Choice Care, Inc.
("Purchaser")
Pine Tree Telephone and Telegraph Company
(the "Company")
and
Tim Hutchison,
Stockholder of
Pine Tree Telephone and
Telegraph Company
May 15, 1999
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I PURCHASE AND SALE OF STOCK................................................ 1
1.1 Purchase and Sale of Shares of Company Stock.................................. 1
--------------------------------------------
1.2 Purchase Price for Shares of Company's Stock.................................. 1
--------------------------------------------
ARTICLE II CLOSING.................................................................. 5
2.1 Date and Time of Closing...................................................... 5
------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................... 5
3.1 Representations and Warranties of the Company and the Stockholders............ 5
------------------------------------------------------------------
(a) Organization; Subsidiaries.................................................. 6
--------------------------
(b) Capitalization.............................................................. 6
--------------
(c) Financial Statements........................................................ 6
--------------------
(d) Absence of Certain Changes or Events........................................ 6
------------------------------------
(e) Litigation.................................................................. 8
----------
(f) Books and Records........................................................... 8
-----------------
(g) Accuracy of Information Furnished........................................... 8
---------------------------------
3.2 Representations and Warranties of Purchaser................................... 9
-------------------------------------------
(a) Authorization............................................................... 9
-------------
(b) Organization................................................................ 9
------------
(c) Accuracy of Information Furnished........................................... 10
---------------------------------
3.3 Survival of Representations and Warranties.................................. 10
------------------------------------------
ARTICLE IV COVENANTS................................................................ 10
4.1 Covenants of the Company and the Stockholders................................. 10
---------------------------------------------
(a) Notification................................................................ 10
------------
(b) Conduct of Business; Certain Covenants...................................... 11
--------------------------------------
(c) Best Efforts and Cooperation; Further Assurances............................ 12
------------------------------------------------
(d) Access to Additional Agreements and Information............................. 12
-----------------------------------------------
(e) Non-Competition and Non-Solicitation........................................ 13
------------------------------------
(f) Confidential Information.................................................... 13
------------------------
4.2 Covenants of Purchaser........................................................ 14
(a) Notice of Defaults.......................................................... 14
------------------
(b) Third Party Consents........................................................ 14
--------------------
(c) Best Efforts and Cooperation; Further Assurances............................ 14
------------------------------------------------
4.4 Publicity..................................................................... 14
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ARTICLE V CONDITIONS................................................................ 15
5.1 Conditions to Obligations of Purchaser........................................ 15
-------------------------------------
(a) Litigation.................................................................. 15
----------
ARTICLE VI INDEMNIFICATION AND CLAIMS............................................... 15
6.6 Acknowledgment by Purchaser................................................... 16
---------------------------
ARTICLE VII TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT................... 16
7.3 Termination by Operation of Law............................................... 16
-------------------------------
ARTICLE VIII MISCELLANEOUS.......................................................... 16
8.1 Fees and Expenses............................................................. 16
-----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.3 Assignment........................................................ 16
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8.4 Burden and Benefit................................................ 17
------------------
8.5 Brokers........................................................... 17
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8.6 Entire Agreement.................................................. 17
----------------
8.7 Governing Law..................................................... 17
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8.8 Notices........................................................... 17
-------
8.9 Counterparts...................................................... 18
------------
8.10 Rights Cumulative................................................. 18
-----------------
8.11 Severability of Provisions........................................ 18
--------------------------
8.12 Headings.......................................................... 19
--------
8.13 Remedies.......................................................... 19
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</TABLE>
ii
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
TO
STOCK PURCHASE AGREEMENT
EXHIBITS:
Exhibit 3.1(c): Financial Statements
SCHEDULES:
Schedule 1.3 Non-performing Assets to be distributed
Schedule 1.4 Escrow Agreement
Schedule 1.5 Escrow Agreement
Schedule 1.6 1999 Capital Budget
Schedule 3.1(d) Certain Changes
Schedule 3.1(m) Year 2000 Compliance
Schedule 3.2(a) Corporate Authorization
Schedule 9.2 Employment Agreements
Schedule 9.4 Tim Hutchison Employment Agreement
ADDITIONAL AGREEMENTS
Agreement Regarding NECA Liability
Agreement Regarding West Gray Generator
Agreement Regarding Books and Records of Northeast Cellular Telephone,
LP.
iii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of this __ day of May, 1999, by and among Continental Choice Care, Inc., a New
Jersey corporation (the "Purchaser"), Pine Tree Telephone and Telegraph Company,
a Maine corporation (the "Company") and Tim Hutchison, (the "Stockholder"),
majority stockholder of the Company.
WITNESSETH:
WHEREAS, the Stockholder owns 2,029 of the 2,144 issued and outstanding
shares of capital stock of the Company and, as such, Stockholder desires to
sell, assign, transfer and convey to the Purchaser all of Stockholder's right,
title and interest in and to such shares of capital stock of the Company
pursuant to the terms and subject to the conditions set forth in this Agreement;
WHEREAS, it is the desire of the Purchaser to purchase, obtain and acquire
from the Stockholder all of Stockholder's right, title and interest in and to
the issued and outstanding shares of capital stock of the Company pursuant to
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Shares of Company Stock. Upon the terms set forth
--------------------------------------------
in this Agreement, the Stockholder hereby agrees that at the Closing (as
hereinafter defined in Section 2.1), the Stockholder shall sell, assign,
transfer and convey to the Purchaser, and the Purchaser hereby agrees to
purchase, obtain and acquire from the Stockholder, all of the Stockholder's
right, title and interest in and to 2,029 shares (the "Stockholder's Shares") of
the issued and outstanding shares of capital stock of the Company (the
"Company's Stock"). The Stockholder hereby further agrees, upon the terms and
subject to the conditions set forth herein, to transfer and deliver to the
Purchaser at the Closing (as hereinafter defined in Section 2.1) certificates,
properly endorsed in blank or accompanied by a properly executed stock power,
representing the Stockholder's Shares.
1.2 Purchase Price for the Stockholder's Shares. In consideration of
-------------------------------------------
and in exchange for the Stockholder's sale, assignment, transfer and conveyance
of the Stockholder's Shares, the Purchaser hereby agrees to pay the Stockholder
cash consideration in the amount of $14,225.74 per share
<PAGE>
("Purchase Price per Share"). The Purchase Price per Share multiplied by the
number of outstanding shares of the Company's capital stock is referred to
herein as the "Purchase Price". The Purchase Price shall be subject to certain
adjustments set forth in Sections 1.3, 1.6 and 1.7 hereof, and such adjustments
shall be used to recalculate the Purchase Price per Share at or after the time
of closing.
1.3 Pre-Closing Distribution. The Company will, at or prior to the
------------------------
Closing, distribute to its stockholders its accumulated cash, the non-performing
assets listed on Schedule 1.3, and any securities held. Schedule 1.3 may be
amended to include additional non-regulated, non-operating assets until the date
of Closing, but shall not be amended to include additional real estate. Such
distribution shall not affect the Purchase Price. At the Closing, the Purchase
Price shall be increased by an amount equal, at the Effective Date, to the
excess of the Company's current assets (inventory shall not be considered a
current asset for this purpose) over the net of current liabilities less accrued
pension expense after payment of actuaries and other cash expenses, all as
classified in the Company's Financial Statement (as hereafter defined).
