EXHIBIT 10.20
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 28th day of November, 1994 (the "Execution Date"), by and among
Citizens Utilities Company, a Delaware corporation ("Buyer"), and ALLTEL
Corporation, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of NCC Systems, Inc., a Texas corporation
(the "Company"); and
WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, the Shares (as defined below), upon the terms
and conditions set forth in this Agreement; and
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:
Additional Financial Statements is defined in Section 11.4.
Adjusted Total Current Assets means the sum of the following accounts as
reflected on the Company's Balance Sheet: (i) Telecommunications Accounts
Receivable (item 2-Assets on the Company's Balance Sheet) less "Accounts
Receivable Allowance" (item 3 - Assets on the Company's Balance Sheet) after
adjusting "Accounts Receivable Allowance" to reflect an uncollectible
percentage based upon the Company's actual uncollectible net write-off
percentage for the calendar year immediately preceding the year in which the
Closing occurs, (ii) Accounts Receivable - Other (item 5-Assets on the
Company's Balance Sheet) less Accounts Receivable Allowance - Other (item 6 -
Assets on the Company's Balance Sheet), (iii) Prepaid Expense (item 9-Assets on
the Company's Balance Sheet), and (iv) Other Current Assets (item 10-Assets on
the Company's Balance Sheet) to the extent such other current assets do not
represent cash accounts.
Adjusted Total Non-Current Assets means the sum of the following accounts
as reflected on the Company's Balance Sheet: (i) Other Investments at Cost
(item 15-Assets on the Company's Balance Sheet) to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and which RTB Stock is owned by the
Company immediately after the Effective Date, (ii) Unamortized Debt Expense
(item 16-Assets on the Company's Balance Sheet) to the extent such debt expense
relates to debt which is to remain outstanding immediately after the Effective
Date and (iii) Deferred Maintenance and Retirements (Item 17 - Assets on the
Company's Balance Sheet).
Adjusted Total Current And Non-Current Liabilities means the sum of the
following accounts as reflected on the Company's Balance Sheet: (i) Current
Maturities of Long Term Debt (item 1- Liabilities on the Company's Balance
Sheet) to the extent such long term debt is to remain outstanding immediately
after the Effective Date, (ii) Accounts Payable-Other (item 6-Liabilities on
the Company's Balance Sheet), (iii) Advance Payments and Customer Deposits
(item 7-Liabilities on the Company's Balance Sheet), (iv) Taxes Accrued - Other
(item 9 - Liability on the Company's Balance Sheet), (v) Interest Accrued-Other
(item 13-Liabilities on the Company's Balance Sheet) to the extent such
interest relates to debt which is to remain outstanding immediately after the
Effective Date, and (vi) that portion of Other Deferred Credits (item 25 -
Liabilities on the Company's Balance Sheet) that relates to liabilities that
are associated with the requirements of Financial Accounting Standard 106
attributable to the active Transferred Employees.
Affiliate has the meaning given to that term in Rule 405 under the
Securities Act of 1933, as amended.
Agreement is defined in Section 17.7.
The Business means the business of the Company; i.e., providing cable
television services to the communities served by the NCCSI Systems and other
related regulated and non-regulated activities, services and products
associated with the NCCSI Systems, including without limitation such
unregulated activities, services and products of the Company conducted, offered
or serviced by the Transferred Employees or provided or related to the
Company's subscribers or customers served in or from the NCCSI Systems (such
unregulated activities, services and products (the "Unregulated Business") are
considered an integral part of the Business for all purposes of this
Agreement).
Buyer's Closing Certificate is defined in Section 7.2.1.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Cable Act of 1992 means the Cable Television Consumer Protection and
Competition Act of 1992 and rules and regulations promulgated thereunder.
Cable Plant is defined in Section 2.2.1.
Casualty Notice is defined in Section 11.9.
Casualty Termination Notice is defined in Section 11.9.
Closing is defined in Section 8.1.
Closing Date is defined in Section 8.1.
Common Stock means the common stock of the Company par value $1.00.
Communications Act means the Communications Act of 1934, as amended, and
rules and regulations promulgated thereunder.
Company is defined in the recitals of this Agreement.
Company Books and Records is defined in Section 2.2.3.
Company's Balance Sheet means the balance sheet of the Company.
Confidentiality Agreement means the Confidentiality Agreement dated
September 30, 1994 between ALLTEL Corporation and Citizens Utilities Company
which is attached and incorporated into this Agreement as Schedule 1-1.
Contracts is defined in Section 2.2.2.
Copyright Act means Title 17 of the United States Code, as amended, and
rules and regulations promulgated thereunder.
Damaged Property is defined in Section 11.9.
Debtholder Consents is defined in Section 5.2(a).
Direct Claim is defined in Section 13.4(b).
Effective Date is defined in Section 8.1.
Employee Plan Assets is defined in the Employee Transfer Agreement.
Employee Transfer Agreement is defined in Section 12.1
Employment Agreements is defined in Section 9.1.18.
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 (a) the release or threatened
release of a Regulated Material in amounts that require response or remediation
into the outdoor environment, (b) any circumstance or condition relating to the
ownership or operation of the Property by any person or party or the conduct of
the Business or any part thereof, that does not comply with Environmental
Requirements, or (c) any claim, demand, notice, cause of action, directive,
order, judgment, fine or penalty asserted or sought under or pursuant to any
Environmental Requirements by an entity or person not a party to this
Agreement, to the extent that the condition or circumstance or event giving
rise to the claim, demand, notice, cause of action, directive, order, judgment,
fine or penalty relates to the ownership or operation of the Property by any
person or party or the conduct of the Business or any part thereof.
Environmental Requirements means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any Governmental Authority and all valid and
enforceable guidance documents and policies thereof, relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Regulated Material, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Regulated
Material in each case as now amended and as now or hereafter in effect. The
term Environmental Requirements includes, without limitation, CERCLA, the
Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal
Act, the federal Toxic Substances Control Act and the federal Insecticide,
Fungicide and Rodenticide Act, each as now amended and as now or hereafter in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Plans is defined in Section 9.1.18.
Estimated Purchase Price is defined in Section 3.3(a).
Evaluation Material is defined in the first paragraph of the
Confidentiality Agreement.
Excluded Books and Records means 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, (iv) employees of the Company that are not
Transferred Employees, and (v) subject to Section 11.13, all Original Cost
Documents that are not located in the NCCSI Systems.
Excluded Contracts means the contracts, leases and agreements listed or
identified on Schedule 11.22.
Excluded Property means the Excluded Books and Records, the trademarks,
trade names, trade dress, logos, and any other intangible assets that use or
incorporate the word "ALLTEL" and any other marks listed on Schedule 11.1.5,
and the assets disposed, transferred or dividended by the Company pursuant to
Section 11.22 and any assets excluded pursuant to Sections 11.9 and 14.1.7.
