<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 0-873
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PACIFIC TELECOM, INC.
(Exact name of registrant as specified in its charter)
STATE OF WASHINGTON 91-0644974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
805 BROADWAY, P.O. BOX 9901, VANCOUVER, WASHINGTON 98668-8701
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (360)905-5800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES
[X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 14, 1997, there were 100 shares of Common Stock outstanding.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant: None
THIS REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH
THE REDUCED DISCLOSURE FORMAT.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
TABLE OF CONTENTS
Page No.
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Definitions ..................................................... 3
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PART I
- ------
Item 1 Business
Introduction ........................................ 4
Telecommunications Operations ....................... 4
Local Exchange Companies .......................... 4
Cellular Operations ............................... 5
Pacific Telecom Cable ............................. 5
Regulation .......................................... 6
Employees ........................................... 7
Item 2 Properties ............................................ 7
Item 3 Legal Proceedings ..................................... 7
PART II
- -------
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters ......................... 8
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 8
Item 8 Financial Statements and Supplementary Data ........... 13
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .............. 31
PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K ......................................... 31
Signatures ...................................................... 34
Appendices
Statements of Ratio of Earnings to Fixed Charges
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<PAGE>
DEFINITIONS
When the following terms are used in the text, they will have the meanings
indicated:
TERM MEANING
---- -------
Alaska Spur A portion of the North Pacific Cable that links
Alaska and the lower 48 states
AT&T AT&T Corp.
Alascom Alascom, Inc., a wholly-owned subsidiary of PTI until
its sale to AT&T in August 1995
Company PTI and its subsidiaries
FCC Federal Communications Commission
FMUS Fairbanks Municipal Utility System
GTE GTE North Incorporated
Holdings PacifiCorp Holdings, Inc., a wholly-owned subsidiary
of PacifiCorp
LEC Local exchange company
MSA Metropolitan statistical area
NPC North Pacific Cable, a submarine fiber optic cable
between the U.S. and Japan
PCS Personal communication services
PTC Pacific Telecom Cable, Inc., an 80 percent
owned subsidiary of PTI
PT Cellular Pacific Telecom Cellular, Inc., a wholly-owned
subsidiary of PTI
PT Transmission Pacific Telecom Transmission Services, Inc.,
a wholly-owned subsidiary of PTI
PTI Pacific Telecom, Inc., a Washington corporation
RSA Rural service area
U.S. United States of America
USF Universal Service Fund
USWC US WEST Communications, Inc.
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<PAGE>
PART I
Item 1. BUSINESS
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Introduction
- ------------
PTI was organized in 1955 to provide telephone service to suburban
and rural communities principally in the Pacific Northwest. Since that
time, the Company has grown significantly through acquisitions and
expansion of its service offerings in several areas within the
telecommunications industry. This expansion included investments in
cellular telephone operations, international communications, including the
construction of a trans-Pacific fiber optic cable and, until August 1995,
the provision of long distance services in the State of Alaska through
Alascom. Over the past few years, the Company's strategy has been to
focus on its core business of providing local exchange service to suburban
and rural markets and to divest its diversified portfolio of noncore
businesses. This strategy has been implemented through the acquisition of
LECs, the sale of certain international operations, the consolidation and
sale of cellular holdings, and the sale of Alascom to AT&T.
The Company is a wholly-owned subsidiary of Holdings, which is a
wholly-owned subsidiary of PacifiCorp. On September 27, 1995, holders of
a majority of the approximately 5.3 million shares of outstanding common
stock held by minority shareholders voted in favor of the merger of a
wholly-owned subsidiary of Holdings into the Company. As a result of the
merger, the Company has a liability at December 31, 1996 of $29.5 million
to be paid to dissenters in the merger based on $30.00 per share fair
value for their shares, including interest on the liability accrued at a
rate equal to 5.97 percent per annum. The Company also has a receivable
from Holdings in the amount of the accrued liability to dissenters. PTI
had been a majority-owned subsidiary of PacifiCorp since 1973.
Telecommunications Operations
- -----------------------------
Local Exchange Companies
------------------------
The Company's LECs operate under a common business and brand name,
PTI Communications. This marketing concept creates a unified identity for
the local operations, improves communication with customers and assists in
the marketing of new products and services. As one of the major
independent telephone companies in the U.S., the Company's LECs provide
both local telephone service and access to the long distance network for
customers in their respective service areas. The LECs also provide
directory advertising and, through contracts with interexchange carriers,
billing and collection services. At December 31, 1996, the Company
operated 13 LECs within eleven states comprised of 559,500 access lines
in 344 exchanges. The average number of access lines per exchange is
approximately 1,626, reflecting the lower population density generally
found in the Company's service areas. The Company's largest exchange in
terms of access lines is in Kalispell, Montana, which had 26,594 access
lines at December 31, 1996. Service areas are located primarily in the
states of Alaska, Colorado, Montana, Oregon, Washington and Wisconsin.
States also served, but to a lesser extent, include Idaho, Iowa,
Minnesota, Nevada and Wyoming. (See "Regulation.") The Company provides
centralized administrative and support services to field operations from
its corporate offices in Vancouver, Washington.
The LECs experienced strong internal access line growth in certain
service areas, as evidenced by a 5.5 percent increase in access lines
served during 1996. As a result of acquisitions in Colorado, Washington
and Oregon, the Company added 90,000 access lines in 1995, an increase of
22 percent. The Company has definitive agreements with USWC and GTE to
purchase local exchange telephone properties in Minnesota and Michigan,
respectively. The Minnesota properties represent 32 exchanges serving
27,100 access lines and the Michigan properties represent eight exchanges
serving 11,300 access lines. The Company has a definitive agreement with
the City of Fairbanks to acquire its telephone and cellular operations,
FMUS, that have approximately 32,000 access lines and 6,800 cellular
customers. These acquisitions are subject to regulatory approval and are
expected to close in 1997. The Company has letters of intent to acquire
operations representing eight exchanges serving approximately 4,300 access
lines. These acquisitions are subject to completion of due diligence
investigations, negotiations of definitive purchase agreements and
regulatory approval.
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<PAGE>
Cellular Operations
-------------------
The Company's wholly-owned subsidiary, PT Cellular, is a holding
company with subsidiaries in Alaska, Michigan, Oregon, South Dakota,
Washington and Wisconsin. The Company has ownership interests with
respect to 24 MSAs and RSAs and manages 10 of these interests in Alaska,
Michigan and Wisconsin. The Company also manages one other RSA in
Wisconsin in which it has no ownership interest. Revenues from cellular
operations represented approximately eight percent of total Company
revenues in 1996.
The Company may increase its ownership interests in certain cellular
properties in order to achieve ownership control or to consolidate the
Company's cellular service areas into larger contiguous units for
operating and network efficiencies. This plan may be accomplished through
the exchange of existing cellular interests and/or future acquisitions.
Due to the purchase of cellular properties with the pending FMUS
acquisition, the Company would own a portion of both the wireline and non
wireline channel blocks in Alaska RSA #1. The FCC rules generally
prohibit direct or indirect ownership interest in licensees for both
blocks in the same cellular geographic service areas. Therefore, the
Company will be required to sell one of the channel blocks located in
Alaska RSA #1.
On January 14, 1997, the FCC completed its auction of 1,479 licenses
to provide broadband PCS on the D, E and F blocks in the two GHz frequency
band. Each license authorizes service on 10 MHz of spectrum in one of 493
Basic Trading Areas, with three licenses awarded in each area. The
Company, through its wholly-owned subsidiary MVI, Corp., was high bidder
on eleven licenses in Wisconsin, eight licenses in Michigan, three
licenses each in Minnesota and Alaska and one license each in Montana,
Iowa and Colorado. The Company's average bid per POP for these licenses
was $2.17. These licenses overlap the Company's existing cellular and
local exchange properties. The Company continues to evaluate the
potential services to be offered within each license area, but anticipates
initial deployment of services in some areas to commence in late 1997.
The FCC requires that an adequate signal be provided to at least
one-quarter of the population of the licensed area within five years of
the license grant. Funds to be used to purchase the PCS licences will be
provided from the sale of cellular interests in two properties in Wisconsin.
Pacific Telecom Cable
---------------------
PTC, which is owned 80 percent by PTI and 20 percent by Cable &
Wireless plc (C&W), a United Kingdom corporation, is involved in the
operation, maintenance and sale of capacity of a submarine fiber optic
cable between the U.S. and Japan, known as the NPC. The eastern end of
the cable is operated by PTC. The western end is operated by
International Digital Communications, Inc. (IDC), a Japanese corporation.
Major IDC shareholders include C. Itoh & Co., Ltd, Toyota Motor
Corporation, Pacific Telesis International and C&W.
The NPC was the first submarine fiber optic cable to provide direct
service between the U.S. and Japan. In addition, through the Alaska Spur,
it provides the first and only digital fiber optic link between Alaska and
the lower 48 states. Service between the U.S. and Japan is carried on
three, 420 Mbit/s digital fiber optic pairs, providing a total capacity of
1,260 Mbit/s. Service between Alaska and the lower 48 states is carried
on one, 420 Mbit/s digital fiber optic pair. On the eastern end, the
cable lands at Pacific City, Oregon and Seward, Alaska. From the landing
stations, traffic is transmitted to carrier access centers near Portland,
Oregon and Anchorage, Alaska for interconnection with digital
communications facilities serving the lower 48 states and Alaska and with
facilities transmitting traffic to foreign countries. On the western end,
the cable lands at Miura, Japan, and traffic is transmitted to IDC's
carrier access centers in Tokyo, Yokohama and Osaka for interconnection
with Japanese domestic service providers. For service to points beyond
Japan, IDC has constructed a 75-mile submarine cable from Miura to Chikura
where it interconnects with other international cables. IDC also
participates in the Asia Pacific Cable system that links Miura with Hong
Kong, Singapore, Taiwan and Malaysia. (See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for information about cable outages during 1995.) At December 31, 1996,
approximately 59 percent of the cable's 17,010 circuit capacity had been
sold.
PT Transmission provides restoration services for the eastern end of
the NPC under the terms of its tariff. In the event of a cable failure,
restoration services are provided via a PT Transmission satellite earth
station located at Moores Valley, Oregon.
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<PAGE>
Regulation
- ----------
The Company's LECs operate in an industry that is subject to
extensive regulation by the FCC and state regulatory agencies. Virtually
all services are provided in accordance with tariffs filed with the
appropriate regulatory agencies. The telecommunications industry
continues to undergo change as a result of a series of regulatory,
judicial and Congressional proceedings regarding the deregulation of
certain aspects of the industry. The FCC and certain state regulatory
agencies are also pursuing alternative forms of regulation that depart
from traditional rate-of-return regulation for telecommunications
companies such as the Company. These alternatives include opening local
exchange franchises to encourage greater competition.
In 1993, the Wisconsin legislature enacted a new model to manage the
transition to a competitive telecommunications marketplace.
Telecommunication utilities are permitted to file alternatives to
traditional rate-of-return regulation, and the Company's Wisconsin LEC
operations received approval of an alternative regulation plan effective
July 1, 1996. The plan covers a five-year period and includes a provision
that allows the Company to adjust rates within specified parameters if
certain quality-of-service and infrastructure-development commitments are
met. The alternative regulation plan also included proposed open market
initiatives designed to facilitate the introduction of local exchange
competition in the Company's Wisconsin service territory.
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the 1996 Act). The 1996 Act addresses a
substantial number of telecommunications matters, with a general goal of
promoting the development of competitive service provisioning in all
telecommunications markets over time, including local exchange services.
Among the many issues comprehended by the 1996 Act are those affecting
removal of barriers to entry for various geographic and service markets,
universal service standards and mechanisms, eligibility for and access to
universal service support funding, interconnection and unbundling of
telecommunications networks (including exemption, suspensions, and
modifications of requirements pertaining thereto for certain classes of
carriers), large carrier (Bell Operating Companies) entry into interstate
interexchange communications markets, and infrastructure sharing.
The 1996 Act, which applies generally to the Company, also contains
provisions with specific import for the Company's operations.
Definitional provisons classify the Company as a "rural telephone company"
for certain purposes of the Act. Various of the interconnection and
unbundling requirements applicable generally to incumbent local exchange
carriers are subject to exemption provisions available to rural telephone
companies, which the Company is under the above definition, or to waiver
provisions for local exchange companies with less than two percent of the
total nationwide access lines, which qualification the Company also meets.
The 1996 Act authorizes the establishment of USF to provide support for
eligible telecommunications carriers, for which designation the Company
believes it will qualify in the future. Management believes these and
other provisions will prove consistent with the Company's current and
planned operations. The Company recognized USF revenues of $55.1 million
in 1996 and anticipates recognition of approximately $56.0 million in
1997.
With respect to a number of matters, the 1996 Act permits or requires
further proceedings by the FCC, or state regulatory commissions, or both.
Following the effective date of the 1996 Act, the FCC initiated more than
one hundred separate dockets to address various aspects of the 1996 Act's
implementation. Also, a Federal-State Joint Board was convened to examine
and to make recommendations concerning issues pertaining to future
universal service definitions and the establishment of mechanisms for
support funding. Independently, a number of state regulatory commissions
overseeing the Company's local exchange operations within the states
commenced proceedings relating to both the 1996 Act and specific state
statutory initiatives and requirements. The Company has participated
actively in all major proceedings which are likely to have an impact upon
its future operations and financial performance. Additionally, the
Company has helped to organize or has participated, or both, in industry
organizations in an effort to communicate its views effectively on these
various issues.
The Company believes that the 1996 Act, and the regulatory
proceedings deriving therefrom, continue to prove consistent with the
long-term strategic plan of the Company. Based in part upon the rural
nature of the Company's operations and the recognition currently being
accorded to rural serving requirements in the 1996 Act and derivative
regulatory proceedings, the Company does not believe that the Act and its
associated regulatory interpretations will have a material advese impact
on the Company's financial results of operations.
The Company's cellular interests are regulated by the FCC with
respect to the construction, operation and technical standards of cellular
systems and the licensing and designation of geographic boundaries of
service areas. Certain states also require operators of cellular systems
to satisfy a state certification process to serve as cellular operators.
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<PAGE>
Employees
- ---------
At December 31, 1996, the Company had 2,187 employees, approximately
32 percent of whom were members of five different bargaining units. These
units are represented by the International Brotherhood of Teamsters, the
International Brotherhood of Electrical Workers, Communication Workers of
America or the NTS Employee Committee. Relations with represented and
non-represented employees continue to be generally good.
Item 2. PROPERTIES
----------
The telephone properties of the Company's LECs include central office
equipment, microwave and radio equipment, poles, cables, rights of way,
land and buildings, customer premise equipment, vehicles and other work
equipment. Most of the Company's division headquarters buildings,
telephone exchange buildings, business offices, warehouses and storage
areas are owned by the Company's LECs. Approximately 39 percent of plant
assets are pledged to secure long-term debt. In addition, certain of the
LECs' microwave facilities, central office equipment and warehouses are
located on leased land. Such leases are not considered material, and
their termination would not substantially interfere with the operation of
the Company's business. (See "Item 1. Business - Telecommunications
Operations - Local Exchange Companies" for information regarding the
states in which the Company has LEC operations.)
PT Cellular's subsidiaries are partners in partnerships that own or
lease switching facilities, cell site towers, cell site radio equipment
and other equipment required to furnish cellular service to the areas they
serve. (See "Item 1. Business - Telecommunications Operations - Cellular
Operations" for information regarding the states in which the Company has
cellular operations.)
The properties of PTC and PT Transmission include a satellite
transmit and receive earth station, located at Moores Valley, Oregon,
fiber optic cables, land, buildings, operating facilities and business
offices, all of which are owned. In addition, PTC leases a duplicate
cable for backup between Pacific City, Oregon and Portland, Oregon and
business office space. PTC also holds in inventory its portion of the
unsold capacity in the NPC and backhaul facilities.
The Company's executive, administrative, purchasing and certain
engineering functions are headquartered in Vancouver, Washington. The
Company has a 50 percent ownership interest in its headquarters building
and, through a long-term lease, occupies approximately 63 percent of the
225,000 square-foot building. The Company owns two mainframe computers
and leases most of the other equipment used in conjunction with providing
data processing services.
Item 3. LEGAL PROCEEDINGS
-----------------
The Company is a party to various legal claims, actions and
complaints, one of which is described below. Although the ultimate
resolution of legal proceedings cannot be predicted with certainty,
management believes that disposition of these matters will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
On September 27, 1995, holders of a majority of the approximately 5.3
million shares of outstanding common stock held by minority shareholders
of the Company voted in favor of the merger of a wholly-owned subsidiary
of Holdings into the Company. As a result of the merger, the common stock
held by minority shareholders was converted into the right to receive
$30.00 per share in cash, other than shares as to which dissenters' rights
were perfected. Former minority shareholders of the Company who owned
approximately 26 percent of the total outstanding shares held by minority
shareholders filed notices with the Company asserting dissenters' rights
in connection with the merger. Certain of these shareholders have also
asserted that the fair value of the Company's common stock, to which they
will be entitled under the dissenters' rights provisions of the Washington
Business Corporation Act (WBCA), is substantially in excess of the $30.00
per share paid to the minority shareholders who did not dissent. The
process for judicial resolution of dissenting shareholder proceedings is
governed by the provisions of the WBCA. On February 12, 1996, the Company
filed a petition with the Superior Court of Washington for Clark County in
accordance with these provisions (Pacific Telecom, Inc. v. Gabelli Funds,
---------------------------------------
Inc. et. al., Superior Court of Washington for Clark County). Each of the
- ------------
dissenters filed an answer in late March 1996. The dissenters
transferred the case to federal district court in Tacoma, Washington,
where it is now pending. The number of
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<PAGE>
shares originally at issue was 1,343,995; however, 13 dissenters,
representing 460,800 shares, agreed to accept $30.00 per share and will be
dismissed from the case. As part of the dissenters' pre-trial
disclosures, the Company was advised that expert testimony to be offered
by the dissenters will be to the effect that the fair value per share of
the Company's common stock as of the date of the merger was in the range
of $43.56 to $50.20. Trial is scheduled for April 14, 1997.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-------------------------------------------------
There is no public market for the Company's common stock. All of the
Company's outstanding common stock is owned by Holdings. Dividends are
normally declared and paid on a quarterly basis. For 1996 and 1995,
dividends paid totalled $52,816,000 and $52,267,000, respectively.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS *
-------------------------------------------------
The Company is continuing with its strategy of focusing resources on
providing local exchange telephone services in rural and suburban
markets. In late 1995 and during 1996, the Company signed definitive
agreements to purchase local exchange telephone properties and operations
representing approximately 70,400 access lines and cellular operations
representing 6,800 customers. The year ended December 31, 1995 can be
best described as a transition year, as the Company successfully exited
the long distance business in Alaska and redeployed the proceeds from the
divestiture into LEC assets. During 1995, the Company closed three
acquisitions of local exchange properties with USWC in Colorado,
Washington and Oregon. Assets representing 94 exchanges serving
approximately 90,000 access lines were purchased for an aggregate of
approximately $376.3 million. See Note 14 to Consolidated Financial
Statements included in Item 8 hereof for information concerning the USWC
asset acquisitions.
In August 1995, the Company sold its long distance subsidiary,
Alascom, to AT&T in a transaction that provided $365.5 million in cash.
AT&T paid $290.5 million in cash for the Alascom stock and settlement of
all past cost study issues. AT&T also agreed to allow the Company to
retain a $75 million transition payment made by AT&T to Alascom in July
1994 pursuant to an FCC order. See Note 15 to Consolidated Financial
Statements included in Item 8 hereof for information concerning the sale
of Alascom.
The Company operates predominately in the telecommunications industry
through local exchange operations, providing switched and non-switched
voice and data communication services, and access to its networks to
interexchange carriers. The Company had provided long lines operations
until August 7, 1995, when Alascom was sold. The Company is involved with
cellular operations which generate revenues from retail and foreign roamer
cellular services, as well as from management of cellular properties for
other owners. The Company is also engaged in the operation and
maintenance of the NPC. Revenues from this cable project are recognized
from the sale of capacity on the primary cable and backhaul system and
from maintenance and restoration services provided for the system. In
1996, 86 percent of consolidated operating revenues were contributed by
local exchange companies, eight percent by cellular operations, five
percent by cable and backhaul capacity sales and related cable services
and one percent by other activities. Certain revenues from the Company's
rate of return regulated operations are based on estimates that are
subject to subsequent adjustments in future accounting periods as refined
operational information becomes available.
- ----------------------------------
* Pursuant to General Instruction J (1)(a) and (b) of Form 10-K, the
Company is substituting a management's narrative analysis of results of
operations for Item 7.
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<PAGE>
The NPC system experienced three outages in 1995. The February and
October outages were caused by failure of components covered under
existing contractual warranty provisions. NPC's warranty provision
requires the contractor to pay for incurred marine operations charges and
to replace spares and materials used during the repair. The May outage
was caused by an external agency hooking the cable and dragging it on the
sea bed until the cable was damaged. During each of the outages,
restoration services were provided to customers within three hours after
the outage occured. The NPC system generates positive cash flow for the
Company, primarily from the provision of maintenance and restoration
services.
The Company's net income for the year ended December 31, 1996 was
$75.3 million, a decrease of 46 percent compared to net income of $139.6
million in 1995. This decrease was attributable to the after-tax gain on
the sale of Alascom of $66.4 million in 1995. Operating income declined
four percent or $6.6 million in 1996 compared to 1995 due to the $36.9
million decrease relating to the sale of Alascom. Most of the operating
income decline was offset by the acquisition of local exchange assets in
Colorado, Washington and Oregon, internal access line growth, revised
local exchange revenue estimates for prior years and cellular customer
growth. Operating revenues for 1996 were $521.1 million, a decrease of
$119.0 million, or 19 percent, compared to 1995. Operating expenses in
1996 were $362.4 million, a decrease of $112.4 million, or 24 percent,
compared to 1995. The local exchange acquisitions completed during 1995
had served to increase both operating revenues and expenses, and
substantially replace operating income that had been provided by Alascom.
However, with the sale of Alascom, the presentation of long distance
network services and access expense tend to distort a year to year
comparison of revenue and expenses.
The following table summarizes the effects of the sale of Alascom in
August 1995 and the acquisition of LEC assets in 1995 on operating income
for the period ended December 31, 1996, when compared to 1995. Other
variances are footnoted below:
<TABLE>
<CAPTION>
Year Alascom Variance Year
Ended Seven Months due to Ended
December 31, Ended July 31, LEC December 31,
1995 1995 Acquisitions Other 1996
------------ -------------- ------------ ----- ------------
(in millions)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Local network service $120.5 $ 7.5 $12.9 (a) $140.9
Network access service 223.7 32.9 2.5 (b) 259.1
Long distance network service 150.1 $(148.9) .3 .1 1.6
Private line service 34.3 (34.3) -
Sales of cable capacity 3.4 5.0 (c) 8.4
Cellular 33.9 10.1 (d) 44.0
Other 74.2 (9.9) 1.8 1.0 67.1
----- ----- ---- ---- -----
Total operating revenues 640.1 (193.1) 42.5 31.6 521.1
----- ----- ---- ---- -----
Operating expenses:
Plant support 112.4 (26.3) 5.1 91.2
Depreciation and amortization 105.8 (19.6) 11.7 4.4 (e) 102.3
Leased circuits 20.9 (16.3) .1 (2.2)(f) 2.5
Access expense 53.0 (53.0) -
Other operating expense 37.9 (9.3) 1.1 1.4 (g) 31.1
Cost of cable sales 2.2 4.5 (h) 6.7
Customer operations 58.4 (15.8) .7 2.1 (i) 45.4
Administrative support 68.3 (14.8) 3.3 6.8 (j) 63.6
Taxes other than income taxes 15.9 (1.1) 2.4 2.4 (k) 19.6
----- ----- ---- ---- -----
Total operating expenses ` 474.8 (156.2) 24.4 19.4 362.4
----- ----- ---- ---- -----
Operating income $165.3 $(36.9) $18.1 $12.2 $158.7
===== ===== ==== ==== =====
</TABLE>
(a) Revenue from enhanced services, such as caller name and number
identification, voice messaging, automatic call back, auto recall and
call trace, of $4.1 million, revenue from LEC access line growth of
$6.1 million, LEC installation related charges of $1.0 million due to
customer growth and certain rate increases and extended area services
of $1.0 million accounted for most of the $12.9 million increase in
local network service revenue.
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<PAGE>
(b) Network access service revenue grew by $2.5 million, with $3.4
million resulting from access line growth and higher minutes of use
and $2.8 million resulting from revised LEC revenue estimates for
prior years. This increase was partially offset by decreased
Universal Service Fund (USF) support of $3.9 million. The national
average cost per access line to provide service to rural telephone
customers (the USF benchmark) increased while the Company's cost per
access line increased at a rate below the national average. This
caused a slight decrease in the USF support received per access line.
(c) Sales of cable capacity increased $5.0 million due to additional
circuit sales.
(d) Cellular revenue grew $10.1 million due to growth in customers and
increased roamer revenues.
(e) Depreciation expense was higher by $4.4 million, which included $3.4
million due to increased LEC depreciable plant balances and $.7
million due to growth in cellular operations.
(f) Leased circuits expense decreased $2.2 million in 1996 mainly due to
the cable outage restoration services provided in February and May
1995.
(g) Other operating expense increased $1.4 million primarily due to
growth in cellular operations.
(h) Cost of cable sales increased by $4.5 million due to additional
circuit sales.
(i) Customer operations expense grew $2.1 million, which included $1.1
million due to growth in cellular operations and $.9 million due to
LEC customer growth.
(j) Administrative support increased $6.8 million mainly due to customer
growth, systems development and acquisition activities.
(k) Taxes other than income taxes increased $2.4 million mainly due to
higher property valuations and growth in excise taxes due to
increased LEC revenues.
Other expense - net was $36.0 million in 1996 compared to other
income - net of $21.3 million in 1995. Gain on sale of subsidiaries and
investments included pre-tax gains on cellular properties of $3.7 million
in 1996 and the pre-tax gain on the sale of Alascom of $66.5 million in
1995. Other expense was lower in 1996 due to higher cellular and LEC
equity income of $2.7 million and because 1995 included $1.5 million of
costs relating to Holdings' offer to purchase the minority interest in the
Company.
INCOME TAXES
- ------------
(in millions, except percentages)
1996 1995
----- -----
Income tax expense $47.5 $47.0
Effective income tax rate 38.7% 25.2%
Income tax expense increased due to higher taxable income. The
financial statement gain on the sale of Alascom in 1995 was recorded
without federal or state income tax expense, because the tax basis in
Alascom was greater than the selling price. This caused the effective tax
rate to decline in 1995. Excluding the sale of Alascom, the Company's
effective tax rate would have been 39.1 percent in 1995. See Note 6 to
the Consolidated Financial Statements for an explanation of the tax impact
of the gain on the sale of Alascom.
- 10 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
(in millions)
Plan 1997 1996 1995
--------- ---- ----
Capital expenditures:
Local exchange companies $126 $113 $106
Long Lines - - 7
Cellular 7 6 7
Other 4 3 2
--- --- ---
Total capital expenditures $137 $122 $122
=== === ===
Acquisitions - LEC $432 $ - $368
=== === ===
Acquisitions - PCS $ 10 $ - $ -
=== === ===
Planned acquisitions during 1997 include the purchase of assets or
operations in Minnesota, Michigan, Fairbanks, Alaska and other
acquisitions for an aggregate $252 million, which includes a $5 million
escrow payment made during 1995, escrow payments totalling $2 million made
during 1996, and approximately $20 million for cash to be acquired in the
acquisitions. Also included in planned acquisitions in 1997 are $200
million for asset purchases not yet identified and that may not be
completed before year end. The Company plans to fund these acquisitions
with medium-term note issuances, internally generated cash and short-term
debt. If all the planned acquisitions close during 1997, debt as a
percentage of total capitalization is anticipated to be 53 percent by
year end 1997.
CAPITAL EXPENDITURES
- --------------------
The Company's capital expenditures during 1996 were funded through
internally generated cash of $197 million. The acquisitions in 1995 were
funded primarily by proceeds from the sale of Alascom and borrowings under
the Series B Medium-term Notes program. The Company expects to fund its
capital expenditures in 1997 primarily through internally generated cash.
Capital expenditures during 1996 related mainly to network upgrades and
growth in the Company's operations. Significant network upgrades were
made during 1996 to acquired LEC assets.
ACQUISITIONS
- ------------
The Company has a stated objective of growing its local exchange
operations through internal growth and acquisitions. The Company intends
to pursue acquisitions of independent telephone companies, and to
participate in the rural divestiture strategy of USWC and other large
regional holding companies. While the Company's primary goal is to
acquire properties in its current operating states, it would consider
entering new states if an acquisition opportunity were of sufficient size.
The Company believes that significant economies of scale and associated
cash flow benefits can be generated by acquiring new properties and
integrating them into the Company's administrative and operations
structure. See Notes 13 and 14 to Consolidated Financial Statements
included in Item 8 hereof for information concerning the asset
and operation acquisitions that were completed in 1995 and those that are
pending in 1997, respectively.
DISPOSITIONS
- ------------
In February 1997, the Company sold its cellular interests in Brown
County (Wisconsin) and Wisconsin RSA 10 for net cash proceeds of $10.3
million and a net gain of $.1 million. Proceeds of the sale will be used
to purchase PCS licenses. See Item 1. "Business - Telecommunications
Operations - Cellular" for information concerning PCS license purchases.
- 11 -
<PAGE>
See Notes 5 and 15 to Consolidated Financial Statements included in
Item 8 hereof for information concerning the sales of cellular properties
and the sale of Alascom.
LONG-TERM AND SHORT-TERM DEBT
- -----------------------------
(in millions, except percentages)
December 31,
------------------------
1996 1995
---- ----
Long-term debt $527.9 $459.5
Short-term debt 18.0 90.0
Currently maturing long-term debt 15.8 5.5
----- -----
$561.7 $555.0
===== =====
Debt as a percent of total capitalization 41.4% 41.8%
===== =====
In January 1996, the Company established a $200 million Series C
Medium-term Notes program. During 1996, the Company issued $133.5 million
of such notes and used the proceeds primarily to repay short-term debt.
The remaining $66.5 million will be used primarily to fund future
acquisitions.
The Company has access to funds through its $300 million revolving
credit agreement which terminates in November 1999. At December 31, 1996,
no borrowings were outstanding under this agreement. (See Note 11 to
Consolidated Financial Statements included in Item 8 hereof.) The
revolving credit agreement also serves as backup for a $100 million
commercial paper program, under which no borrowings were outstanding at
December 31, 1996. The Company had $43 million outstanding under other
available banking arrangements at December 31, 1996. Short-term
borrowings from other available banking arrangements of $25 million have
been classified as long-term debt at December 31, 1996 based on
management's intent and the Company's ability to support this debt on a
long-term basis. The Company is currently engaged in negotiations to
replace the existing credit agreement with a comparable facility.
At December 31, 1996, the Company had approval from the Rural
Telephone Bank to borrow $15.8 million in additional Rural Utilities
Service debt for certain construction projects.
Any temporary cash or liquidity requirements during 1997 will be met
through utilization of funds available under the revolving credit
agreement or temporary advances from Holdings. (See Note 2 to
Consolidated Financial Statements included in Item 8 hereof.) Long-term
liquidity requirements will be met through utilization of funds available
under the revolving credit agreement or the Series C Medium-term Notes
program. Cash needed to pay dissenters' rights is to be provided by
Holdings. (See Note 2 to Consolidated Financial Statements included in
Item 8 hereof.)
REGULATION
- ----------
See Item 1. "Business - Regulation" for information concerning
regulation.
FORWARD-LOOKING STATEMENTS
- --------------------------
The information in the tables and text in this document include
certain forward-looking statements that involve a number of risks and
uncertainties that may influence the financial performance and earnings of
the Company and its subsidiaries. When used in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
the words "estimates", "expects", "anticipates", "forecasts", "plans",
"intends" and variations of such words, and similar
- 12 -
<PAGE>
expressions are intended to identify forward-looking statements that
involve risks and uncertainties. There can be no assurance the results
predicted will be realized. Actual results will vary from those
represented by the forecasts, and those variations may be material.
The following factors are among the factors that could cause actual
results to differ materially from the forward-looking statements: utility
commission practices; regional economic conditions; environmental,
regulatory and tax legislation; technological developments in the
telecommunications industry; and the cost of debt and equity capital. Any
forward-looking statements issued by the Company should be considered in
light of these factors.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholder of Pacific Telecom, Inc.:
We have audited the accompanying consolidated balance sheets of Pacific
Telecom, Inc. and its subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholder's
equity, and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements represent fairly,
in all material respects, the financial position of Pacific Telecom, Inc.
and its subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
January 27, 1997
- 13 -
<PAGE>
PACIFIC TELECOM, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
OPERATING REVENUES:
Local network service $140,870 $120,512 $ 96,944
Network access service 259,110 223,723 168,530
Long distance network service 1,606 150,064 271,977
Private line service - 34,270 58,193
Sales of cable capacity 8,353 3,419 4,567
Cellular 44,043 33,884 23,642
Other 67,148 74,263 72,533
------- ------- -------
Total operating revenues 521,130 640,135 696,386
------- ------- -------
OPERATING EXPENSES:
Plant support 91,163 112,350 117,694
Depreciation and amortization (Note 3) 102,292 105,828 100,879
Leased circuits 2,509 20,933 26,618
Access expense (Note 2) - 53,002 92,929
Other operating expense 31,066 37,876 35,116
Cost of cable sales 6,688 2,205 2,977
Customer operations 45,482 58,486 64,204
Administrative support 63,623 68,294 75,616
Taxes other than income taxes 19,575 15,850 15,712
------- ------- -------
Total operating expenses 362,398 474,824 531,745
------- ------- -------
OPERATING INCOME 158,732 165,311 164,641
------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense (40,823) (42,316) (34,754)
Interest income 3,471 2,798 1,716
Gain on sale of subsidiaries and
investments (Notes 5 and 15) 3,705 66,526 2,073
Minority interest (2,398) (1,298) (975)
Other 44 (4,445) (10,536)
------- ------- -------
Other income (expense) - net (36,001) 21,265 (42,476)
------- ------- -------
INCOME BEFORE INCOME TAXES 122,731 186,576 122,165
INCOME TAXES (NOTE 6) 47,454 47,012 40,766
------- ------- -------
NET INCOME $ 75,277 $139,564 $ 81,399
======= ======= =======
The accompanying notes are an integral part of these financial statements.
- 14 -
<PAGE>
PACIFIC TELECOM, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------
1996 1995
---- ----
(In thousands)
ASSETS
Current assets:
Cash and temporary cash investments $ 9,421 $ 6,331
Accounts receivable 97,705 81,528
Accounts and notes receivable - affiliates (Note 2) 62,345 41,234
Material and supplies (at average cost) 8,676 7,082
Inventory - North Pacific Cable 53,883 60,571
Other 6,428 9,522
--------- ---------
Total current assets 238,458 206,268
Investments (Note 9) 131,621 124,555
Plant in service:
Telecommunications (Note 3) 1,631,443 1,570,262
Other 22,444 22,655
Less accumulated depreciation 721,462 678,328
--------- ---------
932,425 914,589
Construction work in progress 16,140 13,970
--------- ---------
Net plant 948,565 928,559
Intangible assets - net 365,451 378,214
Deferred charges 17,713 16,528
--------- ---------
Total assets $1,701,808 $1,654,124
========= =========
The accompanying notes are an integral part of these financial statements.
- 15 -
<PAGE>
PACIFIC TELECOM, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------
1996 1995
---- ----
(In thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Currently maturing long-term debt (Note 11) $ 15,813 $ 5,535
Notes payable (Note 10) 18,000 90,000
Accounts payable 48,138 48,395
Accrued liabilities 52,788 58,736
Dissenters' rights (Note 2) 27,930 27,930
Accrued access and unearned revenue 7,216 8,354
--------- ---------
Total current liabilities 169,885 238,950
Long-term debt (Note 11) 527,906 459,502
Deferred income taxes (Note 6) 152,116 126,539
Unamortized investment tax credits 5,203 6,929
Other long-term liabilities 51,607 48,502
Minority interest 17,216 18,288
Shareholder's equity:
Common stock - stated value, 1996 and 1995 -
$1.00 (Note 2)
- authorized, 200,000,000 shares
- outstanding, 1996 and 1995 - 100 shares - -
Additional paid-in capital 225,943 225,943
Retained earnings (Note 11) 551,932 529,471
--------- ---------
Total shareholder's equity 777,875 755,414
Commitments and contingencies (Notes 4 and 13) - -
--------- ---------
Total liabilities and shareholder's equity $1,701,808 $1,654,124
========= =========
The accompanying notes are an integral part of these financial statements.