1.4 Deposit Escrow. The Purchaser shall, upon the execution hereof,
--------------
deposit with a mutually acceptable escrow agent the sum of $915,000 to secure
the Stockholder's rights hereunder, subject to an Escrow Agreement attached
hereto as Schedule 1.4. Such funds shall be treated as a deposit against the
full Purchase Price to be paid by Purchaser and shall be forfeited by Purchaser
in the event that the closing does not occur in accordance with the terms hereof
as a result of Purchaser's actions or inactions, including, but not limited to
nonpayment. The Deposit Escrow shall be released to the Stockholder at Closing
or, if no Closing occurs, on the tenth business day following the date upon
which the Closing would have occurred under Section 2.1 hereof, unless and
solely to the extent that litigation has been filed by the Purchaser or its
successor in interest hereunder claiming that the Deposit Escrow or a portion
thereof is not due to the Stockholder under the terms hereof, in which case the
Deposit Escrow shall be held by the Escrow Agent pending a resolution of such
litigation. The Escrow Agent shall deposit the Deposit Escrow in a Vanguard
municipal money market fund or similar investment vehicle mutually agreed upon
between the Stockholder and the Purchaser. All interest earned upon the Deposit
Escrow shall be the property of the Stockholder unless a court of competent
jurisdiction holds that the Stockholder's right to the Deposit Escrow has been
forfeited by Stockholder's actions or inactions. The Escrow Agent's fee shall be
split between the Purchaser and the Stockholder. Nothing in this Section shall
affect the Stockholder's right to specific performance and/or to equitable
remedies, in addition to all rights under this Agreement. The Deposit Escrow
shall be returned to Purchaser under the circumstances described in Section 5.1
(a). Unless Section 3.2(d) establishes otherwise, the Deposit Escrow shall be
returned to Purchaser in the event the Stockholder interferes with the
Purchaser's attempt to obtain the requisite regulatory approvals and the P.U.C.
denies consent as a result of such interference. If Purchaser interferes with
the regulatory approval process, and the P.U.C. denies consent as a result of
such interference, then Purchaser shall forfeit the Deposit Escrow.
1.5 Closing Escrow. At the Closing, the Purchaser shall deposit $2,900,000
--------------
of the Purchase Price with a mutually acceptable escrow agent to secure the
performance of the obligations of the Stockholder hereunder, subject to an
Escrow Agreement attached hereto as Schedule 1.5. Such escrow shall be released
to the Stockholder upon the first anniversary of the Effective Date as described
in Section 2.1 (subject to post-closing adjustments to the Purchase Price under
the terms hereof) unless and solely to the extent that litigation has been filed
by the Purchaser or its successor in interest
2
<PAGE>
hereunder claiming that a portion of the Closing Escrow is due to Purchaser as
an adjustment to the Purchase Price hereunder or in consequence of a material
breach hereof, in which case the Escrow Agent shall hold such portion pending a
resolution of such litigation. The Escrow Agent shall deposit the Closing Escrow
in a Vanguard municipal money market fund or similar investment vehicle mutually
agreed upon between the Stockholder and the Purchaser. All interest earned upon
the Closing Escrow shall be the property of the Stockholder unless and to the
extent that a court of competent jurisdiction holds that the Stockholder's right
to a portion of the Closing Escrow has been forfeited by Stockholder's actions,
or the parties agree to a pro-ration. The Escrow Agent's fee shall be split
between the Purchaser and the Stockholder. Nothing in this Section shall affect
the Stockholder's right to specific performance and/or to equitable remedies, in
addition to all rights under this Agreement.
1.6 Capital Expenditure. The Purchase Price shall be increased to reflect
-------------------
any capital expenditures made by the Company during the period commencing on
January 1, 1999 and ending at the Effective Date. Purchaser hereby approves the
capital expenditure budget set forth on Schedule 1.6 hereof. Any material
increases in such budget must be approved by Purchaser, with such approval not
to be unreasonably withheld or delayed. Any depreciation which is, or normally
would be, booked during the period commencing on January 1, 1999 and ending at
the Effective Date shall be deducted from the Purchase Price.
1.7 Other Price Adjustments.
-----------------------
(a) Subject to Section 1.7(b), any breach of a representation or
warranty (or, in the case of a covenant, a breach of such
covenant) shall be cured as follows:
(1) an asset, debt, or non-continuing expense or loss (or any
percentage of capital stock of the Company to be conveyed
hereby) which is missing (other than assets distributed or
missing as the result of transactions contemplated hereby)
or incorrectly reported shall be replaced, or the Purchase
Price shall be adjusted (upward or downward, as applicable)
to reflect the replacement value of such asset.
(2) A breach of representation, warranty or covenant by
Stockholder hereunder which has the effect of reducing
earnings, revenue or EBITDA of the Company on a continuing
basis, shall be cured by reducing the Purchase Price by an
amount equal to the annual effect of such breach on EBITDA
multiplied by 9.5.
(3) a misrepresentation (or, in the case of a covenant, a breach
of such covenant) which is not readily subject to a
definable monetary cure shall be cured by specific
performance, or if not so curable, shall be waived by the
other party if the breach or misrepresentation is not
material. A material, uncurable misrepresentation or breach
of covenant which is not subject to monetary cure shall be
resolved in an equitable manner after Closing, by payment to
Stockholder in the event that the misrepresentation or
breach is by Purchaser, and by adjustment to the Purchase
Price in the event that the misrepresentation or breach is
by Stockholder.
3
<PAGE>
(4) Under no circumstance shall NECA accruals or estimated
liabilities for the year 1999 give rise to an adjustment in
the Purchase Price.
(5) Any customer billing accounts receivable which are held by
the Company at the Effective Date and are, reasonably and in
accordance with past Company practices, written off by the
Company during the year following the effective time of
Closing as uncollectable shall give rise to a reduction in
the Purchase Price to the extent that the face value of the
customer billing accounts receivable so written off as
uncollectable exceeds two percent (2%) of the face value of
the Company's total customer billing accounts receivable at
the Effective Date. The amount of such Purchase Price
adjustment shall be reduced by the amount of any accounts
receivable written off by the Company prior to the Closing
and subsequently collected by the Company during the year
following the Effective Date.
(6) The Purchase Price shall be reduced by the amount of any
adverse ruling or settlement paid by the Company in
consequence of litigation initiated after the date hereof,
provided that in the case of a settlement of litigation, the
Company has received the prior written consent of the
Stockholder to such settlement. Prior to Closing, Purchaser
shall have appointed an attorney-in-fact to act on
Stockholder's behalf under this Section 1.7(a)(6) in the
event of Stockholder's absence or other inability to
consent.
(7) All rights of any party to any additional Purchase Price
adjustments shall be limited to those of which notification
was made prior to the first anniversary of the Effective
Date.
(b) Stockholder or Purchaser, as appropriate, shall be obligated to
cure the net effect of offsetting damages under 1.7(a), provided
that the damages from such breaches by one party exceed $50,000,
and acknowledge that Purchaser or Stockholder has the right to
obtain specific performance of any and all of the terms of this
Agreement. This Agreement is to be interpreted so as to compel
both parties to proceed to Closing, and to rectify any breach or
misrepresentation through specific performance or by adjustment
of the Purchase Price.
Nothing in this Section 1.7 shall affect any rights of Stockholder to
the Deposit Escrow pursuant to the terms of Section 1.4 .
4
<PAGE>
ARTICLE II
CLOSING
2.1 Date and Time of Closing. The closing (the "Closing") shall take place
------------------------
at 15 Shaker Road, Gray, ME, or at such other place as shall be mutually
agreeable to the parties hereto. The Closing shall take place, and the
transactions contemplated hereby shall be effective as of 12:01 AM on the first
day following the end of the calendar quarter (provided that the Closing takes
place, the "Effective Date") during which the Public Utilities Commission of the
State of Maine ("P.U.C.") gives written notification that the transfer of
ownership of Stockholder's shares contemplated hereby is approved, provided that
if such notification is given within 10 business days of the end of the quarter,
then the Closing shall be extended until a date ten business days after such
notification, and in such case, the transactions contemplated hereby shall be
effective as of the end of the aforementioned quarter. On the date fourteen (14)
days following the completion and delivery of a post-Closing audit reflecting
the Company's condition and performance through the end of the quarter in which
notification was received, performed by the firm of Baker, Newman and Noyes (the
cost of which shall be split equally between the Purchaser and the Stockholder)
the Purchase Price shall be adjusted based on such audit, and adjustments shall
be made to the Purchase Price as follows: appropriate deductions from the
Closing Escrow or additional payment to the Stockholder shall then be made. If
the parties are in agreement as to the amount of such post-Closing adjustment,
they shall mutually instruct the Escrow Agent as to the net payment to Purchaser
(in the event of a reduction in the Purchase Price) or Purchaser shall wire or
otherwise pay to Stockholder the additional funds payable (in the event of an
increase in the Purchase Price). In the event of both upward and downward
adjustments to the Purchase Price, the adjustments shall be netted against each
other to determine a single net payment.