Execution Date is defined in the preamble to this Agreement.
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.
Existing Environmental Requirements means those applicable provisions of
any Environmental Requirements that are both in effect and applicable to the
Company, the Business or the Property on or prior to the Effective Date.
F.A.A. means the U.S. Federal Aviation Administration
FCC means the Federal Communications Commission.
FCC Consents is defined in Section 5.4.
FCC Licenses is defined in Section 2.2.4.
Final Order means an action by the FCC, a Franchising Authority , or any
other Governmental Authority, as to which: (a) no request for stay of the
action by the FCC, a Franchising Authority, or such other Governmental
Authority, as the case may be, is pending, no such stay is in effect, and if
any time period for filing any request for such a stay is provided by statute
or regulation, such time period has passed; (b) no petition, motion or
application for rehearing, reconsideration, or review, of the action is pending
before the FCC, a Franchising Authority, or such other Governmental Authority,
as the case may be, and the time provided for filing any such petition, motion
or application has passed; (c) the FCC, a Franchising Authority, or such other
Governmental Authority, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, of the FCC's, a Franchising
Authority's or such other Government Authority's action, as the case may be, is
pending or in effect, and the deadline for filing any such appeal has passed.
Final Purchase Price is defined in Section 3.4.
Financial Statements is defined in Section 9.1.11.
Franchises is defined in Section 2.2.5.
Franchising Authorities is defined in Section 2.2.5.
GAAP means generally accepted accounting principles.
Governmental Authority is defined in Section 9.1.3.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indebtedness Releases or Terminations is defined in Section 5.2.
Indemnifiable Losses is defined in Section 13.2(a).
Indemnification Payment is defined in Section 13.2(a).
Indemnifying Party is defined in Section 13.2(a).
Indemnitee is defined in Section 13.2(a).
Intellectual Property is defined in Section 11.1.1.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the Internal Revenue Service.
June 1994 Base Amount means the sum of (i) the amount of Net
Telecommunications Plant as of June 30, 1994 and (ii) the amount of Materials
and Supplies as of June 30, 1994
Law is defined in Section 9.1.4.
Leases means all real and personal property leases to which the Company is
a party, or to which any Affiliate of the Company is a party and which are used
in connection with the Business.
Marks is defined in Section 11.1.5.
Materials and Supplies means the amount set forth on the Company's Balance
Sheet as of a date certain comprising the Company's Materials and Supplies
(item 8 - Assets on the Company's Balance Sheet).
NCCSI Systems means the Navajo System, Needles System and Zuni System
collectively.
Navajo System means the Company's cable television systems that are
franchised or hold other operating authority in and around Window Rock,
Arizona; Fort Defiance, Arizona; Ganado, Arizona; Navajo, Arizona; Ship Rock,
New Mexico; Chinlie, Arizona; Many Farms, Arizona; Tohatchi, New Mexico;
Kayenta, Arizona; and Tsaile, Arizona.
Needles System means the Company's cable television systems that are
franchised or hold other operating authority in and around Needles, California
and Mohave County, Arizona.
Net Telecommunications Plant means the amount set forth on the Company's
Balance Sheet as of a date certain comprising the sum of Telecommunications
Plant In Service (item 22 - Assets on the Company's Balance Sheet, Plant Under
Construction -- Short Term (item 23 - Assets on the Company's Balance Sheet),
Plant Under Construction -- Long Term (item 24 - Assets on the Company's
Balance Sheet), and Telecommunications Plant -- Other (item 25 - Assets on the
Company's Balance Sheet), less Accumulated Depreciation and Amortization (item
27 - Assets on the Company's Balance Sheet).
Non-FCC Authorizations is defined in 2.2.6.
Original Cost Documents means all original cost documentation relating to
the Cable Plant.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Potential Subscriber means, for each System, the total number of single
family dwellings plus the total number of individual households in multiple
dwelling units (apartments, condominiums, mobile home parks, etc.) for all
locations with access to the existing cable plant within the relevant System as
set forth on Schedule 9.1.20(a) and as reported to the FCC in the relevant
Annual Reports of Cable Television Systems for 1993 (FCC Form 325).
Press Release is defined in Section 17.2.
Purchase Price is defined in Section 3. 1.
Property is defined in Section 2.2.
REA Debt means debt of the Company owed to the Rural Electrification
Administration.
Real Property is defined in Section 2.2. 1.
Regulated Material means (i) any "hazardous substance" as defined in
CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Requirements or, as applicable, Existing Environmental Requirements.
Regulatory Approvals is defined in Section 5. 1.
Retained Liabilities is defined in Section 13.3(a).
RTB Stock means stock of the Rural Telephone Bank.
Seller's Closing Certificate is defined in Section 7. 1. 1.
Shares means the 200,000 shares of the Common Stock owned by Seller.
Subscriber means, for each System, the number of subscribers to cable
television provided by the Company in each community unit computed according to
the following method: Number of single family dwellings plus the number of
individual households in multiple dwelling units (apartments, condominiums,
mobile home parks, etc.) paying at the basic subscriber rate plus bulk rate
customers plus courtesy and free service as set forth in Schedule 9.1.20(a) and
as reported to the FCC in the relevant Annual Reports of Cable Television
Systems for 1993 (FCC Form 325).
System means any of the systems included within the Navajo System, Needles
System or the Zuni System, as the context requires.
Tax Returns means a report, return or other information statement required
to be supplied to a federal, state or local taxing Governmental Authority with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
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.
Third Party Claim is defined in Section 13.4(a).
Total Deferred Credits is the amount set forth on the Company's Balance
Sheet as of a date certain comprising the sum of "Unamortized Investment Tax
Credit" (Item 22 - Liabilities on the Company's Balance Sheet), "Non-Current
Deferred Income Taxes" (Item 23 - Liabilities on the Company's Balance Sheet),
"Regulatory Liabilities" (Item 24 - Liabilities on the Company's Balance
Sheet), "Other Deferred Credits" (Item 25 - Liabilities on the Company's
Balance Sheet), and "Donations of Telephone Plant" (Item 26 - Liabilities on
the Company's Balance Sheet).
Total Long-Term Debt is the amount set forth on the Company's Balance Sheet
as of a date certain comprising the sum of "Long-Term Debt" (Item 17 -
Liabilities on the Company's Balance Sheet), "Premium/Discount on Long-Term
Debt" (Item 18 - Liabilities on the Company's Balance Sheet), and "Capital
Lease Obligations" (Item 19 - Liabilities on the Company's Balance Sheet).
Transferred Employee is defined in Article II.A of the Employee Transfer
Agreement.