- 16 -
<PAGE>
PACIFIC TELECOM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Additional Unearned Total
Stock Paid-in Stock Retained Shareholder's
---------------
Shares Amount Capital Compensation Earnings Equity
------ ------- ---------- ------------ -------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 39,609 $19,805 $205,985 $(143) $413,064 $638,711
Shares issued for benefits 13 6 293 299
Share purchases (2) (1) (47) (48)
Unearned stock compensation (Note 7) (299) (299)
Net income 81,399 81,399
Cash dividends (52,289) (52,289)
------ ------- ------- --- ------- -------
BALANCE, DECEMBER 31, 1994 39,620 19,810 206,231 (442) 442,174 667,773
Shares issued for benefits 26 13 792 805
Share purchases (30) (15) (882) (897)
Minority buy-out and
reverse merger (Note 2) (39,616) (19,808) 19,808 -
Share retirements (16) (16)
Unearned stock compensation
(Note 7) 10 442 452
Net income 139,564 139,564
Cash dividends (52,267) (52,267)
------ ------- ------- --- ------- -------
BALANCE, DECEMBER 31, 1995 - - 225,943 - 529,471 755,414
NET INCOME 75,277 75,277
CASH DIVIDENDS (52,816) (52,816)
------ ------- ------- --- ------- -------
BALANCE, DECEMBER 31, 1996 - $ - $225,943 $ - $551,932 $777,875
====== ======= ======= === ======= =======
</TABLE>
The Company has 152,000 shares of $25 stated value, six percent cumulative
Preferred Stock authorized, but no shares are outstanding.
The accompanying notes are an integral part of these financial statements.
- 17 -
<PAGE>
PACIFIC TELECOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 75,277 $139,564 $ 81,399
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 111,508 114,282 107,784
Deferred income taxes and investment tax credits, net 22,296 24,515 (62,329)
Gain on sale of subsidiaries and investments (3,705) (66,526) (2,073)
Gains from unconsolidated entities, net (6,030) (3,350) (3,135)
Accounts receivable and other current assets (10,868) (46,165) (8,089)
Inventory - North Pacific Cable 6,689 2,206 2,977
Accounts payable and accrued liabilities (3,277) (5,430) 22,168
Other 5,147 (6,049) 2,666
------- ------- -------
Net cash provided by operating activities 197,037 153,047 141,368
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (122,387) (121,753) (148,248)
Cost of businesses acquired - (368,348) -
Investments in and advances to affiliates (5,118) (7,321) (4,726)
Proceeds from Alaska restructuring (Note 15) - 235,076 105,000
Proceeds from sales of assets 5,821 3,985 17,656
------- ------- -------
Net cash used by investing activities (121,684) (258,361) (30,318)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (72,000) 82,023 (3,190)
Change in affiliated notes (26,131) 459 -
Proceeds from issuance of long-term debt 135,239 153,810 8,006
Purchase of common stock - (897) (48)
Dividends paid (52,816) (52,267) (52,289)
Payments of long-term debt (56,555) (81,366) (58,507)
------- ------- -------
Net cash provided (used) by financing activities (72,263) 101,762 (106,028)
------- ------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 3,090 (3,552) 5,022
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR 6,331 9,883 4,861
------- ------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 9,421 $ 6,331 $ 9,883
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year $40,030 $40,688 $ 36,692
Income taxes paid during the year 17,911 33,736 102,324
NONCASH INVESTING ACTIVITIES:
Liabilities disposed of in connection with the sale of subsidiaries - 85,668 53
Common stock issued in connection with employee benefits - 805 299
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 18 -
<PAGE>
PACIFIC TELECOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation -- The consolidated financial statements
include the accounts of Pacific Telecom, Inc. (PTI) and its
subsidiaries (Company). The equity method is used to account
for those affiliated companies in which the Company exerts
significant influence through management agreements or ownership
of 20 to 50 percent and for all cellular partnerships in which a
Company subsidiary is a partner. All appropriate intercompany
transactions and balances have been eliminated. The 1995 and
1994 consolidated financial statements reflect certain
reclassifications to conform to the 1996 presentations.
(b) Industry segmentation -- Although regulatory requirements impose
structural separation in its operations, the Company operates
predominately in the telecommunications industry through local
exchange operations providing switched and non-switched voice
and data communication services.
(c) Regulatory authorities -- The accounting policies of the Company
are in conformity with the requirements of the Federal
Communications Commission (FCC) and the regulatory agencies of
the various states in which the Company operates. The Company
prepares its financial statements in accordance with Statement
of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." Accounting under
SFAS 71 is appropriate as long as: rates are established by or
subject to approval by independent, third-party regulators;
rates are designed to recover the specific enterprise's
cost-of-service; and in view of demand for service, it is
reasonable to assume that rates are set at levels that will
recover costs and can be collected from customers.
(d) Telecommunications plant -- Telecommunications plant is stated
at cost. Additions to plant include direct costs and related
indirect charges. Depreciation and amortization are provided
using the straight-line method based on the estimated service
lives of the various classes of depreciable assets. Amounts
charged to operations for depreciation expense reflect methods
prescribed by regulators in the Company's regulated operations
and, given the Company's operating environment, do not
materially differ from estimated useful life determinations used
to calculate depreciation estimates of the Company's
nonregulated operations. These depreciation estimates and
methods are applied consistently in both regulated and public
financial presentations. The composite depreciation rate for
depreciable telecommunications plant was 6.2 percent in 1996,
6.1 percent in 1995 and 6.4 percent in 1994.
(e) Interest during construction -- In accordance with regulatory
requirements, the Company's regulated subsidiaries capitalize
debt costs applicable to their construction projects. Interest
capitalized during 1996 and 1995 was $470,000 and $231,000,
respectively.
(f) Asset impairments -- In December 1995, the Company adopted SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." SFAS 121 establishes
accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those
assets to be held and used and for long-lived assets and certain
identifiable assets to be disposed of. The Company evaluated
its assets based on this standard and concluded that no assets
qualified as impaired and consequently no adjustments were
required.
- 19-
<PAGE>
(g) Cash and cash equivalents -- The Company considers all
investments with original maturities less than 90 days to be
cash equivalents.
(h) Income taxes -- The Company uses the liability method of
accounting for income taxes, which requires that deferred income
taxes be provided for all differences between the financial
statement and tax bases of assets and liabilities. Deferred
income taxes result primarily from differences between the
financial statement and tax bases of depreciable assets and
certain acquired assets, as well as employment related expenses
not currently deductible.
Excess deferred income taxes on regulated assets and liabilities
resulting from the decrease in the statutory rates under the Tax
Reform Act of 1986, net of an increase arising from the Revenue
Reconciliation Act of 1993, are being amortized to income over
the composite book life of the related assets as required by
regulatory authorities.
Investment tax credits relating to regulated telephone property,
plant and equipment have been deferred and are being amortized
over the estimated useful lives of the related assets.
(i) Intangible assets -- These costs are primarily for franchises of
local exchange and cellular companies acquired and goodwill
recorded from such acquisitions and are being amortized
generally over 40 years. Accumulated amortization of these
costs at December 31, 1996 and 1995 was $53,359,000 and
$42,703,000, respectively. Intangible assets relating to
nonconsolidated investments are included in "Investments" on the
balance sheet (Note 9).
(j) Inventory -- Inventory on the North Pacific Cable represents the
construction costs for the cable, which are carried at lower of
cost or market and charged to income on an average cost per unit
basis as capacity in the cable is sold.
(k) Software capitalization -- The Company capitalizes initial
operating system software development costs and expenses
subsequent additions or modifications to operating system
software. The Company also capitalizes application software
that is purchased at a cost of $10,000 or more and with a useful
life in excess of one year.
(l) Accrued access and unearned revenue -- Advance billings
creditable to revenue accounts in future months and advance
payments made by prospective customers prior to establishment of
services are recorded in accrued access and unearned revenue
until the service is rendered or cleared from this account as
refunds are made.
(m) Revenue recognition -- The Company's subsidiaries participate in
access revenue pools for certain interstate and intrastate
revenues, which are initially recorded based on estimates.
Certain network access revenues are estimated under cost
separations procedures that base revenues on current operating
costs and investments in facilities to provide such services.
These estimates are subject to subsequent adjustment in future
accounting periods as refined operational information becomes
available.
(n) Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from
those estimates.
- 20 -
<PAGE>
(o) Regulatory assets and liabilities -- In accordance with SFAS 71,
the Company's LEC operations capitalize certain costs
(regulatory assets) in accordance with regulatory authority
whereby those costs will be expensed and recovered in future
periods. At December 31, 1996 and 1995, the Company had
$502,000 and $704,000, respectively, in regulatory assets and
$5,873,000 and $8,900,000, respectively, in regulatory
liabilities on its balance sheet. The regulatory assets were
included in "Deferred charges" and the regulatory liabilities
were included in "Other long-term liabilities." The regulatory
assets arose from the income tax benefits provided to current
ratepayers for pre-1987 tax deductible expenses that were
capitalized on the books of the Company and for which no
deferred taxes were provided. These regulatory assets are being
reduced as the capitalized amounts are depreciated on the books
and those expenses are recovered. The regulatory liabilities
are made up of three items. The first relates to the excess
deferred taxes that resulted from a reduction in the Federal tax
rate from 46 percent to 35 percent. This excess will not be
paid to the Federal government, but rather will reduce future
revenue requirements from customers over the average life of the
assets that generated the difference. The second item in the
regulatory liability is the tax savings resulting from this
reduced revenue requirement created by the amortization of the
excess deferred taxes. The final item is a similar reduction in
revenue requirements due to the tax savings resulting from
amortization of deferred investment tax credits.
NOTE 2. TRANSACTIONS WITH RELATED PARTIES
The Company is a wholly-owned subsidiary of PacifiCorp Holdings,
Inc. (Holdings), which is a wholly-owned subsidiary of PacifiCorp. On
September 27, 1995, holders of a majority of the approximately 5.3
million shares of outstanding common stock held by minority
shareholders voted in favor of the merger of a wholly-owned subsidiary
of Holdings into the Company. As a result of the merger, the common
stock held by minority shareholders (other than shares as to which
dissenters' rights were perfected) were converted into the right to
receive $30.00 per share in cash, and the Company became a wholly-owned
subsidiary of Holdings with 100 shares of no par value common stock
outstanding. At December 31, 1996, a liability in the amount of
$27,930,000 included amounts to be paid to dissenters in the merger
based on $30.00 per share fair value for shares and accrued interest at
a rate equal to 5.97 percent per annum. The Company also recorded a
receivable from Holdings in the amount of the accrued liability to
dissenters.
(a) Notes payable -- The Company has an agreement that permits
temporary cash advances to or from Holdings at short-term
borrowing rates (Note 10). Interest expense on borrowings from
Holdings was $10,000 in 1996. There were no borrowings from
Holdings in 1995 and 1994. Interest income related to cash
advances to Holdings was $1,660,000 in 1996, $577,000 in 1995
and $777,000 in 1994. Interest income for 1996 and 1995 mainly
relates to the note receivable from Holdings for estimated
amounts due dissenters.
(b) Long-term debt -- At December 30, 1996, the Company issued Series
C Medium-term Notes in the amount of $33,499,000 to PacifiCorp
Environmental Remediation Company, a wholly-owned subsidiary of
Holdings. Holding has agreed to pay the Company a fee of $10,000
annually for each year the notes are outstanding. See Note 11
for additional information relating to these notes.
(c) Accounts and notes receivable - affiliates -- These amounts
generally represent billings to affiliates for services provided
by the Company. The 1996 and 1995 amounts primarily reflect the
amount due from Holdings for estimated amounts due dissenters'
and a tax refund receivable from Holdings. In 1996, the amount
also represents cash advances to Holdings of $26,131,000.
(d) Access expense -- The long lines subsidiary sold during 1995
recognized approximately $10,001,000 for the first seven months
of 1995 and $18,332,000 in 1994 of interstate and intrastate
access expense related to the Company's local exchange companies
in Alaska. Due to the tariffed nature of these charges, the
amounts were recorded as network access service revenues by the
local exchange companies and have not been eliminated in the
consolidated financial statements.
- 21 -
<PAGE>
(e) Income taxes -- The Company participates with PacifiCorp in
filing consolidated income tax returns. The Company's income
tax provisions are based on a separate company calculation of
income taxes.
(f) Management fees -- The Company pays PacifiCorp a management fee
for administrative services PacifiCorp provides to the Company.
Management fees paid to PacifiCorp were $2,214,000 in 1996,
$1,289,000 in 1995 and $871,000 in 1994.
(g) The Company rents its headquarters building from a 50 percent
owned partnership. Annual rent was $1,661,000 in 1996, 1995 and
1994, 50 percent of which was included in administrative
support.
NOTE 3. TELECOMMUNICATIONS PLANT IN SERVICE
The balances by category of Telecommunications Plant in Service
at December 31 are (in thousands):
Average
Remaining
Life 1996 1995
--------- --------- ---------
Central Office Equipment 13 $ 560,841 $ 520,810
Poles, Cable and Conduit 20 874,308 826,075
Building and Towers 29 85,116 91,331
Other 11 111,178 132,046
--------- ---------
Total Telecommunications Plant in Service $1,631,443 $1,570,262
========= =========
Depreciation expense was $97,131,000, $101,966,000 and
$97,784,000 for 1996, 1995 and 1994, respectively. Depreciation
expense declined in 1996 relating to the sale of Alascom, Inc. (Alascom)
in 1995. This was partially offset by increases related to acquisitions.
NOTE 4. LEASE AND MAINTENANCE ARRANGEMENTS
The Company's operating lease and maintenance agreements relate
to the use of headquarters buildings, data processing and customer
premise equipment, terrestrial communications circuits and cable
maintenance and backhaul. These agreements generally contain
provisions or options to renew the agreements at fair market rental
rates. The Company has no material capital lease obligations at
this time. Under these noncancellable operating lease and
maintenance agreements, minimum annual rental commitments are as
follows (in thousands):
Year Ending December 31,
------------------------
1997 $17,442
1998 11,786
1999 5,423
2000 3,158
2001 2,265
2002 and beyond 4,765
------
Total minimum lease and maintenance payments $44,839
======
Rent expense approximated $16,960,000 in 1996, $36,591,000 in
1995 and $41,688,000 in 1994. These amounts included rent expense for
Alascom of $17,939,000 in 1995 and $28,148,000 in 1994.
- 22 -
<PAGE>
NOTE 5. SALE OF SUBSIDIARIES
During 1996, the Company sold several cellular properties.
These transactions resulted in proceeds of $5,286,000 and after-tax gains
of $2,269,000.
See Note 15 for information regarding the sale of Alascom to
AT&T Corp. (AT&T) in August 1995.
On April 29, 1994, the Company completed the sale of PTI
Harbor Bay, Inc. and Upsouth Corporation, to IntelCom Group, Inc. for
1,183,147 shares of IntelCom common stock and $200,000 in cash. On
October 17, 1994, the Company sold its IntelCom stock. Cash proceeds of
$15,934,000 and a gain of $1,007,000, net of tax and selling expenses,
were recognized in 1994.
NOTE 6. INCOME TAXES
The Company's effective combined state and federal income tax
rate was 38.7 percent in 1996, 25.2 percent in 1995 and 33.4 percent in
1994. The difference between taxes calculated as if the statutory
federal tax rate of 35 percent were applied to pre-tax income and the
recorded tax expense is due to the following:
Year Ended December 31,
------------------------
1996 1995 1994
---- ---- ----
(in thousands)
Tax expense at statutory rates $42,955 $65,302 $42,758
State income taxes 6,639 14,491 1,702
Federal benefit of state income taxes (2,324) (5,072) (596)
Amortization of investment tax credits (1,714) (3,098) (4,355)
Amortization of excess deferred income taxes (595) (451) (1,776)
Amortization of acquisition costs in excess
of equity 2,056 2,018 2,086
Alascom gain (a) - (23,278) -
Other 437 (2,900) 947
------ ------ ------
Recorded tax expense $47,454 $47,012 $40,766
====== ====== ======
Income tax expense consisted of:
Taxes currently provided $25,158 $22,497 $103,095
Deferred income taxes (b) 24,010 27,613 (57,974)
Investment tax credits (1,714) (3,098) (4,355)
------ ------ -------
$47,454 $47,012 $ 40,766
====== ====== =======
(a) The financial statement gain on the sale of Alascom was recorded
without federal or state income tax expense, because the tax basis
in Alascom was greater than the selling price. The tax basis was
significantly greater than the book basis due to Alascom's required
tax recognition of the $150,000,000 in transition payments due from
AT&T under a 1994 FCC order. The Company has not historically
provided deferred tax liabilities or assets under SFAS 109 for
book/tax differences on investments in subsidiaries. As a result,
the tax benefit of the higher tax basis in Alascom was realized in
1995 with the sale.
(b) During 1994, prepaid taxes of $61,500,000 were reported due to the
FCC ordered transition payments of $150,000,000. Also, in 1995, the
Company had deferred tax increases associated with book/tax
differences on the newly acquired assets from USWC.
- 23 -
<PAGE>
The tax effect of significant items comprising the Company's net
deferred tax liability are as follows:
Year Ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
Deferred tax liabilities:
Plant in service $124,324 $ 94,602
Cellular acquisition adjustments 43,388 45,224
Deferred tax assets:
Employment related liabilities (13,736) (12,243)
Valuation adjustments 581 (3,902)
Reserve for self insurance (2,848) (3,808)
Other (2,388) 2,661
------- -------
Net deferred tax liability $149,321 $122,534
======= =======
Noncurrent tax liabilities $152,116 $126,539
Current tax assets (2,795) (4,005)
------- -------
$149,321 $122,534
======= =======
NOTE 7. PENSION PLAN
Substantially all employees of the Company, except those who are
members of one local of the International Brotherhood of Electrical
Workers (IBEW), are covered under the Company's pension plan. The
Company recognized costs of $1,173,000, $1,074,000 and $1,065,000 in
1996, 1995 and 1994, respectively, for contributions to the IBEW pension
plans and $1,747,000 and $3,110,000 in 1995 and 1994, respectively, for
contributions to the International Brotherhood of Teamsters. With the
sale of Alascom in August 1995, the Company has no further obligation to
pay for pension benefits of employees represented by the International
Brotherhood of Teamsters. The Company's plan provides benefits based
upon an employee's total years of service and the highest five years
compensation during the last 10 years of service. The Company's policy
is to fund annually up to the maximum amount of the unfunded pension
liability that can be deducted for federal income tax purposes.
The Company's unrecognized net asset resulting from the initial
application of SFAS 87 - "Employer Accounting for Pensions", was
amortized over a 10-year period that ended in 1996 for the Company's
original plan and is being amortized over a 20-year period ending in 2006
for the North-West Telecommunications, Inc. plan that was merged with the
Company's plan on January 1, 1993. Net pension cost and funded status of
the pension plan are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost of benefits earned $ 4,163 $ 3,724 $ 4,308
Interest cost on the projected benefit obligation 10,697 10,765 9,954
Actual loss (gain) on assets (13,638) (32,633) 1,592
Net amortization and deferral (2,118) 18,947 (15,845)
------ ------ ------
Total pension (income) expense $ (896) $ 803 $ 9
====== ====== ======
Early retirement program $ 2,520 $ - $ -
====== ====== ======
- 24 -
<PAGE>
Actuarial present value of benefit obligations:
Accumulated benefit obligation $133,123 $141,574 $112,176
======= ======= =======
Portion of accumulated benefit obligation vested $131,792 $140,022 $111,041
======= ======= =======
Projected benefit obligation $156,406 $167,317 $131,530
Plan assets at fair value, primarily listed stocks and bonds 171,428 154,316 129,582
------- ------- -------
Plan assets in excess of (less than) projected benefit obligation 15,022 (13,001) (1,948)
Unrecognized net loss (gain) (21,150) 6,749 (4,393)
Unrecognized prior service benefit (1,784) (2,029) (2,291)
Unrecognized net asset remaining from initial application
of SFAS 87 (2,663) (4,536) (6,409)
------- ------- -------
Pension liability at December 31 $(10,575)$(12,817) $(15,041)
======= ======= =======
Assumptions used to develop pension plan information were:
Discount rate 7.50% 7.25% 8.50%
Estimated long-term rate of return on assets 9.00 9.00 9.00
Assumed rate of increase in compensation levels 4.50 5.00 5.00
</TABLE>
The Company's pension liability at December 31, 1996 and 1995
was included in "Other long-term liabilities" on the balance sheet.
In December 1996, the Company offered an early retirement program
to a group of corporate employees. The Company recognized an expense of
$2,520,000 relating to this early retirement program.
In August 1995, the Company sold Alascom to AT&T (Note 15), which
resulted in a pre-tax curtailment gain of $3,401,000. This gain was
included in "Gain on sale of subsidiaries and investments."
The Company participates in PacifiCorp's K Plus Employee Stock
Ownership and Savings Plan. Under this plan, eligible employees may
elect to contribute a portion of their pay, within specified limits, to
the Plan. The Company makes a matching contribution of 50 percent of the
employee's elective contribution. Employee elective contributions
subject to matching are limited to six percent of pay. In addition, the
Company makes a fixed contribution of two percent of pay per year. The
costs to the Company for these contributions in 1996, 1995 and 1994 were
$2,882,000, $2,262,000 and $2,991,000, respectively.
PacifiCorp has a long-term incentive plan for certain executive
employees of the Company. Participants are eligible to receive shares of
PacifiCorp's common stock, plus dividend equivalents in cash based on a
determination of PacifiCorp's Board of Directors. Until September 1995,
the Company had its own separate long-term incentive plan for certain
executive employees and awards were in the Company's stock. Under this
previous plan participants received grants of restricted shares of the
Company's common stock based on a determination of the Company's Board of
Directors. The costs to the Company for these benefit plans amounted to
$311,000, $300,000 and $80,000 in 1996, 1995 and 1994, respectively.
Awards granted under these plans that are not yet vested are included as
a liability. Upon completion of the merger with a subsidiary of Holdings
(Note 2), all unvested shares of the Company's stock were converted to
PacifiCorp shares on the basis of the merger consideration.
- 25 -
<PAGE>
NOTE 8. OTHER POSTRETIREMENT BENEFITS
The Company provides health care and life insurance benefit
to eligible retired employees. Substantially all employees of the
Company are covered under the Company's postretirement health care and
life insurance plans. The postretirement health care and life insurance
plans are noncontributory as long as the Company's cost per retiree
remains below $300 per month ($600 per family per month). Generally, the
health care plan pays stated percentages of most medical expenses,
reduced for any deductible and payments made by government programs.
The Company recognizes the cost of postretirement benefits over
the active service period of its employees. The Company's policy is to
fund annually an amount of the postretirement benefit liability that will
systematically reduce that liability using available funds and allow
deductibility for federal income tax purposes. Due to income tax
regulations that restrict the deductibility of certain contributions for
postretirement benefits, the Company has elected to make non-tax
deductible contributions to meet funding requirements imposed by state
regulatory commissions. The Company funded $10,458,000, $13,254,000 and
$2,429,000 in 1996, 1995 and 1994, respectively, through contributions to
restricted trust funds and directly paying postretirement benefit costs
to third parties. The Company anticipates making additional
contributions into 401(h), VEBA and other trusts for 1997 totalling
approximately $5,700,000. The Company recognizes the transition
obligation, which represents the previously unrecognized prior service
cost, over a period of 20 years.
The net funded status for the combined plans is shown below (in
thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees and dependents $41,517 $43,415 $37,119
Fully eligible active plan participants 12,147 11,677 11,089
Other active plan participants 29,779 26,498 22,198
------ ------ ------
APBO 83,443 81,590 70,406
Plan assets at fair value, primarily listed
stocks and bonds (31,131) (21,977) (8,503)
------ ------ ------
APBO in excess of plan assets 52,312 59,613 61,903
Unrecognized transition obligation (27,839) (29,579) (34,521)
Unrecognized prior service cost 491 552 675
Unrecognized net loss from changes in assumptions (2,994) (6,853) (1,666)
------ ------ ------
Accrued postretirement benefit cost $21,970 $23,733 $26,391
====== ====== ======
Net periodic postretirement benefit cost included the following
components (in thousands):
1996 1995 1994
------ ------ ------
Service cost $2,706 $2,030 $2,307
Interest cost on accumulated postretirement
benefit obligation 5,971 5,891 5,836
Actual return on plan assets (1,931) (1,902) 180
Amortization of transition obligation over 20 years 1,740 1,844 1,918
Net amortization and deferral (40) 1,010 (620)
----- ----- -----
Expenses 8,446 8,873 9,621
Early retirement program 250 - -
----- ----- -----
Net periodic postretirement benefit cost $8,696 $8,873 $9,621
===== ===== =====
</TABLE>
- 26 -
<PAGE>
Assumptions used to develop the accumulated postretirement
benefit obligation information were:
1996 1995 1994
----- ----- -----
Discount rate 7.50% 7.25% 8.50%
Estimated long-term rate of return on assets 9.00 9.00 9.00
Health care cost trend rate-under 65 11.00 11.00 11.00
Health care cost trend rate-over 65 10.50 10.00 10.00
Ultimate health care cost trend rate 4.50 4.50 5.50
The assumed health care cost trend rates gradually decrease
over nine years. The health care cost trend rate assumptions have a
significant effect on the amounts reported. Increasing the assumed
health care cost trend rate by one percentage point would increase the
postretirement benefit obligation as of December 31, 1996 by $2,238,000,
and the annual net periodic postretirement benefit costs by $272,000.
In December 1996, the Company offered an early retirement program
to a group of corporate employees. The Company recognized an expense of
$250,000 relating to this early retirement program.
In August 1995, the Company sold Alascom to AT&T (Note 15). As a
result of this sale, the Company recognized a one time pre-tax
curtailment loss of $1,401,000. This loss was included in "Gain on sale
of subsidiaries and investments."
The Company's long-term portion of the accrued postretirement
benefit cost appears in "Other long-term liabilities" and the current
portion of the accrued postretirement benefit cost appears in "Accrued
liabilities" on the balance sheet at December 31, 1996.
NOTE 9. INVESTMENTS
The investment balances, which included interest bearing
advances of $10,037,000 and $5,000,000 at December 31, 1996 and 1995,
respectively, are summarized as follows:
December 31,
----------------------
1996 1995
---- ----
(in thousands)
Equity investments:
Cellular partnerships (a) $111,505 $110,223
Other equity investees 2,375 1,500
Cost investments:
Cellular partnerships 657 767
Other 17,084 12,065
------- -------
$131,621 $124,555
======= =======
(a) Cellular partnerships include goodwill of $23,383,000 in 1996 and
$23,150,000 in 1995, which is net of accumulated amortization of
$4,284,000 and $3,432,000, respectively.
- 27 -
<PAGE>
NOTE 10. SHORT-TERM DEBT
Short-term debt consisted of outstanding notes payable under
borrowing arrangements with various banks and other lenders. Information
regarding short-term debt follows:
<TABLE>
<CAPTON>
At December 31, During the Year
----------------- ----------------------------------
Average Average
Interest Maximum Average Interest
Balance Rate Outstanding Outstanding Rate
------- -------- ----------- ----------- --------
(in thousands, except percentages)
<S> <C> <C> <C> <C> <C>
1996
NOTES PAYABLE - BANKS $18,000 5.6% $80,000 $56,521 5.7%
NOTES PAYABLE - HOLDINGS - - 4,869 66 6.1
1995
Notes payable - banks $90,000 5.9% $242,166 $118,874 6.2%
Notes payable - other - - 8,845 3,655 8.2
1994
Notes payable - banks $12,000 6.8% $20,000 $9,292 5.0%
Notes payable - other 9,713 8.4 11,713 5,164 5.6
</TABLE>
The average interest rate is calculated by dividing the actual
short-term interest expense by the average daily weighted balance
short-term debt outstanding for the year.
NOTE 11. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
2% - 11.8% First mortgage notes payable under U.S. Government-
sponsored loan programs, maturities through 2028 $133,330 $137,173
9.5% First mortgage notes, maturities through 1999 6,000 6,039
8% - 9.8% Unsecured notes, maturities through 2007 22,390 23,325
6.6% - 9.4% Unsecured medium-term notes, maturities through 2008 323,500 223,500
6% Unsecured medium-term notes, maturities through 2006 (b) 33,499 -
6.1% Commercial paper - 50,000
5.6% Other available banking arrangements (c) 25,000 25,000
------- -------
Total 543,719 465,037
Less current maturities 15,813 5,535
------- -------
Total long-term debt $527,906 $459,502
======= =======
</TABLE>
(a) The weighted average cost of long-term debt outstanding at December
31, 1996 was 7.2 percent. The Company has small amounts of debt
which have higher rates than prevailing interest rates due to
prepayment restrictions.
- 28 -
<PAGE>
(b) Variable rate debt based on the Company's commercial paper rate is
convertible to a fixed rate at the option of the holder after
December 30, 1998. Once the debt has been converted to fixed rate
debt, Holdings will indemnify the Company for the incremental
interest expense incurred for rates exceeding 6.75 percent.
(c) Based upon management's intent and the Company's ability to support
the debt on a long-term basis through its revolving credit
agreement, $25,000,000 of borrowings under other available banking
arrangements at December 31, 1996, were classified as long-term
debt.
The Company has a $300,000,000 revolving credit agreement.
Borrowings under the revolving credit agreement bear interest at rates
based on bids from participating banks, certain prime rates, interbank
borrowing rates or certificate of deposit rates. The revolving credit
agreement has been renewed for a term ending in November 1999. Annual
commitment fees on the revolving credit agreement are currently .125
percent of the total authorized amount. Funds that could be borrowed
under the revolving credit agreement at December 31, 1996 were
$300,000,000.
At December 31, 1996, approximately $638,697,000 of
"Telecommunications plant in service" was pledged as collateral under
various loan agreements. Certain agreements also contain provisions
restricting the payment of cash dividends. At December 31, 1996,
consolidated retained earnings available for dividends and other
distributions were $242,037,000, all of which were available from the
retained earnings of subsidiaries.
Long-term debt maturing annually within each of the four years
subsequent to 1997 is as follows: 1998 -$29,071,000; 1999 - $48,156,000;
2000 - $6,574,000; 2001 - $66,546,000.
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Cash and temporary investments and
net trade accounts (a) $121,333 $121,333 $ 80,698 $ 80,698
Investments at cost (Note 9) (b) 17,741 17,741 12,832 13,326
Long-term debt and notes payable
(Notes 10 and 11) (c) 561,719 569,193 555,037 578,024
</TABLE>
(a) The carrying amount approximates fair value because of the short
maturity of these instruments.
(b) The fair values of the other investments are estimated based on
quoted market prices for these or similar investments, or the
investment's ability to return cash to the Company through
operations or through the sale of the investment.
(c) The fair value of the Company's long-term debt is estimated using
the discounted cash flow method based on the quoted market rates and
prices for the same or similar issues of the same remaining
maturities. The discount rate is determined using U.S. Treasury
rates plus the average spread for the Company quoted by several
dealers. Prepayment penalties and other costs of debt retirement
are not reflected in these estimates.
- 29 -
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company has signed agreements with US West Communications,
Inc. (USWC), GTE North Incorporated and the City of Fairbanks to
purchase certain telephone assets or operations in Minnesota, Michigan
and Fairbanks, Alaska for approximately $248 million in cash, which
includes approximately $20 million for cash to be acquired in the
acquisitions. Completion of these transactions will be dependent upon
appropriate regulatory approvals, expected to be received during 1997.
Expenditures under the Company's 1997 construction and capital
expenditure program are expected to approximate $137,000,000. There are
currently no long-term construction projects underway.
The Company is a party to various legal claims, actions and
complaints. Although the ultimate resolution of legal proceedings
cannot be predicted with certainty, management believes that disposition
of these matters will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
NOTE 14. ACQUISITIONS
During 1995, the Company closed transactions in Colorado,
Washington and Oregon to acquire local exchange properties from USWC. On
February 15, 1995, the Company purchased assets in Colorado representing
45 local exchanges serving approximately 53,000 access lines for
$202,070,000. On September 30, 1995, the Company purchased assets in
Washington representing 26 local exchanges serving approximately 20,000
access lines for $92,794,000. On October 20, 1995, the Company purchased
assets in Oregon representing 23 exchanges serving approximately 17,000
access lines for $81,500,000. These purchase prices were based on a
multiple of net book value of USWC assets acquired with certain purchase
price adjustments calculated at closing. Funds used for the purchases
were provided from proceeds received in the sale of Alascom (Note 15),
issuance of medium-term notes and short-term borrowings.
NOTE 15. SALE OF ALASCOM, INC.
On August 7, 1995, the Company sold its Alaska long distance
communication subsidiary, Alascom to AT&T. The Company received total
cash proceeds of $365,500,000 paid in three payments and recognized an
after-tax gain of $66,376,000. In July 1994, AT&T paid a $75,000,000
transition payment to Alascom that PTI retained. In October 1994, AT&T
paid a $30,000,000 down payment at the time of the signing of the sale
agreement. The remaining $260,500,000 was paid at closing. The Company
used the proceeds to fund the asset purchases closed in 1995 (Note 14).
Condensed income information for Alascom is as follows:
Seven months Twelve months
ended July 31, ended December 31,
1995 1994
-------------- ------------------
(in thousands)
Operating revenues $193,126 $343,506
Operating income 36,914 80,651
- 30 -
<PAGE>
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as
follows:
Three Months Ended Dec. 31 Sept. 30 June 30 March 31
------------------ ------- -------- ------- --------
(in thousands)
1996
----
OPERATING REVENUES $134,937 $136,609 $126,761 $122,823
OPERATING INCOME 43,908 41,555 37,914 35,355
NET INCOME 20,781 20,435 18,044 16,017
1995
----
Operating revenues $128,975 $141,326 $190,228 $179,606
Operating income 40,479 39,184 45,493 40,155
Net income 18,175 84,250 20,412 16,727
Decreased revenues and operating income in the first and second
quarters of 1996 and decreased net income in the third quarter of 1996
resulted from the sale of Alascom in 1995 (Note 15).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
No information is required to be reported pursuant to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
--------------------------------------------
<TABLE>
<CAPTION>
Page References
- ---------------
<S>
<C>
(a) The following documents are filed under Item 8 of this Report.
(1) Index to Consolidated Financial Statements:
Independent Auditors' Report 13
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 14
Consolidated Balance Sheets at December 31, 1996 and 1995 15-16
Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1996, 1995 and 1994 17
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 18
Notes to Consolidated Financial Statements 19-31
</TABLE>
- 31 -
<PAGE>
(2) Supplemental Schedules*
* All schedules have been omitted because of the absence of the
conditions under which they are required or because the required
information is included elsewhere in the financial statements filed
under Item 8 in this Report.
(3) Exhibits:
2 Agreement for Purchase and Sale of Exchanges between US WEST
Communications, Inc., Northland Telephone Company and the
Registrant dated December 15, 1995. (Incorporated by
reference to Exhibit 2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995, File No. 0-873.)
2A Stock Purchase Agreement by and among AT&T Corp. and the
Registrant dated October 1, 1994. (Incorporated by reference
to Exhibit 2C of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, File No. 0-873.)
2B Asset Purchase Agreement between GTE North Incorporated, PTI
Communications of Michigan, Inc. and the Registrant dated
March 29, 1996.
2C Asset Purchase Agreement by and between the City of Fairbanks
and PTI Communications of Alaska, Inc. dated August 20, 1996.
3 Restated Articles of Incorporation of the Registrant, as
amended June 13, 1990. (Incorporated by reference to Exhibit
3A of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990, File No. 0-873.)
3A Bylaws of the Registrant, as amended and restated effective
April 30, 1994. (Incorporated by reference to Exhibit 3B of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 0-873.)
4 Indenture dated as of September 20, 1991, between the Company
and The First National Bank of Chicago, as Trustee for the
Series B and C Medium-term Notes. (Incorporated by reference
to Exhibit 4 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1991, File No. 0-873.)
In reliance upon Item 601(4)(iii) of Regulation S-K, various
instruments defining the rights of holders of long-term debt of
the Registrant and its subsidiaries are not being filed because
the total amount authorized under each such instrument does not
exceed 10 percent of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant hereby
agrees to furnish a copy of any such instrument to the Commission
upon request.
*10A Executive Bonus Plan, dated October 26, 1990. (Incorporated by
reference to Exhibit 10B of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990, File No. 0-873.)
10B Intercompany Borrowing Agreement between the Registrant, Inner
PacifiCorp, Inc. (now PacifiCorp Holdings, Inc.) and certain
other affiliated companies dated as of April 1, 1991.
(Incorporated by reference to Exhibit 10A of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1991, File No. 0-873.)
- 32 -
<PAGE>
10C Management Services Agreement between the Registrant and Pacific
Power & Light Company. (Incorporated by reference to Exhibit 10D
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1980, File No. 0-873.)
*10D PacifiCorp Supplemental Executive Retirement Plan 1988
Restatement. (Incorporated by reference to Exhibit 10(q) of
PacifiCorp's Form 10-K for the year ended December 31, 1987, File
No. 1-5152.)
*10E PacifiCorp Long-Term Incentive Plan 1994 Restatement.
(Incorporated by reference to Exhibit 10G of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-873.)
*10F Form of Restricted Stock Agreement under the PacifiCorp Long-Term
Incentive Plan 1994 Restatement. (Incorporated by reference to
Exhibit 10H of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994, File No. 0-873.)
10G Credit Agreement dated as of November 13, 1991. (Incorporated by
reference to Exhibit 10M of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991, File No. 0-873.)
*10H Executive Deferred Compensation Plan dated as of January 1, 1994
as amended. (Incorporated by reference to Exhibit 10L of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 0-873.)
*10I Executive Officer Severance Plan dated as of January 1, 1994.
(Incorporated by reference to Exhibit 10N of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-873.)
10J Second Amendment to the Credit Agreement dated November 29, 1994.
(Incorporated by reference to Exhibit 10O of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-873.)
12 Statements re Computation of Ratios.
23 Independent Auditors' Consent
- ---------------
* This exhibit constitutes a management contract or compensatory
plan or arrangement.