2.2 Incapacity of Stockholder. If Stockholder shall be incapacitated,
--------------------------
dead, or otherwise unable to perform his obligation to Close at the time of
Closing and has not and is then unable or unavailable to appoint a
representative to act as his attorney-in-fact, Stockholder hereby specifically
authorizes Purchaser to request a judge of competent jurisdiction to appoint a
representative for Stockholder to execute the requisite documents as attorney in
fact on Stockholder's behalf. The Closing shall be postponed for only so long as
is necessary to allow such attorney in fact, whether appointed by Stockholder or
by a judge, to satisfy any legally or contractually imposed responsibilities to
locate Stockholder and review the terms of the transaction prior to execution of
documents on behalf of the Stockholder.
2.3 All actions required to be taken at Closing shall be deemed to occur
simultaneously.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company and the Stockholder.
-----------------------------------------------------------------
Although both parties understand that the Stockholder and the Company may not
possess specific personal knowledge as to the following, the Stockholder and the
Company represent and warrant to the Purchaser as follows:
5
<PAGE>
(a) Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of Maine.
(b) Capitalization. The Company has authorized (i) 2,500 shares of
--------------
common stock, par value $10 per share, and (ii) 2,500 shares of preferred stock,
par value $10 per share. The number of issued and outstanding shares of capital
stock as of the date hereof of the Company is 2,144 shares of common stock. The
Company has no shares of its preferred stock issued or outstanding as of the
date hereof. The Company and Stockholder hereby represent and warrant that
Stockholder is the sole legal and beneficial owner of 2,029 shares of the
Company's Stock. Stockholder represents and warrants that the issued and
outstanding shares of the Company's Stock owned by Stockholder are owned, in
each case, free of preemptive rights and free and clear of all adverse claims,
liens, mortgages, charges, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever. As of the date hereof, there
are no options, warrants, calls, convertible securities or commitments of any
kind whatsoever relating to the shares of the Company's Stock to be acquired by
the Purchaser pursuant hereto or any of the unissued shares of capital stock of
the Company, and there are no voting trusts, voting agreements, stockholder
agreements or other agreements or understandings of any kind whatsoever which
relate to the voting of the capital stock of the Company. At the time of
Closing, there will be no unpaid dividends due to the stockholders who were
stockholders of record prior to the Effective Date.
(c) Financial Statements. The Company has previously delivered to the
--------------------
Purchaser audited balance sheets of the Company as of December 31, 1997 and
December 31, 1998, (the "Balance Sheets") and the related audited statements of
operations and retained earnings and cash flows for the years ended December 31,
1997 and December 31, 1998 (all of the foregoing, including the notes thereto,
are collectively referred to herein as the "Financial Statements") accompanied
by the corresponding relevant opinions and reports of the Company's independent
auditors as of the same dates and for the same periods. The Financial Statements
present fairly, in all material respects, the financial position of the Company
as of the respective dates indicated and the results of operations and cash
flows of the Company for the respective periods indicated in conformity with
generally accepted auditing standards applied on a consistent basis. The Company
has no material liabilities (fixed or contingent, including without limitation
any tax liabilities due or to become due) which are not fully reflected or
provided for on the Company Financial Statements. The parties understand and
agree that the NECA accrual in the approximate amount of $111,000 booked in the
first quarter of 1999 rather than in 1998 could have been booked in 1998, and
agree that such treatment shall not be deemed a breach of Stockholder's
representations and warranties hereunder, nor will it give rise to any
adjustment to the Purchase Price, other than in consequence of the operation of
Section 1.3 hereof. The Financial Statements are attached hereto as Exhibit
3.1(c).
(d) Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 3.1(d) and except as expressly set forth in this Agreement, the Company
has not, since December 31, 1998:
(i) issued, sold, granted or contracted to issue, sell or grant
any of its stock, notes, bonds, other securities or any option to purchase any
of the same;
6
<PAGE>
(ii) incurred any damage, destruction or any other loss to any
of its property or assets in an aggregate amount exceeding One Hundred Thousand
Dollars ($100,000) whether or not covered by insurance, but not including damage
to property which the Company has the right to distribute prior to closing under
the terms hereof;
(iii) Other than generally applicable regulatory, legislative or
governmental acts, rulings or other activities, experienced any material adverse
change in the business, assets, operations, earnings or financial condition of
the Company or experienced or has knowledge of any event which is likely to have
a material adverse effect on the business, assets, operations, earnings, or
financial condition of the Company;
(iv) permitted the occurrence or continuance of any material
default under any agreement to which the Company is a party;
(v) sold or entered into any contract to sell or grant any
option to purchase, any of its assets other than in the ordinary course of
business;
(vi) created, assumed or permitted to exist any existing lien,
pledge, security interest, encumbrance or mortgage of any kind whatsoever on any
of its properties or assets other than:
(A) liens existing on the date hereof which the Company
or the Stockholder previously disclosed to the Purchaser or which are otherwise
permitted hereby;
(B) any mortgage, pledge, lien or other security interest
in or upon any property or asset acquired by the Company in the ordinary course
of business, which mortgage, pledge, lien or other security interest was entered
into contemporaneously with such acquisition to secure or provide for the
payment of any part of the purchase price therefor, or the assumption by the
Company of any mortgage, pledge, lien or other security interest in or upon any
property or asset acquired by the Company which mortgage, pledge, lien or other
security interest existed at the time of such acquisition; provided that, each
such mortgage, pledge, lien or other security interest does not extend to or
cover any property or asset of the Company other than such property or asset so
acquired;
(C) any mortgage, pledge, lien or other security interest
created for the sole purpose of renewing or refunding any mortgage, pledge, lien
or other security interest allowed under clause (B) above; provided that, the
principal amount of indebtedness secured thereby does not exceed the principal
amount of indebtedness so secured at the time of such renewal or refunding and
that such renewed or refunded mortgage, pledge, lien or other security interest
did not extend the mortgage, pledge, lien or other security interest renewed or
refunded to any additional property or asset;
(D) the pledge by the Company of any property or asset as
security required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege, license or right;
and
7
<PAGE>
(E) liens for taxes, assessments and governmental charges
or levies imposed upon the Company or upon its income or profit, or upon any of
its property or assets if the same was not at the time due or is or was being
contested in good faith in appropriate proceedings;
(e) Litigation. Except for a threat from the editor of the "Better
----------
Phone Book," and Rate Case docket no. 98-901, there is no action, suit,
proceeding or investigation specifically targeted to the Company pending or, to
the best knowledge of the Stockholder, threatened, which is likely to restrict
the Stockholder's ability to perform his obligations hereunder or is likely to
have a material adverse effect on the business, assets, operations, earnings,
prospects or condition (financial or otherwise) of the Company. The Stockholder
(and not the Company), represents and warrants that to the best of his knowledge
there are no grounds for or facts, events or circumstances which are likely to
form the basis of any such action that could cause or result in any such action,
suit, proceeding or investigation or which is probable of assertion. Neither the
Company nor the Stockholder is in default in respect of any judgment, order,
writ, injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission, department or
instrumentality which is likely to have a material adverse effect on the
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company.
(f) Books and Records
-----------------
(i) The books of account and other financial records of the
Company are complete and correct and have been maintained in accordance with
good business practices.
(ii) The minute books of the Company, as previously made
available to the Purchaser and its counsel, contain accurate records of all
meetings of the Company's board of directors (including any committees) and its
stockholders since the date of the Company's incorporation and accurately
reflect all other material corporate action of the Company's board of directors
(including any committees) and stockholders of the Company since the date of the
Company's incorporation.