Transition Services Agreement is defined in Section 10.1.
Unregulated Business is defined in the definition of Business set forth in
this Article 1.
Zuni System means the Company's cable television systems that are
franchised in or hold other operating authority in and around Yah-Ta-Hey, New
Mexico, Zuni, New Mexico, and Ramah, New Mexico.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and accept, as of the Effective Date, the Shares, free and clear of
all security interests, liens, or encumbrances.
2.2 Property. For purposes of this Agreement, the "Property" consists of
the Cable Plant, Contracts and Leases (to the extent permitted following
compliance with Section 5.3), Company Books and Records, FCC Licenses,
Franchises, the Non-FCC Authorizations and other assets in effect or owned by
the Company as of the Effective Date that are associated with (i) the NCCSI
Systems, and (ii) the Unregulated Business described on Schedule 2.2(b).
2.2.1 Cable Plant. For purposes of this Agreement, "Cable Plant" means
the Real Property, machinery, equipment, vehicles and all other assets and
properties used, or held for future use, in connection with the conduct of the
Business, including, without limitation, all improvements, plants, systems,
structures, construction work in progress, towers, tower equipment, antennas,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, furniture, fixtures, supplies, inventory, and other
physical assets of every nature and kind owned by the Company or in which the
Company holds an interest (other than as a lessee) and used in connection with
the Business. For purposes of this Agreement, "Real Property" means the real
property owned by the Company and used in connection with the Business,
including, without limitation, all land, buildings, structures, easements,
rights of way, appurtenances, improvements or privileges located thereon and
relating thereto.
2.2.2 Contracts. For purposes of this Agreement, "Contracts" means all
agreements that relate to the Business between the Company or any Affiliate of
the Company and (i) the Company's subscribers or customers, or (ii) other
entities or persons who are not Affiliates of the Company and have business
relationships with the Company relating to the Business, except for the
Excluded Contracts (some of which are specifically governed by other Sections
in this Agreement or the Employee Transfer Agreement).
2.2.3 Company Books and Records. For purposes of this Agreement, "Company
Books and Records" means all of the Company's customer or subscriber lists and
records, accounts and billing records (including a copy of the detailed general
ledger and the summary trial balances, where available for the past two fiscal
years), engineering records, files, data, drawings, blueprints, schematics,
reports, lists, plans, and processes, and all files of correspondence, lists,
records, and reports concerning subscribers and prospective subscribers, signal
and program carriage, and dealings with Governmental Authorities, including but
not limited to all reports filed on behalf of the Company with the F.C.C. and
statements of account filed by or on behalf of the Company with the United
States Copyright Office, personnel records (where applicable), Original Cost
Documents (where located but excluding Excluded Books and Records) and all
other documents, computer data and records (including records and files on
computer disks or stored electronically) relating to the Business (excluding
Excluded Books and Records), the Property and the Transferred Employees, except
for the Excluded Books and Records.
2.2.4 FCC Licenses. For purposes of this Agreement, "FCC Licenses" means
all licenses, certificates, permits or other authorizations granted to the
Company by the FCC.
2.2.5 Franchises. For purposes of this Agreement, "Franchises" means all
franchises and similar authorizations or permits issued or granted to the
Company that are used in the conduct of the Business by any local, municipal,
county, state or other regulatory authority (the "Franchising Authorities").
2.2.6 Non-FCC Authorizations. For purposes of this Agreement, "Non-FCC
Authorizations" means all licenses, certificates, permits, franchises, or other
authorizations (other than FCC Licenses and Franchises) granted to the Company
by Governmental Authorities (including without limitation those that are listed
or required to be listed on Schedule 9.1.17(c)).
ARTICLE 3. PURCHASE PRICE
3.1 Purchase Price.
(a) In consideration of the sale of the Shares and the other
undertakings of Seller in this Agreement, and subject to and in accordance with
the other terms and conditions of this Agreement, on the Closing Date, Buyer
will pay to Seller the sum of three million Three Hundred Fifty-Six Thousand
Dollars ($3,356,000.00), subject to adjustment as provided in Section 3.2 (the
"Purchase Price").
(b) (i) On or before the Closing Date, Buyer shall deliver to
Seller, in immediately available funds in U.S. Dollars, the Estimated Purchase
Price. Such delivery shall be made by bank wire transfer to an account that
Seller shall designate at least two (2) business days prior to the Effective
Date.
(ii) Buyer will use its best efforts to make the wire transfer of
the Estimated Purchase Price by 12:00 noon (Eastern Time) on the Closing Date,
provided that all conditions to Closing set forth in Article 7 have been
satisfied, or waived by the appropriate party, before such time.
3.2 Adjustments to Purchase Price.
(a) Adjustment Regarding Damaged Property.
(1) If the provisions of Section 11.9(c)(i) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
repair or replace the Damaged Property, as determined by the mutual agreement
of Buyer and Seller.
(2) If the provisions of Section 11.9(c)(ii) are applicable, the
Purchase Price will be decreased by the reasonable estimate of the cost to
replace the Damaged Property, as determined by the mutual agreement of Buyer
and Seller.
(b) [INTENTIONALLY DELETED]
(c) Adjustment Regarding June 1994 Base Amount. The Purchase Price
shall be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which the sum of Net Telecommunications Plant and Materials and
Supplies as of the Effective Date exceeds or is less than the June 1994 Base
Amount; provided, however, that in determining Net Telecommunications Plant and
Material and Supplies as of the Effective Date, no effect will be given for:
(i) any decrease thereof resulting from damage, loss or destruction of Damaged
Property which is repaired or replaced by Seller or the Company or for which
Seller or the Company makes a substitution, in accordance with Section 11.9(b);
(ii) any increase thereof resulting from expenditures made by Seller or the
Company in connection with any such repair, replacement or substitution of
Damaged Property in accordance with Section 11.9(b); or (iii) any increase
thereof resulting from Seller's expenditures pursuant to its obligations under
Section 14.1.7(b) and (c) except for the cost of purchasing specific items of
new plant (i.e., storage tanks).
(d) Adjustment Regarding Assets and Liabilities. The Purchase Price
will be adjusted, plus or minus, as the case may be, in an amount equal to the
amount by which, in each case as of the Effective Date: (i) Adjusted Total
Current Assets plus Adjusted Total Non-Current Assets exceeds or is less than
(ii) Adjusted Total Current and Non-Current Liabilities plus Total Long Term
Debt to the extent such Total Long-Term Debt shall remain outstanding
immediately after the Effective Date.