(b) Reports on Form 8-K.
None
- 33 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PACIFIC TELECOM, INC.
March 20, 1997 By JAMES H. HUESGEN
- ----------------- ----------------------------
(Date) James H. Huesgen
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE AND CAPACITY DATE
---------------------- ----
CHARLES E. ROBINSON March 20, 1997
- ------------------------------------
(Charles E. Robinson)
Chairman, President, Chief Executive
Officer and Director
JAMES H. HUESGEN March 20, 1997
- ------------------------------------
(James H. Huesgen)
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
- 34 -
<PAGE>
SIGNATURE AND CAPACITY DATE
---------------------- ----
MICHAEL C. HENDERSON March 20, 1997
- ------------------------------------
(Michael C. Henderson)
Director
NOLAN E. KARRAS March 20, 1997
- ------------------------------------
(Nolan E. Karras)
Director
NANCY WILGENBUSCH March 20, 1997
- ------------------------------------
(Nancy Wilgenbusch)
Director
- 35 -<PAGE>
<PAGE>
____________________________________________________________
____________________________________________________________
ASSET PURCHASE AGREEMENT
_________________________
Between
GTE North Incorporated
and
PTI Communications of Michigan, Inc.
and
Pacific Telecom, Inc,
___________________________
March 29 ,1996
______________
_____________________________________________________________
_____________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
____
ARTICLE 1. DEFINITIONS .................................... 1
ARTICLE 2. PURCHASE AND SALE OF ASSETS .................... 7
2.1 Purchase and Sale of Assets..................... 7
___________________________
2.2 Purchased Property ............................. 7
__________________
2.2.1 Telephone Plant ........................ 8
_______________
2.2.2 Contracts .............................. 9
_________
2.2.3 Transferred Books and Records........... 9
_____________________________
2.2.4 Licenses ............................... 9
________
2.3 Leased Assets .................................. 9
_____________
2.4 Excluded Property .............................. 10
_________________
2.5 Assumption of Liabilities
2.5.1 Assumed Liabilities .................... 11
___________________
2.5.2 Retained Liabilities ................... 12
____________________
ARTICLE 3. PURCHASE PRICE AND DEPOSIT ..................... 13
3.1 Purchase Price ................................. 13
______________
3.2 Adjustments After Closing ...................... 14
_________________________
3.3 Performance Deposit ............................ 15
___________________
3.4 Guaranty ....................................... 15
________
ARTICLE 4. BILLING AND COLLECTION PROCEDURES .............. 15
4.1 Ownership of Accounts Receivable ............... 15
________________________________
4.2 Collection of Accounts Receivable .............. 16
_________________________________
4.3 Carrier Access ................................. 16
______________
4.4 Customer Notification .......................... 16
_____________________
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS...17
5.1 State Regulatory Approval ...................... 17
_________________________
5.2 Debtholder Consents ............................ 17
___________________
5.3 Lease and Contract Consents .................... 17
___________________________
5.4 Consents ....................................... 18
________
5.5 HSR Act Review ................................. 19
______________
ARTICLE 6. PRECLOSING COVENANTS ........................... 19
6.1 Investigation by Buyer ......................... 19
______________________
6.1.1 Environmental Assessment................ 20
________________________
6.2 Operation of the Business ...................... 20
_________________________
6.2.1 Preservation of Business................ 21
________________________
6.2.2 No Material Changes .................... 22
___________________
6.3 Satisfaction of conditions ..................... 23
__________________________
<PAGE>
TABLE OF CONTENTS
Page
____
6.4 Notification as to Certain Matters ............. 23
__________________________________
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING ............ 23
7.1 Conditions Precedent to Obligations of Buyer.. . 23
____________________________________________
7.1.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties.......................... 23
______________
7.1.2 Documents ............................... 24
_________
7.1.3 No Pending Litigation ................... 24
_____________________
7.1.4 No Legal Obstruction .................... 24
____________________
7.1.5 Material Adverse Changes................. 25
________________________
7.1.6 Real Estate Transfers ................... 25
_____________________
7.2 Conditions Precedent to Obligations of Seller... 25
_____________________________________________
7.2.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties .......................... 26
______________
7.2.2 Documents ............................... 26
_________
7.2.3 Purchase Price .......................... 26
______________
7.2.4 No Legal Obstruction .................... 26
____________________
ARTICLE 8. THE CLOSING .................................... 26
8.1 The Closing .................................... 26
___________
8.2 Seller's Obligations at Closing ................ 27
_______________________________
8.3 Buyer's Obligations at Closing ................. 28
______________________________
ARTICLE 9. REPRESENTATIONS AND WARRANTIES ................. 28
9.1 Representations and Warranties of Seller ....... 28
________________________________________
9.1.1 Authorization and Effect of Agreement.... 28
_____________________________________
9.1.2 No Restrictions Against Sale of the
___________________________________
Purchased Property ..................... 28
__________________
9.1.3 Consents and Approvals of Governmental
______________________________________
Authorities ............................ 29
___________
9.1.4 No Violation of Law ..................... 29
___________________
9.1.5 Corporate Organization .................. 29
______________________
9.1.6 Brokers ................................. 30
_______
9.1.7 Assumed Liabilities ..................... 30
___________________
9.1.8 Title to Purchased Property ............. 30
___________________________
9.1.9 Leases .................................. 31
______
9.1.10 Tangible Assets ......................... 31
_______________
9.1.11 No Adverse Change ....................... 32
_________________
9.1.12 Contracts ............................... 32
_________
9.1.13 Insurance ............................... 33
_________
9.1.14 Taxes ................................... 34
_____
9.1.15 No Material Claims ...................... 34
__________________
9.1.16 Tariffs: FCC Licenses ....................35
_____________________
<PAGE>
TABLE OF CONTENTS
_________________
Page
____
9.1.17 Employee Matters ......................... 36
________________
9.1.18 Schedules of Telephone Plant ............. 39
____________________________
9.1.19 Access Lines and Minutes of Use .......... 39
_______________________________
9.2 Representations and Warranties of Buyer ......... 40
_______________________________________
9.2.1 Corporate Organization ................... 40
______________________
9.2.2 Authorization and Effect of Agreement..... 40
_____________________________________
9.2.3 No Restrictions Against Purchase of
___________________________________
the Purchased Properties ............... 40
________________________
9.2.4 No Violation of Law ...................... 41
___________________
9.2.5 Financial Capacity ....................... 41
__________________
9.2.6 Brokers .................................. 41
_______
9.2.7 Consents and Approvals of Governmental
______________________________________
Authority ............................... 42
_________
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS .............. 42
10.1 Transition Agreement ........................... 42
____________________
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES ............ 43
11.1 Intellectual Party ............................. 43
__________________
11.1.1 No License ............................ 43
__________
11.1.2 Infringement .......................... 44
____________
11.1.3 Trademark Phaseout .................... 44
__________________
11.1.4 Third Party Software .................. 46
____________________
11.2 Effect of Due Diligence and Related Matters..... 47
___________________________________________
11.3 Confidentiality ................................ 47
_______________
11.4 Regulated Construction Projects and Budget ..... 48
__________________________________________
11.5 Further Assurances ............................. 49
__________________
11.6 Prorations ..................................... 49
__________
11.7 Risk of Loss Prior to Closing .................. 50
_____________________________
11.8 Cost Studies/NECA Matters ...................... 51
_________________________
11.8.1 Prior to Closing ....................... 51
________________
11.8.2 From and After Closing ................. 51
______________________
11.9 Construction and Customer Deposits ............. 52
__________________________________
11.10 Excluded Contracts ............................. 52
__________________
11.11 Access to Books and Records .................... 53
___________________________
11.12 Purchase Price Allocation ...................... 54
_________________________
11.13 Real Property Transfers ........................ 54
_______________________
11.14 Bulk Sales Laws ................................ 55
_______________
11.15 Prepaid Non-regulated Maintenance Agreements
____________________________________________
and Warranty Reserves ......................... 55
____________
11.16 Non-regulated Construction Work in Progress .... 55
___________________________________________
11.17 Vehicle Registration ........................... 56
____________________
<PAGE>
TABLE OF CONTENTS
_________________
Page
____
11.18 Telephone Directories Change Over .............. 56
_________________________________
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS ................. 56
12.1 Employee Transfer Agreement ..................... 56
___________________________
ARTICLE 13. INDEMNIFICATION ................................ 57
13.1 Survival of Representations, Warranties
_______________________________________
and Covenants ................................. 57
_____________
13.2 Limitations on Liability ....................... 58
________________________
13.3 Indemnification ................................ 61
_______________
13.4 Defense of Claims .............................. 62
_________________
ARTICLE 14. ENVIRONMENTAL MATTERS .......................... 65
14.1 Seller's Representations and Warranties ........ 65
_______________________________________
14.1.1 Treatment of Data ...................... 65
_________________
14.1.2 Phase I Reviews ........................ 65
_______________
14.1.3 Phase II Reviews ....................... 66
________________
14.1.4 Indemnity for Due Diligence Activities...67
______________________________________
14.1.5 Environmental Assessment Costs ......... 67
______________________________
14.2 Indemnification for Environmental Matters ...... 67
_________________________________________
14.2.1 Sole Remedy and Release ................ 67
_______________________
14.2.2 Indemnification of Buyer ............... 68
________________________
14.2.3 Indemnnification of Seller ............. 68
__________________________
14.2.4 Assumption of Environmental Liabilities. 68
_______________________________________
14.2.5 Notice ................................. 69
______
14.2.6 Actual Damages ......................... 69
______________
14.2.7 Limitations on Indemnification ......... 69
______________________________
14.3 Facilities Issues .............................. 70
_________________
ARTICLE 15. TERMINATION .................................... 70
15.1 Termination Rights ............................. 70
__________________
15.2 Effect of Termination .......................... 71
_____________________
ARTICLE 16. DISPUTE RESOLUTION.............................. 73
16.1 Exclusive Remedy ............................... 73
________________
16.2 Dispute Resolution Process ..................... 73
__________________________
16.3 Arbitration .................................... 74
___________
16.4 Costs and Attorneys' Fees ...................... 74
_________________________
16.5 Certain Limitations ............................ 74
___________________
ARTICLE 17. MISCELLANEOUS .................................. 75
17.1 Notices ........................................ 75
_______
TABLE OF CONTENTS
_________________
Page
____
17.2 Press Release .................................. 76
_____________
17.3 Expenses ....................................... 77
________
17.4 Successors and Assigns ......................... 77
______________________
17.5 Amendments ..................................... 77
__________
17.6 Captions ....................................... 77
________
17.7 Entire Agreement ............................... 77
________________
17.8 Waiver ......................................... 78
______
17.9 Third Parties .................................. 78
_____________
17.10 Counterparts ................................... 78
____________
17.11 Governing Law .................................. 78
_____________
17.12 Further Assurances ............................. 78
__________________
17.13 Certain Interpretive Matters and Definitions ... 79
____________________________________________
<PAGE>
INDEX OF SCHEDULES
__________________
Schedule* Title
________ _____
1.17 Confidentiality Agreement
2.2 Purchased Exchanges
2.4(f) Other Excluded Property
2.5.1 (e) Joint Construction Projects
5.4 FCC Waivers
6.2.2(c) Employee Matters - Extraordinary Transactions
6.2.2(e) Accounting Changes
7.1.1 Seller's Closing Certificate
7.2.1 Buyer's Closing Certificate
8.2(b) Legal Opinion of Seller's Counsel
8.3(b) Legal Opinion by Buyer's Counsel
9.1.3 Other Consents and Approvals
9.1.4 Violation of Law
9.1.8-1 Bondholders
9.1.8-2 Real Property; Liens and Encumbrances
9.1.9 Leases
9.1.10 Tangible Assets; Exceptions
9.1.11 Adverse Changes
9.1.12(a) Material Contracts
9.1.12(b) Other Contracts
9.1.14 Taxes
9.1.15 Material Claims
9.1-16 FCC Licenses
9.1.17(a) Employee Benefit Plans, Etc.
9.1.17(b) Material Liabilities Under ERISA
9.1.17(c) ERISA Plans - Compliance, Etc.
9.1.17(d) Multiemployer Plans
9.1.17(e) Union Representation
9.1.18 Telephone Plant
9.1.19 Access Lines and Minutes of Use
10.1 Conversion Services Agreements
11.1.1 Intellectual Property
11.1.3 List of Marks
11.4 Improvement Expenditures
11.10 Excluded Contracts
11.12 Allocation of Purchase Price
11.16 Non-regulated Construction Work in Progress
12.1 Employee Transfer Agreement
14.1 (a) Environmental Compliance
14.1 (b) Environmental Permits
14.1 (c) Underground Storage Tanks
* The Schedule numbers refer to the appropriate Section
within the Agreement.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of the 29th day of March, 1996, by
and between PTI Communications of Michigan, Inc., a Michigan
corporation ("Buyer"), and GTE North Incorporated, a
Wisconsin corporation ("Seller"), and Pacific Telecom, Inc.,
a Washington corporation, as guarantor of Buyer's
obligations ("PTI").
RECITALS
WHEREAS, Seller is in the business of providing
regulated local exchange telephone service in certain
areas of the state of Michigan; and
WHEREAS, Seller desires to sell, convey, assign,
transfer and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, certain of its
telephone properties and related assets, upon
the terms and conditions set forth in this Agreement;
and
WHEREAS, Seller desires that PTI guaranty Buyer's
obligations hereunder and PTI agrees to guaranty Buyer's
obligations hereunder.
NOW, THEREFORE, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment
hereto, the following terms are defined as set out below
or in the Section referenced below:
1.1 Accounts Receivable is defined in Section 2.4(b).
___________________
<PAGE>
1.2 Advanced Billing Amounts is defined in Section 4.1.
________________________
1.3 Affiliate has the meaning given to that term in
_________
Rule 405 under the Securities Act of 1933, as amended.
1.4 This Agreement is defined in Section 17.7.
______________
1.5 Allocation is defined in Section 11.12.
__________
1.6 Assumed Liabilities is defined in Section 2.5.1.
___________________
1.7 Bondholders is defined in Section 9.1.8.
___________
1.8 The Business means the business of providing
____________
local exchange and exchange access telecommunications
services and other related activities, services and
products within the Purchased Exchanges.
1.9 Buyer's Closing Certificate is defined in
___________________________
Section 7.2.1.
1.10 Casualty Notice is defined in Section 11.7.
_______________
1.11 Casualty Termination Notice is defined in
___________________________
Section 11.7.
1.12 CERCLA means the Comprehensive Environmental
______
Response, Compensation and Liability Act of 1980, as amended.
1.13 Claims is defined as any and all liabilities,
______
obligations, losses, damages, deficiencies, demands, claims,
penalties, settlements, judgments, actions, proceedings and
suits of whatever kind and nature and all reasonable costs
and expenses including reasonable attorneys' fees; provided,
however, Claims shall not include any regulatory liability
including any demand, or judgment resulting from an action
or proceeding before a State or Federal Regulatory body
having jurisdiction over Buyer's regulated activities.
1.14 Closing is defined in Section 8.1.
_______
-2-
<PAGE>
1.15 Closing Date is defined in Section 8.1.
____________
1.16 Collection Period is defined in Section 4.2
_________________
1.17 Confidentiality Agreement means the agreement
_________________________
between the parties dated March 14, 1995, which is attached
and incorporated into this Agreement as Schedule 1.17.
1.18 Construction Advances is defined in Section ll.9.
_____________________
1.19 Customer Deposits is defined in Section 11.9.
_________________
1.20 Contracts is defined in Section 2.2.2.
_________
1.21 Debtholder Consents is defined in Section 5.2.
___________________
1.22 Deposit is defined in Section 3.3.
_______
1.23 Direct Claim is defined in Section 13.4(b).
____________
1.24 Earned Accounts Receivable is defined in Section 4.1.
__________________________
1.25 Employee is defined in Section 9.1.17.
________
1.26 Employment Agreements is defined in Section 9.1.17.
_____________________
1.27 Environmental Liabilities means all liabilities,
_________________________
obligations (including obligations to respond to, investigate
and remediate conditions caused by any Regulated Material),
responsibilities, losses, damages (including punitive or treble
damages), costs and expenses (including reasonable fees,
disbursements and expenses of counsel, experts, consultants and
expert witnesses), fines, penalties, interest or bonds, based
upon any Environmental Requirements of any Governmental
Authority, or as a consequence of noncompliance with
any Environmental
-3-
<PAGE>
Requirements or the release or threatened release of a
Regulated Material into the outdoor environment.
1.28 Environmental Requirements means all applicable
__________________________
federal, state, interstate and local government or agency
laws, statutes, ordinances, rules, regulations, codes,
orders, approvals and permits and requirements of common
law relating to protection of the outdoor environment.
1.29 ERISA means the Employee Retirement Income
_____
Security Act of 1974, as amended.
1.30 ERISA Plans is defined in Section 9.1.17(a).
___________
1.31 Estimated Purchase Price is defined in Section 3.1
________________________
1.32 Evaluation Material is defined in the first
___________________
paragraph of the Confidentiality Agreement.
1.33 Excluded Property is defined in Section 2.4.
_________________
1.34 Executive Officers of an entity means the
__________________
president and any vice president of the entity in charge of
a principal business unit, division or function.
1.35 Existing Environmental Requirements means those
___________________________________
applicable provisions of any Environmental Requirements that
are both in effect and required to be met by Seller prior to
the Closing Date.
1.36 FCC means the Federal Communications Commission.
___
1.37 FCC Consents is defined in Section 5.4.
____________
1.38 FCC Licenses is defined in Section 2.2.4.
____________
1.39 Final Purchase Price is defined in Section 3.2
____________________
1.40 GAAP means generally accepted accounting principles.
____
-4-
<PAGE>
1.41 Governmental Authority is defined in Section 9.1.3.
______________________
1.42 HSR Act means the Hart-Scott-Rodino Antitrust
_______
Improvements Act of 1976, as amended.
1.43 Improvement Expenditures is defined in Section 11.4
________________________
1.44 Indemnifiable Losses is defined in Section 13.2(a).
____________________
1.45 Indemnification Payment is defined in Section l3.2(a).
_______________________
1.46 Indemnifying Party is defined in Section 13.2(a).
__________________
1.47 Indemnitee is defined in Section 13.2(a).
__________
1.48 Intellectual Property is defined in Section 11.1.1.
_____________________
1.49 Interest Amount is defined in Section 15-2(a).
_______________
1.50 IRC means the Internal Revenue Code of 1986, as amended.
___
1.51 IRS means the Internal Revenue Service.
___
1.52 Law is defined in Section 9.1.4.
___
1.53 Leases is defined in Section 2.3.
______
1.54 Liquid Investment means (i) direct obligations
_________________
of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii)
commercial paper rated at least A-1 by Standard & Poor's
Corporation and P-1 by Moody's Investors Services, Inc., or
(iii) time deposits with, including certificates of deposit
issued by, a bank or trust company that is organized under
the laws of the United States or any state thereof.
1.55 Marks is defined in Section 11.1.3.
_____
1.56 Material Contracts is defined in Section 9.1.12.
__________________
1.57 Other Licenses is defined in Section 2.2.4
______________
-5-
<PAGE>
1.58 PBGC means the Pension Benefit Guaranty Corporation.
____
1.59 Permitted Exceptions is defined in Section 11.13.
____________________
1.60 Plans is defined in Section 9.1.17(a).
_____
1.61 Press Release is defined in Section 17.2.
_____________
1.62 Proration Periods is defined in Section 11.6
_________________
1.63 Purchase Price is defined in Section 3.1.
______________
1.64 Purchased Exchanges is defined in Section 2.2.
___________________
1.65 Purchased Property is defined in Section 2.2.
__________________
1.66 Real Property is defined in Section 2.2.1.
_____________
1.67 Real Property Interests is defined in Section 2.2.1.
_______________________
1.68 Regulated Material means (i) any "hazardous
__________________
substances as defined in CERCLA, (ii) any petroleum or
petroleum substance, and (iii) any other pollutant, waste,
contaminant, or other substance regulated under
Environmental Requirements.
1.69 Regulatory Approval is defined in Section 5.1.
___________________
1.70 Retained Books and Records is defined in
__________________________
Section 2.4(c).
1.71 Retained Liabilities is defined in Section 2.5.2.
____________________
1.72 The Sale is defined in Section 2.4.
____
1.73 Seller's Closing Certificate is defined in
____________________________
Section 7.1.1.
1.74 Tax Returns means a report, return or other
___________
information statement required to be supplied to a Governmental
Authority with respect to Taxes, including, where permitted or
required, combined or consolidated returns for any group of
entities that includes Seller.
-6-
<PAGE>
1.75 Tax(es) means any foreign, federal, state,
______
provincial, county or local income, sales, use, transfer,
excise, franchise, stamp duty, custom duty, real and
personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll,
severance, recording, ad valorem, gains, value-added,
unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social
security, estimated, add-on, minimum, privilege, or
withholding tax and any interest and penalties and
additions to such taxes (civil or criminal) related thereto
or to the nonpayment thereof and related notarial fees.
1.76 Telephone Plant is defined in Section 2.2.1.
_______________
1.77 Third Party Claim is defined in Section 13.4(a).
_________________
1.78 Transferred Books and Records is defined in
_____________________________
Section 2.2.3.
1.79 Transition Services Agreements is defined in
______________________________
Section 10.1.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the terms
___________________________
and conditions of this Agreement, Seller agrees to sell,
convey, transfer, assign and deliver to Buyer, and Buyer
agrees to purchase and accept, at the Closing, all of
Seller's right, title and interest in and to the Purchased
Property, free and clear of all security interests, liens,
or encumbrances, except for Permitted Exceptions.
2.2 Purchased Property. For purposes of this Agreement,
__________________
the "Purchased Property" consists of the Telephone Plant,
Contracts, Transferred Books and Records and FCC Licenses
in effect or owned by Seller on the Closing Date that
pertain solely
-7-
<PAGE>
to the telephone exchanges listed in Schedule 2.2 (the
"Purchased Exchanges") other than the Excluded Property.
2.2.1 Telephone Plant. For purposes of this
_______________
Agreement, Telephone Plant" means the Real Property, Real
Property interests, machinery, equipment, vehicles and all
other assets and properties used in connection with the
conduct of the Business, including, without limitation,
all improvements, plants, systems, structures, construction
work in progress, telephone cable (wherever located and
whether in service or under construction), microwave
facilities (including frequency spectrum assignments),
telephone line facilities, telephones, machinery,
furniture, fixtures, materials, supplies, tools,
implements, conduits, stations, substations, equipment
(including, without limitation, central office equipment,
subscribers' station equipment and other equipment in
general), instruments, house-wiring connections and all
other equipment of every nature and kind owned by Seller
and used in connection with the Business. For purposes of
this Agreement, "Real Property" means the real property
owned by Seller and used in connection with the Business,
including, without limitation, all land, buildings,
structures, appurtenances, improvements or privileges
located thereon. "Real Property Interests" means easements,
rights of way, licenses or other interests in real property
other than interests in fee or leasehold interests. Without
limiting the generality of the foregoing, the Telephone
Plant includes the assets that would be property included
in the fixed asset accounts referenced in Part 32 of the
FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.18.
-8-
<PAGE>
2.2.2 Contracts. For purposes of this Agreement,
_________
"Contracts" means all agreements that relate to the
Business between Seller or any Affiliate of Seller and
(i) Seller's customers or (ii) other entities or persons
who are not Affiliates of Seller and who have business
relationships with Seller that relate to the Business
except for the agreements described on Schedule 11.1O
(which are agreements not to be assigned by Seller).
2.2.3 Transferred Books and Records. For
_____________________________
purposes of this Agreement, "Transferred Books and Records"
means all of Seller's customer or subscriber lists and
records, accounts billing, plant and continuing property
records, plans, blueprints, specifications, designs,
drawings, surveys, engineering reports, personnel records
(where applicable) and all other documents, computer data
and records relating to the Business, the Purchased Property,
the Employees and/or the Assumed Liabilities, except for the
Retained Books and Records.
2.2.4 Licenses. For purposes of this Agreement,
________
"FCC Licenses" means all licenses, certificates, permits or
other authorizations granted to Seller by the FCC that are
used in the conduct of the Business. For purposes of this
Agreement, "0ther Licenses" means all licenses, certificates,
permits, franchises or other authorization granted to Seller
by state and local regulatory agencies that are used in the
conduct of the Business.
2.3 Leased Assets. Seller shall, on the Closing Date,
_____________
assign to Buyer all of its interests, rights, benefits
and obligations as lessee with respect to all real and
personal property leases that are necessary or
useful in connection with Seller's conduct of the
-9-
<PAGE>
Business (the "Leases"). The assignment of the Leases is
subject to the provisions of Section 5.3.
2.4 Excluded Property. The sale contemplated by this
_________________
Agreement (the "Sale" shall not include the Excluded
Property. For purposes of this Agreement, "Excluded
Property" means the following, subject to the
provisions of Sections 4.2, 11.6 and 11.9:
(a) Cash, cash equivalents and investments;
(b) All accounts receivable, trade and otherwise,
of Seller outstanding as of the Closing Date (the "Accounts
Receivable"), other than the Advanced Billing Amounts
referred to in Section 4.1;
(c) The general ledger and all books and records
relating to (i) tax returns and tax records, (ii) the
Excluded Property, or (iii) the Retained Liabilities
(collectively, the "Retained Books and Records"); provided,
however, that Seller shall provide Buyer with access to the
Retained Books and Records pertaining to the Business, upon
reasonable request, and shall provide assistance in
determining the appropriate adjustments for plant
related tax-book timing differences;
(d) All trademarks, trade names, trade dress,
logos and any other intangible assets that use or
incorporate the word "GTE" and as provided in
Sections 11.1.1 and 11.14;
(e) Seller's interests in any business other
than the Business, including without limitation cellular
service areas or any applications or licenses granted
with respect thereto;
(f) Such other assets (i.e., encryption decoder
devices, AWAS terminals, etc.), if any, as Seller lists
and identifies on Schedule 2.4(f); and
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(g) The Contracts listed on Schedule 11.10.
2.5 Assumption of Liabilities.
_________________________
2.5.1 Assumed Liabilities. Buyer hereby agrees
___________________
to assume, perform and discharge, as of the Closing Date,
the specific liabilities, responsibilities and obligations
set forth below with respect to the Purchased Property
(the "Assumed Liabilities"):
(a) Conduct of Business after Closing.
_________________________________
All liabilities, responsibilities and obligations arising
out of or resulting from the use or ownership of the
Purchased Property after the Closing Date or the conduct
of the Business by Buyer after the Closing Date;
(b) Employment Matters. All liabilities,
__________________
responsibilities and obligations that are to be assumed by
Buyer under Article 12 with respect to Employees;
(c) Environmental Matters. All liabilities,
_____________________
responsibilities and obligations that are to be assumed
by Buyer under Article 14 with respect to
Environmental Liabilities;
(d) Contracts: Leases. All liabilities,
_________________
responsibilities and obligations that arise after the
Closing Date in connection with the performance of the
Contracts and the Leases:
(e) Joint Construction Projects. Those
___________________________
liabilities, responsibilities and obligations which are set
forth in Schedule 2.5.1 (e) to third parties that relate to
arrangements and commitments between Seller and a third
party for the construction of mutual transmission facilities
between various switching points;
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(f) Construction in Progress. All
________________________
liabilities, responsibilities and obligations relating to
post-Closing engineering and construction required to complete
scheduled construction and other capital expenditure projects;
(g) Customer Deposits and Construction Advances.
___________________________________________
All liabilities, responsibilities and obligations relating
to Customer Deposits, as set forth in Section 11.9, including
any interest thereon which has accrued through the Closing
Date and Construction Advances; and
(h) Advanced Billing Amounts. All
________________________
liabilities, responsibilities and obligations relating to
Advanced Billing Amounts.
2.5.2 Retained Liabilities. Seller shall retain
____________________
and have full responsibility and obligation with respect to,
and shall indemnify Buyer against, all liabilities,
responsibilities and obligations of Seller, other than those
liabilities, responsibilities and obligations that are
specifically assumed by Buyer pursuant to Section 2.5.1 or
any other provision of this Agreement (the "Retained
Liabilities"). Without limiting the generality of the
foregoing, but subject to liabilities that are
specifically assumed pursuant to Section 2.5.1 or other
provisions of this Agreement, the Retained Liabilities shall
include the following liabilities, responsibilities and
obligations of Seller
(a) All liabilities, responsibilities and
obligations relating to the use or ownership of the
Purchased Property on or before the Closing Date or to the
conduct of the Business on or before the Closing Date;
(b) All current liabilities of Seller
as of the Closing Date, including, without limitation,
trade payables;
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(c) All long-term debt of Seller, including
without limitation, indebtedness to the Bondholders;
(d) Subject to Sections 11.6 and 11.14, all
federal, state and local income, franchise, gross receipts and
similar taxes of Seller or its consolidated or combined group
and all federal, state and local income, franchise, gross
receipts and sales, use, property or other taxes relating to
the conduct of the Business on or before the Closing Date or
the use, ownership or operation of the Purchased Property on
or before the Closing Date;
(e) Subject to Article 12, all liabilities
and obligations arising on or before the Closing Date with
respect to the Employees, and any such liabilities or
obligations that arise after the Closing Date to the extent
that such liabilities and obligations relate to facts,
circumstances or conditions arising or occurring on or before
the Closing Date;
(f) All liabilities, responsibilities and
obligations arising out of or related to the litigation,
claims and other matters set forth on Schedule 9.1.15 and
any other litigation based on facts, circumstances or
conditions arising or occurring on or before the Closing
Date excluding regulatory proceedings; and
(g) All liabilities, responsibilities and
obligations arising on or before the Closing Date relating
to collective bargaining or other union contracts.
ARTICLE 3. PURCHASE PRICE AND DEPOSIT
3.1 Purchase Price. In consideration of the sale
______________
of the Purchased Property and other undertakings of Seller
in this Agreement, Buyer will pay to Seller the sum of
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Twenty-Five Million dollars ($25,000,000) subject to
adjustment as provided in Section 11.4, together with
any other adjustments contemplated in this Agreement
(the "Purchase Price"). At Closing, Buyer shall pay to
Seller an Estimated Purchase Price which shall be the
Purchase Price (less the Deposit) as adjusted in an amount
based upon Sellers good faith estimate of the adjustments
described in the first sentence of this Section 3.1. Seller
shall give Buyer notice of the Estimated Purchase Price at
least twenty (20) days prior to Closing.
3.2 Adjustments After Closing. Ninety (90) days
_________________________
following the Closing Date, Seller shall deliver to Buyer
the final calculations of the Purchase Price, as adjusted
pursuant to Section 3.1. Within thirty (30) days following
the delivery of such calculations and adjustments to Buyer,
Buyer shall notify Seller of any objection thereto, stating
in reasonable detail the reasons therefor; otherwise, such
calculations and adjustments of the Purchase Price and the
proration shall be final and binding on Seller and Buyer and
shall be the Final Purchase Price. If Buyer shall object,
Seller and Buyer shall work in good faith to agree on the
correct amount for the Final Purchase Price.
(a) If the Final Purchase Price shall exceed the
Estimated Purchase Price, Buyer shall cause to be transferred
to such account in the United States as Seller may specify,
immediately available funds, in U.S. dollars, the amount equal
to such excess. Amounts not so transferred within 120 days
after Close shall be subject to interest thereon at the rate of
five percent (5%) per annum, or
(b) If the Estimated Purchase Price shall exceed the
Final Purchase Price, Seller shall cause to be transferred to
such account in the United
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States as Buyer may specify, immediately available funds, in
U.S. dollars, the amount equal to such excess. Amounts not
so transferred within 120 days after Close shall be subject
to interest thereon at the rate of five percent (5%) per annum.
3.3 Performance Deposit. Concurrently with the execution
___________________
and delivery hereof, Buyer shall pay to Seller by wire transfer
of immediately available funds the sum of One Million Two
Hundred Fifty Thousand dollars ($1,250,000) (the "Deposit"), to
be held by Seller against payment of the Purchase Price and as
security for the performance by Buyer of its obligations under
this Agreement and shall become nonrefundable except as provided
in Article 15.
3.4 Guaranty. PTI guarantees Buyer's financial
________
obligations and performance hereunder. PTI agrees to cause
Buyer to perform each of Buyees agreements and covenants
contained in this Agreement. PTI shall be liable to the
same extent as Buyer (but only to that extent) for any
non-performance of Buyees agreements and covenants
contained in this Agreement.
ARTICLE 4. BILLING AND COLLECTION PROCEDURES
4.1 Ownership of Accounts Receivable. The parties
________________________________
acknowledge that Sellees "Accounts Receivable" for the
Business as of the Closing Date will include both amounts
that have been earned by Seller relating to service on or
before the Closing Date, whether billed or unbilled,
hereinafter collectively referred to as "Earned Accounts
Receivable," and amounts that have been billed as of the
Closing Date by Seller but are unearned (i.e., relating
to service after the Closing Date), hereinafter referred
to as the "Advanced Billing Amounts."
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4.2 Collection of Accounts Receivable. Buyer agrees
_________________________________
to act as a collection agent for Seller's Earned Accounts
Receivable for a period of ninety (90) days subsequent to
the Closing Date (the "Collection Period"). Buyer will
receive all cash collections and remit to Seller at the
end of each month an amount equal to Earned Accounts
Receivable actually collected during said month. During
the Collection Period, Buyer agrees to follow its normal
collection procedures. At the end of the Collection Period,
Buyer will send Seller a list of all uncollected account
balances relating to the Earned Accounts Receivable.
After the Collection Period, the collection of any such
outstanding balances will be the responsibility of Seller.
4.3 Carrier Access. Seller shall render its own final
______________
carrier access bills to its interexchange carriers for
minutes, messages and other applicable charges up to the
Closing Date. Seller shall be responsible for collecting,
and settling any disputes associated with its final bills
to the interexchange carriers.
4.4 Customer Notification. For a period of at least
_____________________
one (1) month prior to the Closing Date, Seller will permit
Buyer, at Buyer's expense, to insert preprinted single-page
subscriber education materials into billing documentation to
be delivered to subscribers affected by the Sale. Other
means of notifying subscribers may be employed by either
party, at the expense of the initiating party, but in no
event shall any notification be initiated without the prior
consent of the other party (which consent shall not be
unreasonably withheld) and earlier than two (2) months
prior to the Closing Date.
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ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 State Regulatory Approval. Promptly after the date
_________________________
of this Agreement, Buyer, and where required Buyer and Seller,
shall file the appropriate application(s) and notice(s) with
the Michigan Public Service Commission, seeking an order
permitting the transfer of service in the Purchased Exchanges
to Buyer (the "Regulatory Approval"). Buyer will be
responsible for establishing the tariff for its post-Closing
operations in Michigan. To the extent assignable, Seller will
assign its local community right of way agreements to Buyer.
Buyer agrees to use its best efforts to obtain the Regulatory
Approval and the parties agree to cooperate fully with each
other and with the applicable regulatory agency to obtain the
Regulatory Approval at the earliest practicable date.
5.2 Debtholder Consents. Seller shall take all actions
___________________
necessary with respect to its Bondholders to obtain the
termination or release, at Closing, of all security
agreements, mortgages and financing statements relating to
the Purchased Property (such termination or release being
hereinafter referred to as the "Debtholder Consents"). Buyer
agrees to cooperate in good faith with Seller in obtaining
the required Debtholder Consents.
5.3 Lease and Contract Consents. As promptly as
___________________________
practicable after the execution date, the parties hereto
shall mutually seek the consent, approval or waiver of the
third party to any Lease or Material Contract that requires
consent, approval or waiver as a condition to an assignment
of such Lease or Material Contract. To the extent any of
the approvals, consents or waivers required to assign any
such Lease or Material Contract have not been obtained with
respect to any Lease or Material
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Contract as of the Close Date, Seller shall continue to
use its best efforts to obtain the consent of such Lessor
or other third party to a Material Contract that is
required for the transfer or assignment of such Lease or
Material Contract after the Close Date. Refusal by such
other third party to release Seller from a Lease or
Material Contract shall not excuse Seller from entering
into an assignment of such Lease or Material Contract.
From the Close Date until such approval, consent or waiver
is obtained, Seller shall hold such Leases and Material
Contracts, or ancillary rights as agent for Buyer, and
preserve the benefit of and enforce the same as agent for
Buyer to the fullest extent permissible under the
applicable Lease or Material Contract. Buyer and Seller
agree that upon request by either party, at Closing, they
will enter into an agency agreement in form and substance
mutually satisfactory to each party specifying the terms
and conditions upon which Seller will so act as Buyer's
agent. Buyer and Seller agree to use their best efforts
to list all Leases on Schedule 9.1.9 and Material Contracts
on Schedule 9.1.12(a) which are to be assigned to Buyer;
however, failure to list a Lease(s), Material Contract(s)
or Contract(s) shall not negate the general assignment of
said Lease(s), Material Contract(s) or Contract(s)
pertaining to the Purchased Property.
5.4 Consents. Promptly after the date of this
________
Agreement, the parties shall use their best efforts to
obtain (i) the FCC's consent to the transfer of the FCC
Licenses (as listed in Schedule 9.1.16) from Seller to
Buyer, (ii) the FCC waivers set forth on Schedule 5.4
(all such consents or waivers are collectively referred
to as the FCC Consents), and (iii) the consents necessary
to transfer the Other Licenses.