(iii) The Company will provide the Purchaser access to all books
and records referred to in clauses (i) and (ii) above and all such books and
records shall be delivered to the Purchaser at the Closing, with the exception
of the minute books, which shall be provided to Purchaser in photocopy form.
Stockholder agrees to make originals of the minute books available if any third
party requires review of original minute books rather than photocopies.
(g) Accuracy of Information Furnished. No statement by the Company or
---------------------------------
the Stockholder set forth herein or in the exhibits or the schedules hereto, and
no statement set forth in any certificate or other instrument or document
required to be delivered by or on behalf of the Company or the Stockholder
pursuant hereto or in connection with the consummation of the transactions
contemplated hereby, contained, contains or will contain any untrue statement of
a material fact, or omits, omitted or will omit to state any material fact which
is necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
8
<PAGE>
(h) Authorization and Corporate Power. All corporate action on the
---------------------------------
part of the Company necessary for entry into and performance of this Agreement
will be taken prior to the Closing. To the extent that the Company is bound
hereby, this Agreement is the valid and binding obligation of the Company, and
the performance of this Agreement will not result in any violation or breach of
any law or agreement by which it is bound.
(i) Contracts. The Company has made all material contracts available
---------
to the Purchaser for inspection, and the Company is in material compliance with
all such contracts.
(j) Title to Properties; Liens and Encumbrances. The Company has
-------------------------------------------
good, valid and marketable title to all its material properties and assets, real
personal and mixed, tangible or intangible, all of which are free from all
liens, security interests, encumbrances or charges, except as shown on the
Company Financial Statements. The Company is not a lessee of any real or
personal property.
(k) Employee Benefit Plans. The Company has not knowingly violated
----------------------
any laws governing, and is not liable for any payments due under the Company's
employee benefit plans as a result of a violation of such laws.
(l) Environmental Matters. The Company and the Stockholder represent
---------------------
that to the best of Stockholder's knowledge (but not to the Company's
knowledge), the Company is not in violation of any laws or regulations relating
to the protection of the environment.
(m) Year 2000 Compliance. The Stockholder and the Company represent
--------------------
and warrant that the description of the Company's year 2000 compliance set forth
as Schedule 3.1(m) is correct and accurate in all material respects as of the
date hereof.
3.2 Representations and Warranties of Purchaser. The Purchaser represents
-------------------------------------------
and warrants to the Company and the Stockholder as follows:
(a) Authorization. The execution, delivery and performance of this
-------------
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of the
Purchaser, and such action is not inconsistent with the bylaws of the Purchaser.
The Purchaser has taken all necessary corporate action and has all the necessary
corporate power to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by an officer of the Purchaser on its behalf. Because this Agreement
is the valid and binding obligation of the Company and Stockholder, this
Agreement is also the valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as limited by law or
in equity. A copy of such corporate resolutions is attached hereto as Schedule
3.2(a).
(b) Organization. The Purchaser is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of New Jersey.
9
<PAGE>
(c) Accuracy of Information Furnished. No statement by the Purchaser
---------------------------------
set forth herein or in the exhibits or the schedules hereto, and no statement
set forth in any certificate or other instrument or document required to be
delivered by or on behalf of the Purchaser pursuant hereto or in connection with
consummation of the transactions contemplated hereby, contained, contains or
will contain any untrue statement of a material fact, or omitted, omits or will
omit to state any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(d) Financial Ability of Purchaser. Purchaser will have the financial
-------------------------------
means to effect the Closing and to operate the Company prudently afterwards. In
the event that the P.U.C. correctly determines that the Purchaser lacks such
ability, then Stockholder shall have the right, following the completion of the
process of appeal, as described in Section 7.1, to receive all of the
appropriate remedies as set forth in Section 1.4.
(e) Due Diligence. Purchaser has performed its due diligence and
-------------
reviewed the Company's documents, and has been provided with all documents, and
access to the physical plant of the Company that Purchaser requested during its
due diligence.
(f) Business Plans. Purchaser does not presently seek and will not
--------------
seek to alter the debt structure or the capital structure of the Company, if at
all, until after such time as the consent of the P.U.C. to the transfer of
Stockholder's shares as contemplated herein has been granted and understands
that if at some future time Purchaser desires to implement such change, any
change in the debt structure or capital structure of the Company would require
prior P.U.C. approval.
Purchaser does not presently seek and will not seek to cause the Company to
enter any affiliated company service arrangement, if at all, until after such
time as the consent of the P.U.C. to the transfer of Stockholder's shares as
contemplated herein has been granted and understands that if, at some future
time Purchaser desires to implement such an arrangement, that the implementation
of any affiliated company service arrangement with the Company would require
prior P.U.C. approval.
3.3 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties set forth in Sections 3.1 and 3.2 hereof shall survive until the
close of business on the first anniversary of the Effective Date.
ARTICLE IV
COVENANTS
4.1 Covenants of the Stockholder.
----------------------------
(a) Notification. Prior to and through the Closing, the Stockholder
------------
shall give prompt notice to the Purchaser of: (i) any notice or other
communication received by the Stockholder prior to the Closing, relating to a
material breach or an event which, with notice or lapse of time or both would
become a material breach under this Agreement or under any other material
contract, agreement or instrument to which the Company is a party, by which it
or any of its properties or assets are bound or
10
<PAGE>
to which it or any of its properties or assets are subject; (ii) any event
which, with notice or lapse of time or both, would cause any warranty or
representation of the Stockholder under this Agreement to be inaccurate, untrue,
incomplete or misleading in any respect; (iii) any notice or other communication
from any third party alleging that the consent of such third party was, is or
may be required in connection with the transactions contemplated by this
Agreement; and (iv) any material adverse change in the business, assets,
operations, earnings or financial condition of the Company, other than such
changes caused by generally applicable regulatory, legislative or government
acts, rulings or other activities but including any government communications
specifically addressed to or naming the Company or Stockholder.
(b) Conduct of Business; Certain Covenants. Prior to and through the
--------------------------------------
Closing, Stockholder shall cause the Company to conduct and operate its business
and will not, without prior written consent of the Purchaser, which consent
shall not be unreasonably withheld, take any action other than in accordance
with the ordinary and usual course of business. The Stockholder shall cause the
Company to use its best efforts to preserve intact its business, operations,
organization and relationships with its employees, independent contractors,
agents, suppliers, customers and others having business dealings with it. For
six months from the date hereof, neither the Stockholder nor his agents will,
and the Stockholder shall not permit the Company to, solicit or engage in
discussions for the sale of any capital stock or material assets of the Company.
Prior to and through the Closing, without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld, the Stockholder
shall not permit the Company to:
(i) issue or otherwise grant or enter into any agreement relating
to the issuance or grant of any stock options, warrants or other rights calling
for or permitting the issue, transfer, sale or delivery of its capital stock;
(ii) issue, transfer, sell or deliver any shares of its capital
stock or any securities convertible into or exchangeable for, with or without
additional consideration, such capital stock;
(iii) permit the occurrence or continuance of any material default
under any agreement to which the Company is a party;
(iv) sell, enter into any contract to sell or grant any option to
purchase, any of its assets other than in the ordinary course of business;
(v) create, assume or permit to exist at Closing any lien, pledge,
security interest, encumbrance or mortgage of any kind whatsoever on any of its
properties or assets other than:
(A) liens existing on the date hereof which the Company or the
Stockholder previously disclosed to the Purchaser or which are otherwise
permitted hereby;
(B) any mortgage, pledge, lien or other security interest in
or upon any property or asset hereafter acquired by the Company in the ordinary
course of business, which mortgage, pledge, lien or other security interest is
entered into contemporaneously with such acquisition to secure or provide for
the payment of any part of the purchase price therefor, or the assumption by the
11
<PAGE>
Company of any mortgage, pledge, lien or other security interest in or upon any
property or asset hereafter acquired by the Company which mortgage, pledge, lien
or other security interest existed at the time of such acquisition; provided
that, each such mortgage, pledge, lien or other security interest shall not
extend to or cover any property or asset of the Company other than such property
or asset hereafter acquired;
(C) any mortgage, pledge, lien or other security interest
created for the sole purpose of renewing or refunding any mortgage, pledge, lien
or other security interest allowed under clause (B) above; provided that, the
principal amount of indebtedness secured thereby shall not exceed the principal
amount of indebtedness so secured at the time of such renewal or refunding and
that such renewed or refunded mortgage, pledge, lien or other security interest
shall not extend the mortgage, pledge, lien or other security interest renewed
or refunded to any additional property or asset;
(D) the pledge by the Company of any property or asset as
security required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege, license or right;
and
(E) liens for taxes, assessments and governmental charges or
levies imposed upon the Company or upon its income or profit, or upon any of its
property or assets if the same shall not at the time be due or are being
contested in good faith in appropriate proceedings;
(vi) take any action that would cause any representation or warranty
contained herein to be inaccurate, untrue, incomplete or misleading.