3.3 Estimate of Purchase Price. At least five (5) days prior to the
date scheduled for Closing, Seller shall deliver to Buyer an estimate of the
Purchase Price based on Seller's good faith estimate of the amount of each
adjustment described in Section 3.2 (the "Estimated Purchase Price") on the
same basis and in accordance with the same accounting principles, methods and
practices applied in preparing the Financial Statements and the Additional
Financial Statements, if applicable, taking into account all adjustments
required in Section 3.2 (using the balances as reflected on the Company's
Balance Sheet as of the end of the month immediately preceding the month in
which the Effective Date is scheduled to occur for purposes of the Adjustment
Regarding June 1994 Base Amount in Section 3.2(c) and the Adjustment Regarding
Assets and Liabilities in Section 3.2(d)) and accompanied by a reasonably
detailed statement, certified by the chief financial or accounting officer of
Seller, describing how each such adjustment was determined.
3.4 Adjustments After Closing.
(a) Within sixty (60) days following the Effective Date, Buyer shall
deliver to Seller final calculations of the Purchase Price, as adjusted
pursuant to Section 3.2 (prepared on the same basis (but using the balances
reflected on the Company's Balance Sheet as of the Effective Date for purposes
of the Adjustment Regarding June 1994 Base Amount in Section 3.2(c) and the
Adjustment Regarding Assets and Liabilities in Section 3.2(d)) and in
accordance with the same accounting principles, methods and practices used to
prepare the Estimated Purchase Price) which shall be accompanied by a
reasonably detailed statement certified by the chief financial or accounting
officer of Buyer describing how each such adjustment was determined. (For the
purpose of preparing Buyer's calculations and adjustments, Seller shall give
Buyer access to all books, records, and other information regarding the Company
available to Seller that Buyer may reasonably determine appropriate.) Within
thirty (30) days following the delivery of such calculations and adjustments,
Seller shall notify Buyer of any objection thereto, stating in reasonable
detail the reasons therefor; otherwise, such calculations and adjustments of
the Purchase Price shall be final and binding on Seller and Buyer. (For the
purpose of reviewing Buyer's calculations and adjustments, Buyer shall give
Seller access to all books, records, and other information regarding the
Company available to Buyer that Seller may reasonably determine appropriate.)
If Seller shall object, Seller and Buyer shall work in good faith to agree on
the correct amounts for the final Purchase Price, but if they fail to agree,
either party may exercise its rights pursuant to Article 16.
(b) Within three (3) business days following the day on which the
Purchase Price shall become final, whether by expiration of time or agreement
of Seller and Buyer (the "Final Purchase Price"):
(i) 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, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer, or
(ii) if the Estimated Purchase Price shall exceed the Final
Purchase Price, Seller shall cause to be transferred to such account in the
United States as Buyer may specify, immediately available funds, in U.S.
Dollars, in an amount equal to such excess, together with interest thereon at a
rate of seven percent (7%) per annum from the Effective Date through the date
of such transfer.
It is the intent of the parties that all Purchase Price adjustments that
are not disputed shall be paid by the appropriate party as soon as reasonably
practicable, and any disputed amounts will not delay payments with respect to
amounts not in dispute.
ARTICLE 4. [INTENTIONALLY DELETED]
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 Governmental Regulatory Approval. Except as provided in Section
5.4, as promptly as practicable after the Execution Date, but no later than
forty-five (45) days after the Execution Date with respect to applications to
be filed with the Franchising Authorities and with respect to the Material
Regulatory Approvals, the parties shall file the applications and notices
described on Schedule 5.1 in such form as agreed to by the parties with the
appropriate Governmental Authorities, including without limitation the
Franchising Authorities, seeking an order permitting the transfer of control of
the Company to Buyer (the "Regulatory Approvals"). Each party agrees to use
its best efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with all Governmental Authorities to obtain
the Regulatory Approvals as described on Schedule 5.1 at the earliest
practicable date. The parties agree that the Regulatory Approvals containing
asterisks on Schedule 5.1 constitute material Regulatory Approvals (the
"Material Regulatory Approvals") which are subject to Sections 7.1.3 and 7.2.4,
and the Regulatory Approvals that do not contain an asterisk on Schedule 5.1
constitute Immaterial Regulatory Approvals (the "Immaterial Regulatory
Approvals") which are subject to Section 5.3, but not Sections 7.1.3 and 7.2.4.
5.2 Debtholder Consents; Indebtedness Releases or Terminations.
(a) With respect to the Company's long-term indebtedness identified
on Schedule 5.2(a) (the "Long Term Indebtedness"), where required by the
underlying debt instruments, as promptly as practicable following the Execution
Date, but in any event no more than forty-five (45) days thereafter, the
parties shall contact the holders of such indebtedness to request, and use
their best efforts to obtain, such holders' consent ("Debtholder Consents") to
the transfer of control of the Company on terms acceptable to the parties. The
parties acknowledge that all Long Term Indebtedness for which Debtholder
Consents have been obtained before the Effective Date and all other Long Term
Indebtedness for which Debtholder Consent is not required, shall remain
outstanding immediately after the Effective Date and shall be included as a
Purchase Price adjustment pursuant to Section 3.2(d). Each party shall bear
their own costs and expenses in obtaining such Debtholder Consent. Neither
party, however, shall be required to make any payment to the debtholder to
obtain the Debtholder Consent, except that Seller shall be responsible for any
such payments as are specified in the relevant debt agreement.
(b) If within thirty (30) days prior to the Closing Date, the parties
have been unable to obtain the Debtholder Consents with respect to any Long
Term Indebtedness, the Company shall repay such Long Term Indebtedness in full
(including all interest and premiums or penalties thereon).
(c) With respect to Long Term Indebtedness that the Company shall repay
on or prior to the Effective Date, Seller shall take, at Seller's sole cost and
expense, all actions necessary with respect to all persons or entities
(collectively, the "Secured Parties") holding any security interest or lien
against the Property, to obtain the termination or release, as of the Effective
Date, and the prompt removal after the Effective Date, of all security
agreements, mortgages and financing statements relating to the Property (such
terminations and releases being hereinafter collectively referred to as the
"Indebtedness Releases or Terminations"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Indebtedness Releases or
Terminations.
5.3 Other Consents.
(a) As promptly as practicable after the Execution Date, the parties
hereto shall mutually seek the consent, approval or waiver of the other party
to any Lease or Contract that requires consent, approval or waiver as a
condition to the transfer of control of the Company to Buyer as a result of
Buyer's purchase of the Shares. To the extent any of the approvals, consents
or waivers required with respect to any Lease, Contract or Immaterial
Authorization have not been obtained with respect to any Lease, Contract or
Immaterial Authorization as of the Effective Date, Seller shall continue to use
its best efforts to obtain the consent of such other third party that is
required for the transfer of control of such Lease, Contract or Immaterial
Authorization after the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, if a
third party refuses or has failed to consent to the transfer of control of a
Lease, Contract or Immaterial Authorization after the Seller has used its best
efforts for a period of six months after the Effective Date to obtain such
consent, waiver or approval, then Seller and Buyer shall within thirty (30)
days after expiration of such six-month period negotiate in good faith and
agree upon, and Seller shall pay to Buyer, an amount representing fair
compensation to Buyer for the harm caused by the failure to obtain such
consent, waiver or approval. Following such payment, Seller shall have no
further obligation to Buyer with respect to such Lease, Contract or Immaterial
Authorization except as otherwise provided in Section 11.12 with respect to the
Contracts and Excluded Contracts addressed in Section 11.12.