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5.5 HSR Act Review. Within thirty (30) business days
______________
after the date of this Agreement, the parties will make
such filings, at Buyer's sole cost and expense, as may be
required by the HSR Act with respect to the Sale.
Thereafter, the parties will file as promptly as practicable
any supplemental information that may be requested by the
U.S. Federal Trade Commission or the U.S. Department of
Justice pursuant to the HSR Act. The parties agree to
cooperate in seeking early termination of the waiting
periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer. Prior to the Closing,
______________________
upon reasonable notice from Buyer to Seller given in
accordance with this Agreement and subject to approval
by Seller's appointed representative, Seller will afford
to the authorized representatives of Buyer reasonable
access during normal business hours to the books and
records relating to the Purchased Property (including,
without limitation, relevant tax information)and to
the personal and real property comprising the Purchased
Property, so as to afford Buyer the opportunity to make
such review, examination and investigation of the
Business and the Purchased Property as Buyer may desire
to make; provided, however, that all environmental
sampling or other testing shall be performed in
accordance with Section 6.1.1 and Section 14.1 herein.
Buyer will be permitted to make extracts from or copies
of such books and records as may be reasonably necessary.
Buyer will not contact any employee, customer or supplier
of Seller as to this Agreement or the matters involved
herein without the prior written approval of Seller.
Prior to the Closing, Seller will furnish such
financial and operating
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data and other information pertaining to the Business as
Buyer may reasonably request; provided, however, that
nothing herein will obligate Seller to take actions that
would unreasonably disrupt the normal course of the
business of Seller or violate the terms of any applicable
Law or any contract to which Seller is a party or to
which any of its assets is subject. Any information or
document provided to Buyer or acquired by Buyer during this
investigation shall be deemed "Evaluation Material as that
term is defined in the Confidentiality Agreement and shall
be subject in all cases to the terms of the
Confidentiality Agreement.
6.1.1 Environmental Assessment. Within thirty
________________________
(30) days from the date of this Agreement, Buyer may
conduct an environmental audit. Such environmental audit
may include but not be limited to (i) compliance with
Environmental Requirements; (ii) any proceeding or
investigation by any governmental authority evaluating
whether any remedial work is needed to respond to a
release of any hazardous substance; (iii) whether any
leaking is occurring or has occurred from underground
storage tanks or above ground storage tanks ("UST's")
and if such UST's are in compliance with all Environmental
Requirements; and whether any of the Purchased Property
is constructed with or contains asbestos-containing
material and if so the location and condition of such
material. Buyer shall cause the independent environmental
consultant to issue within one hundred and twenty (120)
days of said engagement a report regarding the
environmental audit and provide a copy to Seller. The
environmental audit shall be conducted as contemplated
in Section 14.1.
6.2 Operation of the Business.
_________________________
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6.2.1 Preservation of Business. Except with
________________________
the prior consent of Buyer, from the date of this Agreement
until the Closing Date, Seller shall:
(a) Conduct the Business in the ordinary
course in accordance with prudent business judgment and
consistent with past practice and policy and shall (i)
preserve the Business as an ongoing business, (ii) keep
available to the Business its services and the services of
its Affiliates to the same extent as such were generally
available throughout the calendar year 19__ and are
available on the date hereof, (iii) not take any action
that would jeopardize any material and beneficial
contractual relationships with persons having business
dealings with the Business, and (iv) preserve all of the
Business' tariffs, certificates, licenses, authorizations
and other rights;
(b) Conduct the Business in
substantially the same manner as it is presently being
conducted, and, with respect to the Business, refrain from
entering into any material transaction or contract other
than in the ordinary course of business or making any
material change in its methods of management, marketing,
accounting or operations;
(c) Not institute any proceeding with
respect to, or otherwise change, amend or supplement any
of its tariffs or make any other filings with the Michigan
Public Service Commission except in the ordinary course of
business and except as disclosed on Schedule 9.1.16;
(d) Maintain the Purchased Property
in good repair, order and condition, reasonable wear
and use excepted.
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6.2.2 No Material Changes. Except as
___________________
contemplated by this Agreement or as otherwise consented
to by Buyer, prior to the Closing, Seller will not:
(a) Make any material change in the
general nature of the Business;
(b) Sell, lease or dispose of, or make
any contract for the sale, lease or disposition of any
Purchased Property other than in the ordinary course
of business;
(c) Materially increase the benefit
provided under any plans concerning employee benefits
or materially increase the general rates of compensation
of its Employees, except (i) as required by Law, (ii)
pursuant to any Contract (iii) in the ordinary course of
business of Seller, or (iv) as listed or described on
Schedule 6.2.2(c);
(d) Enter into any new written
employment agreement, or union agreement with, or
commitment to, the Employees (including any new commitment
to pay retirement or other benefits or other amendments to
Seller's retirement plans);
(e) Maintain the books and records of
the Business other than in accordance with prior practice,
except as mandated by the FCC, required by GAAP or as
disclosed on Schedule 6.2.2(e); or
(f) Make any commitment to take any
actions prohibited by the provisions of this Section 6.2.2.
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6.3 Satisfaction of Conditions. Without limiting
__________________________
the generality or effect of any provision of Article 7, the
parties will use their best efforts to satisfy promptly all
conditions required to be satisfied prior to the Closing.
6.4 Notification as to Certain Matters. Each party
__________________________________
will promptly notify the other party of any information of
which it becomes aware on or before the Closing Date that
would cause any representation or warranty of such other
party contained in this Agreement not to be true and correct
as of the date on which it was made or as of the Closing Date.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The
____________________________________________
obligations of Buyer to consummate the Sale shall be subject
to the satisfaction, at or prior to the Closing, of each of
the following conditions, any one or more of which may be
waived at the option of Buyer:
7.1.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties. There shall have been no breach by Seller of
______________
any of its covenants to be performed in whole or in part prior to the
Closing, except for any breach that would not have a
material adverse effect on the Business, and the
representations and warranties of Seller in
Section 9.1 shall be true and correct as of the Closing,
except for such representations or warranties that are made
expressly as of some other date, which shall be true and
correct as of such other date, and, in each case, except to
the extent that the facts that caused such representations
and warranties not to be true and correct do not have a
material adverse effect on the Business; and Seller shall have
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delivered to Buyer a certificate ("Seller's Closing
Certificate") in substantially the form attached as
Schedule 7.1.1, dated the Closing Date and signed by
Seller, certifying each of the foregoing, or specifying
those respects in which such covenants have not been
performed or such representations and warranties are not
true and correct (in which event, if the Closing occurs,
any claim with respect to matters so specified shall
be waived by Buyer).
7.1.2 Documents. Seller shall have delivered
_________
to Buyer all documents required by Section 8.2.
7.1.3 No Pending Litigation. There shall not
_____________________
be any litigation or other proceeding pending or threatened
to restrain or invalidate any of the transactions
contemplated hereby.
7.1.4 No Legal Obstruction. If a filing is
____________________
required under the HSR Act, all required waiting periods
under the HSR Act shall have expired or been terminated,
each of the required Debtholder Consents shall have been
obtained, and the required Regulatory Approval and FCC
Consents shall have been obtained free of any special
terms, conditions or restrictions that are unacceptable
to Buyer based upon good faith business concerns that
are not commercially unreasonable (other than any
such approvals or consents which, if not obtained, would
not have a material adverse effect on the Business).
For purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained upon the
granting thereof, regardless of whether any appeals
period has expired. In addition, there shall not have
been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or
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administrative order or decree in any jurisdiction, the
effect of which prohibits the Closing.
7.1.5 Material Adverse Changes. There shall have
________________________
been no material adverse changes to the Purchased Property
or results of operations of the Business, and Seller shall
not have suffered any material loss or damage to the
Purchased Property, whether or not insured, that would
materially affect or impair its ability to conduct the Business.
7.1.6 Real Estate Transfers. Seller shall have
_____________________
complied with Section 11.13 with respect to its Real
Property to be transferred to Buyer.
7.2 Conditions Precedent to Obligations of Seller.
_____________________________________________
The obligations of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be
waived at the option of Seller:
7.2.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties. There shall have been no material breach by
______________
Buyer of any of its covenants to be performed in whole or
in part prior to the Closing, and the representations and
warranties of Buyer in Section 9.2 shall be true and
correct in all material respects as of the Closing,
except for representations or warranties made expressly
as of some other date, which shall be true and correct in
all material respects as of such other date, and Buyer
shall have delivered to Seller a certificate ("Buyer's
Closing Certificate") in substantially the form attached
as Schedule 7.2.1, dated the Closing Date and signed
by one of its Executive Officers, certifying each of the
foregoing or specifying those respects in which such
covenants have not been performed or such representations
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and warranties are not true and correct (in which event,
if the Closing occurs, any claim with respect to matters
so specified shall be waived by Seller).
7.2.2 Documents. Buyer shall have delivered
_________
to Seller all documents required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have
______________
delivered to Seller, in the manner specified in
Section 3.1, the Purchase Price (less the Deposit).
7.2.4 No Legal Obstruction. If a filing is
____________________
required under the HSR Act, all required waiting periods
under the HSR Act shall have expired or been terminated,
each of the required Debtholder Consents shall have been
obtained, and the required Regulatory Approval and FCC
Consents shall have been obtained free of any special
terms, conditions or restrictions that are unacceptable
to Seller based upon good faith business concerns that
are not commercially unreasonable (other than any such
approvals or consents which, if not obtained, would not
have a material adverse effect on the Business). For
purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained upon the
granting thereof, regardless of whether any appeals
period has expired. In addition, there shall not have
been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or
administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions
___________
of this Agreement, the closing of the Sale (the "Closing")
shall be held at 9 A.M. local time at the offices of
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GTE Telephone Operations at 600 Hidden Ridge, Irving,
Texas 75038, on the date agreed upon by the parties,
provided such date shall be (i) the last business day
of the month, and (ii) at least thirty (30) days, but
not more than ninety (90) days, or as mutually agreed
upon between the Buyer and Seller, after the date
Seller notifies Buyer in writing of its determination
that all required Regulatory Approvals, Debtholder
Consents and FCC Consents have been obtained, or at
such other time and place as the parties may agree (the
"CLOSING Date"). Such Closing shall be deemed to have
occurred as of 11:59 P.M. on the last calendar day of
said month.
8.2 Seller's Obligations at Closing. At the Closing,
_______________________________
Seller shall deliver to Buyer the following documents:
(a) Bills of sale, warranty deeds, assignments
and other good and sufficient instruments of transfer
(including, without limitation, vehicle titles) to
transfer title or its interest in the Purchased
Property to Buyer,
(b) A legal opinion from Richard M. Cahill,
Vice President and General Counsel of GTE Service
Corporation, as counsel for Seller, dated as of the
Closing Date and in the form of Schedule 8.2(b);
(c) Seller's Closing Certificate;
(d) Instruments of assignment or, to the extent
set forth in Section 5.3, subleases for the Leases;
(e) Mortgage satisfactions, UCC Form 3 Termination
Statements and other instruments necessary to remove, release
and terminate all security interests held by the Bondholders
or any other debtholder on the Purchased Property; and
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(f) All of the documents and papers required of
Seller as conditions to Closing, including without limitation,
the Regulatory Approvals, Debtholder Consents and FCC Consents.
8.3 Buyer's Obligations at Closing. At the Closing,
______________________________
Buyer shall deliver to Seller the following:
(a) The Purchase Price (less the Deposit), in the
manner specified in Section 3.1.
(b) A legal opinion from Deborah Harwood, Buyer's
Corporate Counsel, dated as of the Closing Date and in the
form of Schedule 8.3(b).
(c) Buyer's Closing Certificate.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Seller
________________________________________
represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller
_____________________________________
has the requisite corporate power and authority to
execute and deliver this Agreement and to fulfill its
obligations under this Agreement. The execution and
delivery by Seller of this Agreement and the fulfillment
of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part
of Seller. This Agreement has been duly executed and
delivered by Seller and, assuming the due execution and
delivery of this Agreement by Buyer, constitutes a valid
and binding obligation of Seller.
9.1.2 No Restrictions Against Sale of the
___________________________________
Purchased Property. The execution and delivery of this
__________________
Agreement by Seller does not, and the fulfillment by
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<PAGE>
Seller of its obligations under this Agreement will not
conflict with or violate any provision of its certificate
of incorporation or bylaws or, subject to obtaining the
approvals and consents referred to in Article 5, conflict
with, violate or result in the breach of any provision
of any Material Contract other than any such conflict,
violation or breach that would not have a material
adverse effect on the Business or on the Purchased Property.
9.1.3 Consents and Approvals of Governmental
______________________________________
Authorities. No consent, approval, order or authorization
___________
of, or registration, declaration or filing with, any court
or governmental agency, authority or instrumentality
("Governmental Authority") is required to be obtained or
made by or with respect to Seller or in connection with
the execution and delivery of this Agreement by Seller
or the fulfillment by Seller of its obligations under this
Agreement, except (i) the filings and approvals described
in Article 5, (ii) as described in Schedule 9.1.3, and
(iii) such of the foregoing, which if not obtained or
made would not have a material adverse effect on the
Business or the Purchased Property.
9.1.4 No Violation of Law, Except as indicated in
___________________
Schedule 9.1.4, the execution and delivery of this
Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any
applicable statute, ordinance, rule, regulation or common
law obligation (collectively, "Law"), except where such
violation would not have a material adverse effect on the
Business or the Purchased Property.
9.1.5 Corporate Organization. Seller is a
______________________
corporation duly organized, validly existing and in
good standing under the laws of the state of Wisconsin
and is duly qualified to conduct business in Michigan;
it has full power and authority, corporate
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and otherwise, to own its properties and to carry on
the Business as it is now being conducted in Michigan
and to own, or hold under lease the Purchased Property;
it holds valid licenses, permits or other operating
authority adequate for the conduct of the Business and
no such license, permit or other operating authority is
presently the subject of any dispute which, if resolved
adversely to Seller, would have a material adverse effect
on the Business.
9.1.6 Brokers. Seller has not paid or become
_______
obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary in
connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a valid
claim against Buyer for any broker's or finder's fees
or similar fees or expenses.
9.1.7 Assumed Liabilities. Seller is not in
___________________
default with respect to any of its pre-Closing liabilities
that will become Buyer's Assumed Liabilities at Closing or
the performance, observance or fulfillment of any covenant
or condition relating thereto, and no event has occurred
and is continuing that constitutes a breach or default
thereunder or that would constitute such a breach or
default with the giving of notice or lapse of time, or both.
9.1.8 Title to Purchased Property. Seller
___________________________
represents that the only creditors that have a material
security interest, lien or other interest in or
encumbrances on any of the Purchased Property are the
Bondholders listed on Schedule 9.1.8-1 (the "Bondholders").
Set forth on Schedule 9.1.8-2 is the address and a
general description of each item of Real Property
included in the Purchased Property. Seller has title to
all of the Purchased Property (except for the Real
Property Interests or other interests that
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are not interests in fee), free and clear of all liens,
charges or encumbrances January 14, 1997 of any kind,
except for (i) the liens and encumbrances shown and
disclosed on Schedule 9.1.8-2, (ii) current real and
personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii)
such other imperfections of title and encumbrances,
if any, as do not interfere in any material respect
with the present use of the item of Purchased Property
to which such imperfection or encumbrance relates. No
condemnation proceeding is pending or, to the knowledge
of Seller, threatened with respect to any part of the
Purchased Property.
9.1.9 Leases. Seller has set forth on
______
Schedule 9.1.9 a list of all the Leases. Each of the
Leases is enforceable in accordance with its terms, and
except as otherwise disclosed in Schedule 9.1.9, there is
not under any Lease any material default or a material
breach of covenant by Seller.
9.1.10 Tangible Assets. All of the tangible
_______________
Purchased Property is in substantially good operating
condition and repair, normal wear and tear excepted.
Except as set forth on Schedule 9.1.10, Seller has not
received any written notice within the past twelve (12)
months of a violation of any ordinances, regulations or
building, zoning and other similar laws with respect to
such assets that would have a material adverse effect
on the Business. EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 9.1.10, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OR
FITNESS OF THE TANGIBLE PURCHASED PROPERTY AND HEREBY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
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9.1.11 No Adverse Change. Except as disclosed
_________________
in Schedule 9.1.11, since December 31, 1995, there has
not been (i) any material adverse change in the Business,
other than changes in the ordinary course of business or
resulting from general economic conditions or industry wide
developments not reasonably within Sellers control; (ii)
any damage, destruction or loss that would have a material
adverse effect on the Business; (iii) any increase in
compensation payable or to become payable by Seller to
any of its Employees or agents, other than normal merit
or promotional increases; or (iv) any amendment or
termination by Seller of any Material Contract, agreement
or license except (x) any amendment or termination in
the ordinary course of business, (y) any termination of
licenses or other rights to use any Intellectual Property
(including, but not limited to, any rights in respect of
Marks currently used in the Business) to the extent that
such licenses or other rights differ in any respect from
those to be granted to Buyer pursuant to Section 11.1.1,
and (z) any amendment or termination described on
Schedule 9.1.11.
9.1.12 Contracts. Except for the instruments
_________
specifically described in Schedule 9.1.12(a) (the
"Material Contracts"), Seller is not a party to or
subject to any of the following contracts affecting the
Business: (i) any written employment contract with any
employee; (ii) any plan, contract or arrangement providing
for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing, or the like; (iii)
any agreement with any labor union; (iv) any agreement
for the purchase or disposition of any material, equipment,
supplies, inventory or service, except individual purchase
orders and contracts in amounts less than twenty-five
thousand dollars ($25,000); (v) any other agreements
which are to be assigned not of the type covered
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by any of the foregoing items of this Section 9.1.12
requiring payments by Seller in excess of twenty-five
thousand dollars ($25,000) per annum on or after the
Closing Date. Seller has delivered to Buyer true and
correct copies of all agreements and instruments listed
in Schedule 9.1.12(a). Seller is not in default in the
performance of any term or condition contained in any
Contract, except for any default that would not have a
material adverse effect on the Business. Material
Contracts do not include the contracts shown on
Schedule 9.1.12(b), which lists (i) all Contracts for
the provision of telephone service at public pay
telephone locations and (ii) all other written Contracts
(except for agreements with subscribers or customers that
did not involve, during 1995, aggregate payments to Seller
of more than twenty-five thousand dollars ($25,0001).
Seller shall not be required to obtain the consent
of any party to the Contracts shown on Schedule 9.1.12(b)
but Seller shall assign all its interest in such Contracts
to Buyer.
9.1.13 Insurance. The Purchased Property of
_________
an insurable nature and of a character usually insured
by companies carrying on similar businesses is insured
under insurance policies or self insured in such amounts
and against such losses or casualties as is (i) usual
in such companies and (ii) required under any of the
Contracts or Leases. On the Closing Date, the coverage
under the insurance policies and programs applicable to
the Purchased Property will be terminated, and Buyer
will be responsible for providing all insurance coverage
for the Purchased Property. Following the Closing,
Seller shall be responsible for and shall pay any
additional premiums that might be required by an
insurance company for insurance coverage prior to the
Closing relating to the Purchased Property and shall be
entitled to any refunds or dividends due from such
companies relating to such coverage. All Claims that
relate to the operation
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of the Purchased Property prior to the Closing shall
remain the sole responsibility of Seller.
9.1.14 Taxes. Except as disclosed on Schedule
_____
9.1.14, (i) all Tax Returns required to be filed by Seller
on or before the Closing Date with respect to the Business
or the Purchased Property have or will have been filed, and
all taxes shown as due and payable on such Tax Returns have
been or will be paid by Seller when required by law; (ii) no
deficiencies for any taxes, assessments or other governmental
charges have been asserted in writing or assessed against
Seller with respect to the Business that remain unpaid and
that individually or in the aggregate are material to the
Business; (iii) Seller has withheld all required federal,
state and local payroll taxes and has remitted all amounts
required to be remitted to the appropriate taxing
authorities; (iv) there are no tax liens upon any of the
Purchased Property except for statutory liens covering taxes
not yet due and payable; (v) none of the Purchased Property
is tax exempt use property within the meaning of Section
168(h) of the IRC and none of the Purchased Property is
property that is or will be required to be treated as being
owned by another person pursuant to the provisions of
Section 168(f(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986; and (vi) Seller is not a
"foreign person" within the meaning of Section 1445(b)(2)
of the [RC and shall provide an appropriate affidavit for
purposes of Section 1445(b)(2) of the IRC.
9.1.15 No Material Claims. Except as disclosed
__________________
in Schedule 9.1.15 or with respect to Taxes, there are no
claims, actions, lawsuits or legal proceedings pending, or,
to the knowledge of Seller, threatened against or affecting
Seller or its
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properties that in Seller's opinion, if determined
adversely to Seller, would reasonably be expected to
have a material adverse effect on the Business.
9.1.16 Tariffs: FCC Licenses.
_____________________
(a) The regulatory tariffs applicable
to the Business stand in full force and effect on the date
of this Agreement in accordance with all terms, and there
is no outstanding notice of cancellation or termination or,
to Seller's knowledge, any threatened cancellation or
termination in connection therewith, nor is the Seller
subject to any restrictions or conditions applicable to
its regulatory tariffs that limit or would limit the
operation of the Business (other than restrictions or
conditions generally applicable to tariffs of that type).
Each such tariff has been duly and validly approved by
Seller's regulatory agency. Seller is not in material
default under the terms and conditions of any such
tariff, and there is no basis for any claim of default
by Seller in any material respect under any such tariff.
Except as disclosed on Schedule 9.1.16, there are no
applications by Seller or complaints or petitions by
others or proceedings pending or threatened before the
state regulatory authority relating to the Business or
its operations or the regulatory tariffs. To the
knowledge of Seller, there are no material violations
by subscribers or others under any such tariff. A true
and correct copy of each tariff applicable to the
Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.16 are
the FCC Licenses held by Seller and used in the
operation of the Business. Each such FCC License is in
full force and effect on the date of this Agreement in
accordance with its terms, and there is no outstanding
notice of cancellation or termination or, to Seller's
knowledge, any threatened cancellation or termination
in connection therewith, nor are any of such FCC
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Licenses subject to any restrictions or conditions that
limit the operation of the Business (other than restrictions
or conditions generally applicable to licenses of that type).
Subject to the Communications Act of 1934, as amended, and
the regulations thereunder, the FCC Licenses are free from
all security interests, liens, claims, or encumbrances of
any nature whatsoever. There are no applications by Seller
or complaints or petitions by others or proceedings pending
or threatened before the FCC relating to the Business or the
FCC Licenses that, in Seller's opinion, would reasonably be
expected to have a material adverse impact on the Business.
9.1.17 Employee Matters.
________________
(a) Schedule 9.1.17(a) lists (and
identifies the sponsor of) each material Employee Pension
Benefit Plan," as that term is defined in Section 3(2)
of ERISA, each material "Employee Welfare Benefit Plan,"
as that term is defined in Section 3(l) of ERISA (such
plans being hereinafter referred to collectively as the
'ERISA Plans), and each other material retirement, pension,
profit-sharing, money purchase, deferred compensation,
incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation
pay, savings, medical, dental, post-retirement medical,
accident, disability, weekly income, salary continuation,
health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement
maintained or contributed to by Seller or its Affiliates
in respect of or for the benefit of any employee of Seller
who is to be employed by Buyer in accordance with Article
12 ("Employee") or former employee, excluding any such
plan, program, agreement, or arrangement maintained or
contributed to solely in respect of or for the benefit
of Employees or former employees employed or formerly
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employed by Seller outside of the United States, as of
the date hereof (collectively, together with the EISA
Plans, referred to hereinafter as the "Plans").
Schedule 9.1.17(a) also includes a list of each
material written employment, severance, termination or
similar-type agreement between Seller and its Affiliates
and any Employee (the "Employment Agreements"). Except
as otherwise disclosed on Schedule 9.1.17(a), the
execution and delivery of this Agreement by Seller
and the performance of this Agreement by Seller will
not directly result now or at any time in the future
in (i) the payment to any Employee of any severance,
termination, or similar-type payments or benefits or
(ii) any "parachute payment" (as such term is defined
in Section 28OG of the IRC) being made to any Employee.
(b) Except as set forth on
Schedule 9.1.17(b):
(i) Neither Seller nor any of
its Affiliates, any of the ERISA Plans, any trust created
thereunder, or any trustee or administrator thereof, has
engaged in any transaction as a result of which Seller
could be subject to any material liability pursuant to
Section 409 of ERISA or to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed
pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of
ERISA, no material liability under Title IV of ERISA has
been incurred or is reasonably expected to be incurred
by Seller (other than liability for premiums due to the
PBGC), unless such liability has been, or prior to the
Closing Date will be, satisfied in full.
(c) Except as set forth on
Schedule 9.1.17(c), with respect to the ERISA Plans
other than those ERISA Plans identified on
Schedule 9.1.17(a) as "multiemployer plans":
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(i) the PBGC has not instituted
proceedings to terminate any Plan that is subject to
Title IV of ERISA (the "Retirement Plans");
(ii) none of the ERISA Plans has
incurred an "accumulated funding deficiency" (as defined
in Section 302 of ERISA and Section 412 of the IRC),
whether or not waived, as of the last day of the most
recent fiscal year of each of the ERISA Plans ended prior
to the date of this Agreement;
(iii) each of the ERISA Plans has been
operated and administered in all material respects in
accordance with its provisions and with all applicable laws;
(iv) each of the ERISA Plans that is
intended to be "qualified" within the meaning of
Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS
to be so qualified, and nothing has occurred since the date
of the most recent such determination (other than the
effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would
adversely affect the qualified status of any of such ERISA
Plans; and
(v) there are no pending material claims
by or on behalf of any of the ERISA Plans, by any employee
or beneficiary covered under any such ERISA Plan, or otherwise
Involving any such ERISA Plan (other than routine claims for
benefits and routine expenses).
(d) Except as set forth on Schedule 9.1.17(d),
none of the ERISA Plans is a "multiemployer plan," as that
term is defined in Section 3(37) of ERISA, and with
respect to any such multiemployer plans (as so defined)
listed in
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Schedule 9.1.17(d), Seller has not made or incurred a
"complete withdrawal" or a "partial withdrawal" as such
terms are respectively defined in Sections 4203 and 4205
of ERISA that would result in the incurrence of a material
liability by Seller.
(e) Except as set forth on Schedule 91.17(e),
(i) none of the Employees are represented by a labor union
or labor organization and (ii) Seller is not subject to any
collective bargaining agreement covering any Employee. There
are currently no strikes, slowdowns, work stoppages or
lockouts by or with respect to any Employee covered by
collective bargaining agreements. Except as set forth on
Schedule 9.1.17(e), to the best knowledge of Seller,
during the twelve (12) months preceding the date of this
Agreement there have not been any union organizational
campaigns by or directed at Employees.
(f) Seller will make available to Buyer,
prior to the Closing Date, a list of those Employees that
Seller believes to have participated in the health or
dependent care reimbursement accounts of Seller, together
with the elections made prior to the Closing Date with
respect to such accounts through the Closing Date.
9.1.18 Schedules of Telephone Plant. Seller has
____________________________
set forth on Schedule 9.1.18 true and correct copies of schedules
of its Michigan regulated net Telephone Plant as of
December 31, 1995.
9.1.19 Access Lines and Minutes of Use. Seller has set
_______________________________
forth in Schedule 9.1.19 true and correct copies of schedules of
the number of access lines as of December 31, 1995, and minutes of
use for the 10-month period ending October 31, 1995, associated
with the Purchased Property.
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9.2 Representations and Warranties of Buyer. Buyer represents
_______________________________________
and warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation
______________________
duly organized, validly existing and in good standing under the laws
of the state of Michigan and has the requisite corporate power and
authority to own, lease or otherwise hold the assets owned, leased
or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has
_____________________________________
the requisite corporate power and authority to execute and deliver
this Agreement, to carry on the Business as presently conducted and
to fulfill all other obligations of Buyer under this Agreement.
The execution and delivery by Buyer of this Agreement and the
fulfillment by it of its obligations under this Agreement have
been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to
purchase, own and hold the Purchased Property upon the
consummation of the Sale. This Agreement has been duly executed
and delivered by Buyer and, assuming the due execution and
delivery of this Agreement by Seller, constitutes a valid and
binding obligation of Buyer.
9.2.3 No Restrictions Against Purchase of the
_______________________________________
Purchased Properties. The execution and delivery of this
____________________
Agreement by Buyer do not, and the fulfillment by Buyer
of its obligations under this Agreement will not
conflict with, violate or result in the breach of
any provision of the certificate of incorporation or
bylaws of Buyer or, subject to obtaining the approvals
and consents referred to in Article 5, conflict with,
violate or result in the breach of any Contract to which
Buyer is a party. No material consent, approval, order or
authorization of, or registration, declaration or filing with,
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any Governmental Authority is required to be obtained or made by
or with respect to Buyer in connection with the execution and
delivery of this Agreement by Buyer or the fulfillment by Buyer
of its obligations under this Agreement, except the filings
and approvals described in Article 5.
9.2.4 No Violation of Law. The execution and delivery of
___________________
this Agreement and the fulfillment by Buyer of its obligations
under this Agreement will not violate any Law.
9.2.5 Financial Capacity.
__________________
(a) Buyer has sufficient cash or other sources of
funds, to pay the Purchase Price in the manner specified in
Section 3.1 and all related fees and expenses. In addition, if
Buyer is relying upon any financing to be provided by third
parties in order to pay any part of the Purchase Price and
related fees and expenses, Buyer has delivered to Seller a true
and correct copy of a commitment letter from Buyer's financial
institution for such financing.
(b) Buyer has sufficient financial resources to
operate the Business after the Closing Date. Without limiting
the generality at the foregoing, Buyer has sufficient financial
resources to satisfy any applicable requirement relating to
financial capacity or capital imposed by any Governmental
Authority in any state in which the Business is conducted.
Buyer is solvent, is able to pay its debts as they become due,
and owns property that has both a fair value and a fair
saleable value in excess of the amount required to pay its
debts as they become due.
9.2.6 Brokers. Buyer has not paid or become
_______
obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary in
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connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a valid claim
against Seller for any broker's or finders fees or similar
fees or expenses.
9.2.7 Consents and Approvals of Governmental
______________________________________
Authority. Subject to Article 5 with respect to Regulatory
_________
Approval and FCC Consents, no consent, approval or
authorization of, or declaration, filing or registration
with, any Governmental Authority or regulatory authority
is required in connection with the execution, delivery and
performance of this Agreement by Buyer or the consummation
by Buyer of the transactions contemplated herein, except
for filings with the Federal Trade Commission and
Department of Justice pursuant to the HSR Act, if required.
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Agreement. The parties agree to cooperate
____________________
with each other to ensure that the transition of the ownership
of the Purchased Property proceeds with a minimum of disruption
to the services being provided to subscribers. The parties agree
that it may be necessary for Seller to assist Buyer in converting
Seller's systems and processes with respect to the Purchased
Property to Buyer's systems and processes and, until that
conversion is complete, Seller may be requested to provide some
basic customer services. If such services are necessary and
Seller agrees to provide the services, the parties shall
enter into separate agreements that will set forth the
services that Seller will provide to Buyer and the terms
and conditions for providing those services. Any such
agreements relating to the conversion of systems and processes
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and relating to continuation of services (collectively
"Transition Services Agreements") shall be substantially in the
form as attached hereto as Schedule 10.1.
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
_____________________
11.1.1 No License. "Intellectual Property" means
__________
all inventions (whether patentable or not and whether or not such
inventions are described or claimed in any patent or patent
application), designs (useful or ornamental), and works subject
to copyright that may be embodied in, without exclusion,
invention disclosures, specifications, manuals, drawings, functional
or system block diagrams, flow charts, circuit diagrams, design
or user documentation, engineering notebooks, schematics, test
programs, documented procedures, documented processes, documented
flows, devices, software, or firmware, that relate to the
function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus,
article of manufacture, process, method or service.
"Intellectual Property" shall also include patents, patent
applications (including continuations, continuations-in-part,
divisions, reissues, reexamined patents and patent applications
and extensions thereof), copyrights (whether common law or
statutory, registered or unregistered), or trade secrets,
residing in the subject matter above. Buyer and Seller agree
and understand that except as expressly set forth in writing
in this agreement, Seller has granted no, and nothing shall
constitute or be construed as a, license or right to Seller
under any patent, copyright, trademark, trade secret or any
other intellectual property right now or hereafter owned,
obtained or licensable by Seller. Seller has set forth in
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Schedule 11.1.1 true and correct statements of the Intellectual
Property which is associated with the Purchased Property and
will be assigned to Buyer.
11.1.2 Infringement.
____________
(a) Seller shall have no obligation to defend,
indemnify or hold harmless Buyer from any damages, costs or
expenses resulting from any obligation, proceeding or suit based
upon any claim that any activity, subsequent to the Closing Date,
engaged in by Buyer, a customer of Buyer's or anyone claiming
under Buyer constitutes direct or contributory infringement or
misuse of, or inducement to infringe, any intellectual property
right of any third party, except for that Intellectual Property
set forth in Schedule 11.1.1.
(b) Buyer shall defend, indemnify and hold
harmless Seller and its Affiliates from and against any and all
Indemnifiable Losses resulting from any obligation, proceeding or
suit based upon any claim alleging or asserting direct or
contributory infringement, or misuse or misappropriation of, or
inducement to infringe by Seller of any intellectual property
right of any third party, to the extent that such claim is
based on, or would not have arisen but for activity conducted
or engaged in, subsequent to the Closing Date, by Buyer, a
customer of Buyer's, or anyone claiming under Buyer, except for
that Intellectual Property set forth in Schedule 11.1.1.
11.1.3 Trademark Phaseout.
__________________
(a) Buyer acknowledges that Seller or its
Affiliates are the owners of certain trade names, trade dress,
trademarks, service marks, logos and related intangible property
(collectively, "Marks"), including, without limitation, the items
listed on Schedule 11.1.3 and Marks that quality as Excluded
Property under
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Section 2.4(d). Buyer understands and agrees that
the Marks, or any right or license to the Marks,
are not being transferred pursuant to this Agreement.
Buyer acknowledges Seller's exclusive and proprietary rights
in the use of the Marks, and Buyer agrees that it shall not
use the Marks (or any names, marks or indicia confusingly
similar to the Marks) except as expressly set forth in this
Section 11.1.3. After the Closing, all Marks of Seller shall
be replaced by Buyer as soon as possible, but in no event
later than sixty (60) days after the Closing Date for items
with Marks affixed to them with a valid continuing use in
Buyer's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats.
tools, tool boxes, kits (safety and others), signs, manual
covers and notebooks. After the Closing, Buyer will not use,
and will destroy or deliver to Seller, all such items with
Marks affixed to them that have no valid continuing use in
Buyer's conduct of the Business, including items affecting
customer or employee relations or items that do not reflect
Buyer's true identity. Specific items to be destroyed or
returned include items with Marks affixed to them including,
without limitation, giveaways; order, purchase or materials
forms; requisitions; invoices; statements; time sheets/labor
reports; bill inserts; stationery; personalized note pads;
maps; organization charts; bulletins/releases; sales/price
literature; manuals or catalogs; report covers/folders;
program materials; and materials such as media contact
lists/cards. The sixty (60) day time period for replacement
of Marks affixed to telephone directories that were already
published or closed for publication at the Closing Date shall
be extended to the expiration date of such directories.
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(b) Buyer recognizes the great value of
the goodwill associated with the Marks, and acknowledges that
the Marks and all rights therein and the goodwill pertaining
thereto belong exclusively to Seller and that the Marks have
a secondary meaning in the minds of the public.
(c) Buyer agrees that the conduct of the
Business after the Closing by Buyer using the Marks shall be
provided in accordance with all applicable federal, state and
local laws, and that the same shall not reflect adversely upon
the good name of Seller, and that the conduct of the Business
will be of a high standard and skill.
(d) Buyer acknowledges that its failure
to cease use of the Marks as provided in this Agreement, or its
improper use of the Marks, will result in immediate and
irreparable harm to Seller. Buyer acknowledges and admits that
there is no adequate remedy at law for such failure to terminate
use of the Marks, or for such improper use of the Marks. Buyer
agrees that in the event of such failure or improper use, Seller
shall be entitled to equitable relief by way of temporary
restraining order, or preliminary or permanent injunction, or
any other relief available under this Agreement.
11.1.4 Third Party Software. To the extent that
____________________
the transfer of Purchased Property by Seller to Buyer under
this Agreement results in the transfer of possession to
Buyer of software that at the Closing Date is not owned by
Seller, which software was rightfully used by Seller prior
to the Closing Date in the normal and ordinary operation of
the Business, then Seller does hereby assign to Buyer, and
Buyer accepts all rights and licenses to use such software
that Seller has the right to so assign without consent from,
or notice or payment of consideration to, any third party.
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Buyer agrees that the acceptance by Buyer of such rights and
licenses includes the assumption by Buyer of obligations necessary
or incidental to the transfer of rights and licenses. Buyer
understands and agrees that except as provided above in this
Section 11.1.4, or as expressly provided elsewhere in this
Agreement or in another written agreement between Buyer and
Seller, no rights to use software are transferred to Buyer.
Buyer shall properly dispose of, and shall not use, any
software which Buyer acquires in connection with Purchased
Property and which, after the Closing Date, Buyer knows, or
reasonably should know, is not the subject of a license to
use that has been rightfully granted or transferred to Buyer.