(c) Best Efforts and Cooperation; Further Assurances. Prior to the
------------------------------------------------
Closing, with the cooperation of Purchaser where not forbidden by law,
Stockholder shall cause the Company to:
(i) promptly comply with all filing requirements which United
States federal, state, local or foreign law may impose on the Company with
respect to the transactions contemplated by this Agreement;
(ii) use its diligent efforts to take all actions necessary to be
taken, to make any filing and obtain any consent, authorization or approval of
or exemption by any governmental authority, regulatory agency or any other third
party (including, without limitation, any landlord or lessor of the Company and
any party to whom notification is required to be delivered or from whom any form
of consent is required) which is required to be filed or obtained by the Company
in connection with the transactions contemplated by this Agreement;
(d) Access to Additional Agreements and Information. Prior to the Closing,
-----------------------------------------------
the Company shall make available to the Purchaser any and all agreements,
contracts, documents and other instruments material to the business or
operations of the Company, including without limitation, those to which the
Company is a party and those by which any of its properties or assets are bound.
It is understood that the provision of such information to the Purchaser is
solely to facilitate Purchaser's ability to assume control of the Company at the
Closing.
12
<PAGE>
(e) Non-Competition and Non-Solicitation. During the period commencing at
------------------------------------
the Closing and until the first anniversary of the termination of Stockholder's
employment with the Company or its successors or assigns (the "Non-Compete
Period"): the Stockholder, either as an individual on his own account, as an
investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or salesman for any other person, or entity, corporation or
otherwise will not (A) induce any employee or independent contractor of the
Purchaser to leave the Purchaser's employ or service or hire on a full time
basis any such employee or independent contractor (unless an authorized officer
of the Purchaser shall have authorized such employment and the Purchaser shall
have consented thereto in writing), or (B) other than on behalf of the
Purchaser, contact, service or solicit any clients, customers or accounts of the
Purchaser, or compete with Purchaser with respect to any telecommunications
business in which Purchaser is actively engaged in the area in which the Company
does business.
(f) Confidential Information. The parties hereto recognize that a major
------------------------
need of the Purchaser is to obtain and preserve specialized knowledge, trade
secrets, customer lists and confidential information concerning the industry.
The strength and goodwill of the Purchaser is derived from the specialized
knowledge, trade secrets, and confidential information generated from experience
with the activities undertaken by the Purchaser and its subsidiaries. The
disclosure of this information and knowledge to competitors would be beneficial
to them and detrimental to the Purchaser, as would the disclosure of information
about the products, methods, marketing practices, pricing practices, costs,
profit margins, design specifications, analytical techniques, technical
information, client contracts, inventory sources, customer information, employee
information, and other similar items of the Purchaser and its subsidiaries. The
Stockholder has or will have access to, and has obtained or will obtain,
specialized knowledge, trade secrets and confidential information about the
Purchaser's business and the Purchaser's operations and the operations of its
subsidiaries, affiliates, and/or divisions. The term "confidential" or
"proprietary information" shall not include information which is i) already
known from sources not subject to any confidential obligations; ii) is or
becomes generally available to the public other than as a result of a disclosure
by the Purchaser; or iii) required to be disclosed by law, regulatory or
judicial process. Therefore, Stockholder hereby agrees as follows, recognizing
that the Purchaser is relying on these agreements in entering into this
Agreement:
From the date of this Agreement and through the end of the Non-Compete
Period, the Stockholder will keep secret and retain in strict confidence, and
will not use, disclose to others, or publish any inventions or any confidential
business information about the affairs of the Purchaser or the Company's
business, including but not limited to confidential information concerning the
Purchaser's and the Company's products, services, methods, marketing practices,
pricing practices, costs, profit margins, design specifications, analytical
techniques, technical information, client contracts, inventory sources, customer
information, employee information, and other similar items of confidential
information.
(g) Litigation or Investigation. Stockholder shall cause the Company to
---------------------------
consult with Purchaser in managing the defense or response to any investigation
of the Company or litigation against the Company which is ongoing following the
date hereof and prior to Closing.
13
<PAGE>
(h) Notification. Prior to the Closing, Stockholder shall notify
------------
Purchaser of any change or event which would require notification under Section
3.1(d) but for its having occurred after the execution of this Agreement.
4.2 Covenants of Purchaser
----------------------
(a) Notice of Defaults. The Purchaser shall give prompt notice to the
------------------
Company and the Stockholder of: (i) any notice or other communication relating
to a material breach hereunder or event which, with notice or lapse of time or
both, would become a material breach hereunder, received by the Purchaser prior
to the Closing, or under any material contract, agreement or instrument to which
the Purchaser is a party, by which it or any of its properties or assets are
bound or to which it or any of its properties or assets are subject which would
prevent the consummation of the transactions contemplated hereby; (ii) any event
which, with notice or lapse of time or both, would cause any representation or
warranty of the Purchaser under this Agreement to be inaccurate or misleading in
any respect; and (iii) any notice or other communication by any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
(b) Third Party Consents. The Purchaser shall use its diligent
--------------------
efforts to obtain any consent, authorization or approval of, or exemption by,
any governmental authority or agency or other third party required to be
obtained or made by it in connection with this Agreement or the consummation of
the transactions contemplated hereby.
(c) Best Efforts and Cooperation; Further Assurances. Prior to the
------------------------------------------------
Closing, with the cooperation of the Company and the Stockholder where
appropriate, the Purchaser shall:
(i) promptly comply with all filing requirements which
federal, state or local law may impose on the Purchaser with respect to the
transactions contemplated by this Agreement and
(ii) use its diligent efforts to take all actions necessary to
be taken, make any filing and obtain any consent, authorization or approval of
or exemption by any governmental authority, regulatory agency or any other third
party which is required to be filed or obtained by the Purchaser in connection
with the transactions contemplated by this Agreement, including, but not limited
to appealing, in timely fashion, any adverse ruling of the P.U.C., the State of
Maine or any governmental authority (including a court of competent
jurisdiction) which would have the effect of preventing the Closing, other than
a ruling of general effect.
(d) Purchaser Assistance with Governmental Filings. Purchaser shall,
----------------------------------------------
upon the request of Stockholder, proactively assist or, at the election of the
Stockholder, act on behalf of Stockholder and the Company with respect to the
actions described in Section 4.1(c) hereof.
(e) Purchaser shall consult with Stockholder in managing the process
of applying for P.U.C. consent.