(c) Seller shall bear all reasonable costs and expenses in obtaining
such consents, approvals or waivers to the extent such costs or expenses are
specified in the relevant Lease, Contract or Immaterial Authorization, or under
applicable Law, and shall reimburse Buyer to the extent Buyer makes any
transfer payments which are specified in amount and required under any Lease or
Contract to the lessor or other party thereto, provided that seven (7) business
days before Buyer makes any transfer payments, Buyer will notify Seller of its
intent to do so and after making such transfer payment, Buyer will provide
evidence satisfactory to Seller that such transfer payment was made. Buyer and
Seller will negotiate in good faith to determine the extent to which each will
bear any other costs and expenses arising in connection with obtaining such
consents, approvals and waivers.
5.4 FCC Consents. As promptly as practicable after the Execution Date,
but no later than forty-five (45) days after the Execution Date, the parties
shall file all applications and requests described on Schedule 5.4 in such form
as agreed to by the parties with the FCC seeking, and shall use their best
efforts to obtain, the FCC's consent to the transfer of control of all FCC
Licenses (as listed in Schedule 9.1.17(a)) from Seller to Buyer (the "FCC
Consents"). Each party agrees to use its best efforts, and the parties agree
to cooperate fully with each other and with the FCC, to obtain the FCC Consents
at the earliest practicable date.
5.5 HSR Act Review. As promptly as practicable after the Execution Date
but in no event later than thirty (30) days after the Execution Date, the
parties will make such filings as may be required by the HSR Act with respect
to the sale contemplated by this Agreement. 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.
(a) Prior to the Closing, upon reasonable notice from Buyer to
Seller given in accordance with this Agreement, Seller will afford to the
authorized representatives of Buyer reasonable access during normal business
hours to the books and records of the Company (including, without limitation,
relevant tax information) and to the personal property and Real Property
comprising the Property. Buyer and Seller will cooperate with each other to
schedule such access. With the consent of Seller (which consent will not be
unreasonably withheld), Buyer and its representatives shall have access to all
customers of the Company, and to all officers, employees and agents of the
Company having knowledge or information concerning the operations of the
Company so as to afford Buyer the opportunity to make such review, examination
and investigation of the Company and the Property as Buyer may desire to make,
to evaluate the competitiveness of the Company and the Business, and to enable
Buyer to assimilate the Company and the Business into Buyer's operations as
soon as practicable after the Effective Date. To the extent it so desires,
Seller shall accompany Buyer on all of Buyer's access to the customers and
agents of the Company. 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 the Company as to this Agreement
or the matters involved herein except in accordance with this Section 6.1.
(b) Subject to applicable law, and upon Buyer's request and Seller's
consent (which consent will not be unreasonably withheld), Seller shall cause
the Company to permit, at Buyer's sole cost and expense:
(i) certain key employees and officers of the Company selected
by Buyer to attend workshops and training sessions of Buyer (including sessions
to train such employees in Buyer's business planning process in order to have
the Company after the Effective Date follow Buyer's business planning process
and procedures);
(ii) The Company's management to work with Buyer during Buyer's
planning process between the Execution Date and the Effective Date;
(iii) Buyer to confer with the Company about, and to participate
in the Company's planning for, any material reduction in work force or other
arrangements regarding employees required or implemented pursuant to the
Employee Transfer Agreement.
(c) As promptly as reasonably practicable after Buyer's request,
Seller will furnish, and cause the Company to furnish, such financial and
operating data and other information pertaining to the Company as Buyer may
reasonably request in order, among other things, to comply with Buyer's
disclosure obligations under the federal securities or other laws as such
obligations relate to Buyer's prospective ownership of the Company, including
any disclosure required in connection with the sale of any securities by Buyer;
provided, however, that nothing herein will obligate Seller or the Company to
take actions that would unreasonably disrupt the normal course of the business
of the Company or violate the terms of any applicable Law or any contract to
which the Company is a party or to which any of its assets is subject in
providing such information, or to incur any costs with respect to Buyer's
external auditors (or the Company's external auditors in the event a report by
such auditors is requested by Buyer) providing accounting services with respect
to issuing an auditor's report required by Buyer. 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; provided, however, that following consultation with Seller, Buyer
may disseminate financial or other information with respect to the Business or
the Company that Buyer, upon consultation with counsel, determines is required
to be disclosed under federal securities laws.
(d) Prior to Closing, upon reasonable notice from Buyer to Seller
given in accordance with this Agreement, Seller will cause the Company to
afford the authorized representatives of Buyer access to the Properties in
order to conduct the environmental audit contemplated by Section 14.1.
(e) In connection with the continuing operation of the Business
between the Execution Date and the Effective Date, Seller shall cause the
Company to confer in good faith with Buyer, as reasonably requested by Buyer
from time to time, to report on material operational matters, material
reductions in work force and other material employee matters, and the general
status of ongoing operations.
(f) Notwithstanding the provisions of this Agreement or the
Confidentiality Agreement, from and after the Execution Date, upon the prior
consent of Seller (which consent will not be unreasonably withheld), Buyer may
disclose Evaluation Material (as defined in the Confidentiality Agreement) to
representatives of rating agencies, underwriters, underwriters' counsel, public
accountants, prospective lenders and other third parties involved in any of
Buyer's offering of securities or other financings and to fixed income and
equity analysts to the extent such parties reasonably have a need to know any
such information; provided, that such parties shall (y) be advised of the
confidential nature of any Evaluation Material they receive, and (z) agree in
writing to be bound to the provisions of the Confidentiality Agreement.
6.2 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.
6.3 Notification as to Certain Matters.
(a) The Buyer will promptly notify Seller of (i) any information that
would cause any representation or warranty of Buyer contained in this Agreement
not to be true and correct as of the date on which it was made or as of the
Effective Date, and (ii) any material governmental complaints, investigations,
or hearings (or communications indicating that the same may be contemplated),
or the institution or overt threat or settlement of significant litigation,
involving the transactions contemplated by this Agreement; of which in any such
case, Buyer's representatives listed on Schedule 6.3(a) become aware on or
before the Effective Date. Buyer shall use reasonable best efforts to keep
Seller informed of the events described in this Section 6.3(a) and shall permit
Seller access to all materials prepared by Buyer in connection therewith.