11.2 Effect of Due Diligence and Related Matters. Buyer
___________________________________________
represents that it is a sophisticated entity that was advised
by knowledgeable counsel and financial advisors and, to the
extent it deemed necessary, other advisors in connection with
this Agreement and has conducted its own independent review
and evaluation of the Purchased Property. Accordingly, Buyer
covenants and agrees that (i) except for the representations
and warranties set forth in this Agreement, Buyer has not
relied and will not rely upon any document or written or oral
information furnished to or discovered by it or its
representatives, including, without limitation, any financial
data, (ii) there are no representations or warranties by or
on behalf of Seller or its Affiliates or representatives except
for those expressly set forth in this Agreement, and (iii) to
the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will
be solely as set forth in this Agreement.
11.3 Confidentiality. Whether or not the Closing occurs,
_______________
the parties hereto and their respective officers, directors,
employees and representatives will comply with the
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Confidentiality Agreement, the provisions of which are expressly
incorporated herein in their entirety by this reference.
11.4 Regulated Construction Projects and Budget. Seller has
__________________________________________
delivered to Buyer a summary of its expected construction and
other network plans ("Improvement Expenditures") through 1996
(which summary will be updated for 1997 if the Close Date extends
into 1997), which summary is attached as Schedule 11.4, and the
parties have agreed to the projected costs and the dollars to be
included in such Improvements. Seller agrees to use its best
efforts to substantially complete such plans within the projected
time schedules and such construction work shall be performed in
accordance with Seller's normal course of business and in
conformance with industry practices. All construction work that
is in progress on the Closing Date will be accounted for by
identifying and accruing all associated time reporting, material
and contractor costs, whether invoiced or not, through the
Closing Date in addition to the expenses already incurred
for Improvement Expenditures, all of which will be added on
a dollar for dollar basis to the Purchase Price. To the extent
that Seller recognizes a depreciation expense on the
Improvement Expenditures prior to the Closing Date, the
Purchase Price will be reduced by the amount of said
depreciation expense. After the Closing Date, the Buyer
shall be responsible for the completion of all projects in
progress and the costs associated with the completion of
those projects. If additional construction is required due
to unforseen circumstances or customer demand, Schedule 11.4
may be amended by Seller with the consent of Buyer, which
consent shall not be unreasonably withheld.
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11.5 Further Assurances. After the Closing, Seller will
__________________
furnish to Buyer such other instruments and information as Buyer
may reasonably request in order to convey to Buyer title to the
Purchased Property, to be delivered from time to time upon
Buyer's reasonable request.
11.6 Prorations. The following liabilities shall be
__________
prorated between Seller and Buyer: (i) utility charges
(which shall include, without limitation, water, sewer,
electricity, gas and other utility charges) with respect
to the Real Property, the property subject to the Leases
and customer owned equipment, (ii) rental charges (which
shall include, without limitation, rental charges and
other lease payments under the Leases), and (iii) real
and personal property taxes and local franchise fees or
taxes. With respect to measurement periods during which
the Closing Date occurs (all such periods of time being
hereinafter called "Proration Periods"), the liabilities
described in clauses (i) and (ii) of the preceding
sentence shall be apportioned between Seller and Buyer
as of the Closing Date, with Buyer bearing only the
expense thereof in the proportion that the number of days
remaining in the applicable Proration Period on and after
the Closing Date bears to the total number of days covered
by such Proration Period. Real and personal property taxes
shall be prorated between Buyer and Seller based on the
period the Purchased Property was owned by each respective
party during the fiscal period for which such taxes were
imposed by the taxing jurisdiction (as such fiscal period
is reflected on the bill rendered by such taxing
jurisdiction). Buyer and Seller shall pay or be reimbursed
for real and personal property taxes (including instances
in which such property taxes have been paid before the
Closing Date) prorated on this basis. If a payment on a
tax bill is due after the Closing, the party that is legally
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required to make such payment shall make such payment and
promptly forward an invoice to the other party for its pro
rata share, if any. If the other party does not pay the
invoice within thirty (30) calendar days of receipt, the
amount of such payment shall bear interest at the rate of
eight percent (8%) per annum. Similarly, all prepayments
made by Seller with respect to service or maintenance
agreements with third parties or license or other fees
payable to third parties shall be prorated on an appropriate
basis between Seller and Buyer.
11.7 Risk of Loss Prior to Closing. If any material
damage or destruction of any sort occurs prior to the
Closing to any of the tangible properties that constitute
the Purchased Property, Seller shall promptly notify Buyer
thereof (the "Casualty Notice"). If Seller or Buyer
reasonably estimates the cost to repair or replace such
damage or destruction will exceed One Million Two
Hundred Fifty Thousand dollars ($1,250,000), either
party may, by written notice to the other (the "Casualty
Termination Notice"), within thirty (30) days of the
date of delivery of the Casualty Notice, refuse to
consummate this Agreement, at which time this Agreement
shall terminate in all respects. Should such estimate
of damage or destruction not exceed One Million Two
Hundred Fifty Thousand dollars ($1,250,000) or such
Casualty Termination Notice not be made by either party,
Seller, within forty-five (45) days of the damage or
destruction, shall agree in writing, at its option,
either to (i) repair all of such damage or destruction
prior to Closing or (ii) reduce the Purchase Price by
the amount of all costs and expenses to be incurred for
the repair of the damage or destruction; provided, however,
that if the time periods pursuant to this Section continue
beyond the Closing Date,
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either Seller or Buyer may elect to Postpone the Closing until
the expiration of any such periods, which election shall be
binding upon all parties.
11.8 Cost Studies/NECA Matters.
_________________________
11.8.1 Prior to Closing. Seller agrees that, with
________________
respect to all toll revenues, settlements, pools, separations
studies or similar activities, Seller shall be responsible for
(and shall receive the benefit or suffer the burden of) any
adjustments to contributions, or receipt of funds, by Seller
resulting from any such activities that are related to the
conduct of the Business or the ownership or operation of the
Purchased Property prior to the Closing Date. Specifically,
this paragraph shall apply, but shall not be limited to, any
matters related to the National Exchange Carrier Association
("NECA") including the Universal Service Fund ("USF"), Long
Term Support ("LTS"), and Telecommunications Relay Services
funds.
11.8.2 From and After Closing.
______________________
(a) Buyer shall receive a pro rata.
share of USF funds received by Seller, under Seller's
algorithm, pursuant to FCC Rules and Regulations as stated
in Part 36.631, until such time as Buyer is permitted to
make its own filing in accordance with said FCC Rules and
Regulations, Part 36.611 or Part 36.612. The USF funds due
to Buyer shall be determined by calculating the difference
between the USF funds due to Seller prior to the Closing
and the USF funds that would be due to Seller after
excluding the investment and expenses associated with the
Purchased Property. The resulting Buyer's annual USF amount
shall be prorated in proportion to the number of months
remaining in the year from and after the Closing Date.
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(b) Notwithstanding the foregoing, Buyer's
right to receive a pro rata share of USF is conditioned upon
Buyer's payment, from and after the Closing Date, of a pro
rata share of the LTS funds owed by Seller until the next
prescribed FCC filing by all Local Exchange Carriers. Should
Buyer reenter the NECA common line pool at the time of Closing,
Seller will retain the LTS obligation until such time as NECA
submits a new LTS filing as part of the interstate
tariff-filing process. The LTS funds to be paid by Buyer to
Seller ("Buyer's LTS") shall be determined by prorating the
LTS obligation between Seller and Buyer based on the number
of access lines purchased by Buyer as compared to total
company access lines prior to the Closing. Buyer will have
the option to pay the full amount of Buyer's LTS to Seller at
Closing or monthly installments until the effective date of the
next prescribed interstate tariff filing.
11.9 Construction and Customer Deposits. Within thirty
__________________________________
(30) days after Closing, Seller agrees to transfer to Buyer the
customer deposits together with any interest accrued thereon
(collectively "Customer Deposits") and construction advances
and deposits ("Construction Advances") together with all of
Seller's obligations and rights to hold the Customer Deposits
and Construction Advances of the Business, up to the Closing
Date, and Buyer agrees to hold, disburse and retain such
deposits, advances and interest so delivered to it as if it
were Seller.
11.10 Excluded Contracts. Buyer and Seller will use
__________________
their best efforts to list on Schedule 11.10 all directories
contracts, billing and collection agreements, and other Contracts
that will not be assigned by Seller. Of the excluded Contracts
listed on Schedule 11.10, those that will require negotiation
of special provisions or a new agreement between Buyer
and third parties are indicated. Buyer's negotiation of a
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new agreement with any such third party shall not be a
condition precedent to Buyer's performance of Buyer's obligations
under this Agreement.
11.11 Access to Books and Records.
___________________________
(a) After the Closing, Seller will retain all Retained
Books and Records for a period of seven (7) years, or such longer
period as is required by applicable Law.
(b) After the Closing, upon reasonable notice, the
parties will give to the representatives, employees, counsel and
accountants of the other, access, during normal business hours,
to records relating to periods prior to or including the Closing,
and will permit such persons to examine and copy such records, in
each case to the extent reasonably requested by the other party
in connection with tax and financial reporting matters (including,
without limitation, any Tax Returns and related information),
audits, legal proceedings, governmental investigations and other
business purposes (including, without limitation, such financial
information and any receipts evidencing payment of taxes as may
be requested by Seller to substantiate any claim for tax credits
or refunds); provided, however, that nothing herein will
obligate any party to take actions that would unreasonably
disrupt the normal course of its business or violate the terms
of any Contract to which it is a party or to which it or any
of its assets is subject. Seller and Buyer will cooperate with
each other in the conduct of any Tax audit or similar
proceedings involving or otherwise relating to the Business
(or the income therefrom or assets thereof) with respect to
any Tax and each will execute and deliver such powers of
attorney and other documents as are necessary to carry out
the intent of this Section 11.11(b).
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11.12 Purchase Price Allocation. Buyer and Seller shall
_________________________
allocate the Purchase Price and the Assumed Liabilities to the
Purchased Property (the "Allocation") consistent with
Schedule 11.12. Buyer and Seller shall file and shall cause
their respective Affiliates to file all Tax Returns
(including, without limitation, those returns and forms
required under Section 1060 of the IRC) consistent with
Schedule 11.12, unless otherwise required because of a
change of applicable law.
11.13 Real Property Transfers. Within sixty (60) days
_______________________
of the date of this Agreement, Seller shall deliver to Buyer
copies of all existing title insurance policies covering
the Real Property. Thereafter, no later than sixty (60) days
before the Closing Date, Seller shall deliver (at its
expense) to Buyer a preliminary title binder (on a
standard form), issued by a title insurance company reasonably
acceptable to Buyer, with respect to all Real Property included
in the Purchased Property and in which Seller purports to own
fee title. Such title binders shall be reasonably
satisfactory to counsel, subject to the standard exceptions
set forth in the following sentence, for Buyer. Such title
binders shall reflect that, upon consummation of the sale
contemplated by this Agreement, Buyer will be vested with
good, fee simple, indefeasible and insurable title to such
Real Property, subject only to (i) inchoate liens for
current taxes and assessments not yet delinquent, (ii)
standard utility easements, covenants and restrictions of
record that do not individually or in the aggregate
materially interfere with the operation of the present
Business on the Real Property affected thereby, (iii)
existing zoning or similar laws or ordinances that do
not interfere with the operation of the Business and
(iv) leases (collectively, the "Permitted Exceptions").
If a preliminary title binder indicates an exception
other than a Permitted Exception, Seller
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shall, at its expense, cause such exception to be removed
on or before the Closing Date. With respect to each parcel
of Real Property covered by a preliminary title binder, the
amount of title insurance provided by Seller shall be the
real estate valuation amount shown on Seller's continuous
property records. Seller shall also deliver to Buyer (at
Seller's expense and on or prior to the Closing Date) a
certified current survey. By no later than forty-five (45)
days after the Closing Date, Seller shall deliver to Buyer
a final title insurance policy paid for by Seller covering
the Real Property included in the preliminary title binder.
11.14 Bulk Sales Laws. Seller and Buyer waive compliance
______________
with applicable laws under any version of Article 6 of the
Uniform Commercial Code adopted by any state or any similar
law relating to the sale of inventory, equipment or other
assets in bulk in connection with the sale of the
Purchased Property.
11.15 Prepaid Non-regulated Maintenance Agreements and
________________________________________________
Warranty Reserves. Within thirty (30) days following Closing,
_________________
Seller shall pay to Buyer an amount equal to the pro rata
portion of all prepaid but unearned revenues from Seller's
customers for all non-regulated maintenance agreements and
manufacturer warranties outstanding as of the Closing Date.
11.16 Non-regulated Construction Work in Progress.
___________________________________________
Seller has delivered to Buyer a summary of its nonregulated
activities, which summary is attached as Schedule 11.16
and will be updated to the Closing Date. All nonregulated
construction work from the date of the execution of this
Agreement through the Closing Date will be accounted for
by identifying and accruing all associated time reporting,
material and construction costs, whether invoiced
or not, through the Closing Date. Within 45 days
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following the Closing, Buyer shall pay to Seller an amount
equal to the expenditures by Seller for nonregulated
construction work in progress (net of advances) up to and
including Closing Date. After the Closing Date, the Buyer
shall be responsible for the completion of all nonregulated
construction work in progress and the costs associated with
completion of those projects. In the event the estimated
construction costs for the nonregulated construction exceeds
$25,000, Seller shall obtain the consent of the Buyer,
which consent shall not be unreasonably withheld.
11.17 Vehicle Registration. Buyer agrees to use its best
____________________
efforts to file promptly the appropriate vehicle title
applications and registrations to change the name of the
titled owner on each vehicle title certificate and change
the motor vehicle registration (with respect to license
plate information) on each vehicle being transferred to
Buyer from Seller pursuant to this Agreement. Buyer agrees
that it shall remove and destroy Seller's existing license
plates from all vehicles received upon the earlier of
receipt of new license plates or sixty (60) days
following Closing.
11.18 Telephone Directories Change Over. Within ninety
_________________________________
(90) days, but not earlier than thirty (30) days, following
the date of this Agreement, Buyer agrees to meet with Seller
for the purpose of mutually determining the method for changing
over to Buyer's directories for the Purchased Exchanges. Such
meeting(s) shall be held at Seller's address set forth in
Section 17.1 unless otherwise agreed by the parties.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have
___________________________
addressed the transfer of employees and employee benefits
matters in a separate agreement, entitled
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Employee Transfer Agreement, which is incorporated into
this Agreement as Schedule 12.1.
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
_____________________________________________________
(a) The representations and warranties contained in
Sections 9.1.6 and 9.2.6 will survive the Closing and remain in
full force and effect indefinitely. Each of the other
representations and warranties contained in Article 9 will
terminate, without further action, on the date twelve (12) months
following the Closing Date, except for Section 9.1.10, which shall
terminate six (6) months following the Closing Date. Any claim
for indemnification with respect to any alleged breach of any
representation or warranty not asserted by notice given as
herein provided that specifically identifies a particular
breach and the underlying facts relating thereto, which notice
is given within the applicable period of survival for such
representation or warranty, may not be pursued and is irrevocably
waived after such time. Without limiting the generality or
effect of the foregoing, no claim for indemnification with
respect to any representation or warranty will be deemed to have
been properly made except to the extent it is based upon a
Third Party Claim made or brought, or to the extent of
Indemnifiable Losses actually incurred by an Indemnitee, prior
to the expiration of the survival period for such representation
or warranty.
(b) Unless a specified period is set forth in this
Agreement, in which event such specified period will control, the
covenants contained in this Article 13, and in Articles 10, 11, 12,
14, 16 and 17, will survive the Closing and remain in effect
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indefinitely, or in the case of Section 11.14, will
survive for the applicable statute of limitations. All other
covenants contained in this Agreement will terminate, without
further action, upon the occurrence of the Closing and any
claim for an alleged breach of any such covenant may not be
pursued, and is irrevocably waived, upon the occurrence of
the Closing.
13.2 Limitations on Liability.
________________________
(a) For purposes of this Agreement, (i)
"Indemnification Payment" means any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement, (ii)
"Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying
Party" means any person or entity required to provide
indemnification under this Agreement, and (iv) "Indemnifiable
Losses" means any losses, liabilities, damages and expenses
and any claims, demands or suits by any person or entity,
including, without limitation, any Governmental Authority,
and costs and expenses actually incurred in connection with
any actions, suits, demands, assessments, judgments and
settlements and reasonable attorneys' fees and expenses,
in any such case (x) reduced by the amount of insurance
proceeds recovered from any person or entity and any tax
benefits to the Indemnitee as a result of the Indemnifiable
Losses involved and (y) provided that the underlying
liability or obligation is not the result of any action
taken or omitted to be taken by any Indemnitee. For
purposes of this 13.2(a), the amount of any tax benefits
to the Indemnitee shall be deemed to be equal to the
reduction in the federal, state and local income or
franchise taxes determined on the basis of the maximum
tax rates in effect for the taxable period when payment is
made by the Indemnifying Party (regardless of whether such
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reduction results in an actual reduction in the federal,
state or local income or franchise taxes of the Indemnitee).
(b) Notwithstanding anything to the contrary
contained in this Agreement, if the Closing occurs, (i) no
claim for indemnification may be asserted under Section 13.3(a)(i)
with respect to any matter discovered by or known to Buyer on
or before the Closing Date and (ii) no claim for indemnification
may be asserted under Section 13.3(b)(i) with respect to any
matter discovered by or known to Seller on or before
the Closing Date.
(c) As between Seller and any Affiliate of Seller,
on the one hand, and Buyer and any Affiliate of Buyer, on the
other hand, the rights and obligations set forth in this
Article 13 will be the exclusive rights and obligations
with respect to the liabilities and obligations referred to
in Section 13.3, and any breach of the representations,
warranties or covenants referred to in Section 13.3. Without
limiting the foregoing, as a material inducement to entering
into this Agreement, to the fullest extent permitted by law,
each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under
the common law or federal or state securities, trade
regulation or other laws, by reason of the liabilities and
obligations, and any breach of the representations, warranties
or covenants referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and
conditions of this Article 13.
(d) Notwithstanding any other provision of this
Agreement or of any applicable Law, no Indemnitee will be
entitled to make a claim against an Indemnifying Party under
Sections 13.3(a)(i) or 13.3(b)(i) until:
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(i) the aggregate amount of Indemnifiable
Losses incurred by the Indemnitee for any individual
occurrence giving rise to such Indemnifiable Losses exceeds
Twelve Thousand Five Hundred dollars ($12,500), in which event
(subject to the other provisions of this Section 13.2), such
Indemnitee may assert its right to indemnification for its
Indemnifiable Losses for that occurrence; and
(ii) the aggregate amount of claims that may
be asserted for such Indemnifiable Losses pursuant to
Section 13.2(d)(i) exceeds One Hundred Thousand dollars ($100,000),
but only to the extent such amount, if any, (a) exceeds One
Hundred Thousand dollars ($100,000) and (b) is less than the
amount set forth in Section 13.2(e).
(e) Notwithstanding any other provision of this
Agreement, the indemnification obligations of Seller under
Section 13.3(a)(i) (except with respect to indemnification for
inaccuracies of the representations contained in Sections 9.1.1
through 9.1.6) or the indemnification obligation of Buyer under
Section 13.3(b)(i) will not exceed the amount of Nine Hundred
Fifty Thousand dollars ($950,000) respectively, after subtracting
the floor amount specified in Section 13.2(d)(ii)(a).
(f) No indemnifying Party shall be liable to or
obligated to indemnify any Indemnitee hereunder for any
consequential, special, multiple, punitive or exemplary damages
including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or
goodwill, loss of use of facilities, loss of capital, claims
of customers, or any cost or expense related thereto, except
to the extent such damages have been recovered by a third
person and are the
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subject of a Third Party Claim for which indemnification is
available under the express terms of this Section 13.
13.3 Indemnification.
_______________
(a) Subject to the other sections of this Article 13,
Seller will indemnify, defend and hold harmless Buyer and its
Affiliates, directors, officers, agents and representatives from
all Indemnifiable Losses relating to, resulting from or arising
out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1 of this Agreement and (ii) a
breach by Seller of any covenant of Seller contained in this
Agreement, which covenant requires performance by Seller at or
after the Closing.
(b) Subject to the other sections of this Article 13,
Buyer will indemnify, defend and hold harmless Seller and its
Affiliates, directors, officers, agents and representatives from
all Indemnifiable Losses relating to, resulting from or arising
out of (i) a breach by Buyer of any of the representations or
warranties contained in Section 9.2 of this Agreement and (ii)
a breach by Buyer of any covenant of Buyer contained in this
Agreement, which covenant requires performance by Buyer at or
after the Closing.
(c) The indemnification obligations contained in
Article 14 with respect to Environmental Liabilities are to be
governed by Article 14 and are not limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 and
under Article 14 shall be treated by Buyer and Seller as
purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding
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anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any tax consequences arising from
receipt of an indemnity payment including without limitation
any adjustments to the basis of any asset resulting from an
adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
13.4 Defense of Claims.
_________________
(a) If any Indemnitee receives notice of the
assertion of any claim or of the commencement of any action
or proceeding by any entity that is not a party to this Agreement
or an Affiliate of such a party (a "Third Party Claim") against
such Indemnitee, with respect to which an Indemnifying Party is
obligated to provide indemnification under this Agreement, the
Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than ten (10)
calendar days after receipt of notice of such Third Party Claim;
provided, however, that the failure of the Indemnitee to notify
the Indemnifying Party shall only relieve the Indemnifying Party
from its obligation to indemnify the Indemnitee pursuant to this
Article 13 to the extent that the Indemnifying Party is
materially prejudiced by such failure (whether as a result of
the forfeiture of substantive rights or defenses or otherwise).
Upon receipt of notification of a Third Party Claim, the
Indemnifying Party shall be entitled, upon written notice to the
Indemnitee, to assume the investigation and defense thereof with
counsel reasonably satisfactory to the Indemnitee. Whether or
not the Indemnifying Party elects to assume the investigation
and defense of any Third Party Claim, the Indemnitee shall have
the right to employ separate counsel and to participate in the
investigation and defense thereof; provided, however, that the
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Indemnitee shall pay the fees and disbursements of such separate
counsel unless (i) the employment of such separate counsel has
been specifically authorized in writing by the Indemnifying Party,
(ii) the Indemnifying Party has failed to assume the defense of
such Third Party Claim within reasonable time after receipt of
notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in
which such claim, demand, action or cause of action has been
asserted include both the Indemnifying Party and such Indemnitee
and, in the reasonable judgment of counsel to such Indemnitee,
there exists one or more defenses that may be available to the
Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the
Indemnifying Party shall not be liable for the fees and
disbursements of more than one counsel for all Indemnified
Parties in connection with any one proceeding or any similar
or related proceedings arising from the same general
allegations or circumstances. Without the prior written
consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim that would
lead to liability or create any financial or other obligation
on the part of the Indemnitee unless such settlement includes
as an unconditional term thereof the release of the Indemnitee
from all liability in respect of such Third Party Claim.
(b) Any claim by an Indemnitee on account of an
Indemnifiable Loss that does not result from a Third Party
Claim (a "Direct Claim") will be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof,
but in any event not later than thirty (30) calendar days
after the incurrence thereof, and the Indemnifying Party will
have a period of thirty (30) calendar days within which to
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respond in writing to such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected
such claim, in which event the Indemnitee will be free to
pursue such remedies as may be available to the Indemnitee on
the terms and subject to the provisions of this Article 13.
(c) If after the making of any Indemnification
Payment the amount of the Indemnifiable Loss to which such
payment relates is reduced by recovery, settlement or otherwise
under any insurance coverage, or pursuant to any claim, recovery,
settlement or payment by or against any other entity, the
amount of such reduction (less any costs, expenses, premiums
or taxes incurred in connection therewith) will promptly be
repaid by the Indemnitee to the Indemnifying Party. Upon
making any Indemnification Payment, the Indemnifying Party
will, to the extent of such Indemnification Payment, be
subrogated to all rights of the Indemnitee against any third
party that is not an Affiliate of the Indemnitee in respect
of the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (i) the Indemnifying Party
shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii)
until the Indemnitee recovers full payment of its Indemnifiable
Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be
subrogated and subordinated in right of payment to the
Indemnitee's rights against such third party. Without
limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party
will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described
subrogation and subordination rights.
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ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Seller's Representations and Warranties. Except as
_______________________________________
set forth in Schedule 14.1(a) and Schedule 14.1(b), to the
knowledge of Seller:
(a) Seller's operation of the Business and the
Purchased Property has been and is presently in substantial
compliance with Existing Environmental Requirements, except
where noncompliance would not have a material adverse effect
on the Business. Buyer and Seller agree to make a good faith
effort to list all noncompliance in Schedule 14.1(a).
(b) Seller has obtained or filed for all
necessary environmental permits, authorizations and licenses
required to operate the Business or the Purchased Property,
except where failure to obtain or file such permits,
authorizations and licenses would not have a material adverse
effect on the Business. Buyer and Seller have made a good
faith effort to set forth all failures to file in
Schedule 14.1(b).
(c) Seller has set forth all UST's in
Schedule 14.1(c).
14.1.1 Treatment of Data. All information collected
_________________
and generated as a result of the environmental audit will be
subject to the terms and conditions of the Confidentiality
Agreement.
14.1.2 Phase I Reviews. Buyer may conduct the usual
_______________
Phase I environmental assessment activities of the Purchased
Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing.
(a) Buyer shall give Seller at least three (3)
business days' notice prior to any entry onto the Purchased
Property.
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(b) If Buyer enters the Purchased Property, a
representative of Seller may be, but is not required to be, present
during such entry on the Purchased Property.
(c) All activities of Buyer regarding environmental
due diligence shall be conducted to minimize any inconveniences or
interruption of the normal use and enjoyment of Seller's Business
and the Purchased Property.
14.1.3 Phase 11 Reviews. Buyer may conduct the usual
________________
Phase II environmental assessment activities of the Purchased
Property (including, but not limited to, the taking and analysis
of soil, surface water and groundwater samples, testing of
buildings, drilling wells, taking soil borings, and excavating)
provided that such Phase II assessment activities are conducted
in accordance with this Section 14.1.
(a) If Buyer desires to perform sampling or
intrusive testing at a site included in the Purchased Property,
Buyer must notify Seller of its desire at least five (5)
business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding
such sampling or intrusive testing.
(b) Buyer shall provide Seller with copies
of field data, field reports, laboratory analyses, logs,
laboratory reports and other material or information regarding
the sampling or intrusive testing ("Environmental Data") within
three (3) business days of Buyer's receipt of such data and
shall promptly provide Seller with "matched" or "paired"
samples, in accordance with standard sampling and testing
protocols, that are obtained during the sampling or intrusive
testing of a particular site; provided, however, that Seller
shall have no obligation to Buyer to take any action whatsoever
regarding such samples.
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14.1.4 Indemnity for Due Diligence Activities.
______________________________________
Buyer hereby agrees to indemnify and hold harmless Seller,
Seller's Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders,
penalties, fines, costs, charges and expenses (including
attorneys' fees and disbursements, and costs of experts and
expert witnesses) with respect to persons or property arising
out of or in connection with the entry of Buyer or its
environmental consultant(s) onto the Purchased Property and
resulting from an act or omission of Buyer or its environmental
consultant(s) provided that Buyer shall not be liable for any
Environmental Liabilities incurred by any such party
discovered by the environmental due diligence performed by
Buyer or its environmental consultant(s). In addition, in
the event the transaction contemplated herein with regard
to any portion of the Purchased Property does not Close, Buyer
agrees to restore such portion of the Purchased Property to
the condition which existed prior to Buyer's inspections and
testing thereof to the extent such portion of the Purchased
Property was damaged by such inspections and testing.
14.1.5 Environmental Assessment Costs. If the
______________________________
environmental audit report states that further assessment,
investigation or remediation is required or advised, then
such assessment, investigation and remediation shall be
performed and completed in accordance with Environmental
Requirements prior to Closing and at Seller's sole cost
and expense.
14.2 Indemnification for Environmental Matters.
_________________________________________
14.2.1 Sole Remedy and Release. It is the
_______________________
intent of each party to this Agreement that the indemnification
provided under this Section 14.2 shall be the sole
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remedy for resolving disputes regarding environmental matters,
including but not limited to, Environmental Liabilities related
to the Business or the Purchased Property. Each party to this
Agreement hereby waives and releases the other party from any
and all liability under any other cause of action at law or
in equity concerning these matters, whether raised pursuant to
(i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation,
or (iii) common law.
14.2.2 Indemnification of Buyer. Seller agrees
________________________
to indemnify and hold harmless Buyer, its Affiliates and their
respective officers, directors, employees, agents, successors
and assigns from and against any and all Environmental
Liabilities under Existing Environmental Requirements arising
from acts or omissions occurring prior to the Closing Date on
the Purchased Property. Indemnification under this
Section 14.2.2 shall only be provided for claims for which
Buyer provides notice pursuant to the procedures of
Section 14.2.5 within one (1) year of the Closing Date.
14.2.3 Indemnification of Seller. Buyer agrees
_________________________
to indemnity and hold harmless Seller, its Affiliates and their
respective officers, directors, employees, agents, successors
and assigns from and against any and all Environmental
Liabilities arising from acts or omissions occurring after
the Closing Date on the Purchased Property. Indemnification
under this Section 14.2.3 shall only be provided for claims
for which Seller provides notice pursuant to the procedures
of Section 14.2.5. The indemnification provided for under
this Section 14.2.3 shall survive the Closing.
14.2.4 Assumption of Environmental Liabilities.
_______________________________________
As at the Closing Date, Buyer assumes all Environmental
Liabilities related to the Purchased Property, except
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for those liabilities subject to indemnification by Seller
in accordance with Sections 14.2.2 and 14.2.7.
14.2.5 Notice. Either party seeking
______
indemnification under this Article 14 must give written notice
to the other party. Any such written notice by one party must
include information sufficient to inform the other party of,
and allow such other party to confirm the nature of the claim,
and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm all costs
incurred by the indemnified party under Section 14.2.2 or
Section 14.2.3, as applicable.
14.2.6 Actual Damages. Any indemnifiable claim
______________
under this Article 14 shall be limited to actual damages that
have been incurred and shall not include consequential
damages. Any indemnifiable claim under this Article 14 shall
also be reduced to account for any insurance, storage tank fund,
or other proceeds received by the party to be indemnified.
14.2.7 Limitations on Indemnification.
______________________________
Notwithstanding any other provision of this Agreement, this Article
14, or any applicable Law, neither party shall be entitled to
make a claim against the other party for Environmental
Liabilities under this Article 14 until the aggregate amount of
costs for indemnifiable environmental matters incurred by the
party to be indemnified exceeds One Hundred Thousand dollars
($100,000) and then only to the extent of such excess, if any.
Further, notwithstanding any other provision of this Agreement,
this Article 14, or any applicable law, the indemnification
obligations of Seller under Section 14.2.2 shall not exceed the
aggregate amount of Nine Hundred Fifty Thousand dollars
($950,000).
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14.3 Facilities Issues. Within thirty (30) days of the
_________________
date hereof, Seller will provide to Buyer copies of all surveys
and reports in Seller's possession concerning the existence or
possible existence of asbestos or materials containing asbestos
relating to any of the Real Property. The parties further agree
that, if Seller discloses the existence or suspected existence
of materials containing asbestos with respect to a given parcel
of Real Property and the asbestos does not exceed applicable
limits, if Buyer desires to make renovations or structural
changes to the property after Closing (which changes require
the removal of asbestos), the removal will be at the expense
of Buyer. If the asbestos does exceed applicable limits, then
the asbestos will be removed at Seller's sole cost and expense.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated
__________________
at any time prior to the Closing Date:
(a) at any time by mutual written consent of
the parties;
(b) by Seller or Buyer, as applicable, if there
has been a material misrepresentation, breach of covenant or breach
of warranty on the part of the other party in their respective
representations, warranties and covenants set forth in this
Agreement;
(c) by Buyer if any of the conditions provided in
Section 7.1 of this Agreement have not been met at the Closing Date
and have not been waived by Buyer;
(d) by either party on the date two (2) years from
the execution of this Agreement; or
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(e) by Seller if any of the conditions provided in
Section 7.2 of this Agreement have not been met at the Closing Date
and have not been waived by Seller; provided, however, that a party
shall not be entitled to exercise any right of termination
pursuant to subsection (c), (d) or (e) above if such party shall
not have performed diligently and in good faith the obligations
required to be performed by such party hereunder prior to the
date of termination.
15.2 Effect of Termination.
_____________________
(a) If this Agreement is terminated pursuant to
Section 11.7 or Section 15.1(a), this Agreement shall be of no
further force and effect and there shall be no further
liability hereunder (except the obligation of confidentiality
under the Confidentiality Agreement) on the part of either
party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives. Upon such a
termination, Seller shall promptly refund the Deposit to Buyer
and shall pay to Buyer an additional amount (the "Interest
Amount") equal to the interest that would have been accrued
on the Deposit during the period beginning on receipt by
Seller of the Deposit and ending on the date of termination
hereof if the Deposit had borne interest at a rate per annum
of six percent (6%).
(b) If this Agreement is terminated by Buyer
pursuant to Section 15.1(b) or (c), this Agreement shall
be of no further force and effect and there shall be no
further liability hereunder (except the obligation of
confidentiality under the Confidentiality Agreement) on the
part of either party or their respective Affiliates,
directors, officers, shareholders, agents or other
representatives; provided, however, that no such termination
shall relieve Seller of liability for any claims, damages or
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losses suffered by Buyer as a result of the negligent or
willful failure of Seller to perform any obligations required
to be performed by it hereunder on or prior to the date of
termination. Upon such a termination, Seller shall promptly
refund the Deposit to Buyer and shall pay to Buyer the
Interest Amount.
(c) If this Agreement is terminated by Seller
pursuant to Section 15.1(b) or (d), this Agreement shall be
of no further force and effect and there shall be no further
liability hereunder (except the obligation of confidentiality
under the Confidentiality Agreement) on the part of either
party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives; provided,
however, that no such termination shall relieve Buyer of
liability for any claims, damages or losses suffered by
Seller as a result of the negligent or willful failure of
Buyer to perform any obligations required to be performed
by it hereunder on or prior to the date of termination.
Notwithstanding anything to the contrary in Sections 13.2(d)
or (e), which provisions shall not apply to this Article 15,
upon such a termination, Seller shall be entitled to retain
the Deposit as reimbursement for a portion of its out-of-pocket
expenses incurred in connection with this Agreement and the
transactions contemplated thereby. The retention of the Deposit
by Seller is not intended to be the sole or exclusive remedy
available to Seller upon such a termination, it being understood
and agreed that Buyer shall be liable to Seller for the full
amount of any surviving claims, damages and losses suffered
by Seller to the extent that the same exceed the amount of
the Deposit.
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(d) Notwithstanding anything to the contrary
contained herein, the provisions of this Section 15.2 and of
Sections 17.1, 17.2, 17.3, 17.8, 17.11, 17.13 and Article 16
shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5,
________________
the parties agree to resolve disputes arising out of this
Agreement without litigation. Accordingly, except as provided
in Section 16.5, or in the case of a suit to compel compliance
with this dispute resolution process, the parties agree to use
the following alternative dispute resolution procedure as their
sole remedy with respect to any controversy or claim arising
out of or relating to this Agreement or its breach.
16.2 Dispute Resolution Process. At the written
__________________________
request of a party, each party shall appoint a knowledgeable,
responsible representative to meet and negotiate in good faith
to resolve any dispute arising under this Agreement. The
discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures
such as mediation to assist in the negotiations. Discussions
and correspondence among the parties' representatives for
purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement,
exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the
arbitration described below or in any lawsuit. Documents
identified in or provided with such communications, which are
not prepared for purposes of the negotiations, are not
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so exempted and may, if otherwise admissible, be admitted in
evidence in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if
___________
negotiations between the representatives of the parties do
not resolve the dispute within sixty (60) days of the initial
written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association.
Either party may demand such arbitration in accordance with
the procedures set out in those rules. The arbitration
hearing shall be commenced within sixty (60) days of the
demand for arbitration and the arbitration shall be held
in, Chicago, Illinois. The arbitrator shall control the
scheduling (so as to process the matter expeditiously) and
any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings.
The times specified in this Section 16.3 may be extended upon
mutual agreement of the parties or by the arbitrator upon a
showing of good cause. Judgment upon the award rendered by
the arbitrator may be entered in any court having
jurisdiction.
16.4 Costs and Attorneys' Fees, Each party shall bear
_________________________
its own costs and attorneys' fees associated with these
procedures. A party seeking discovery shall reimburse the
responding party the cost of production of documents
(including search time and reproduction time costs). The
parties shall equally share the fees of the arbitration and
the arbitrator.
16.5 Certain Limitations. The provisions of this
___________________
Article 16 with respect to the resolution of disputes without
litigation shall not apply to any dispute, controversy or
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claim arising out of the provisions of Section 11.1 or the
Confidentiality Agreement, it being understood and agreed that
in the event of a breach by either party of the provisions of
Section 11.1 or the Confidentiality Agreement, the other party
shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate
proceeding, whether for specific enforcement of any agreement
contained in Section 11.1 or the Confidentiality Agreement or
in aid of the exercise of any power granted by Section 11.1
or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices and other communications
_______
required or permitted hereunder shall be in writing and,
unless otherwise provided in this Agreement, will be deemed
to have been given when delivered in person or dispatched by
electronic facsimile transfer (confirmed in writing by
certified mail, concurrently dispatched) or one business day
after having been dispatched for next-day delivery by a
nationally recognized overnight courier service to the
appropriate party at the address specified below.