4.3 Publicity. Until the sixth month following the Closing, the
---------
Company, the Stockholder and the Purchaser will consult with each other party
hereto prior to making, releasing or otherwise
14
<PAGE>
disseminating any public announcements with respect to the transactions
contemplated by this Agreement. Any public announcements permitted hereunder
shall be made only at such time and in such manner as the Stockholder and the
Purchaser shall mutually agree, except that any party hereto shall be free to
make such public announcements as it shall reasonably deem necessary to comply
with federal or state laws, provided that such announcement is simultaneously
delivered to the other parties hereto. Stockholder shall have the right to
announce the execution of this Agreement and of the Closing to the employees of
the Company and to the public as and when stockholder chooses. Stockholder
agrees for a period of three years from the date hereof not to make any
intentionally misleading or untrue negative statements or cause any
intentionally misleading or untrue negative statements to be made on his behalf
regarding the Purchaser or the Company.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of the Parties. The obligation of any party
----------------------------------------
hereto to consummate the transactions contemplated at the time contemplated by
this Agreement is subject to nothing other than the fulfillment of each of the
following conditions, which may be waived in whole or in part by the other
parties to the extent permitted by applicable law. These conditions are intended
only to provide for the delay of the Closing until a party has completed its
obligation to seek governmental approval under Section 4.2(c)(ii), and not to
permit any party to avoid Closing, with the exception of Section 5.1 (a), which
would allow a party to terminate this Agreement.
(a) Material Litigation. In the event that a third-party lawsuit or
-------------------
similar proceeding against the Company, seeking damages in excess of $1 million
over the amount to which the Company is insured with respect to such lawsuit or
proceeding, is pending at the time of Closing, then no party shall be obligated
to Close (provided that any party inciting or encouraging such lawsuit shall
continue to be obligated to Close), and if in consequence the Closing does not
take place, the Deposit Escrow shall be returned to the Purchaser provided that
Purchaser did not incite or encourage the third-party lawsuit.
(b) Litigation. At the Closing, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company or the Stockholder issued by a court or
governmental agency (or other governmental or regulatory authority) of competent
jurisdiction restraining or prohibiting the consummation of the transactions
contemplated hereby.
ARTICLE VI
INDEMNIFICATION AND CLAIMS
15
<PAGE>
6.1 Acknowledgment by Purchaser. The representations and warranties by the
---------------------------
Company and the Stockholders contained in this Agreement and exhibits and
schedules hereto constitute the sole and exclusive representations and
warranties of the Company and the Stockholders to the Purchaser in connection
with the transactions contemplated hereby.
6.2 Indemnification by Stockholder for Adjustments in Excess of the
---------------------------------------------------------------
Closing Escrow. In the event that the Purchaser is entitled to reductions in
- ---------------
the Purchase Price under the terms of this Agreement which exceed the amount of
the Closing Escrow, Stockholder covenants and agrees that Stockholder shall pay
to Purchaser the amount of the excess of such adjustments over the Closing
Escrow at the same time that Purchaser withdraws the balance of the Closing
Escrow in consequence of adjustments to the Purchase Price.
ARTICLE VII
TERMINATION OF THIS AGREEMENT
7.1 Termination by Operation of Law. This Agreement may be terminated by
-------------------------------
the Purchaser, or the Stockholder if there shall be any statute, rule or
regulation of competent jurisdiction that renders consummation of the
transactions contemplated hereby illegal or otherwise prohibited, or a court of
competent jurisdiction or any government (or governmental authority) shall have
issued an order, decree or ruling, or has taken any other action restraining,
enjoining or otherwise prohibiting the consummation of such transactions and
such order, decree, ruling or other action shall have become final and
nonappealable. Notwithstanding the foregoing, if the Closing has not taken place
by one year following the date of commencement of the appeal process, to the
highest state court applicable thereto (or in the case of a federal case, to the
applicable circuit court of appeals), relating to any order, decree or ruling as
set forth in the first sentence of this Section, then either party may terminate
this agreement, provided, however, that the Agreement may not be terminated
during the pendency of an appeal to the Supreme Court of the State of Maine.
Additionally, this Agreement may be terminated by any party as set forth in
Section 5.1(a).
ARTICLE VIII
MISCELLANEOUS
8.1 Fees and Expenses. The Stockholder shall pay his own expenses and the
-----------------
Purchaser shall pay its own expenses incident to execution, delivery and
performance of the terms of this Agreement and the consummation of the
transactions contemplated hereby.
8.2 Assignment. The Purchaser shall not have the authority to assign its
----------
respective rights or obligations under this Agreement without the prior written
consent of the other parties hereto, except that the Purchaser may assign all or
any portion of its respective rights hereunder without the prior written consent
of the Company or the Stockholder to any controlled or controlling affiliate of
the Purchaser (including any wholly-owned subsidiary) or to any lender, bank or
other financial institution
16
<PAGE>
providing adequate financing to the Purchaser in connection with the entire
consummation of the transactions contemplated hereby, and the Company and the
Stockholder shall execute such documents as are necessary in order to effectuate
such assignments.
8.3 Burden and Benefit. This Agreement shall be binding upon the parties'
------------------
heirs (up to the extent of their benefit from the Agreement), attorneys-in-fact,
personal representatives, successors and assigns and shall inure to the benefit
of the parties and their heirs, successors and assigns. In the event of a
default by the Stockholder of any of his obligations hereunder, the sole and
exclusive recourse and remedy of the Purchaser shall be against the Stockholder
and the Stockholder's assets. In the event of a default by the Purchaser of any
of its obligations hereunder, the sole and exclusive recourse and remedy of the
Stockholder shall be against the Purchaser and its assets; under no
circumstances shall any officer, director, stockholder or affiliate of the
Purchaser be liable in law or equity for any obligations of the Purchaser
hereunder.
8.4 Brokers. The Company and the Stockholder represent and warrant to
-------
the Purchaser that there are no brokers or finders entitled to any brokerage or
finder's fee or other commission or fee based upon arrangements made by or on
behalf of the Company or the Stockholder or any other person in connection with
this Agreement or any of the transactions contemplated hereby which would give
rise to any liability of the Purchaser to pay a fee. The Purchaser represents
and warrants to the Company and the Stockholder that no broker or finder is
entitled to any brokerage or finder's fee or other commission or fee based upon
arrangements made by or on behalf of the Purchaser in connection with this
Agreement or any of the transactions contemplated hereby which would give rise
to any liability of the Company or the Stockholder to pay a fee.
8.5 Entire Agreement. This Agreement and the exhibits, lists and other
----------------
documents referred to herein contain the entire agreement among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements with respect thereto, whether written or oral.
8.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Maine, without regard, however, to such
jurisdiction's principles of conflicts of laws.
8.7 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
17
<PAGE>
If to the Stockholder, to:
Tim Hutchison
15 Shaker Road
Box 300
Gray, ME 04039
with a copy to:
Petruccelli & Martin
15 Monument Square
Box 7733
Portland, ME 01040
attn: Joel Martin, Esq.
If to the Purchaser, to:
Continental Choice Care, Inc.
35 Airport Road
Morristown, New Jersey
Attn: Steven L. Trenk
with a copy to:
Reed Smith Shaw & McClay LLP
One Riverfront Plaza, First Floor
Newark, New Jersey 07102
Attn: Gerard S. DiFiore, Esq.
Fax: (973) 621-3200
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
8.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
8.10 Rights Cumulative. All rights, powers and privileges conferred
-----------------
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
8.11 Severability of Provisions. The provisions of this Agreement shall
--------------------------
be considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be
18
<PAGE>
invalid, void or otherwise unenforceable. Such invalid, void or otherwise
unenforceable provisions shall be automatically replaced by other provisions
which are valid and enforceable and which are as similar as possible in term and
intent to those provisions deemed to be invalid, void or otherwise
unenforceable. Notwithstanding the foregoing, the remaining provisions hereof
shall remain enforceable to the fullest extent permitted by law.
8.12 Headings. The headings set forth in the articles and sections of
--------
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
8.13 Remedies. It is acknowledged that the provisions of this Agreement
--------
are of a unique nature and of extraordinary value and of such a character that a
breach thereof may result in irreparable damage and injury to the non-breaching
party for which the non-breaching party may not have any adequate remedy at law.