(b) The Seller will promptly notify Buyer of (i) any information that
would cause any representation or warranty of Seller contained in this
Agreement not to be true and correct as of the date on which it was made or as
of the Effective Date, and (ii) any material governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or overt threat or settlement of significant
litigation, involving the Company, the Business or the transactions
contemplated by this Agreement; of which in any such case, Seller's
representatives listed on Schedule 6.3(b) become aware on or before the
Effective Date. Seller shall use reasonable best efforts to keep Buyer
informed of the events described in this Section 6.3(b) and shall permit Buyer
access to all materials prepared by Seller in connection therewith.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer 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
Buyer:
7.1.1 No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller of any of its covenants to be
performed in whole or in part prior to the Closing and the representations and
warranties of Seller in Section 9.1 (after giving effect to any material
adverse effect qualification (or any other materiality qualification) contained
therein) shall be true and correct as of the Effective Date, except for such
representations or warranties that are made expressly as of some other date,
which shall be true and correct (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) as of such other date, and Seller shall have delivered to Buyer a
certificate in the form attached hereto as Schedule 7.1.1 ("Seller's Closing
Certificate"), dated as of the Effective Date and signed by one of Seller's
Executive Officers, certifying each of the foregoing, or specifying those
respects in which such covenants have been materially breached or such
representations and warranties (after giving effect to any material adverse
effect qualification (or any other materiality qualification) contained
therein) 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 unless
otherwise expressly agreed by Seller at Closing.
7.1.2 Documents. Seller shall have delivered to Buyer all documents
required by Section 8.2.
7.1.3 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions
or restrictions which Buyer determines, in good faith and in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Buyer of the transactions contemplated by this
Agreement. For purposes of this Section 7.1.3, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. 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.
7.1.4 Material Adverse Changes. There shall have been no material adverse
changes to the Property as a whole or the financial position or results of
operations of the Company as a whole, and, subject to Section 11.9, the Company
shall not have suffered any material loss or damage to the Property, whether or
not insured, that would materially affect or impair the Company's ability to
conduct the Business after the Effective Date. None of the Additional
Financial Statements of the Company delivered pursuant to Section 11.4 shall
reflect a material change in the financial position or results of operations of
the Company from the financial position or results of operations reflected in
the Financial Statements.
7.1.5 Real Estate Transfers. Seller shall have complied with Section
11.16 with respect to its Real Property to be transferred to Buyer.
7.1.6 Lessor and Other Third Party Consents. Seller shall have delivered
to Buyer all consents, approvals or waivers of lessors or other third parties
to the Material Agreements as so identified by an asterisk on Schedules 9.1.9
and 9.1.13, as such Schedules may be amended pursuant to Section 11.26. All of
such delivered consents, approvals or waivers shall be in effect as of the
Effective Date.
7.1.7 [INTENTIONALLY DELETED]
7.1.8 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Buyer's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Buyer, would involve material expense to Buyer.
7.1.9. Corporate Proceedings. All corporate proceedings required to be
taken by Seller in connection with the transactions contemplated by this
Agreement shall have been taken;
7.1.10 Lien Searches. Seller shall have delivered to Buyer reasonably
comprehensive searches, dated as of a date within 30 days of the Execution Date
or any time thereafter, of the public records regarding liens and judgments
with respect to the Company, the Business and the Property.
7.1.11. Debtholder Consents. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Buyer if required by the underlying debt instrument shall have received
the Debtholder Consents and shall have entered into any other necessary
agreements with the holders of such Long-Term Indebtedness evidencing such
Debtholder Consent in form and substance reasonably acceptable to Buyer.
7.1.12. Navajo Stock Purchase. The closing of this transaction shall be
concurrent with the closing of Buyer's purchase of all the outstanding common
stock of Navajo Communications Co., Inc. from ALLTEL Corporation, pursuant to
that certain Stock Purchase Agreement between Buyer and ALLTEL Corporation
dated November 28, 1994.
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 Misrepresentations or Breach of Covenants and Warranties. There
shall have 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 as of the Effective Date, except for such representations or warranties
made expressly as of some other date, which shall be true and correct as of
such other date (all such representations and warranties to be qualified by any
materiality standards contained therein), and Buyer shall have delivered to
Seller a certificate ("Buyer's Closing Certificate"), dated as of the Effective
Date and signed by one of Buyer's Executive Officers, 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 Seller unless otherwise expressly agreed by Buyer
at Closing.
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 Estimated Purchase Price as adjusted pursuant to
Section 3.2.
7.2.4 No Legal Obstruction. All required waiting periods under the HSR
Act shall have expired or been terminated and each of the required Material
Regulatory Approvals as set forth on Schedule 5.1 and FCC Consents as set forth
on Schedule 5.4 shall have been obtained free of any special terms, conditions,
or restrictions which Seller determines, in good faith in its reasonable
discretion, will materially and adversely affect the anticipated operational
and financial benefits to Seller of the transactions contemplated by this
Agreement. For purposes of this Section 7.2.4, all such approvals and consents
shall be deemed to have been obtained upon the grant thereof becoming a Final
Order. 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.
7.2.5 Corporate Proceedings. All corporate proceedings required to be
taken by Buyer in connection with the transactions contemplated by this
Agreement shall have been taken.
7.2.6 Litigation. There shall not be any litigation or other proceeding
pending or to the best of Seller's knowledge threatened to restrain or
invalidate any of the transactions contemplated hereby which, in the reasonable
judgment of Seller would involve a material expense to Seller.
7.2.7 [INTENTIONALLY DELETED]
7.2.8 Debtholder Consents. With respect to any Long-Term Indebtedness
to remain outstanding immediately after the Effective Date pursuant to Section
5.2(a), Seller, if required by the underlying debt instrument, shall have
received the Debtholder Consent.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall be held at a place mutually agreed upon by the parties at 9:00 a.m.,
local time, on the last calendar day (the "Closing Date") of the calendar month
in which occurs the tenth (10th) business day after the date Seller notifies
Buyer in writing (the "Notice") of its determination that all required Material
Regulatory Approvals and FCC Consents have been obtained and provided that the
other conditions set forth in Article 7 shall have been satisfied, or at such
other place and time as may be agreed upon by Seller and Buyer. The
transactions to be consummated at Closing shall be deemed to have been
consummated as of 11:59 p.m. on the last calendar day of the calendar month in
which occurs the tenth (10th) business day after the date of the Notice (the
"Effective Date"). If the Effective Date is not a day on which financial
institutions are open and operating, then the Closing Date shall be the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver
to Buyer the following documents duly executed and acknowledged, as
appropriate:
(a) Certificates representing the Shares, duly endorsed for transfer
or accompanied by stock powers duly endorsed in blank.