(a) If to Buyer, to:
James Huesgen
Pacific Telecom, Inc.
805 Broadway
Vancouver, WA 98660
Phone No.: 360/905-6991
Facsimile No.: 360/905-7876
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With a copy to:
Deborah Harwood, Esq.
Pacific Telecom, Inc.
805 Broadway
Vancouver, WA 98660
Phone No.: 360/905-7381
Facsimile No.: 360/905-5953
(b) If to Seller, to:
Karen Smith
600 Hidden Ridge, HQE04N58
Irving, TX 75015-2092
Facsimile No.: (214) 718-2802
With a copy to:
Richard M. Cahill
GTE Telephone Operations
600 Hidden Ridge, HQE04H08
Irving, TX 75015-2092
Facsimile No.: (214) 718-2809
or to such other address or addresses as any such party may
from time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with
______________
each other in preparing any press release, public announcement,
news media response or other form of release of information
concerning this Agreement or the transactions contemplated
hereby that is intended to provide such information to the
news media or the public (a "Press Release"). Neither party
shall issue or cause the publication of any such Press Release
without the prior written consent of the other party;
provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such
Press Release to the extent that such action is required
by applicable Law or the rules of any national stock exchange
applicable to such party or its Affiliates, in which case
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the party wishing to make such disclosure will, if practicable
under the circumstances, notify the other party of the proposed
time of issuance of such Press Release and consult with and
allow the other party reasonable time to comment on such Press
Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided
________
herein, each party will pay any expenses (including, without
limitation, attorneys' fees) incurred by it incident to this
Agreement and in consummating the transactions provided
for herein.
17.4 Successors and Assigns. This Agreement will be
______________________
binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but
is not assignable or delegable by any party without the
prior written consent of the other party: provided, that
Seller may assign this Agreement to an Affiliate of Seller
without the consent of Buyer.
17.5 Amendments. This Agreement may be amended or
__________
modified only by a subsequent writing signed by authorized
representatives of both parties.
17.6 Captions. The captions set forth in this
________
Agreement are for convenience only and shall not be
considered as part of this Agreement, nor as in any way
limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement"
________________
shall mean collectively this document, the Schedules hereto,
and any agreements expressly incorporated herein. This Agreement
supersedes and revokes any prior discussions and representations,
other agreements, commitments, arrangements or understandings of
any sort whatsoever, whether oral or written, that may have
been made or entered into by the parties relating to the
matters contemplated hereby. This Agreement constitutes the
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entire agreement by and among the parties, and there are no
representations, warranties, agreements, commitments,
arrangements or understandings except as expressly set forth
herein.
17.8 Waiver. Except as otherwise expressly provided in
______
this Agreement, neither the failure nor any delay on the part of
any party to exercise any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any such right, power or privilege preclude
any other or further exercise thereof, or the exercise of any
other right, power or privilege available to each party at law
or in equity.
17.9 Third Parties. Except as expressly provided herein,
_____________
nothing contained in this Agreement is intended to confer upon
any person, other than the parties and their successors and
permitted assigns, any rights or remedies under or by reason
of this Agreement.
17.10 Counterparts. This Agreement may be executed in
____________
two or more counterparts, any or all of which shall constitute
one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects
_____________
be governed by and construed in accordance with the internal
laws of the State of Texas (except that no effect shall be
given to any conflicts of law principles of the State of Texas
that would require the application of the laws of any
other jurisdiction).
17.12 Further Assurances. From time to time, as and when
__________________
requested by one of the parties, the other party will execute
and deliver, or cause to be executed and delivered, all such
documents and instruments as may be reasonably necessary to
consummate and make effective the transactions contemplated
by this Agreement.
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17.13 Certain Interpretive Matters and Definitions.
____________________________________________
(a) Unless the context otherwise requires, (i) all
references to Sections, Articles or Schedules are to Sections,
Articles or Schedules of or to this Agreement, (ii) each term
defined in this Agreement has the meaning so assigned to it,
(iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with
GAAP, (iv) all references to the "knowledge of Seller" will be
deemed to refer to the actual knowledge of the Executive
Officers of Seller, (v) all references to Seller's
"best efforts" and references of like import will be deemed
to refer to the best efforts of Seller in accordance with
reasonable commercial practice and without the incurrence
of unreasonable expense, and (vi) as used in this Agreement,
"material adverse effect" and "material adverse change"
shall be interpreted as referring to a change or effect
that has a significant impact on the Business as a whole.
(b) No provision of this Agreement will be
interpreted in favor of, or against, either of the parties
by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent
with any prior draft of such provision or of this Agreement.
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IN WITNESS WHEREOF, the parties, acting through their duly
authorized agents, have caused this Agreement to be duly
executed and delivered as of the date first above written.
GTE NORTH INCORPORATED PTI COMMUNICATIONS OF
MICHIGAN, INC.
By: ALEX STADLER By: JAMES H. HUESGEN
___________________ _______________________________
Name: Alex Stadler Name: James H. Huesgen
________________
Title: Vice President - Title: Executive Vice President and
Strategy & Technology Chief Financial Officer
Planning
PACIFIC TELECOM, INC.
By: JAMES H. HUESGEN
_____________________________
Name: James H. Huesgen
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THE CITY OF FAIRBANKS
AND
PTI COMMUNICATIONS OF ALASKA, INC.
DATED AUGUST 20, 1996
<PAGE>
TABLE OF CONTENTS
1. AGREEMENT TO PURCHASE; PURCHASE PRICE;
_____________________________________
ASSUMPTION OF LIABILITIES....................... 1
_________________________
1.1 AGREEMENT TO PURCHASE ...................... 1
_____________________
1.2 DEFINITION OF ASSETS ....................... 1
____________________
1.3 PURCHASE PRICE ............................. 2
______________
1.4 PAYMENT OF PURCHASE PRICE .................. 3
_________________________
1.5 ASSUMPTION OF LIABILITIES .................. 3
_________________________
1.6 CONTRACTS .................................. 4
_________
1.7 LIABILITIES NOT ASSUMED .................... 4
_______________________
1.8 EMPLOYEES .................................. 4
_________
1.9 PERMITS, APPROVALS ......................... 4
__________________
2. ACQUIRED AND EXCLUDED ASSETS ..................... 4
____________________________
2.1 ASSETS TO BE ACQUIRED ...................... 4
_____________________
2.2 EXCLUDED ASSETS ............................ 4
_______________
3. TRANSFER AND ASSIGNMENT OF ASSETS ................ 5
_________________________________
3.1 INSTRUMENTS OF CONVEYANCE AND TRANSFER ..... 5
______________________________________
3.2 ASSIGNMENTS OF CERTAIN CONTRACTS AND RIGHTS. 5
___________________________________________
3.3 FURTHER ASSURANCES ......................... 5
__________________
3.4 RIGHTS OF WAY, EASEMENTS, LICENSES,
___________________________________
LEASES, PERMITS, AND FRANCHISES ............ 6
_______________________________
3.5 REAL PROPERTY, CONVEYANCE .................. 6
_________________________
4. CLOSING .......................................... 7
_______
4.1 CLOSING DATE AND TIME ...................... 7
_____________________
4.2 SELLER'S OBLIGATIONS AT CLOSING ............ 7
_______________________________
4.3 BUYER'S OBLIGATIONS AT CLOSING ............. 7
______________________________
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER ..... 7
____________________________________________
5.1 STANDING AND POWER ......................... 7
__________________
5.2 AUTHORITY .................................. 7
_________
5.3 FINANCIAL INFORMATION ...................... 8
_____________________
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS ....... 8
____________________________________
5.5 TITLE TO PROPERTIES, ABSENCE OF LIENS
_____________________________________
AND ENCUMBRANCES .......................... 10
________________
5.6 LIST OF PROPERTIES, CONTRACTS AND
_________________________________
OTHER DATA ............................... 10
__________
5.7 LITIGATION ................................. 11
__________
5.8 GOVERNMENT APPROVALS ....................... 12
____________________
5.9 INSURANCE .................................. 12
_________
5.10 CONDITION OF THE ASSETS .................... 12
_______________________
5.11 ACCOUNTS RECEIVABLE ........................ 12
___________________
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
i - ASSET PURCHASE AGREEMENT
<PAGE>
5.12 NO DEFAULTS ................................ 12
___________
5.13 COMPLIANCE WITH APPLICABLE LAW ............. 13
______________________________
5.14 ABSENCE OF UNDISCLOSED LIABILITIES ......... 13
__________________________________
5.15 TAXES ...................................... 13
_____
5.16 BROKERS .................................... 13
_______
5.17 HAZARDOUS SUBSTANCES ....................... 14
____________________
5.18 STORAGE TANKS .............................. 14
_____________
5.19 ACCESS LINES AND CUSTOMERS ................. 14
__________________________
5.20 EMPLOYEE BENEFIT PLANS ..................... 14
______________________
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER ...... 15
___________________________________________
6.1 ORGANIZATION AND STANDING .................. 15
_________________________
6.2 AUTHORITY .................................. 15
_________
7. COVENANTS OF THE SELLER .......................... 16
_______________________
7.1 ACCESS TO PROPERTIES, BOOKS AND RECORDS .... 16
_______________________________________
7.2 CONDUCT OF BUSINESS ........................ 16
___________________
7.3 DEFEASANCE ................................. 17
__________
7.4 TRANSFER FEES .............................. 17
_____________
7.5 SCHEDULE ELECTION .......................... 18
_________________
7.6 LAND FOR DIVISION HEADQUARTERS ............. 18
______________________________
7.7 SELLER FEES ................................ 18
___________
8. COVENANTS OF THE BUYER ........................... 18
______________________
9. COVENANTS OF THE BUYER AND SELLER ................ 19
_________________________________
9.1 REGULATORY APPROVALS ....................... 19
____________________
9.2 INSPECTION AND PRESERVATION OF
______________________________
RECORDS: FURTHER ASSISTANCE .............. 19
___________________________
9.3 PUBLIC ANNOUNCEMENTS ....................... 20
____________________
9.4 INTERVENTION IN COMMISSION HEARINGS ........ 20
___________________________________
9.5 TAXES ...................................... 21
_____
9.6 ALLOCATION OF PURCHASE PRICE ............... 21
____________________________
9.7 UTILIDOR EASEMENT .......................... 21
_________________
9.8 GLOBE ADMINISTRATIVE BUILDING LEASE ........ 22
___________________________________
9.9 TRANSFER OF FMUS MIS OPERATIONS ............ 22
_______________________________
9.10 ALASKA DIVISION HEADQUARTERS ............... 22
____________________________
9.11 COOPERATION ................................ 22
___________
10. CONDITIONS TO OBLIGATIONS OF THE SELLER .......... 22
_______________________________________
10.1 COMPLIANCE WITH AGREEMENT .................. 23
_________________________
10.2 REPRESENTATIONS, WARRANTIES AND COVENANTS .. 23
_________________________________________
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
ii - ASSET PURCHASE AGREEMENT
<PAGE>
10.3 CERTIFICATE OF THE BUYER ................... 23
________________________
10.4 CONSENTS AND APPROVALS ..................... 23
______________________
10.5 COUNCIL AND VOTER APPROVAL ................. 23
__________________________
10.6 ALL PROCEEDINGS TO BE SATISFACTORY ......... 23
__________________________________
10.7 DEFEASANCE ................................. 23
__________
10.8 ADVERSE PROCEEDINGS ........................ 24
___________________
10.9 CONTINGENT CLOSING ......................... 24
__________________
11. CONDITIONS TO OBLIGATIONS OF THE BUYER ........... 24
______________________________________
11.1 COMPLIANCE WITH AGREEMENT .................. 24
_________________________
11.2 REPRESENTATIONS, WARRANTIES AND COVENANTS .. 24
_________________________________________
11.3 CERTIFICATE OF THE SELLER .................. 24
_________________________
11.4 CONSENTS AND APPROVALS ..................... 24
______________________
11.5 COUNCIL AND VOTER APPROVAL ................. 24
__________________________
11.6 ALL PROCEEDINGS TO BE SATISFACTORY.......... 25
__________________________________
11.7 OPINION OF COUNSEL ......................... 25
__________________
11.8 DEFEASANCE ................................. 25
__________
11.9 ADVERSE PROCEEDINGS ........................ 25
___________________
11.10 THIRD-PARTY CONSENTS AND APPROVALS ......... 25
__________________________________
11.11 CONTINGENT CLOSING ......................... 25
__________________
11.12 NO MATERIAL ADVERSE CHANGE ................. 26
__________________________
11.13 UTILIDOR EASEMENT .......................... 26
_________________
11.14 GLOBE ADMINISTRATIVE BUILDING LEASE ........ 26
___________________________________
11.15 RELOCATION OF MIS .......................... 26
_________________
12. TERMINATION ...................................... 26
___________
13. AMENDMENT AND WAIVERS ............................ 27
_____________________
13.1 AMENDMENTS, MODIFICATIONS, ETC. ............. 27
______________________________
13.2 WAIVERS ..................................... 27
_______
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES
_______________________________________
AND COVENANTS .................................. 27
_____________
15. INDEMNIFICATION .................................. 27
_______________
15.1 INDEMNIFICATION BY THE BUYER ................ 27
____________________________
15.2 INDEMNIFICATION BY THE SELLER ............... 28
_____________________________
15.3 PROCEDURE FOR INDEMNIFICATION WITH
__________________________________
RESPECT TO THIRD-PARTY CLAIMS ............... 28
_____________________________
15.4 MUTUAL INDEMNIFICATION ...................... 29
______________________
15.5 HAZARDOUS SUBSTANCES INDEMNIFICATION ........ 29
____________________________________
15.6 LIMITATION ON INDEMNIFICATION ............... 30
______________________________
16. EXPENSES ........................................ 30
________
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
iii - ASSET PURCHASE AGREEMENT
<PAGE>
17. ASSIGNMENT ...................................... 30
__________
18. ENTIRE AGREEMENT ................................ 30
________________
19. THIRD-PARTY BENEFICIARIES ....................... 30
_________________________
20. COUNTERPARTS .................................... 31
____________
21. SECTION HEADINGS ................................ 31
________________
22. APPLICABLE LAW .................................. 31
______________
23. CONFIDENTIAL INFORMATION ........................ 31
________________________
24. NOTICES ......................................... 32
_______
25. FURTHER ASSURANCES .............................. 33
__________________
SCHEDULES:
_________
SCHEDULE 1.2 REAL PROPERTY OWNED
SCHEDULE 1.8 EMPLOYEES
SCHEDULE 1.9 PERMITS AND APPROVALS
SCHEDULE 3.1 BILL OF SALE AND ASSIGNMENT
SCHEDULE 3.4 RIGHTS OF WAY, EASEMENTS, LICENSES, LEASES
PERMITS AND FRANCHISES
SCHEDULE 5.2(B) AUTHORITY
SCHEDULE 5.2(C) AUTHORITY
SCHEDULE 5.3 FINANCIAL INFORMATION
SCHEDULE 5.4 CHANGES IN ASSETS
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
iv - ASSET PURCHASE AGREEMENT
<PAGE>
SCHEDULE 5.5 DEFECTS IN TITLE
SCHEDULE 5.6(a) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.6(b) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.6(c) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.6(d) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.6(e) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.6(f) LISTS OF PROPERTIES, CONTRACTS AND OTHER DATA
SCHEDULE 5.7 LITIGATION
SCHEDULE 5.8 GOVERNMENTAL APPROVALS
SCHEDULE 5.9 INSURANCE
SCHEDULE 5.10 CONDITION OF ASSETS
SCHEDULE 5.12 DEFAULTS
SCHEDULE 5.13 APPLICABLE LAW COMPLIANCE
SCHEDULE 5.14 UNDISCLOSED LIABILITIES
SCHEDULE 5.17 HAZARDOUS SUBSTANCES
SCHEDULE 5.18 STORAGE TANKS
SCHEDULE 5.20 EMPLOYEE BENEFIT PLANS
SCHEDULE 6.2(b) CONFLICTS, BREACHES AND VIOLATIONS CAUSED BY
AGREEMENT
SCHEDULE 6.2(c) CONFLICTS, BREACHES AND VIOLATIONS CAUSED BY
AGREEMENT
SCHEDULE 7.3 BOND DEFEASANCE
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
v - ASSET PURCHASE AGREEMENT
<PAGE>
SCHEDULE 7.4 TRANSFER FEES
SCHEDULE 9.1 REGULATORY APPROVALS
The above mentioned schedules have been omitted. The
Company agrees to furnish supplementally a copy of
any omitted schedule to the Commission upon request.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
vi - ASSET PURCHASE AGREEMENT
<PAGE>
ASSET PURCHASE AGREEMENT
________________________
THIS ASSET PURCHASE AGREEMENT ("Agreement"),
dated as of August 20, 1996, is being made and
entered into by and between the City of Fairbanks,
a municipal corporation located in the State of
Alaska (the "Seller") and PTI Communications of
Alaska, Inc., an Alaskan corporation ("Buyer").
WITNESSETH:
__________
WHEREAS, the Seller is the owner of telephone
local exchange, cellular and deregulated marketing;
electric transmission distribution; and water, sewer
and waste water operations which provide such utility
services within the City of Fairbanks and the
surrounding area ("FMUS"); and
WHEREAS, the Seller desires to sell and Buyer
desires to purchase, subject to the terms and
conditions set forth herein, the telephone local
exchange, cellular and deregulated marketing and
certain common assets and operations owned by
Seller; and
WHEREAS, the Seller further desires to sell
and Buyer further desires to purchase, subject to
terms and conditions set forth herein, certain
working capital and restricted assets of FMUS;
NOW THEREFORE, in consideration of the
premises and the mutual covenants and agreements
hereinafter set forth, the Seller and Buyer
("Parties") hereto agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE;
______________________________________
ASSUMPTION OF LIABILITIES.
_________________________
1.1 AGREEMENT TO PURCHASE. Subject to
_____________________
the terms and conditions contained herein,
Seller agrees to convey, transfer, assign and
deliver to Buyer, and Buyer agrees to purchase
and accept all of Seller's right, title and
interest in and to all of the Assets, as
defined herein, free and clear of all
security interests, liens or encumbrances.
1.2 DEFINITION OF ASSETS. For purposes of
____________________
this Agreement, except for the Excluded Assets,
Assets shall mean properties, books, records,
subscriber lists, licenses, authorizations,
tangible or intangible, real or personal that
are currently in existence and are necessary
to conduct the local telephone exchange, cellular,
deregulated marketing and common businesses
____________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
1 - ASSET PURCHASE AGREEMENT
<PAGE>
of the Seller, including but not limited to those assets
defined on the Financial Statements of FMUS as of
12/31/95 in the following amounts:
Telephone Regulated Utility Plant and Equipment $104,709,308
Teleconnect Equipment $ 6,341,909
Cellular Equipment $ 3,713,126
Common Plant and Equipment $ 3,487,481
Land as set forth in Schedule 1.2
and incorporated herein by reference
Further, all assets acquired from 12/31/95 in the
normal course of business until the date of Closing
will be treated as an included asset including
Working Capital and Restricted Assets, defined in
the FMUS Financial Statements as: (i) Revenue Fund
Cash and Cash Investments, (ii) Accounts Receivable
less Allowance for Doubtful Accounts, (iii) Other
Receivables, (iv) Unbilled Receivables, (v) Estimated
Access Revenues Receivable, (vi) Prepaid Expenses and
Deposits and (vii) Notes Receivable (Current Portion),
(viii) Compensatory Balance, (ix) Construction Fund
Investments, (x) Revenue Bond Fund Investments,
(xi) Customer Deposits and Interests, (xii) Notes
Receivable and (xiii) Investment in Sales Type Leases
and the inventory of materials and supplies that are
necessary to conduct the telephone local exchange,
cellular deregulated marketing, and common
functions of FMUS.
1.3 PURCHASE PRICE. The cash purchase price
______________
for the Assets to be transferred hereunder shall be
One Hundred Twelve Million Dollars ($112,000,000)
and shall be subject to the following adjustments
("Purchase Price"). The Purchase Price shall be
adjusted downward on a dollar for dollar basis
to the extent that the total combined balances
of the accounts identified in the Financial
Statements as Revenue Fund Cash and Cash
Investment, Compensatory Balance, Construction Fund
Investment and Revenue Bond Fund Investments at
Closing is less on the date of Closing than
$19,348,989. Purchase Price shall be adjusted
upward on a dollar for dollar basis to the extent
that the total combined balances of the accounts
identified in the Financial Statements as Revenue
Fund Cash and Cash Investment, Compensatory Balance,
Construction Fund Investment and Revenue Bond
Fund Investments at Closing is greater on the date
of Closing than $19,348,989. In the event that
Seller is unable to sell to Buyer Block 13 or
Block 66 described in Section 7.6, the Purchase
Price shall be further adjusted downward on a
dollar for dollar basis in the amount of $800,000
for Block 13 or $400,000 for Block 66
respectively. As further consideration, Buyer
will waive any claim or rights to all associated
funding in excess of the accumulated benefit
obligation that will exist upon termination and
vesting for those current and former FMUS
employees participating in the initial PERS
Pension Plan, as of the most recent measurement date.
Furthermore, Buyer shall also pay to Seller at
Closing One Million Five Hundred Thousand Dollars
($1,500,000) which amount represents pre-payment of all
current and future taxes, fees, assessments or other
governmenal charges required by or imposed by the City of
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
2 - ASSET PURCHASE AGREEMENT
<PAGE>
Fairbanks, including any entities or departments
which it controls or which collects for the City,
which pre-payment represents a period commencing
January 1, the year following Closing and
ten (10) years thereafter.
1.4 PAYMENT OF PURCHASE PRICE. The Purchase
_________________________
Price shall be payable as follows:
(a) At the Closing, the Purchase Price,
less a credit of the Earnest Money and interest
earned described in (b) below, shall be paid by
Buyer to the Seller by wire transfer of immediately
available funds to such bank account or accounts as
may be designated in writing by the Seller.
(b) Buyer has paid to the Seller an
amount equal to Seven Hundred Thirty Thousand Four
Hundred Thirty-five Dollars ($730,435.00) (the
"Earnest Money") which, in combination with a
payment by Golden Valley Electric Association
(GVEA) and Fairbanks Sewer and Water (FSW) was
required by Seller's Resolution No. 3639 as
Amended. The Earnest Money shall be held by
the Seller and invested in a manner mutually
acceptable to the Buyer and Seller. If this
Agreement is terminated without a Closing
due to either the breach of this Agreement
by the Seller, the failure to obtain any
condition to the obligations of Buyer, then
the Earnest Money and the interest earned
thereon shall be returned to Buyer. If this
Agreement is terminated due to the breach of
this Agreement by the Buyer, then the Earnest
Money and the interest earned thereon shall
be retained by Seller. If this Agreement
is not terminated and the Closing occurs,
then the Earnest Money and the interest earned
shall be credited against the Purchase
Price at the Closing.
1.5 ASSUMPTION OF LIABILITIES. At the
_________________________
Closing, and as additional consideration for the
purchase of the Assets, the Buyer shall assume,
subject to the terms and conditions herein, any and
all liabilities and obligations related to or arising
from the ownership and use of the Assets during
the normal course of business consistent with
past practices and as defined in the FMUS Financial
Statements as: (i) Current Portion of Capital Lease
Obligations; (ii) Accounts Payable; (iii) Estimated
Access Revenues Payable; (iv) Revenues Billed in
Advance; (v) Customer Deposits and Interest; and
(vi) Accrued Self Insurance Reserves, but only for
claims incurred prior to Closing and paid by the
City within twelve (12) months after the Closing
and only to the extent of the amount that said
paid claims have actually been reserved
on Seller's books as of 12/31/95. Notwithstanding
this Section 1.5, Buyer will assume all long term
capital lease obligations of FMUS and only the
accrued payroll, leave and taxes associated with
accrued payroll in effect at Closing for those
Employees identified in Schedule 1.8. The Buyer
shall be responsible for that litigation to the
extent it arises from a cause or condition first
arising after Buyer takes ownership of the Assets.
The Buyer shall execute and deliver to the Seller
assumption and lease agreements as described
herein, pursuant to which the Buyer shall agree
to pay, perform and discharge when due after
the Closing Date the liabilities and obligations
("Liabilities") of the Seller listed herein.
___________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
3 - ASSET PURCHASE AGREEMENT
<PAGE>
1.6 CONTRACTS. Buyer will acquire, subject
_________
to the terms thereof, only those contracts related
to the Assets as set forth in Schedule 5.6 and all
rights, privileges, benefits, obligations and
interests under the contracts, agreements, consents
or licenses with respect to intangible or personal
property or interest therein, and all records,
including plant, accounting, customer service and
those records which identify and describe the
physical property being sold hereby. Buyer will
further acquire all rights, privileges, benefits,
obligations and interest under all contracts,
agreements, consents or licenses with respect to
the intangible or personal property or interest
therein, and all records, including plant,
accounting, central office, customer service and
those records which identify and describe
the physical property being sold hereby.
1.7 LIABILITIES NOT ASSUMED. Notwithstanding
_______________________
anything in this Agreement, Buyer shall not assume any,
and the Seller shall retain and be responsible for, all
liabilities and obligations not expressly assumed by
Buyer pursuant to the terms and conditions herein,
including but not limited to all outstanding revenue
bonds, all liabilities under any deferred compensation
plans or programs interfund amounts due and owing
between FMUS and Seller, any litigation either now
existing or hereafter instituted, except that litigation
set forth in Section 1.5, accrued payroll and
leave for FMUS Employees not identified in Schedule 1.8,
all environmental matters arising out of or related to
Seller's use or operation of the Assets prior to
Closing, except as provided in Section 15.5.
1.8 EMPLOYEES. At Closing, the Buyer shall employ
_________
only those employees of Seller who:
(a) as of the Date of this Agreement are
regular, full-time employees of Seller,
assigned to the Departments set forth in
Schedule 1.8; and
(b) are continuously employed in any Department
set forth in Schedule 1.8 in regular full-time
status from the Date of this Agreement until
the Closing Date ("Employees").
1.9 PERMITS, APPROVALS. Buyer will acquire from Seller
__________________
those permits, approvals and the like set forth in Schedule
1.9, to the extent transferable pursuant to the terms thereof.
2. ACQUIRED AND EXCLUDED ASSETS.
____________________________
2.1 ASSETS TO BE ACQUIRED. At the Closing (as
_____________________
defined in Section 4.1 hereof), the Seller shall sell,
assign, convey, transfer and deliver, or cause to be
sold, assigned, conveyed, transferred and delivered,
to Buyer and its permitted successors and assigns,
the Assets as set forth herein, except the
Excluded Assets.
2.2 EXCLUDED ASSETS. All assets under any
_______________
deferred compensation plans or programs, Utilidor
loan receivable, the FMUS power plant and
adjacent warehouse, Globe Street
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
4 - ASSET PURCHASE AGREEMENT
<PAGE>
Administration Building and associated land
located at 645 5th Avenue, Fairbanks, AK and
all hardware and software ssociated with the IBM
AS400 computer system shall be retained by Seller,
any assets which relate to electric transmission
and distribution business and are conveyed to Golden
Valley Electric Association, and any assets which
relate to water and waste water utilities that
are conveyed to Fairbanks Sewer and Water ("Excluded
Assets") and Seller or its assigns shall have full
responsibility and obligation with respect to the
Excluded Assets.
3. TRANSFER AND ASSIGNMENT OF ASSETS.
_________________________________
3.1 INSTRUMENTS OF CONVEYANCE AND TRANSFER. The
______________________________________
sale, assignment, conveyance, transfer and delivery of
the Assets shall be effected by the Seller's execution
and delivery to the Buyer, on the Closing Date, of a
bill of sale in substantially the form of the Bill of
Sale and Assignment attached hereto as Schedule 3.1,
together with such other General Warranty Deeds, bills
of sale, endorsements, assignments and other instruments
of transfer and conveyance in form and substance
sufficient to vest in the Buyer all of the Seller's right,
title and interest in and to the Assets and as shall
reasonably be required by the Buyer or its counsel.
In addition to the extent permitted by law,
Buyer shall be entitled to the benefit of adverse
possession, prescriptive use or the like by Seller,
if any, and tacking to establish such rights.
3.2 ASSIGNMENT OF CERTAIN CONTRACTS AND RIGHTS.
__________________________________________
The Seller and Buyer shall use their reasonable best
efforts prior to and, if necessary, after the Closing
Date to obtain such consents or approvals as may be
required for the assignment or transfer of the
contracts, agreements, leases, commitments
and rights to be transferred to the Buyer under
Sections 1.6 and 1.9; provided, however, that the
Seller shall not be required to institute any
litigation, or to pay or agree to pay any amount,
in order to obtain any such consent or approval. If
any such consent or approval is not obtained,
the Seller and the Buyer agree to cooperate in any
reasonable arrangements (which may include, in the
case of leased property, a sublease or license
thereof or operating agreement with respect thereto)
designed to provide for the Buyer all of the benefits
(and to assure that the Seller will be
effectively relieved from related liabilities)
under such contract, agreement, lease, commitment
or right. Nothing in this Agreement shall be
construed as an attempt or agreement to assign (a)
any contract, agreement, lease, commitment or right
which is nonassignable without the consent of the
other Party or Parties thereto unless such consent shall
have been given, or (b) any contract or claim as to
which all the remedies for the enforcement thereof
would not pass to the Buyer as an incident of the
assignments provided for by this Agreement.
3.3 FURTHER ASSURANCES. Subject to the terms
__________________
hereof, the Seller agrees that, at any time and
from time to time on and after the Closing Date,
it will, upon the request of the Buyer and
without further consideration, take any and all
commercially reasonable steps necessary to place
the Buyer in possession and operating control
of the Assets as provided for herein, and will
do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and
delivered, all such further acts, deeds,
assignments, conveyances, transfers, powers of
___________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
5 - ASSET PURCHASE AGREEMENT
<PAGE>
attorney or assurances as may be reasonably required
in order fully to sell, assign, convey, transfer, grant,
assure and confirm to the Buyer, or to aid and assist in
the collection of or reducing to possession by the
Buyer of, all of the Assets, or to vest in the Buyer
good, valid and marketable title, subject to the
encumbrances permitted by this Agreement, to the Assets.
Subject to the terms hereof, the Buyer agrees that, at
any time and from time to time on and after the Closing
Date, it will, upon the request of the Seller and without
further consideration, take any and all commercially
reasonable steps necessary to assume the liabilities
and obligations of the Seller with respect to the use
of the Assets as provided herein, and will do, execute,
acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts,
deeds, assignments, conveyances, transfers, powers of
attorney or assurances as may be reasonably required in
order fully to assume such liabilities and obligations.
3.4 RIGHTS OF WAY, EASEMENTS, LICENSES, LEASES,
___________________________________________
PERMITS, AND FRANCHISES.
_______________________
Seller's obligations under this Section 3.4 are subject
to the limitations set forth in Sections 14 and 15.6.
Except as set forth in Schedule 3.4, without limiting
any of the other Assets to be transferred hereunder,
Seller, in consideration of payment of the Purchase
Price and without further consideration, will obtain
for and deliver to the Buyer all Seller's rights
under the easements, rights of way, permits, leases,
licenses, and franchises (collectively, the "Rights
of Way") reasonably necessary to the operation of the
Assets as of the Closing Date. Seller warrants that
the Rights of Way are owned by Seller free and clear
of any monetary liens or encumbrances or other title
exceptions which would interfere with the operations
of the Assets by Buyer. Seller, upon the request of
Buyer and without further consideration, will take
any and all steps necessary to obtain for and deliver
to Buyer the Rights of Way conveyed, or substitutes
therefor reasonably adequate and acceptable to Buyer,
all at Seller's expense. If any claim is made
challenging Buyer's entitlement to any Rights of Way
materially necessary to the conduct of business of
the Assets, Seller shall at its expense, immediately
make available an alternative Right of Way reasonably
adequate and acceptable to Buyer and relocate any Assets
to the new Rights of Way. If Seller is unwilling or
unable to provide an adequate and alternative Right of
Way within 90 days of written request from Buyer, Buyer
may take any and all steps necessary to acquire
an adequate and appropriate alternative Right of Way
or to secure the transferred Right of Way and relocate
Assets to the new Rights of Way and Seller shall pay
or reimburse Buyer for all costs thereof, including
any costs incurred in condemnation or any other
litigation, including reasonable attorneys fees and
costs, immediately upon demand from the Buyer. If
such amounts are not paid or reimbursed to Buyer
within 60 days of the demand, the unpaid amounts will
bear interest at the rate of seven percent (7%) per
annum until paid. Seller shall be responsible for
its obligations under this Section, and Buyer may offset
any amounts due under this Section against any amounts
payable to Seller for any reason or may sue
to collect the same.
3.5 REAL PROPERTY, CONVEYANCE. Seller will procure,
_________________________
at its cost, within sixty (60) days prior to Closing, an
owner's policy of title insurance in the amount of
$5,000,000. Seller will deliver said policy within fifteen
(15) days after the Closing Date. The title insurance shall
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
6 - ASSET PURCHASE AGREEMENT
<PAGE>
insure against loss or damage arising out of those items
covered by a standard owner's policy as to the real
property set forth on Schedule 1.2, which policy shall
contain no non-standard reservations, exceptions or
conditions.
4. CLOSING.
_______
4.1 CLOSING DATE AND TIME. The Closing of the
_____________________
transaction provided for herein (the "Closing"), shall take
place at 10:00 a.m. Fairbanks, Alaska time on the date 15
business days following the date on which the last of the
conditions contained in Sections 10 and 11 hereof has been
satisfied or waived, other than such conditions that by
their terms are to be satisfied on the Closing Date, at the
offices of the Seller, Office of the Mayor, City Hall,
Fairbanks, Alaska, or at such other date, time and place as
the Parties hereto may mutually agree, but in no event later
than 30 days following the date on which the last of the
conditions contained in Sections 10 and 11 hereof has been
satisfied or waived, other than such conditions that by
their terms are to be satisfied on the Closing Date. At the
Closing, the Buyer and the Seller shall deliver, or cause to
be delivered, to the other Party, such certificates,
receipts or other documents or instruments, in
addition to those specifically provided for herein,
as may reasonably be requested by such other Party.
The date on which the Closing occurs is referred to
herein as the "Closing Date."
4.2 SELLER'S OBLIGATIONS AT CLOSING. At the
_______________________________
Closing, Seller shall deliver the following documents
duly executed and acknowledged as appropriate: (a) Bills
of Sale, General Warranty Deeds, Assignments and other
good and sufficient instruments of transfer to transfer
the Assets; (b) Seller's Closing Certificate; (c) all
documents required as conditions to Closing set forth
in Section 11.
4.3 BUYER'S OBLIGATIONS AT CLOSING. At the
______________________________
Closing, Buyer shall deliver to Seller the following
items and documents duly executed and acknowledged as
appropriate: (a) the Purchase Price; (b) Buyer's
Closing Certificate; (c) all documents required as
conditions to Closing set forth in Section 10;
(d) all instruments of assignment and assumption.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
____________________________________________
Seller hereby represents and warrants to the Buyer as follows:
5.1 STANDING AND POWER. The Seller has full power and
__________________
authority to own the Assets and is authorized to conduct and
operate the Assets and business related to the Assets.
5.2 AUTHORITY.
_________
(a) The Seller is not a Party to any agreement,
arrangement or commitment which would render the Seller unable
to comply with its obligations hereunder.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
7 - ASSET PURCHASE AGREEMENT
<PAGE>
(b) Except for the approval of the sale of the
Assets by the voters of the Seller, the execution and
delivery of this Agreement and the consummation of the
transactions contemplated have been duly authorized by all
requisite action on the part of the Seller. This Agreement
constitutes the legal, valid and binding obligations of the
Seller, enforceable in accordance with its terms. Except as
disclosed in Schedule 5.2(b) hereto, neither the execution
nor the delivery of this Agreement, nor the consummation
of the transaction contemplated, nor the compliance with
or fulfillment of their terms and provisions, will (i)
conflict with or result in a breach or violation of any of
the terms, conditions or provisions of the Fairbanks
Municipal Code or other governance documents of the Seller,
or (ii) result in a material breach or default under any
provision of any agreement, indenture, mortgage, lien, lease
or other instrument or restriction of any kind to which the
Seller is a Party or by which the Seller or any of the Assets
is otherwise bound or affected, or (iii) violate any order,
writ, injunction, decree, statute, rule or
regulation applicable to the Seller or any of the Assets,
which conflict, breach, default or violation, in any such
case, would have a material adverse effect on the Assets or
the condition (financial or other), business or operations of
Seller, in each case taken as a whole, or on the
consummation of the transactions contemplated hereby,
or would result in any material liability of the Buyer, and
which will not be cured, waived or terminated prior to
the Closing Date.
(c) Except as set forth in Schedule 5.2(c) no
consent, approval or authorization of, or filing or
registration with, any governmental or regulatory authority
is required to be obtained by the Seller in connection
with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
5.3 FINANCIAL INFORMATION. Attached hereto as
_____________________
Schedule 5.3 are complete and correct copies of the 1995
Financial Statements of FMUS as of 12/31/95 and the
related statements of revenues and expenses, changes in
fund equity, cash flows, balance sheet and accompanying
notes to the financial statements for the twelve-month
period then ended. The 1995 Financial Statements have
been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent
basis throughout the periods specified therein and
fairly present the financial condition and changes in
financial position of FMUS as of the dates specified
therein and the results of its operations for the periods
specified therein.