Therefore, the non-breaching party shall be entitled to seek a decree of
specific performance against the breaching party, or such other relief by way of
restraining order, injunction or otherwise as may be appropriate to ensure
compliance with this Agreement. The remedies provided by this Agreement,
including but not limited to those set forth in Sections 1.7 and 8.13 are non-
exclusive and the pursuit of such remedies shall not in any way limit any other
remedy available to the parties with respect to this Agreement, including,
without limitation, any remedy available at law or equity with respect to any
anticipatory or threatened breach of the provisions hereof.
8.14 Survival. Covenants hereunder shall survive for a period of one year
--------
from the Effective Date unless a different time period is specifically set
forth.
8.15 Interpretation. This Agreement is to be interpreted so as to compel
--------------
both parties to proceed to Closing, and to rectify any breach or
misrepresentation through specific performance or by adjustment of the Purchase
Price, and to compel Purchaser to appeal any obstacle to Closing as set forth in
Sections 4.2(c)(ii) and 7.1.
ARTICLE IX
FURTHER AGREEMENTS
The agreements set forth in this Article IX shall survive the Closing.
9.1 Pension Plan. Purchaser shall undertake in good faith to maintain the
-------------
Company's existing pension plan if, and to the extent such maintenance
is feasible under ERISA, state law, and from the standpoint of
Purchaser's commercial interests and tax planning.
9.2 Employees. Employment agreements to be entered with certain employees
----------
of the Company are set forth on Schedule 9.2 hereto, and Purchaser
agrees to offer such employment agreements to the employees named
thereupon.
19
<PAGE>
9.3 Office Space. For the period of the employment agreement referenced in
------------
Section 9.4 hereof, Stockholder shall have the use of the office he
currently occupies, with similar furnishings and office equipment.
Stockholder agrees that Stockholder's access to the office will be
predicated upon his adherence to the same rules of behavior governing
the Company's other management employees (except that smoking
cigarettes shall be permitted in such office provided that smoking in
such office is otherwise legal), and that the undertaking of Purchaser
contained in this Section 9.3 may be terminated by the Purchaser in
the event that Stockholder is notified of and persists in any
violation or series of violations which would, for an employee, result
in termination. Stockholder agrees not to operate a business which is
open to the public from such office, and to use it solely for the
Company's or his personal use, although Stockholder may allow an
assistant to share such space.
9.4 Employment Agreement. The Purchaser agrees to retain the Stockholder
--------------------
as an employee subject to the terms of an Employment Agreement in the
form set forth hereto as Schedule 9.4.
9.5 Remaining Company Stock. Purchaser is obligated to purchase the shares
-----------------------
of the other stockholders of the Company at the Closing, or for a
reasonable time thereafter if a stockholder is not available at
Closing,at the Purchase Price per Share if such stock is offered.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
20
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered on the date and year first above written.
CONTINENTAL CHOICE CARE, INC.
ATTEST:
__________________ By: _________________________________
Name: _______________________________
Title: ______________________________
STOCKHOLDER
ATTEST:
__________________ By: _________________________________
Tim Hutchison, Stockholder
PINE TREE TELEPHONE AND TELEGRAPH
ATTEST:
__________________ By: _________________________________
Tim Hutchison, President
21
<PAGE>
Schedule 1.3
Non-performing Assets to be Distributed
1. Seven acre property on Collie Hill used as blueberry field
2. West Gray generator, no longer used by the Company
3. Original handwritten minute books of the Company
4. Office equipment and furnishings in Mr. Hutchison's office on the signing
date of the Agreement
22
<PAGE>
Schedules 1.4 and 1.5
Escrow Agreement
23
<PAGE>
Schedule 1.6
1999 Capital Budget
24
<PAGE>
Schedule 3.1(d)
Certain Changes
None.
25
<PAGE>
Schedule 3.1(m)
Year 2000 Compliance
26
<PAGE>
Schedule 3.2(a)
Corporate Authorization
27
<PAGE>
Schedule 9.2
Employment Agreements and Pay Scale
Pay Scale
28
<PAGE>
Schedule 9.4
Tim Hutchison Employment Agreement
The Employment Agreement referenced in this Schedule is contained in Schedule
9.2.
29
<PAGE>
EXHIBIT 3.1(C)
Financial Statements
30
<PAGE>
EXHIBIT 4.1
Employment Agreement
This Employment Agreement (this "Agreement") is entered into as of _______, 1999
by and between Tim Hutchison ("Employee") and Pine Tree Telephone and Telegraph
Company, or its successors or assigns (the "Company").
In consideration of the mutual promises and covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties hereto, and with particular reference to that
certain Stock Purchase Agreement dated May 15, 1999 by and among Continental
Choice Care, Inc., the Company and Employee (the "Stock Purchase Agreement"),
the parties hereto agree as follows:
1. Employment. The Company and the Employee agree that from the date hereof
until his sixty-fifth birthday, the Employee shall be employed by the
Company on the terms set forth herein. Employee shall be subject to the
direction of the board of directors of the Company, within the limits set
forth herein, and shall report to the President of the Company.
2. Salary. Employee shall be paid an annual salary of $20,000, which shall be
paid over the course of the year in accordance with the Company's normal
payroll practices for salaried employees.
3. Benefits. Employee shall receive the following benefits during the term
hereof, or for a different period if specified:
(a) health, dental, and any other insurance benefits, each as and if
provided to the Company's management-level employees;
(b) a company car for company and personal use, not marked with the logo
or name of the Company, subject to Company policy relating to vehicle
selection and use, but Employee's past use and selection of company
vehicles prior to the sale of the Company shall be deemed acceptable;
(c) use of Employee's current office on the Company's premises, subject to
the terms relating thereto set forth in the Stock Purchase Agreement;
(d) during the term hereof and thereafter until Employee's death,
telephone service within the Company's local service area and to
extended local (premium or free) calling areas, on two lines, at
employee's residence;
(e) during the term hereof and thereafter until Employee's death, the
Company shall not charge Employee for Employee's toll calls, except
that the Employee may be charged by the Company for any out-of-pocket
charges by third parties net of related third-party revenues to the
Company associated therewith
(f) reimbursement for expenses, according to the Company's policies for
reimbursement as may be from time to time in effect, for reasonable
travel, lodging, meals and attendance fees once per year at a national
or regional industry conference of Employee's choice, as a
representative of the Company or Purchaser
<PAGE>
4. Responsibilities. Employee shall review the capital budget prepared by the
Company each year for the following year, provided that such budget shall
be presented to Employee on or before December 1st. Employee shall provide
general comments and suggestions relating to such budget consistent with
past practices as applied to current market, industry and local conditions.
Employee shall also provide specific analysis and recommendations as to the
outside plant construction proposal contained in the annual budget,
including the need for individual projects proposed, the level of
sufficiency of provisioning for each, and, in the case of cable
construction, the pair utilization design (the "Pair Count" design).
Employee shall provide recommendations regarding any proposed changes in
appropriate technical standards and specifications for construction being
contemplated.
Employee's specific responsibilities, as described above, shall be
performed, and Employee shall be available during any thirty business days
of Employee's choice of the period between November 15 and February 20 of
the following year (other than between December 24 and January 4, and
Thanksgiving and the following Friday), but for no more than thirty days,
with the understanding that a thorough and competent review may not be
forthcoming in the event that the details of major project proposals such
as cable and central office equipment construction are not available for
Employee's review during the entire period described herein.
Employee's responsibilities hereunder shall be advisory, and shall not be
construed to require Employee to prepare studies, budgets, etc.
Employee shall be reasonably available (by telephone, generally) to advise
the Company throughout the year to advise the Company on matters regarding
the history of the Company's industry negotiations and PUC interactions and
as to the application of past practices to current situations.