(b) Seller's Closing Certificate.
(c) [INTENTIONALLY DELETED.]
(d) Indebtedness Releases and Terminations and evidence satisfactory
to Buyer that all Long-Term Indebtedness (and interest, premiums and penalties
thereon) to be repaid pursuant to Section 5.2(b) has been (or will be at
Closing) repaid in full.
(e) All of the documents and papers required of Seller as conditions
to Closing, including without limitation, the Regulatory Approvals, FCC
Consents and the documents required to be delivered by Seller pursuant to
Section 11.16.
(f) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(g) The Environmental Remediation Agreement if required pursuant to
Section 14.1.7(d).
(h) All documents required of Seller under the Employee Transfer
Agreement.
(i) Certificate of the Secretary or Assistant Secretary of Seller
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
(j) Resignations of all officers and directors of the Company,
effective as of the Effective Date.
8.3 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 Estimated Purchase Price (as adjusted under Section 3.2), in
the manner specified in Section 3.1;
(b) Buyer's Closing Certificate
(c) All of the documents and papers required of Buyer as conditions
to Closing, including, without limitation, the Regulatory Approval and FCC
Consents.
(d) The Transition Services Agreement, if requested by Buyer
pursuant to Section 10.1.
(e) The Environmental Remediation Agreement if required pursuant to
Section 14.17(d).
(f) All documents required of Buyer under the Employee Transfer
Agreement.
(g) Certificate of the Secretary or Assistant Secretary of the Buyer
certifying as to Articles of Incorporation, Bylaws, Board of Directors'
approval and incumbency.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Except as to the
environmental matters which are exclusively addressed in Article 14 of this
Agreement, Seller represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement and to fulfill its respective 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, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights generally and subject to the qualification
that general equitable principles may limit the enforcement of certain
remedies, including the remedy of specific performance.
9.1.2 No Restrictions Against Sale of the Shares. The execution and
delivery of this Agreement by Seller does not, and the fulfillment by Seller of
its obligations under this Agreement will not, (i) conflict with or violate any
provision of Seller's or the Company's certificate of incorporation or bylaws
or, (ii) except as set forth in Schedule 9.1.13, or subject to obtaining the
approvals and consents reflected in Article 5, conflict with, violate or result
in the breach of, constitute a default under, accelerate the performance
required by, or result in the creation of any encumbrance upon any of the
Property under any provision of any Contract other than any such conflict,
violation or breach that alone or in the aggregate would not have an adverse
effect on the Buyer, the Company, the Business or the Property after the
Effective Date.
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,
including, without limitation, the Navajo Nation ("Governmental Authority") is
required to be obtained or made by or with respect to Seller or the Company 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 (ii) such other consents, approvals, orders or authorizations, or
registrations, declarations or filings, which if not obtained or made would not
result in a material adverse effect on Buyer, the Company, the Business or the
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 existing
statute, ordinance, rule, regulation or common law obligation (collectively,
"Law"), except where such violation would not have a material adverse effect on
the Company, the Business as a whole or on any significant part of Property
after the Effective Date.
9.1.5 Corporate Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; it
has full corporate power and authority to own the Shares and perform its
obligations under this Agreement.
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 claim against Buyer for any broker's or finder's
fees or similar fees or expenses.
9.1.7 Liabilities. The Company is not in default with respect to any of
its obligations or liabilities, or the performance, observance or fulfillment
of any covenant or condition relating thereto, and no event has occurred and is
continuing that constitutes a material breach or default thereunder or that
would constitute such a material breach or default with the giving of notice or
lapse of time, or both.
9.1.8 Title to Property. The Company has good, valid, undivided,
marketable and defensible title to all owned Property, free and clear of all
restrictions, charges, liens, or encumbrances of any kind, except for (i) the
liens, encumbrances and restrictions shown and disclosed on Schedule 9.1.8-1,
(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 or value of the item of owned Property to which such
imperfection or encumbrance relates. No condemnation proceeding is pending or,
to the knowledge of Seller or the Company, threatened with respect to any part
of the Property and such Property is not in any violation of any restrictive
covenant relating thereto. Schedule 9.1.8-2 sets forth the address and a
general description of each item of Real Property owned by the Company included
in the Property. In addition, Schedule 9.1.8-2 sets forth a list of the Real
Property included in the Property in which the Company holds other than a fee
interest (such as easements and rights of way).
9.1.9 Leases. Seller has set forth on Schedule 9.1.9 a list of all the
Leases. Each of the Leases is valid, binding and enforceable in accordance
with its terms, and except as otherwise disclosed in Schedule 9.1.9, there is
not any existing material default or existing material breach of a covenant by
the Company under any Lease. The Company enjoys peaceful and undisturbed
possession under all material Leases and, to Seller's and the Company's
knowledge, the lessor under any such Lease is not (with or without notice or
the lapse of time, or both) in material breach or default thereunder, has
performed all material obligations required to be performed by it thereunder,
and has not given notice of such lessor's intent to terminate such Lease.
9.1.10 Condition of Tangible Assets. All of the tangible Property is in
substantially good operating condition and repair, normal wear and tear
excepted, well maintained, adequate for the present uses thereof and in
compliance in all material respects with applicable federal, state and local
ordinances, regulations and statutes relating to the ownership and operation of
such Property. Except as set forth on Schedule 9. 1. 10, the Company 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
Company, the Business as a whole or any significant part of the Property. Each
parcel of Real Property and, to the knowledge of Seller and the Company, of
real estate leased by the Company and material or necessary to the Business as
presently conducted substantially complies with all applicable Laws except
where the failure to so comply individually or in the aggregate, would not have
a material adverse effect on the Company, the Business as a whole or any such
parcel after the Effective Date. Except as set forth on Schedule 9.1.10, other
than the Company, no person or party has actual possession or has a right to
possession of all or any material portion of any parcel of such Real Property
or such leased real estate. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
9.1.10, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED OR STATUTORY, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE PERSONAL
PROPERTY INCLUDED IN THE PROPERTY AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