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS.
____________________________________
Except as otherwise set forth in Schedule 5.4 hereto
or expressly consented to in writing by the Buyer
pursuant to this Agreement or otherwise, since 12/31/95:
(a) The Assets have not sustained any damage,
destruction or loss, whether by reason of fire, explosion,
earthquake, casualty, requisition or taking of property by
any government or agency thereof, windstorm, embargo, riot,
strike, act of God or public enemy, flood, accident,
revocation of license or right to do business, total or
partial termination, suspension, default or modification of
any contract, governmental restriction or regulation or
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
8 - ASSET PURCHASE AGREEMENT
<PAGE>
other calamity or other similar event adversely affecting
the Assets or the condition (financial or other), business
or operations of the Assets.
(b) There have been no changes in the Assets or the
condition (financial or other), business, operations,
obligations or liabilities (fixed or contingent) of the
Assets or any losses of personnel key to the business or
operations of the Assets that, in the aggregate, have had
or may be reasonably expected to have (whether prior to or
after the Closing Date), a material adverse effect on the
Assets or the condition (financial or other), business or
operations of Seller.
(c) Seller has not incurred in respect of the Assets
additional debt for borrowed money (including, without limitation,
obligations under leases for real or personal property whether
or not required to be capitalized under GAAP), nor incurred or
increased in respect of the Assets any obligation or liability
(fixed, contingent or other, including, without limitation,
liabilities as a guarantor or otherwise with respect to
obligations of others), nor has the Seller forgiven or released
in respect of the Assets any debt or claim, given any waiver of
any right of value or voluntarily suffered any extraordinary loss.
(d) Seller has not made in respect of the Assets any
payment to discharge or satisfy any material lien or
encumbrance or paid any material obligation or liability (fixed or
contingent) other than (i) current liabilities (including the
current portion of any long-term liabilities) included in the
Financial Statements; and (ii) current liabilities incurred or
maturing since the date of the Financial Statements in the
ordinary course of business.
(e) Seller has not declared or made any cash interfund
transfer, equity distribution or other transfer or distribution
of cash or property from FMUS to the Seller such that such cash
or property would no longer be considered part of the Assets,
except for a payment in lieu of taxes for the 12-month period
ending 12/31/96 which amount shall not exceed $3,577,000.
(f) Seller has not mortgaged, pledged, otherwise
encumbered or subjected to lien any of the Assets nor committed
itself to do any of the foregoing.
(g) Seller has not, except in the ordinary course
of business in each case for fair consideration, disposed of,
or agreed to dispose of, any of the Assets nor leased or
licensed to others, or agreed so to lease or license, any of
the Assets.
(h) Seller has not entered into any transaction
or contract, or an amendment thereto, in respect of the
Assets or made any commitment to do the same, except (i)
in the ordinary course of business and not requiring the
payment in any case of an amount in excess of $25,000 in
any one year or an amount in excess of $50,000 over the
life of the transaction or contract, or (ii) with respect
to any Excluded Assets.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
9 - ASSET PURCHASE AGREEMENT
<PAGE>
(i) Seller has not made any material increases
in the compensation of the Employees other than as may
be required pursuant to Seller's current collective
bargaining agreements related to the Assets or materially
changed any personnel policies or employee benefits
applicable to such Employees, other than in the ordinary
course of business and consistent with past practices, or
increased the number of Employees beyond that number as set
forth in Schedule 1.8.
(j) Seller has not changed any of the accounting
methods, policies or practices of Seller other than after so
notifying the Buyer of the change.
(k) Seller has not acquired any additional
Assets which would be material to the condition (financial
or other), business or operations of Seller, in each case
taken as a whole, except for Assets acquired in the
ordinary course of business and consistent with
past practices.
(l) Seller has not agreed or committed to do
any of the foregoing.
5.5 TITLE TO PROPERTIES, ABSENCE OF LIENS AND
_________________________________________
ENCUMBRANCES.
____________
Except as set forth in Section 3.4 and in Schedule 5.5
hereto, the Seller has, and shall transfer and convey to
the Buyer, good, valid and marketable title, subject to
the encumbrances permitted by this Agreement, to the
Assets, in each case free and clear of all liens, charges,
security interests and other encumbrances of any nature
whatsoever. Except as set forth in Section 3.4 and in
Schedule 5.5 hereto, all leaseholds, leasehold interests,
contract rights, licenses, permits and other intangible
Assets are owned directly by the Seller and are (and when
transferred and conveyed to the Buyer will be) valid,
subsisting and in full force and effect in accordance with
their terms. The leases of real property and all
amendments thereto described in Schedule 5.5 hereto
constitute the entire agreements between the Parties
thereto, and said leases have not been further
amended or modified.
5.6 LIST OF PROPERTIES, CONTRACTS AND OTHER DATA.
____________________________________________
Schedule 5.6 hereto contains a list setting forth with
respect to the Seller, as of 12/31/95, the following:
(a) All land and improvements thereon owned by
the Seller which are included in the Assets;
(b) All leases of real or personal property to
which the Seller is a Party, either as lessee or lessor,
which are included in the Assets; provided, however, that
Schedule 5.6, hereto does not list any lease of personal
property under which the total remaining lease payments
are less than $25,000;
(c) (i) All patents, trademarks, trade names,
copyrights and servicemarks, and all registrations therefor
unexpired as of 12/31/95, all applications pending therefor
on said date and all other proprietary rights included in
the Assets, and (ii) all licenses granted by or to the
_________________________________________________________
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10 - ASSET PURCHASE AGREEMENT
<PAGE>
Seller and all other agreements to which the Seller is a
Party which relate, in whole or in part, to any items of
the categories mentioned in (c)(i) above or to other
proprietary rights included in the Assets;
(d) All contracts, understandings and commitments
(including, without limitation, mortgages, indentures, loan
agreements, employment agreements, collective bargaining
agreements and other employment, related contracts and
agreements) to which the Seller is a Party relating to the
Assets, or to which the Seller or any of the Assets are
subject and which are not specifically referred to in (b)
or (c) above; provided, however that Schedule 5.6
hereto does not list any contracts, understandings or
commitments under purchase orders with customers, sales
contracts, supply contracts with suppliers and other such
commitments incurred in the ordinary course of business
and consistent with past practices, other than any such
contract, understanding or commitment which (i) is a
contract or group of related contracts under which the
total remaining payments exceed $25,000 in aggregate
amount, (ii) is a sales contract of an open-ended or
blanket nature, or (iii) cannot be performed in the normal
course within 180 days after the Closing Date or canceled
within such period by the Seller, or its assignee, without
breach, penalty or liability;
(e) All approvals, authorizations, consents,
licenses, permits, franchises, orders and other
registrations of any federal, state or local court or
other governmental department, commission, board,
bureau, agency or instrumentality, held by the Seller
and required to permit the Seller to conduct the Assets
as presently conducted; and
(f) Except as disclosed in Schedule 5.6 hereto,
there has been no claim that any lease, license, patent or
other proprietary right, agreement or contract referred to
in such Schedule 5.6, or any lease, license, patent or
other proprietary right, agreement or contract coming into
existence after 12/31/95 which, if in existence on 12/31/95,
would have been required to be disclosed on such Schedule
5.6, is not valid and enforceable in accordance with its
terms for the periods stated therein, or that there is
under any such lease, license, patent or other
proprietary right, agreement or contract any existing
default or event of default or event which with notice
or lapse of time or both would constitute such a default
or event of default, and there is no such existing default,
event of default or event on the part of the Seller, or,
to the knowledge of the Seller, any other person.
5.7 LITIGATION. Except as listed and described
__________
in Schedule 5.7 hereto, there are no actions, suits,
proceedings, claims, investigations or examinations
pending or threatened which arise from the use of the
Assets or the conduct of the business of the Assets,
including without limitation actions, suits, proceedings,
claims, investigations or examinations pertaining to
employment matters or labor agreements, or which question
the validity or seek to prevent the consummation of
this Agreement or the transactions contemplated hereby,
whether at law or in equity, before or by any federal,
state or local court or other governmental department,
commission, board, bureau, agency or instrumentality,
which, individually or in the aggregate,
_________________________________________________________
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11 - ASSET PURCHASE AGREEMENT
<PAGE>
if adversely determined, would result in any
material adverse effect on the condition (financial or
other), business or operations of Seller, or would
prevent the consummation of this Agreement or the
transactions contemplated hereby. Pursuant to the terms
hereof, Buyer will not assume any litigation.
5.8 GOVERNMENT APPROVALS. Except as set forth in
____________________
Schedule 5.8 hereto, the Seller has all approvals,
authorizations, consents, licenses, permits, franchises,
orders and other registrations of any federal, state
or local court or other governmental department
commission, board, bureau, agency or instrumentality,
required to permit the Seller to conduct the Assets as
presently conducted, except where the failure to have
such approvals, authorizations, consents, licenses,
permits, franchises, orders and other registrations,
individually or in the aggregate, does not have
material adverse effect on the Assets or the condition
(financial or other), business or operations of Seller.
5.9 INSURANCE. Schedule 5.9 hereto contains a list
_________
of all policies and binders of insurance and self-insurance
arrangements covering any of the Assets and Liabilities.
No policy listed has been canceled and each policy listed
will continue in effect until the Closing Date. On the
Closing Date, each such policy listed will be canceled as
to FMUS and the Seller will notify the insurance carriers
issuing such policies of the cancellations. The Seller
agrees to retain all liabilities and obligations to the
extent they are covered under all policies and binders of
insurance and/or self insurance set forth in Schedule 5.9
which are incurred prior to the Closing Date, including
but not limited to those claims or losses incurred prior
to the Closing Date but not reported until after the
Closing Date.
5.10 CONDITION OF THE ASSETS. Except as set forth
_______________________
in Schedule 5.10 hereto, all necessary Assets, and all
personal and real property, fixtures and equipment
leased under leases included in the Assets, are (a) in
good operating-condition or otherwise suitable for their
intended purpose, and (b) adequate for the use of the
Assets as currently being used.
5.11 ACCOUNTS RECEIVABLE. The accounts receivable
___________________
related to the Assets shown on the 1995 Financial
Statements arose from bona fide transactions in the
ordinary course of business and consistent with past
practices. The values at which accounts receivable
are carried on the 1995 Financial Statements reflect
the accounts receivable valuation policy of the Seller,
which is consistent with past practices and in
accordance with GAAP applied on a consistent basis.
5.12 NO DEFAULTS. Except as set forth on Schedule
___________
5.12, hereto, the Seller is not in violation of or in default
with respect to any contract, agreement, lease, mortgage or
other instrument, or any covenant or restriction affecting
any of the real property included in the Assets, or any
order, write or decree of any federal, state or local
court or other governmental department, commission, board,
bureau, agency or instrumentality, which violation or
default would have a material adverse effect on the
financial condition of the Assets, or on the ability
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
12 - ASSET PURCHASE AGREEMENT
<PAGE>
of the Seller to perform its obligations hereunder, and
there has not occurred any event which, with notice or
lapse of time or both, would constitute such a
violation or default.
5.13 COMPLIANCE WITH APPLICABLE LAW. Except as set
______________________________
forth on Schedule 5.13 hereto, the conduct of the Assets
and the operation and maintenance of the real property
included in the Assets does not violate or infringe upon
any, and is in compliance with all, federal, state or
local statutes, laws, regulations, rules or ordinances.
5.14 ABSENCE OF UNDISCLOSED LIABILITIES. Except to
__________________________________
the extent disclosed, reflected or reserved against in
the 1995 Financial Statements or on Schedule 5.14 hereof,
Seller had as of 12/31/95 no liabilities or obligations
of any nature related to the Assets, whether accrued,
absolute, contingent or other (including, without
limitation, liabilities as guarantor or otherwise with
respect to obligations of others) and whether due or to
become due, including, without limitation, any
liabilities for Taxes (as defined in Section 5.15 hereof),
for any period prior to such date or arising out of any
transaction entered into or any set of facts existing
prior to such date, other than those liabilities or
obligations that either individually or in the aggregate
would not reasonably be expected to have a material
adverse effect on the Assets or the condition (financial
or other), business or operations of Seller, in each case
taken as a whole. Except for those liabilities or
obligations that are fully disclosed, reflected or
reserved against in the 1995 Financial Statements or on
Schedule 5.14 hereto, to the knowledge of the Seller,
there is no reasonable basis for a determination by any
court, agency, authority, arbitration panel or other
tribunal that the Seller is liable with respect to any
liabilities or obligations that would reasonably be
expected to be adverse to the Assets or the condition
(financial or other), business or operations of the Assets.
5.15 TAXES. All taxes, assessments, fees, imposts,
_____
levies and other charges, including, without limitation,
interest and penalties, upon the Seller in respect of
the Assets, whether on property, payroll, sales, assets,
revenues, income, net income, net worth, accumulated
earnings, items of tax preference or any other base,
imposed by any taxing authority, federal, state, local
or foreign ("Taxes"), that have become due and payable
have been paid, other than those not yet delinquent. The
Seller has duly filed with the appropriate government
agencies all returns and reports with respect to Taxes
required to be filed by them. No waiver of any statute
of limitations relating to Taxes has been executed or
given by the Seller. The charges, accruals and reserves
shown in the 1995 Financial Statements are adequate to
cover all liabilities for Taxes as of 12/31/95, except
to the extent disclosed in notes to such financial
statements. The Seller has made available to the Buyer
correct and complete copies of all documents and materials
relating to any pending federal, state or local tax
dispute concerning the Assets or in any way
affecting the Assets.
5.16 BROKERS. Neither the Seller nor any officer,
_______
official (elected or appointed), director or employee of
either, has employed any finder, broker, investment banker
or similar agent or other intermediary on behalf of the
Seller or the Buyer, or incurred on behalf of the
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
13 - ASSET PURCHASE AGREEMENT
<PAGE>
Seller or the Buyer any liability for any brokerage,
finders' or investment banking fees or commissions in
connection with the negotiation or consummation of the
transactions contemplated hereby which would result in
a payment obligation by the Buyer or which would be
paid directly or indirectly by FMUS.
5.17 HAZARDOUS SUBSTANCES. Except as set forth on
____________________
Schedule 5.17 hereto, the Seller has complied with
respect to the Assets in all respects with all
Environmental Laws (as hereinafter defined) in connection
with the generation, handling, manufacturing, processing,
treatment, storage, use, transfer, release or disposal of
hazardous substances, hazardous wastes, hazardous waste
constituents and reaction byproducts, hazardous materials,
pesticides, oil and other petroleum products, and toxic
substances, including asbestos and PCB, as those terms
are defined pursuant to Environmental Laws (collectively
"Hazardous Substances"). Except as set forth in
Schedule 5.17, the Assets do not contain any Hazardous
Substances the presence of which could have a material
adverse effect on the condition (financial or other),
business or operations of Buyer. For purposes of this
Section 5.17, "Environmental Laws" shall be all federal,
state and local laws, rules, regulations, ordinances,
programs, permits, guidance, orders and consent decrees
relating to environmental matters, including without
limitation the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation
and Liability Act, the Toxic Substance Act, the Clean
Water Act, the Clean Air Act and state and federal
environmental cleanup programs.
5.18 STORAGE TANKS. Except as set forth on
_____________
Schedule 5.18 hereto, the Assets do not contain any
storage or treatment tanks, active or abandoned water,
gas or oil wells, or any abandoned above ground or
underground improvements or structures included in
the Assets.
5.19 ACCESS LINES AND CUSTOMERS. Seller represents
__________________________
and warrants that all customers are billed in amounts in
accordance with applicable tariffs, ordinances or based
upon the terms of any service contract.
5.20 EMPLOYEE BENEFIT PLANS.
______________________
(a) A list of all FMUS Employee Benefit
Plans (as hereinafter defined in Section 5.20(c) hereof)
is set forth on Schedule 5.20 hereto.
(b) The FMUS Employee Benefit Plans other
than any plans maintained pursuant to a collective
bargaining agreement and any trust agreements, group
annuity contracts, insurance policies or other agreements
related to such FMUS Employee Benefit Plans are in
substantial compliance with the applicable provisions,
if any, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Internal Revenue
Code of 1986, as amended (the "Code"), and other applicable
laws. All contributions due and payable on or before the
Closing Date in respect of the FMUS Employee Benefit Plans
have been made or will be made before the Closing Date.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
14 - ASSET PURCHASE AGREEMENT
<PAGE>
(c) For the purposes hereof, the term "FMUS
Employee Benefit Plan" means any "employee benefit plan"
(as that term is defined in Section 3(3) of ERISA), as
well as any other written or formal plan or contract
involving direct or indirect compensation, under which
FMUS has any present or future obligations or liability
on behalf of its employees or former employees or their
dependents or beneficiaries.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
___________________________________________
hereby represents and warrants to the Seller with respect
to the purchase of the Assets as follows:
6.1 ORGANIZATION AND STANDING. The Buyer is a
_________________________
corporation duly organized and validly existing under the
laws of its state of incorporation. The Buyer has
full corporate power and corporate authority to acquire,
own, lease and operate the respective portion of the
Assets to be conveyed to it, to enter into this Agreement
and to perform all of its obligations hereunder.
6.2 AUTHORITY.
_________
(a) Except for the approval of the purchase of
the Assets by the voters of Seller, the Buyer is not
a Party to any agreement, arrangement or commitment which
would render the Buyer unable to comply with its
obligations hereunder.
(b) The execution and delivery by the Buyer of
this Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized
by all requisite action on the part of the Buyer. This
Agreement constitutes the legal, valid and binding
obligation of the Buyer, enforceable in accordance with
its terms. Neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor the compliance with or
fulfillment of the terms and provisions hereof or thereof,
will (i) conflict with or result in a breach or violation
of any of the terms, conditions or provisions of the
Articles of Incorporation or By-Laws of the Buyer, or
(ii) result in a material breach or default under any
provision of any agreement, indenture, mortgage, lien,
lease or other instrument or restriction of any kind to
which the Buyer is a Party or by which the Buyer or any
of its assets or properties are otherwise bound or
affected, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the
Buyer or any of its assets or properties, which
conflict, breach, default or violation, in any such
case, would have a material adverse effect on the
condition (financial or other) of the Buyer or the
consummation of the transactions contemplated hereby,
or would result in any material liability of the
Seller, and which will not be cured, waived or terminated
prior to the Closing Date.
(c) Except as set forth in Schedule 6.2(c)
hereto, no consent, approval or authorization of, or
filing or registration with, any governmental or
regulatory authority is required to be obtained by the
Buyer in connection with the execution and delivery
of this Agreement or the consummation of the transactions
contemplated hereby or thereby.
_________________________________________________________
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15 - ASSET PURCHASE AGREEMENT
<PAGE>
7. COVENANTS OF THE SELLER.
_______________________
7.1 ACCESS TO PROPERTIES, BOOKS AND RECORDS. Prior
_______________________________________
to the Closing Date and subject to appropriate
confidentiality arrangements, the Seller shall, at
Buyer's request, afford or cause to be afforded
to the agents, attorneys, accountants and other authorized
representatives of the Buyer, reasonable access, after
prior telephonic notice to Seller, during normal business
hours to all employees, properties, books and records
relating to Seller, and shall permit such persons, at the
Buyer's expense and risk, to make copies of such books and
records. In particular, the Seller shall afford the Buyer
and its authorized representatives reasonable access to
the real and personal property included in the Assets for
the purpose of conducting investigations and examinations
thereof, except where contrary to law or contract, and for
preparation of surveys, making appraisals and ascertaining
the condition thereof and shall deliver to the Buyer monthly
financial statements of Seller, promptly after they become
available. The Seller shall cooperate with the Buyer and
issue any consents and authorizations reasonably
requested by the Buyer in connection with the Buyer's
examination of governmental records pertaining to the
real and personal property included in the Assets. No
investigation by the Buyer or any of its representatives
pursuant to this Section 7.1 shall affect any representation,
warranty or Closing condition of any Party hereto.
7.2 CONDUCT OF BUSINESS.
___________________
(a) Except as otherwise permitted by this
Agreement or with the prior written consent of the
Buyer, prior to the Closing Date, the Seller shall
not: (i) incur in respect of the Assets additional
debt for borrowed money (including, without
limitation, obligations under leases for real or
personal property whether or not required to be
capitalized under Generally Accepted Accounting
Principles), nor incur or increase in respect of
the Assets any obligation or liability (fixed,
contingent or other, including, without limitation,
liabilities as a guarantor or otherwise with respect
to obligations of others), nor forgive or release in
respect of the Assets any debt or claim, give any
waiver of any right of value or voluntarily suffer any
extraordinary loss; (ii) make in respect of the Assets
any payment to discharge or satisfy any lien or
encumbrance or pay any material obligation or
liability (fixed or contingent); (iii) declare or
make any interfund transfer, equity distribution or
other transfer or distribution, directly or
indirectly, of cash or property to the Seller such
that such cash or property would no longer be
considered part of the Assets, except for (y)
a 1996 PILOT payment in an amount no greater than
$3,577,000 million or a 1997 pilot payment of
$3,577,000 multiplied by a fraction equal to
number of days from January 1, 1997 to the
date of Closing, divided by 365; or (z) any
intra governmental charges incurred in the ordinary
course of business and consistent with past practices
and as set forth in the Council approved 1996 FMUS
Operating and Expense Budget (Budget); (iv)
mortgage, pledge, otherwise encumber or subject to
lien any of the Assets or commit to do any of the
foregoing; (v) dispose of, or agree to dispose of,
any of the Assets or lease or license to others,
or agree so to lease or license, any of the Assets
or make any commitment to do the same; (vi) make any
increases in the compensation of the Employees, hire
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PTI COMMUNICATIONS OF ALASKA, INC.
16 - ASSET PURCHASE AGREEMENT
<PAGE>
any regular full-time Employees or change any
personnel policies or employee benefits applicable to
such employees, or enter into any agreement to modify
a collective bargaining agreement; (vii) use any
accounting methods, policies or practices not in
conformity with GAAP; (viii) acquire any additional
Assets which would be material to the condition
(financial or other), business or operations of Seller,
in each case taken as a whole, except for Assets acquired
in the ordinary course of business and consistent with
past practices or as set forth in the Budget; (ix)
delay payment of any Accounts Payable; (x) physically
relocate or remove any functions, Assets or Employees to
any other location, except for the relocation of the
MIS department from the Globe Administrative Building;
(xi) materially change any rates or pricing for any
service related to the Assets; or (xii) agree or commit
to do any of the foregoing.
(b) Except as otherwise permitted by this
Agreement or with the prior written consent of the Buyer,
prior to the Closing Date, the Seller shall: (i) operate
the Assets as presently operated and only in the ordinary
course of business and consistent with past practices:
(ii) not cancel or change any existing policy of insurance
(including self-insurance) or fidelity bond relating to
the Assets, or any policy or bond providing substantially
the same coverage, unless replaced by a policy or bond
providing substantially the same coverage or such
cancellation or change is effective only on the Closing
Date, and not change in any respect the Seller's and
Seller's currently existing policies and practices with
respect to the maintenance of self-insurance reserves
allocable to Seller; (iii) advise the Buyer in writing
of any adverse change or any event, occurrence or
circumstance which are likely to cause an adverse
change in the Assets or the condition (financial
or other), business or operations of Seller; (iv)
use all commercially reasonable best efforts to
maintain all of the Assets in good operating
condition, reasonable wear and tear excepted,
consistent with past practices, and take all
commercially reasonable steps necessary to
maintain the Assets; (v) maintain all inventories,
spare parts, office supplies and other expendable
items included in the Assets and (vi) perform the
actions specified in the Budget; and (vii) preserve
all records related to the Assets and customers
associated with said Assets.
7.3 DEFEASANCE. On the Closing Date, the
__________
Seller shall take all actions necessary to retire or
defease duly and validly, all revenue bonds of the
Seller outstanding as of the Closing Date and
relating to the Assets, including without limitation
the revenue bonds listed on Schedule 7.3 hereto, using
for such purpose the proceeds of the Purchase Price
received from the Buyer pursuant to this Agreement.
7.4 TRANSFER FEES. Except for payment of the
_____________
Purchase Price, and as specifically set forth in
Schedule 7.4 hereto, the Seller shall not charge the
Buyer for the transfer, assumption or use by the Buyer
of any Seller Assets or Seller permits, leases,
rights-of-way, licenses, franchises or other such
authorizations. Buyer will pay for the transfer
assumption or use fees associated with all third-party
permits, leases, rights-of-way, licenses, franchises or
other such authorizations.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
17 - ASSET PURCHASE AGREEMENT
<PAGE>
7.5 SCHEDULE ELECTION. The Seller shall
_________________
schedule the election for the necessary voter approval
required in sections 10.5 and 11.5 no later than 10/31/96.
7.6 LAND FOR DIVISION HEADQUARTERS. On or before
______________________________
December 31, 1996 Seller shall assist Buyer to locate
mutually satisfactory real property in downtown Fairbanks,
owned by Seller, for the purpose of establishing a
Buyer's Alaska Division Headquarters. Seller and Buyer
agree that either Block 13 or Block 66 is mutually
satisfactory if Seller is able to transfer and convey
to Buyer good, valid and marketable title to said
property free and clear of all liens, charges, security
interests, and other encumbrances of any nature whatsoever
and if said property is not in violation of Environmental
Laws. Seller recognizes that consideration for said real
property is included in the Purchase Price. In the
event that said property is located and mutually agreed
to, Seller shall sell, transfer and convey to Buyer with
the delivery of a General Warranty Deed at Closing the
above referenced property. In the event that said
property is not mutually agreed to, the Purchase Price
shall be adjusted as provided in Section 1.3.
7.7 SELLER FEES. The Seller may never charge Buyer
___________
a franchise, user or other equivalent fee. The Seller shall
not for a period of five (5) years charge or require Buyer to
pay a construction or relocation fee for the Assets. After
five (5) years, Seller shall only charge, if at all, Buyer a
reasonable permit fee for construction or relocation based on
Seller's direct costs.
8. COVENANTS OF THE BUYER. Buyer covenants as follows:
______________________
(a) for a period of at least three (3) years
after the Closing Date, it shall not seek from the Alaska
Public Utilities Commission to earn a return for rate
making purposes with respect to the portion of the
aggregated purchase price paid hereunder which exceeds
the net book value of the Assets in the hands of the
Seller immediately prior to the Closing Date.
(b) it will not increase the local service
telephone rates in effect at the time of the Closing for
a period of three (3) years after the Closing Date, except
as may be required to reflect changes in regulation,
legislation, or judicial order.
(c) it has entered into, or will prior to
the Closing Date, bargain in good faith to enter into a
collective bargaining agreement covering the Employees
with each current certified bargaining agent for and
representative of Seller's employees which shall represent
the Employees after the Closing Date.
(d) it shall provide telephone service no
less than that required by the Alaska Administrative
Code, as the same exists or may after the date hereof
be amended and as required by the Federal Communications
Commission ("FCC"). No later than eighteen (18) months
following the Closing, Buyer will deploy integrated
digital services network (ISDN) or its equivalent to
the City of Fairbanks.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
18 - ASSET PURCHASE AGREEMENT
<PAGE>
(e) it shall establish a statewide
telecommunications Advisory Board for the purpose of
assisting in the development of new technologies and
recommending ways to improve service.
9. COVENANTS OF THE BUYER AND SELLER.
_________________________________
9.1 REGULATORY APPROVALS. The Seller and
____________________
the Buyer, and their respective Representatives (as
hereinafter defined), shall cooperate and use all
reasonable best efforts, in good faith, to make all
registrations, filings and applications and to give
all notices and obtain all governmental and regulatory
consents, approvals, orders, qualifications and waivers
necessary or desirable for the consummation of the
transactions contemplated hereby including, without
limitation, those consents, approvals, orders,
qualifications and waivers set forth in Schedule 9.1
hereto as soon as practicable following execution of
this Agreement. Buyer and Seller agree to each use
diligent efforts to consummate the transactions
contemplated hereby within ninety days (or as soon
thereafter as possible) after receipt of the voter
approval has been obtained. For purposes of this
Section 9.1, with respect to the Seller, the term
"Representatives" means the City Attorney of the
Seller, the Seller's special counsel, and such other
counsel as shall be appointed by the Seller, which
shall represent the Seller in obtaining all approvals
required by this Section 9.1. For purposes of this
Section 9.1, with respect to the Buyer, the term
"Representatives" means the attorneys of the Buyer,
and such other counsel as shall be appointed by the
Buyer, which shall represent the Buyer in obtaining
all approvals required by this Section 9.1. The
Seller and the Buyer, and their respective
Representatives, each shall use its reasonable
efforts in good faith to obtain such consents, approvals,
orders, qualifications and waivers (including
reaching separate agreements or entering stipulations
with intervenors or agency staffs) as may be necessary
or desirable to permit the Closing and the
consummation of the transactions contemplated hereunder
or as may be required by the public utility or
other laws or regulations of the United States of
America, the State of Alaska, the APUC or others,
in each case to the extent applicable; provided,
however, that if any such governmental or regulatory
consent, approval, order, qualification or waiver
be denied or be granted, contingent on modification
of any material provision of this Agreement, then
either Party may terminate this Agreement after
completion of any mutually agreed upon appeals
concerning any such consents, approvals, orders,
qualifications or waivers pursuant to this
Agreement. If any provision of this Agreement
which is a material impact upon a Party is
declared invalid by a court or agency, either
Party may terminate the affected Agreement by
giving notice to the other Party within thirty
(30) days of such declaration. The Buyer and
its Representatives need only participate in
seeking to obtain approvals which relate
directly to the Assets the Buyer is acquiring and
shall do nothing to interfere with or adverse to
the approval of GVEA and FWS's obtaining of said
approvals.
9.2 INSPECTION AND PRESERVATION OF RECORDS:
_______________________________________
FURTHER ASSISTANCE.
__________________
On and after the Closing Date, the Buyer will permit
the Seller and its agents, attorneys, accountants and
other representatives, at all reasonable times during
regular business hours, to inspect and copy, at the
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
19 - ASSET PURCHASE AGREEMENT
<PAGE>
Seller's expense, the books, files, records and
accounts of Seller held by Buyer, if any, relating
to periods prior to the Closing Date, for any
reasonable purpose or purposes including, without
limitation, the preparation, review or audit of any
financial statements or tax returns, providing
appropriate verification of documents, or preparing
for, conducting or defending any legal proceeding
against any Party other than the Buyer or any of
its affiliates. The Buyer shall maintain and
preserve all of such books, files, records and
accounts of Seller held by Buyer, if any;
provided, however, that the Buyer may dispose of
any such books, files, records and accounts at
any time and from time to time if it first
shall have afforded the Seller the opportunity,
upon thirty (30) days' prior notice and at the
Seller's expense, to take possession thereof.
On and after the Closing Date, the Seller will
permit the Buyer and its agents, attorneys,
accountants and other representatives, at all
reasonable times during regular business hours,
to inspect and copy, at the Buyer's expense, the
books, files, records and accounts of the Seller
not included in the Assets insofar as they
relate to any of the Assets, for any reasonable
purpose or purposes including, without limitation,
the preparation, review or audit of any financial
statements or tax returns, providing appropriate
verification of documents, or preparing for,
conducting or defending any legal proceeding
against any Party other than the Seller. The
Seller shall maintain and preserve all such
books, files, records and accounts;
provided, however that the Seller may dispose
_________________
of any such books, files, records and accounts
at any time and from time to time if it first
shall have afforded the Buyer the opportunity,
upon thirty (30) days' prior notice and at the
Buyer's expense, to take possession thereof.
The Buyer and the Seller agree to render
such assistance to the Seller and the Buyer,
respectively, including permitting such other
Party to have access to its employees, as may
be reasonably requested in connection with
obtaining information for the purposes set forth
in the four preceding sentences. The Buyer
and the Seller will treat all information
obtained pursuant to this Section as confidential
except to the extent disclosure thereof is
necessary for attainment of the purpose or
purposes for which such information was
obtained or as required by law. In addition,
the Seller and the Buyer agrees to provide each
other with such further assistance and cooperation
as may be reasonably requested by the other Party
for any proper purpose, including, by way of
illustration. assisting such other Party in
preparing for, conducting or defending any
legal or regulatory proceeding against any Party
other than the Parties hereto and their affiliates
and in connection therewith providing such
documentary or physical evidence and expert or other
testimony as may be reasonably requested; provided,
however, that in each such case, the requesting
Party shall pay or reimburse the other Party
for, any out-of-pocket costs or expenses incurred by
such other Party in providing such assistance.
9.3 PUBLIC ANNOUNCEMENTS. The Seller and the
____________________
Buyer agree that they will provide each other with a
copy of each written public announcement or press
release (other than public advertisements) relating
to the execution of this Agreement or any
transactions contemplated hereby.
9.4 INTERVENTION IN COMMISSION HEARINGS.
___________________________________
The Buyer and the Seller agree that, notwithstanding
anything in this Agreement to the contrary,
no part of this Agreement (other
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
20 - ASSET PURCHASE AGREEMENT
<PAGE>
than Section 9.1 hereof) shall be construed to
limit at any time before or after the Closing the
Seller's and the Buyer's rights to intervene in
any hearing, proceeding or docket before the
APUC or any other regulatory body.
9.5 TAXES. Subject to Section 1.3,
_____
the Buyer agrees and acknowledges that, following
the Closing, the Buyer shall be subject to real and
personal property tax assessments under state and
local tax laws with respect to the Assets on the same
basis as any other private enterprise.
9.6 ALLOCATION OF PURCHASE PRICE. The Seller
____________________________
and the Buyer shall cooperate and use all reasonable
efforts, in good faith, to reach agreement as
to the appropriate allocation of the aggregate
purchase price among the various Assets, to the
extent and in the manner required by law, and
shall report the transactions contemplated by
the Agreement to any relevant taxing authority in
conformity with such allocation.
9.7 UTILIDOR EASEMENT. The Seller and
_________________
Buyer shall negotiate in good faith to enter into a
non-exclusive easement for Buyer's use of
the Seller's utilidor ("Utilidor Easement").
The Utilidor Easement shall be for a period
of fifty (50) years (renewable for a second
50 year period). The Seller shall contract
with all holders of a utilidor easement to
provide that neither the Seller nor any other
utilidor easement holders may assign any
rights, obligations or commitments thereunder,
without the prior written consent of all
holders of a utilidor easement, which consent
shall not be unreasonably withheld. The
Buyer, as well as Fairbanks Sewer and
Water, Inc. and Golden Valley Electric
Association, shall pay to the Seller an amount
of Twenty Thousand Dollars ($20,000) per
year for their utilidor easement. The
Seller agrees that any other additional
holders of a utilidor easement, except
Usibelli, will be required to pay their
proportional share of the $60,000 annual
charge thereby reducing the Buyer's, Fairbanks
Sewer and Water, Inc. and Golden Valley Electric
Association's proportionately. The reduction
shall apply with respect to Cooke Cablevision upon
the earliest contractual date of termination, after
Closing, pursuant to the current agreement between
the Seller and Cooke Cablevision. During the term
of the Utilidor Easement, Seller shall own the
utilidor, unless transfer of such is approved by
all holders of utilidor easements. Buyer, together
with all other utilidor easement holders, at their
expense, shall provide routine maintenance of the
utilidor in accordance with the terms and
provisions of the Utilidor Easement. Seller
shall not be responsible for the heating of the
utilidor. The holders of utilidor easements are
not obligated to heat the utilidor. Seller shall
either repair, at Seller's cost, any catastrophic
damage, destruction or loss to the utilidor (but
not to the property of the holders of a utilidor
easement) due to causes set forth in Section 5.4
(a) hereof (except where such damages were caused
solely by a failure to heat the utilidor) or
provide alternative right of way, at no cost, to
the holders of a utilidor easement (except where
such damages were caused solely by a failure to
heat the utilidor), which shall be the holders'
of a utilidor easement sole remedy. If Seller
elects to make an alternative easement available
to Buyer, Seller shall not bear any cost of
relocation of Buyer's property from the utilidor
and shall bear no further liability. Seller may
acquire insurance against such losses, if
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
21 - ASSET PURCHASE AGREEMENT
<PAGE>
available at a reasonable cost (not exceeding
$5,000 per year total cost, subject to inflation
pursuant to the Consumer Price Index from the
date of Closing) and all holders of a utilidor
easement shall reimburse Seller, said costs
to be split equally among them. Seller's
liability under this paragraph shall be
limited to the amount of any insurance recovery,
only if Seller obtains and maintains insurance
throughout term of the Utilidor Easement.
9.8 GLOBE ADMINISTRATIVE BUILDING LEASE.
___________________________________
The Seller and Buyer shall agree to a lease
arrangement with customary terms and conditions
whereby Seller would lease free of charge to
Buyer that portion of the Globe Administrative
Building located at 645 5th Avenue, Fairbanks,
AK which houses the main telephone switch,
associated equipment and entrance facilities.
Said lease will be for a period of twenty (20)
years from the Closing. Buyer will further lease
the remaining Globe Administrative Building space
for a period of thirty-six (36) months from
the Closing. During the term of said lease,
Buyer shall pay Seller for Buyer's proportional
amount of Seller's reasonable and customary (in
accordance with Seller's past practices) operation
and maintenance expenses for the Globe
Administrative Building.