5. Pension.
Whereas, the Company currently maintains the Pine Tree Telephone and
Telegraph Company Employees' Pension Plan, as amended (the "Pension Plan"), a
qualified defined benefit pension plan, that provides a retirement benefit equal
to the Standard Retirement Benefit defined in Section 4.02 of the Pension Plan;
Whereas, Employee's salaried status along with the duties and
responsibilities set forth above equate, in the Company's opinion, to the
Employee remaining generally subject to the Company's supervision and control at
all times during his employment by the Company;
Whereas, this contract equates to full time employment in the Company's
opinion, as well as under the guidelines of the Pension Plan (as explained in
the attached letter dated March 18, 1999 from the Nyhart Company, Inc.);
<PAGE>
Whereas, the Company hereby covenants that the Company shall take no action
which could or would change such full-time status during Employee's term of
employment with the Company;
Whereas, the Company desires that the Employee receive a benefit equal to
his Standard Retirement Benefit (as defined in the Pension Plan) as if Employee
had continued to accrue benefits during employment at the Company, or other form
of benefit as employee could elect under the Pension Plan, together with any
further benefits Employee or Employee's heirs would receive ("Full Standard
Retirement Benefit"), upon commencement of benefits ("Retirement") even if the
Pension Plan is terminated or frozen;
Whereas, the Company may elect to terminate or freeze the Pension Plan in
order to substitute a different pension plan for the benefit of employees, and;
Whereas, the "Fixed Accrued Benefit" is defined hereby as the Employee's
Standard Retirement Benefit under the Pension Plan as of the date upon which the
Pension Plan is terminated or frozen, if applicable;
The Company will provide a benefit to the Employee ("Additional Benefit")
upon Retirement equal to his Full Standard Retirement Benefit based on all the
years Employee was employed under the Pension Plan before its termination or
freeze, together with all years the Employee was employed by the Company
thereafter, offset by his Fixed Accrued Benefit and further offset by that
portion of the annuitized value (calculated using the provisions as set forth in
Section 5.02 of the Pension Plan to convert any account balance to an annuity
amount), at Employee's time of Retirement, of any other benefit to the Employee
arising from any other qualified plan sponsored by the Company or any and
attributable to contributions made by the Company. Value attributable to
contributions made by Employee shall not be included in such offset (for
example, 60% of the value of a 401K account funded 40% by the Company and 60% by
the Employee would not be included in the offset). The Full Standard Retirement
Benefit will be calculated based on the same provisions defined in the Pension
Plan and the payment of the Additional Benefit will commence at the same time
and in the same form of payment as could be or could have been elected by the
Employee under the Pension Plan.
<PAGE>
The Company may elect, but is under no obligation to fund the Additional
Benefit through a trust.
PINE TREE TELEPHONE AND TELEGRAPH COMPANY
By: ____________________________
Title: ____________________________
EMPLOYEE
____________________________
Tim Hutchison
<PAGE>
EXHIBIT 4.2
ESCROW AGREEMENT
----------------
THIS AGREEMENT is made by and among TIMOTHY D. HUTCHISON of Gray, Maine
("Hutchison"), CONTINENTAL CHOICE CARE, INC, a New Jersey corporation ("CCC"),
and MAINE BANK & TRUST COMPANY, a Maine banking institution (the "Bank").
RECITALS:
A. Hutchison and CCC are parties to a Stock Purchase Agreement for
substantially all of the stock of Pine Tree Telephone and Telegraph Company, a
Maine corporation.
B. The Stock Purchase Agreement requires that certain sums be placed in
escrow, in accordance with the terms of the said Agreement.
C. Hutchison and CCC wish to appoint the Bank as Escrow Agent, and the
Bank is willing to act as Escrow Agent, under the terms and conditions hereof.
AGREEMENTS:
1. Hutchison and CCC hereby appoint the Bank as Escrow Agent, to hold sums
in escrow as provided in Sections 1.4 and 1.5 of the Stock Purchase Agreement
between Hutchison and CCC. A copy of that Stock Purchase Agreement is appended
hereto as Exhibit A and incorporated herein. The duties of the Bank as Escrow
Agent are described in said sections and in Sections 1.7(b) and 2.1.
2. Acting as Escrow Agent, the Bank will deposit and maintain all sums
contained in the Escrow Account in the Vanguard Municipal Money Market Fund.
1
<PAGE>
3. The Bank will distribute all amounts in escrow, together with interest
thereon, as required by the terms of the said Stock Purchase Agreement.
4. The liability of the Escrow Agent to the parties hereto shall be only
as set forth in this Agreement. The Escrow Agent shall not be liable for any
mistake or error of judgement in the discharge of its functions hereunder but
shall be liable for bad faith or gross negligence. Without limiting the
generality of the foregoing, the Escrow Agent shall not incur any liability with
respect to any action taken or omitted in reliance upon any instrument, not only
as to its due execution and delivery and the validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information contained
therein which the Escrow Agent shall in good faith believe to be genuine, to
have been signed or presented by a proper person or persons, and to conform with
the provisions of this Agreement.
5. Should any dispute arise with respect to the disposition of any sum
held by the Escrow Agent pursuant to the terms hereof, the Escrow Agent shall
have no liability to any party hereto for retaining all or any portion of such
sum until such dispute shall have been settled by either a mutual written
agreement between the parties or a final order, decree or judgement by a court
of competent jurisdiction. In the event there shall be any action or legal
proceeding arising out of this Agreement, Escrow Agent shall be entitled, at any
time in its sole discretion, to deliver the monies held by it hereunder, or any
portion thereof, into court, and upon so doing, it shall be relieved of any
further responsibility or liability as to said court, and upon so doing, it
shall be relieved of any further responsibility or liability as to said monies
and as an Escrow Agent under this Agreement. In no event shall the Escrow Agent
be under any duty whatsoever to institute, defend or actively participate in any
such proceeding.
2
<PAGE>
6. Hutchison and CCC each agree to indemnify the Escrow Agent and to hold
it harmless from and against any and all losses, claims, damages, liabilities
and expenses (including, but not limited to, costs of investigation,
disbursements and attorney's fees) which may be imposed upon or incurred by the
Escrow Agent pursuant to this Agreement or in the performance of its duties
hereunder, or in connection with any mediation, arbitration, or litigation
arising from this Agreement or involving the subject matter hereof, except if
arising from the bad faith or gross negligence of the Escrow Agent.
7. In consideration of Escrow Agent's performance of its duties hereunder,
Escrow Agent shall receive the following fee: 0.15% per annum of the first
$1,000,000 held in escrow, and 0.10% per annum for sums in excess of $1,000,000
held in escrow. The minimum fee shall be $1,000. Each of Hutchison and CCC
agrees to pay one half (1/2) of the Escrow Agent's fee.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set next to each party's name below.
- ----------------------- ---------------- ---------------------------
Witness Date Timothy D. Hutchison
Continental Choice Care, Inc.
- ----------------------- ---------------- By:------------------------
Witness Date --------------,Its------
Maine Bank & Trust Company
[SIGNATURE ILLEGIBLE]^^ 5/12/99 By:/s/ Thomas M. Cattell
- ----------------------- ---------------- ------------------------
Witness Date Thomas M Cattell,
------------------------
Its Vice President
--------------------
3
<PAGE>
STATE OF MAINE
CUMBERLAND, SS May ______, 1999
Personally appeared the above-named Timothy D. Hutchison, and acknowledged
the above instrument to be his/her/its/their free act and deed. Before me.
_______________________________
Notary Public/Attorney at Law
My Commission Expires: ________
STATE OF MAINE
CUMBERLAND, SS: May ______, 1999
Then personally appeared the above-named _____________, in his/her capacity
as _______________ of Continental Choice Care, Inc. and acknowledged the
foregoing to be his/her free act and deed, and the free act and deed of said
Continental Choice Care, Inc. Before me.
______________________________
Notary Public
My Commission Expires:________
STATE OF MAINE
CUMBERLAND, SS: May 12 , 1999
------
Then personally appeared the above-named Thomas M Cattell, in his capacity
----------------
as Vice President of Maine Bank & Trust Company and acknowledged the foregoing
--------------
to be his free act and deed, and the free act and deed of said Maine Bank &
Trust Company. Before me.
/s/ Jennifer A. Baldwin
-----------------------
Notary Public
My Commission Expires: 7/6/2005
--------
4