9.9 TRANSFER OF FMUS MIS OPERATIONS.
_______________________________
Seller agrees that it shall completely transfer all
FMUS Management Information Systems ("MIS")
operations from the Globe Administrative Building
as soon as practicable, but in no event later
than 60 days after Closing, provided that said
MIS employees, after Closing, shall have access
and work within the Globe Administrative Building
Monday through Friday, 8:00 a.m. - 5:00 p.m.
excluding holidays. Furthermore, the Buyer shall
have no liability for damage to property or
personal injury arising out of or related to the
MIS employees' actions or ommissions ("MIS Claims")
and Seller shall indemnify, defend and hold
harmless Buyer, its parents, directors, officers,
employees and agents for and against any and all
claims, suits, damages, costs, fees and expenses
arising out of or related to said MIS Claims.
9.10 ALASKA DIVISION HEADQUARTERS. After
____________________________
Closing, Buyer agrees to establish its Alaska
Division Headquarters in downtown Fairbanks, Alaska.
9.11 COOPERATION. The Seller and Buyer shall
___________
use all reasonable best efforts, commencing upon the
execution and delivery of this Agreement, to take, or
cause to be taken in good faith, all actions, and to
do, or cause to be done, all things necessary, proper
or advisable to expeditiously and practicably to
consummate and make effective the transactions
contemplated by this Agreement.
10. CONDITIONS TO OBLIGATIONS OF THE SELLER. The
_______________________________________
obligations of the Seller to sell the Assets hereunder
are subject to the fulfillment or waiver by the Seller,
on or before the Closing Date, of each of the following
conditions:
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
22 - ASSET PURCHASE AGREEMENT
<PAGE>
10.1 COMPLIANCE WITH AGREEMENT. The Buyer shall
_________________________
have performed in all material respects all obligations
which it is required to perform on or before the Closing
Date under this Agreement.
10.2 REPRESENTATIONS, WARRANTIES AND COVENANTS.
_________________________________________
There shall have been no material breach by Buyer of its
covenants to be performed prior to the Closing and
the representations and warranties made by the Buyer
herein shall be true and correct in all material respects
on and as of the Closing Date as though such representations
and warranties were made on and as of such date,
except that any such representations and warranties that
are given as of a particular date prior to the date hereof
and relate solely to a particular date or period prior to the
date hereof shall be true as of such date or period.
10.3 CERTIFICATE OF THE BUYER. On the Closing Date,
________________________
the Buyer shall have delivered to the Seller a certificate,
duly executed by an executive officer of the Buyer, as to
the fulfillment of the conditions set forth in Sections 10.1
and 10.2 hereof.
10.4 CONSENTS AND APPROVALS. All authorizations,
______________________
consents, approvals, filings and registrations of or with
domestic and foreign governmental or regulatory authorities
required to be obtained or made by the Buyer or the Seller
prior to the consummation of the transactions contemplated
hereby, including, without limitation, those authorizations,
consents, approvals, filings and registrations specifically
referred to in Schedule 5.2 (c) hereto and Section 9.1
hereof, shall have been obtained, approved or permitted to
go into effect, and shall be in effect on terms that are not
materially adverse to the Seller, and the waiting period
under the HSR Act, if applicable, shall have expired or
been terminated.
10.5 COUNCIL AND VOTER APPROVAL. The Seller
__________________________
shall have obtained the authority to sell the Assets pursuant
to an ordinance or initiative proposition approved by the
Fairbanks City Council and the majority of the qualified
voters of the Seller voting on the question not later
than October 31, 1996.
10.6 ALL PROCEEDINGS TO BE SATISFACTORY. All
__________________________________
corporate and association proceedings to be taken by the Buyer
in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably
satisfactory in form and substance to the Seller and its
counsel, and the Seller and its counsel shall have received
all such certified or other copies of such documents as it
or they may reasonably request.
10.7 DEFEASANCE. The Seller shall not have been legally
__________
prevented from duly and validly redeeming or defeasing on the
Closing Date, in accordance with the terms thereof and the
relevant municipal ordinances, all revenue bonds of the Seller
outstanding as of the Closing Date and relating to the Assets
and outstanding on the Closing Date, using for such purpose,
if necessary, the proceeds of the Purchase Price received from
the Buyer pursuant to this Agreement.
_________________________________________________________
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23 - ASSET PURCHASE AGREEMENT
<PAGE>
10.8 ADVERSE PROCEEDINGS. No preliminary or
___________________
permanent injunction or other order or decree by any
federal or state court which prevents the consummation
of the transactions contemplated by this Agreement
shall have been issued and remain in effect (the Seller
agrees to use its reasonable efforts to have any such
injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted, by any
state or federal Government or Governmental agency in
the United States which prohibits the consummation of
the transactions contemplated by this Agreement.
10.9 CONTINGENT CLOSING. The Closing hereunder
__________________
is contingent upon Seller Closing its Asset Purchase
Agreement with Golden Valley Electric Association and
Stock Purchase Agreement with Fairbanks Sewer and
Water, Inc.
11. CONDITIONS TO OBLIGATIONS OF THE BUYER.
______________________________________
The obligations of the Buyer to purchase the Assets
hereunder are subject to the fulfillment or waiver by
the Buyer, on or before the Closing Date, of each of
the following conditions and any other conditions
as provided for herein.
11.1 COMPLIANCE WITH AGREEMENT. The Seller
_________________________
shall have performed in all material respects all
obligations which it is required to perform on or
before the Closing Date under this Agreement.
11.2 REPRESENTATIONS, WARRANTIES AND COVENANTS.
_________________________________________
There shall have been no material breach by Seller of its
covenants to be performed prior to the Closing and
the representations and warranties made by the Seller
herein shall be true and correct in all material respects
on and as of the Closing Date as though such
representations and warranties were made on and as of
such time, except that any such representations and
warranties that are given as of a particular date
prior to the date hereof and relate solely to a particular
date or period prior to the date hereof shall be true as
of such date or period.
11.3 CERTIFICATE OF THE SELLER. On the Closing
_________________________
Date, the Seller shall have delivered to the Buyer a
certificate, duly executed by the Mayor or another
authorized representative of the Seller as to the
fulfillment of the conditions set forth in Sections
11.1 and 11.2 hereof.
11.4 CONSENTS AND APPROVALS. All authorizations,
______________________
consents, approvals, filings and registrations of or with
domestic governmental or regulatory authorities required
to be obtained or made by the Buyer or the Seller prior
to the consummation of the transactions contemplated
hereby, including, without limitation, those authorizations,
consents, approvals, filings and registrations specifically
referred to in Schedule 6.2(c) hereto and Section 9.1
hereof, shall have been obtained, approved or permitted
to go into effect on terms that are not materially adverse
to the Buyer and shall be in effect.
11.5 COUNCIL AND VOTER APPROVAL. The
__________________________
Seller shall have obtained the authority to sell
the Assets pursuant to an ordinance or
initiative proposition approved by the Fairbanks City
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
24 - ASSET PURCHASE AGREEMENT
<PAGE>
Council and the majority of the qualified voters
of the Seller voting on the question no later
than October 31, 1996.
11.6 ALL PROCEEDINGS TO BE SATISFACTORY.
__________________________________
All City proceedings to be taken by the Seller in
connection with the transactions contemplated
hereby and all documents incident thereto shall
be reasonably satisfactory in form and substance
to the Buyer and its counsel, and the Buyer and its
counsel shall have received all such certified or
other copies of such documents as it or they may
reasonably request.
11.7 OPINION OF COUNSEL. The Buyer shall have
__________________
received the written opinion of special bond counsel
for the Seller, dated and delivered as of the Closing
Date opining that Section 11.8 has been satisfied and
that assets free and clear of liens created by or
related to bonds. In rendering such opinion, such
counsel may rely, to the extent such counsel deems
such reliance necessary or appropriate, as to matters
of fact, upon certificates of government officials and
of any officials (elected or appointed) of the Seller.
11.8 DEFEASANCE. On the Closing Date, the
__________
Seller shall have duly and validly retired or defeased
all revenue bonds of the Seller outstanding as of the
Closing Date and relating to the Assets, including
without limitation the revenue bonds listed on Schedule
7.3 and outstanding on the Closing Date, using for such
purpose the proceeds of the Purchase Price received from
the Buyer pursuant to this Agreement.
11.9 ADVERSE PROCEEDINGS. No preliminary or
___________________
permanent injunction or other order or decree by any
federal or state court which prevents the
consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect
(the Buyer agrees to use its reasonable best efforts
to have any such injunction, order or decree
lifted) and no statute, rule or regulation shall have
been enacted, by any state or federal Government or
Governmental agency in the United States which prohibits
the consummation of the transactions contemplated by
this Agreement.
11.10 THIRD-PARTY CONSENTS AND APPROVALS. There
__________________________________
shall have been obtained all consents and approvals of
third Parties required to permit the Buyer to acquire
at the Closing all of the Seller's right, title and
interest in and to the Assets (without termination or
acceleration) which are, in the Buyer's reasonable
judgment, material, individually or in the aggregate,
to the Assets or to the conduct of the business of
the Buyer, and such consents shall be in effect.
11.11 CONTINGENT CLOSING. Simultaneous with
__________________
the Closing hereunder, Seller shall close on its
Asset Purchase Agreement with Golden Valley Electric
Association and Stock Purchase Agreement with Fairbanks
Sewer and Water, Inc.
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PTI COMMUNICATIONS OF ALASKA, INC.
25 - ASSET PURCHASE AGREEMENT
<PAGE>
11.12 NO MATERIAL ADVERSE CHANGE. There
__________________________
shall have been no material adverse changes to the
Assets as a whole or the financial position or results
of operation of the business of the Assets. Seller
shall not have suffered any material loss or damage
to the Assets that would materially impair or affect
the Buyer's ability to conduct the business after
the Closing Date.
11.13 UTILIDOR EASEMENT. The Seller and the
_________________
Buyer shall have mutually agreed to a utilidor easement
as described in Section 9.7 herein.
11.14 GLOBE ADMINISTRATIVE BUILDING LEASE.
___________________________________
The Seller and Buyer shall have mutually agreed to the
leases described in Section 9.8 herein.
11.15 RELOCATION OF MIS. The Seller shall have
_________________
complied in all respects with Section 9.9 herein.
12. TERMINATION. This Agreement may be terminated
___________
before the Closing Date:
(a) by mutual written consent of the
Buyer and the Seller; or
(b) if Fairbanks City Council and voter
approval described in Sections 10.5 and 11.5 hereof is
not obtained on or before October 31, 1996; or
(c) by Buyer or the Seller, if Closing
has not occurred one (1) year from the voter approval
described in sections 10.5 and 11.5; or
(d) by the Buyer, if any of the
authorizations, consents, approvals, filings or
registrations required herein shall have been denied,
not permitted to go into effect or obtained on terms
materially adverse to the Buyer or Seller and, if
Buyer or Seller chooses to appeal at its sole
option, all final appeals shall have been exhausted;
(e) by the Buyer, if the Seller shall have
breached any of its obligations hereunder which denies the
affected Buyer the material benefits intended by the
transactions contemplated herein; or
(f) by the Seller, if the Buyer shall have
breached any of its obligations hereunder which denies
the Seller the intended benefit of the transaction
contemplated herein.
In the event of a termination due to (a),
(b), (c), (d) or (e) then there shall be no liability
between any of the Parties, except for Seller's
obligation to return the Earnest Money and interest
thereon to the Buyer which shall be Buyer's sole
remedy. In the event of a termination due to (e),
the Seller shall return the Earnest Money in the
amount of Seven Hundred Thirty Thousand Four Hundred
Thirty-five Dollars ($730,435.00) and interest earned
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PTI COMMUNICATIONS OF ALASKA, INC.
26 - ASSET PURCHASE AGREEMENT
<PAGE>
thereon to Buyer In the event of a termination due
to (f), the Buyer shall forfeit to the Seller its
Earnest Money and interest thereon, as a termination
fee, which shall be Seller's sole remedy.
If either the Buyer or the Seller shall
decide to terminate this Agreement pursuant to this
Section 12, such Party shall promptly give written
notice to the other of such decision. In the event
of a termination pursuant to this Section 12, the
Parties hereto shall be released from all liabilities
and obligations arising under this Agreement (other
than pursuant to this Section and Sections 15, 16
and 23 hereof) with respect to the matters
contemplated by this Agreement, other than for Buyer
or Seller's damages, if any, damages to the extent
arising from a prior breach of this Agreement.
13. AMENDMENT AND WAIVERS.
_____________________
13.1 AMENDMENTS, MODIFICATIONS, ETC. This
______________________________
Agreement may be amended, modified or supplemented only
by an instrument in writing executed and delivered on
behalf of each of the Parties hereto, which instrument
when so executed and delivered shall thereupon become
a part of this Agreement and the provisions thereof
shall be given effect as if contained in this Agreement
as of the date hereof.
13.2 WAIVERS. The representations, warranties,
_______
covenants or conditions set forth in this Agreement may
be waived only by a written instrument executed by the
Party so waiving. The failure of any Party at any
time or times to require performance of any provision
hereof shall in no manner affect the right of such
Party at a later time to enforce the same. No waiver
by any Party of any condition, or breach of any
term, covenant, agreement, representation or warranty
contained in this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of any
other condition or of the breach of any other
term, covenant, agreement, representation or warranty
contained in this Agreement.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
_____________________________________________________
All representations, warranties and covenants of the Parties
hereto contained in this Agreement or made pursuant hereto
shall terminate upon the Closing, and no action or claim may
be brought thereafter on the basis of such
representations, warranties and covenants, with the
exception of the covenants contained in Sections 3.2, 3.3,
3.4, 5.5, 5.17, 5.18, 8, 9.2, 9.10, 15, 16 and 23, which
continue for five (5) years and any representations,
warranties or covenants contained in any documents
transferring the Assets and any covenants contained in
Sections 1.3, 7.7, 7.4, 7.6, 9.5, 9.7, 9.9, 9.11, 13, 14,
16-25, which shall survive until such have been performed.
15. INDEMNIFICATION.
_______________
15.1 INDEMNIFICATION BY THE BUYER. Subject to the
____________________________
terms and conditions of this Section 15, the Buyer hereby
agrees to indemnify and save harmless the Seller and their
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
27 - ASSET PURCHASE AGREEMENT
<PAGE>
respective affiliates, officials (elected and appointed),
directors, officers and employees ("Seller's Indemnified
Parties") from, against, for and in respect of any
and all liabilities and obligations, whether absolute,
accrued, contingent or otherwise and whether a contractual,
statutory, tax or any other type of liability or
obligation (including, without limitation, all reasonable
costs and expenses, including reasonable attorneys' fees,
interest and penalties), suffered, sustained, incurred or
required to be paid by any of the Seller's Indemnified
Parties and arising from: (1) any of the
representations and warranties, liabilities or obligations
of Buyer described herein; (2) any act or omission
by Buyer related to Assets occurring on or after the
Closing Date; or (3) the Buyer's use or conduct of the
Assets respectively on or after the Closing Date unless
such liability or obligation arises from Assets or
liabilities not expressly assumed by the
Buyer hereunder.
15.2 INDEMNIFICATION BY THE SELLER. Subject to the
_____________________________
terms and conditions of this Section 15, the Seller hereby
agrees to indemnify and save harmless the Buyer after
the Closing Date, and its respective affiliates, directors,
officers and employees (the "Buyer's Indemnified Parties")
from, against, for and in respect of any and all
liabilities and obligations, whether absolute, accrued,
contingent or otherwise and whether a contractual,
statutory, tax or any other type of liability or
obligation (including, without limitation, all
reasonable costs and expenses, including reasonable
attorneys' fees, interest and penalties), suffered,
sustained incurred or required to be paid by any of
the Buyer's Indemnified Parties and arising from:
(1) any of the representations and warranties,
liabilities or obligations of Seller described
herein; (2) any act or omission by Seller related to
Assets occurring prior to the Closing Date and not
expressly assumed by Buyer herein; or (3) the Seller's
use or conduct of the Assets respectively before
the Closing Date.
15.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT
__________________________________________
TO THIRD-PARTY CLAIMS. The liabilities and
_____________________
obligations of the Party hereto against which
indemnification is sought hereunder (the "Indemnifying
Party") with respect to claims resulting from the
assertion of liability or obligation by third parties
shall be subject to the following terms and conditions:
(a) Any Seller's Indemnified Party or
Buyer's Indemnified Party (collectively, the
"Indemnified Parties") seeking indemnification
hereunder agrees to give prompt written notice to
the Indemnifying Party of any claim by a third
party which might give rise to a claim based on
the indemnity agreements contained in Section 15
hereof, stating the nature and basis of said
claim and the amount thereof, to the extent known.
The Indemnifying Party shall satisfy its obligation
to indemnify the Indemnified Party under this Section
within thirty (30) days after receipt of the
foregoing notice unless the Indemnifying Party shall
have elected to defend in good faith such claim
as provided in subsection (b) hereof.
(b) In the event the Indemnified
Party shall notify the Indemnifying Party of any
claim pursuant to subsection (a) hereof, the
Indemnifying Party shall have the right to elect
to defend such claim (including all actions, suits,
proceedings and all proceedings on appeal or
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
28 - ASSET PURCHASE AGREEMENT
<PAGE>
for review which counsel deem appropriate), with
counsel reasonably satisfactory to the Indemnified
Party by written notice to the Indemnified Party
within 30 days after receipt of such notice. The
Indemnified Party shall make available to the
Indemnifying Party and its attorneys and accountants
all books and records of the Indemnified Party
relating to such proceedings or litigation, and the
Parties hereto agree to render to each other such
assistance as they may reasonably require of
each other in order to ensure the proper and
adequate defense of any such action,
suit or proceeding.
(c) So long as the Indemnifying Party is
defending in good faith any such claim, the Indemnified
Party shall not compromise or settle such claim, without
the written consent of the Indemnifying Party.
15.4 MUTUAL INDEMNIFICATION. The Buyer and the Seller
______________________
hereby agree that if either the Buyer or the Seller
takes any action opposing approval of the transactions
contemplated by this Agreement, either in a regulatory
proceeding relating to a consent required hereunder or
litigation arising therefrom, the Party hereto taking such
action will indemnify the other Party hereto for all
costs and expenses, including reasonable attorneys' fees,
incurred by such Party in connection with the
transactions contemplated by this Agreement, including
all costs and expenses arising from such regulatory
proceeding or litigation.
15.5 HAZARDOUS SUBSTANCES INDEMNIFICATION. Under
____________________________________
Section 5.17 of this Agreement, Seller makes
representations and warranties to Buyer concerning the
compliance of the Assets with Environmental Laws and the
freedom of the Assets from Hazardous Substances.
This Section 15.5 shall specifically govern
the Parties obligations for indemnification
concerning Hazardous Substances and Environmental
Laws. The procedures set forth in Section 15.3
will be applicable to indemnification sought under
this Section 15.5.
With respect to Assets acquired by Buyer hereunder,
other than real property acquired from Seller in fee
simple, subject to the terms and conditions of this
Section 15, Buyer hereby agrees to indemnify and save
harmless, the Seller and the Seller's Indemnified
Parties from, against, for and in respect of
any and all liabilities and obligations, whether
absolute, accrued, contingent or otherwise and whether
contractual, statutory, tax or any other type of
liability or obligation (including, without
limitation, all reasonable costs and expenses,
including reasonable attorneys fees, interest and
penalties), suffered, sustained, incurred or
required to be paid by any of the Seller's Indemnified
Parties relating to Hazardous Substances or
breach of Environmental Laws arising from the Buyer's
use or conduct of these Assets on or after the Closing
Date. With respect to Assets acquired by Buyer
hereunder, other than real property acquired from
Seller in fee simple, Seller hereby agrees to
indemnify and save harmless, Buyer and Buyer's
Indemnified Parties against all of the foregoing
arising from Seller's use or conduct of these
Assets before the Closing Date.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
29 - ASSET PURCHASE AGREEMENT
<PAGE>
With respect to the real property acquired by
Buyer from Seller in fee simple, subject to the terms
and conditions of this Section 15, Buyer hereby
agrees to indemnify and save harmless the Seller as
set forth in the immediately preceding paragraph,
except that the indemnification for Hazardous
Substances and violation of Environmental Laws shall
apply to any liabilities and obligations, whether
they arise from Buyer's or Seller's use or conduct
of these Assets at any time.
15.6 LIMITATION ON INDEMNIFICATION. Notwithstanding
_____________________________
any other provision of this Agreement, Buyer and Seller
shall not be entitled to make a claim under this Section
15 and/or Section 3.4 until the aggregate amount of
costs and expense for the indemnifiable matter incurred
exceeds $25,000 per claim. Seller further agrees that
when the aggregate of Buyer's $25,000 claim(s) payments
exceeds $250,000, Seller shall fully indemnify, defend
and hold Buyer harmless for all amounts over $250,000.
16. EXPENSES. The Buyer and Seller shall pay its own
________
expenses arising out of or incidental to this Agreement,
whether or not such transactions are consummated,
including, without limitation, all reasonable
out-of-pocket expenses in relation to the transactions
contemplated by this Agreement, including, but not
limited to, costs for legal, financial and other
advisors relating to solicitation of bids, contract
negotiations, regulatory approval and any litigation
relating to or arising out of the transactions
contemplated by this Agreement.
17. ASSIGNMENT. This Agreement may not be assigned
__________
by any Party hereto without the prior written consent
of the other Party, except that the Buyer may assign
its rights and delegate its obligations hereunder to
one or more direct or indirect wholly owned
subsidiaries of the Buyer, provided that no such
assignment or delegation shall relieve the Buyer of
its obligations hereunder, and provided further, that
in the event of any such assignment or delegation,
the representations, warranties, covenants and
agreements of the Buyer hereunder shall be deemed,
unless the context requires otherwise, to be the
representations, warranties, covenants and
agreements of both the Buyer and such subsidiary
or subsidiaries. Subject to the foregoing, this
Agreement shall bind and inure to the benefit only
of the Parties hereto and their respective
permitted successors and assigns.
18. ENTIRE AGREEMENT. This Agreement, together with
________________
the Attachments, Schedules and Exhibits hereto and
the other documents and instruments referred to
herein, sets forth the entire agreement and
understanding of the Parties hereto in respect of
the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
19. THIRD-PARTY BENEFICIARIES. Nothing in this
_________________________
Agreement is intended or shall be construed to
give any person any legal or equitable right,
remedy or claim under or in respect of this
Agreement or any provision contained herein,
other than the Parties hereto.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
30 - ASSET PURCHASE AGREEMENT
<PAGE>
20. COUNTERPARTS. This Agreement may be executed
____________
in any number of counterparts, all of which
together shall be considered to constitute
one instrument.
21. SECTION HEADINGS. All section headings are
________________
inserted for convenience only and shall not
control or affect the meaning or construction
of any provision of this Agreement.
22. APPLICABLE LAW. This Agreement shall be
______________
governed by and construed in accordance with
the laws of the State of Alaska.
23. CONFIDENTIAL INFORMATION. Each Party to
________________________
this Agreement agrees and covenants with the other
Parties to this Agreement that it shall use, and
shall cause its Representatives (as hereinafter
defined in this Section 23) to use, all
Proprietary Information (as hereinafter defined
in this Section 23) relating to the other Party,
acquired by any of them in the course of
negotiations with or examination of the other
Party in connection with the transactions
contemplated by this Agreement and shall cause
all Proprietary Information obtained by them in
the course of such negotiations and
examinations to be treated as confidential.
If either the Buyer or the Seller shall
terminate this Agreement pursuant to Section 12
hereof, each Party shall cause to be delivered
to the other (or, in the case of the summaries
and work papers hereinafter referred to,
destroyed) all written and other tangible
Proprietary Information obtained by it,
including without limitation, all copies and
summaries thereof and all work papers based
thereon and containing such Proprietary
Information, whether so obtained before or
after the execution of this Agreement,
and each Party agrees that it shall not
itself, and shall cause its Representatives
not to, use or disclose, directly or
indirectly, any Proprietary Information so
obtained, and that it shall have, and shall
cause its Representatives to have, all
Proprietary Information kept confidential
and not be used in any way which is
detrimental to the other Party or Seller.
Notwithstanding anything in this Section 23
to the contrary, either Party may use and
disclose any Proprietary Information which
(a) is already in its possession, provided that
such information is not known by the Party using
or disclosing such information (the
"Disclosing Party") to be subject to a
confidentiality agreement with or other obligation
of secrecy to the Party not using or
disclosing such information (the "Non-Disclosing
Party") in violation of this Section 23, (b)
becomes generally available to the public other
than as a result of a disclosure by the Disclosing
Party, (c) becomes available to the Disclosing
Party on a non-confidential basis from a source
other than the Non-Disclosing Party or any persons
affiliated in any capacity with the Non-Disclosing
Party, provided that such source is not known by
the Disclosing Party to be bound by a
confidentiality agreement with or other
obligation of secrecy to the Non-Disclosing Party
or another Party; (d) required to be disclosed
in order to seek any consent or approval required
herein; or (e) required by law to be disclosed.
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
31 - ASSET PURCHASE AGREEMENT
<PAGE>
Except as otherwise provided herein, no
representation or warranty is made as to the
accuracy or completeness of the Proprietary
Information.
Neither Party to this Agreement nor any of its
respective Representatives shall have any
liability to the other Party to this
Agreement or any of its respective Representatives
arising from the use of the Proprietary
Information in accordance with this Agreement.
Without prejudice to the rights and remedies
otherwise available to any Party to this
Agreement, each Party to this Agreement shall be
entitled to equitable relief by way of
injunction if the other Party to this Agreement
or any of its Representatives shall breach or
threaten to breach any of the provisions of
this Section 23. In addition, each Party to this
Agreement agrees to indemnify and hold harmless
the other Parties to this Agreement from and
against any claims from third parties arising as
a result of the Party's violation of this Section 23.
For the purposes of this Section 23, with
respect to any person, the term "Representative"
shall mean such person's affiliates (as defined
in the Rules and Regulations promulgated under
the Securities Act of 1933, as amended), and the
directors, officials (elected and appointed),
officers, employees, agents and other
representatives of such person and such
person's affiliates.
For the purposes of this Section 23, the term
"Proprietary Information" shall mean collectively
all discussions and negotiations and that written
information marked "Confidential" or "Proprietary"
or the like which the Seller has been, are and
will be providing to the Buyer and its
Representatives with respect to the transactions
contemplated by this Agreement and all such
information which the Buyer has been, is and will
be providing to the Seller and its Representatives
with respect to the transactions contemplated
by this Agreement.
24. NOTICES. Any notice given under this Agreement
_______
shall be in writing and shall be delivered
personally, transmitted by first-class mail or
facsimile. The address for service of each Party
shall be its principal place of business as
identified herein or such other address as has
been previously notified to the other
Parties in writing and served on all Parties:
Pacific Telecom, Inc.
805 Broadway
Vancouver, WA 98660
ATTN: Chief Financial Officer and Executive Vice President
and Vice President of Regulatory and Legal Affairs
Facsimile (360) 905-5953
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
32 - ASSET PURCHASE AGREEMENT
<PAGE>
City of Fairbanks
800 Cushman Street
Fairbanks, AK 99701
ATTN: Mayor
with a copy to:
Office of the City Attorney
800 Cushman Street
Fairbanks, AK 99701
All notices shall be deemed to be effective upon
the time of delivery, if personally delivered or
at the time of automatic acknowledgement of
receipt, if transmitted by facsimile.
25. FURTHER ASSURANCES From time to time as and
__________________
when requested by one of the Parties, the other
Party will execute and deliver, or cause to be
executed and delivered, all such documents and
instruments a may be reasonably necessary to
consummate and make effective the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, each Party hereto has caused
this Agreement to be duly executed as of the date
first above written.
CITY OF FAIRBANKS PTI COMMUNICATIONS OF ALASKA, INC.
By: JAMES C. HAYES By: CHARLES E. ROBINSON
________________ ____________________________
Title: Mayor Title: Chairman, President & Chief
_____________ __________________________
Executive Officer
_________________________________________________________
PTI COMMUNICATIONS OF ALASKA, INC.
33 - ASSET PURCHASE AGREEMENT
<PAGE>
<TABLE>
EXHIBIT 12
PACIFIC TELECOM, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in millions)
<CAPTION>
Year Ended December 31,
_____________________________________
1996 1995 1994 1993 1992
________ _____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Earnings, as defined*:
Income from continuing operations
before income taxes $122.7 $186.6 $122.2 $ 82.9 $ 99.8
Add:
Fixed charges 46.5 54.5 48.6 59.5 63.2
Equity losses of less than 50%
owned persons - - - - 0.9
Minority interest 2.4 1.3 1.0 0.6 0.1
_____ _____ _____ _____ _____
Total earnings $171.6 $242.4 $171.8 $143.0 $164.0
_____ _____ _____ _____ _____
_____ _____ _____ _____ _____
Fixed charges:
Interest $40.8 $42.3 $34.7 $44.3 $52.1
Interest portion of
rental expense 5.7 12.2 13.9 15.2 11.1
____ ____ ____ ____ ____
Total fixed charges $46.5 $54.5 $48.6 $59.5 $63.2
____ ____ ____ ____ ____
____ ____ ____ ____ ____
Ratio of earnings to fixed charges 3.7 4.4 3.5 2.4 2.6
____ ____ ____ ____ ____
____ ____ ____ ____ ____
</TABLE>
[FN]
* For the purpose of computing these ratios, "earnings" represents the
aggregate of (a) income from continuing operations before income taxes,
(b) fixed charges,(c) equity losses of less than 50% owned persons and
(d) minority interest. Equity losses of less than 50% owned persons are
added to income from continuing operations before income taxes since the
Company does not guarantee the debt of such persons. "Fixed Charges"
consist of interest charges and an estimated amount representing the
interest portion of rental expense.
DELOITTE &
TOUCHE LLP
______________ _____________________________________________________
[LOGO] 3900 US Bancorp Tower Telephone: (503)222-1341
111 SW Fifth Avenue Facsimile: (503)224-2172
Portland, Oregon 97204-3698
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
Pacific Telecom, Inc.:
We consent to the incorporation by reference in Registration
Statement No. 333-00191 on Form S-3 of our report dated
January 27, 1997, appearing in this Annual Report on Form 10-K
of Pacific Telecom, Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Portland, Oregon
March 19, 1997
_________________
Deloitte Touche
Tohmatsu
International
_________________
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFIC
TELECOM 1996 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 931390
<OTHER-PROPERTY-AND-INVEST> 148796
<TOTAL-CURRENT-ASSETS> 238458
<TOTAL-DEFERRED-CHARGES> 17713
<OTHER-ASSETS> 365451
<TOTAL-ASSETS> 1701808
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 225943
<RETAINED-EARNINGS> 551932
<TOTAL-COMMON-STOCKHOLDERS-EQ> 777875
0
0
<LONG-TERM-DEBT-NET> 502906
<SHORT-TERM-NOTES> 18000
<LONG-TERM-NOTES-PAYABLE> 25000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15813
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 362214
<TOT-CAPITALIZATION-AND-LIAB> 1701808
<GROSS-OPERATING-REVENUE> 521130
<INCOME-TAX-EXPENSE> 47454
<OTHER-OPERATING-EXPENSES> 362398
<TOTAL-OPERATING-EXPENSES> 409852
<OPERATING-INCOME-LOSS> 111278
<OTHER-INCOME-NET> 4822
<INCOME-BEFORE-INTEREST-EXPEN> 116100
<TOTAL-INTEREST-EXPENSE> 40823
<NET-INCOME> 75277
0
<EARNINGS-AVAILABLE-FOR-COMM> 75277
<COMMON-STOCK-DIVIDENDS> 52816
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 197037
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFIC
TELECOM 1994 10-K AND 1995 10-QS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994 DEC-31-1994
<PERIOD-END> DEC-31-1994 MAR-31-1995 JUN-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 808261 929353 936772
<OTHER-PROPERTY-AND-INVEST> 140887 136065 138906
<TOTAL-CURRENT-ASSETS> 214289 237807 46479
<TOTAL-DEFERRED-CHARGES> 26644 22993 23544
<OTHER-ASSETS> 252870 330704 326638
<TOTAL-ASSETS> 1442951 1656922 1672339
<COMMON> 19810 19808 19808
<CAPITAL-SURPLUS-PAID-IN> 205789 204968 205011
<RETAINED-EARNINGS> 442174 445829 453167
<TOTAL-COMMON-STOCKHOLDERS-EQ> 667773 670605 677986
0 0 0
0 0 0
<LONG-TERM-DEBT-NET> 351997 350433 351175
<SHORT-TERM-NOTES> 21713 178760 192339
<LONG-TERM-NOTES-PAYABLE> 25000 25000 25000
<COMMERCIAL-PAPER-OBLIGATIONS> 0 54177 53465
<LONG-TERM-DEBT-CURRENT-PORT> 15601 15640 15599
0 0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0 0
<LEASES-CURRENT> 0 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 360867 362307 356775
<TOT-CAPITALIZATION-AND-LIAB> 1442951 1656922 1672339
<GROSS-OPERATING-REVENUE> 696386 179606 369834
<INCOME-TAX-EXPENSE> 40766 10385 23249
<OTHER-OPERATING-EXPENSES> 531745 139451 284186
<TOTAL-OPERATING-EXPENSES> 572511 149836 307435
<OPERATING-INCOME-LOSS> 123875 29770 62399
<OTHER-INCOME-NET> (7722) (3045) (3792)
<INCOME-BEFORE-INTEREST-EXPEN> 116153 26725 58607
<TOTAL-INTEREST-EXPENSE> 34754 9998 21468
<NET-INCOME> 81399 16727 37139
0 0 0
<EARNINGS-AVAILABLE-FOR-COMM> 81399 16727 37139
<COMMON-STOCK-DIVIDENDS> 52289 13072 26146
<TOTAL-INTEREST-ON-BONDS> 0 0 0
<CASH-FLOW-OPERATIONS> 141368 52492 82061
<EPS-PRIMARY> 2.05 0.42 0.94
<EPS-DILUTED> 2.05 0.42 0.94
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFIC
TELECOM 1995 10-QS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-END> SEP-30-1995 DEC-31-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 834348 910909
<OTHER-PROPERTY-AND-INVEST> 138541 142205
<TOTAL-CURRENT-ASSETS> 201483 206268
<TOTAL-DEFERRED-CHARGES> 16356 16528
<OTHER-ASSETS> 358407 378214
<TOTAL-ASSETS> 1549135 1654124
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 225919 225943
<RETAINED-EARNINGS> 524344 529471
<TOTAL-COMMON-STOCKHOLDERS-EQ> 750263 755414
0 0
0 0
<LONG-TERM-DEBT-NET> 344204 384502
<SHORT-TERM-NOTES> 35000 90000
<LONG-TERM-NOTES-PAYABLE> 50000 25000
<COMMERCIAL-PAPER-OBLIGATIONS> 0 50000
<LONG-TERM-DEBT-CURRENT-PORT> 15683 5535
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 353985 343673
<TOT-CAPITALIZATION-AND-LIAB> 1549135 1654124
<GROSS-OPERATING-REVENUE> 511160 640135
<INCOME-TAX-EXPENSE> 36068 47012
<OTHER-OPERATING-EXPENSES> 386328 474824
<TOTAL-OPERATING-EXPENSES> 422396 521836
<OPERATING-INCOME-LOSS> 88764 118299
<OTHER-INCOME-NET> 62951 63581
<INCOME-BEFORE-INTEREST-EXPEN> 151715 181880
<TOTAL-INTEREST-EXPENSE> 30326 42316
<NET-INCOME> 121389 139564
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 121389 139564
<COMMON-STOCK-DIVIDENDS> 39219 52267
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 129292 153047
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFIC
TELECOM 1996 10-QS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 902917 907766 918726
<OTHER-PROPERTY-AND-INVEST> 142255 143650 149440
<TOTAL-CURRENT-ASSETS> 213068 234336 242770
<TOTAL-DEFERRED-CHARGES> 16041 16204 16795
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<TOTAL-ASSETS> 1649810 1674475 1697567
<COMMON> 0 0 0
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<RETAINED-EARNINGS> 532421 537216 544400
<TOTAL-COMMON-STOCKHOLDERS-EQ> 758364 763159 770343
0 0 0
0 0 0
<LONG-TERM-DEBT-NET> 384053 382717 430928
<SHORT-TERM-NOTES> 72000 73000 34000
<LONG-TERM-NOTES-PAYABLE> 25000 75000 75000
<COMMERCIAL-PAPER-OBLIGATIONS> 50000 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 5567 5712 5728
0 0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0 0
<LEASES-CURRENT> 0 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 354826 374887 381568
<TOT-CAPITALIZATION-AND-LIAB> 1649810 1674475 1697567
<GROSS-OPERATING-REVENUE> 122283 249584 386193
<INCOME-TAX-EXPENSE> 10196 21686 34697
<OTHER-OPERATING-EXPENSES> 86928 176315 271369
<TOTAL-OPERATING-EXPENSES> 97124 198001 306066
<OPERATING-INCOME-LOSS> 25159 51583 80127
<OTHER-INCOME-NET> 911 3085 4972
<INCOME-BEFORE-INTEREST-EXPEN> 26070 54668 85099
<TOTAL-INTEREST-EXPENSE> 10053 20607 30603
<NET-INCOME> 16017 34061 54496
0 0 0
<EARNINGS-AVAILABLE-FOR-COMM> 16017 34061 54496
<COMMON-STOCK-DIVIDENDS> 13066 26317 39567
<TOTAL-INTEREST-ON-BONDS> 0 0 0
<CASH-FLOW-OPERATIONS> 52277 102465 145969
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