OR STATUTORY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
9.1.11 Financial Statements.
(a) Seller has delivered to Buyer a true and correct copy of the
Company's audited financial statements, consisting of a balance sheet, income
statement and related statement of cash flows as of and for the respective
periods ended December 31, 1992, and December 31, 1993, together with the
auditor's report thereon (the "Financial Statements"). The Financial
Statements were prepared based upon the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
as of the appropriate periods and the results of operations for the year then
ended, in each case in conformity with GAAP and to the best of Seller's
knowledge and to the extent required by applicable Law, have been prepared in
all material respects in conformity with the regulations of the FCC. The
Financial Statements contain no untrue statements of any material fact nor omit
to state any material facts required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The Additional Financial Statements to be delivered to Buyer
pursuant to Section 11.4 hereof (i) will be prepared in each case in accordance
with GAAP (except for the omission of notes thereto with respect to interim
Additional Financial Statements), consistent with past practices, from the
books and records of the Company; and (ii) will fairly present the financial
condition of the Company and the results of operations of the Company for the
periods indicated, subject, in the case of interim Additional Financial
Statements, to normal year-end adjustments which will not be material in amount
or effect; and (iii) to the best of Seller's knowledge and to the extent
required by applicable Law, will be prepared in all material respects in
conformity with the regulations of the FCC; and (iv) will not contain any
untrue statements of any material facts or omit to state any material facts
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The unaudited balance sheet of the Company as of June 30, 1994
was prepared in accordance with GAAP except for the omission of notes thereto,
consistent with past practices, from the books and records of the Company and
fairly presents the financial condition of the Company as of such date subject
to normal year-end adjustments which will not be material in amount or effect,
and to the best of Seller's knowledge and to the extent required by applicable
Law, was prepared in all material respects in conformity with the regulations
of the FCC.
9.1.12 Absence of Material Changes. Except as Seller may disclose in
Schedule 9.1.12, since December 31, 1993, there has not been:
(a) Except as described in Section 11.22, any material change in
the financial condition, results of operations, assets, liabilities, operations
or future business prospects of the Company or the Business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Property, the Company or the
Business;
(c) Except as described in Section 11.22, any disposition
(including, without limitation, the grant of a license, franchise, option or
other right of any nature whatsoever to sell or distribute) or encumbrance or
agreement to dispose of or to encumber, or pledge or grant of a security
interest in or agreement to pledge or grant a security interest in, any of the
Property, or any increase or an agreement to increase any indebtedness of the
Company, except in the ordinary course of business;
(d) Any material change in the manner of conducting the Business;
(e) Except as described in Section 11.22, any dispute, litigation or
other event or condition that materially and adversely affects the business or
prospects of the Company, the Business or the Property;
(f) Any waiver or release of any material rights or settlement of
any material dispute involving the Company, the Business or the Property;
(g) Any granting of a material salary increase or other material
benefits payable to any Employee, except for ordinary and routine salary
increases or bonuses authorized or granted in the ordinary course of business
and consistent with past practices;
(h) Except as described in Section 11.22, any transaction entered
into by Seller or the Company that would have a material adverse effect on the
Company, the Business as a whole or the Property as a whole;
(i) Any change in the accounting methods or practices of the Company
except as required by GAAP or any change in depreciation or amortization
policies or rates heretofore adopted by the Company except as required by GAAP;
(j) Any material labor dispute or threat thereof which affects
generally the Transferred Employees or, to Seller's or the Company's knowledge,
any attempt to organize the Transferred Employees for the purpose of collective
bargaining;
(k) Any event that would have been prohibited under Section 11.5 if
Section 11.5 had been in effect since December 31, 1993;
(l) Except as described in Section 11.22, any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, the Company;
(m) any amendment of any material term of any outstanding capital
stock of the Company;
(n) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practice;
(o) Except as described in Section 11.22, any making of any loan,
advance or capital contributions to or investment in any person or entity other
than loans, advances, capital contributions or investments made in the ordinary
course of business; or
(p) Except as described in Section 11.22, any agreement or
commitment by Seller or the Company (or any understanding between Seller or the
Company and any third party) to do or to take any of the actions referred to in
paragraphs (a) through (o) of this Section 9.1.12.
9.1.13 Contracts. Each of the Contracts is in full force and effect as of
the date of this Agreement in accordance with its terms, and there is no
outstanding notice of cancellation or termination in connection therewith. The
Company is not in material breach or default in connection with any Contracts,
and there is no basis for any claim of breach or default by the Company, or to
Seller's the Company's knowledge, any other party, in any material respect
under any of the Contracts. None of the Contracts, either separately or in the
aggregate, materially and adversely affects the Company, the Business or the
Property. After the Effective Date, all rights and obligations of the Company
under the Contracts shall continue unimpaired in the Company (assuming that if
any Contract requires the consent of the other party thereto, such consent will
have been obtained by the parties hereto prior to the Effective Date). Except
for the instruments specifically listed in Schedule 9.1.13, the Company is not
a party to or subject to: (i) 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
($25,000.00); (ii) any agreement to which the Company is a party or by which
any of the Property is bound relating to indebtedness for money borrowed
including capital leases, security arrangements relating thereto and any
amendment or waiver thereof; and (iii) any other agreement not of the type
covered by any of the foregoing items of this Section 9.1.13 requiring payments
by the Company in excess of Seventy-Five Thousand Dollars ($75,000.00) per
agreement, on or after the Effective Date.
Schedule 9.1.13 also lists (a) each Contract between the Company and any
Affiliate of the Company, and (b) each material Contract between the Company,
or an Affiliate of the Company and relating to the Business, and any third
party. Seller has made available to Buyer true and correct copies of all
agreements and instruments listed in Schedule 9.1.13. Schedule 9.1.13
specifically identifies, with respect to those Contracts which are required to
be listed thereon, the Contracts which require the consent, approval or waiver
of the other party thereto for the transfer of control of the Company.
9.1.14 Insurance. The Property of an insurable nature and of a character
usually insured by companies carrying on similar businesses is insured under
insurance policies 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. The insurance policies referred to in this Section 9.1.14 are (i)
listed on Schedule 9.1.14, and (ii) in full force and effect and the premiums
due thereon have been duly and timely paid. The most current statement of
values (the statement of values of property of an insurable nature that is
submitted to an insurance company to be used as a basis for the calculation of
premiums) relative to the Property as presently insured has been made available
to Buyer by Seller. On the Effective Date, the coverage under the insurance
policies and programs of Seller and its Affiliates applicable to the Company
will be terminated, and Buyer will be responsible for providing all insurance
coverage for the Company. Following the Effective Date, 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 Effective Date
relating to the Company and shall be entitled to any refunds or dividends due
from such companies relating to such coverage. Schedule 9.1.14 sets forth a
list of the open material claims affecting the Company complete in all material
respects, and a description of any self-insurance levels, underlying limits and
deductibles.
9.1.15 Taxes.
(a) Except as set forth on Schedule 9.1.15(a): (i) Seller or the
Company has filed or caused to be filed with the appropriate United States,
state and local Governmental Authorities, all Tax Returns required to be filed
on or prior to the Effective Date (taking into account all extensions of due
dates) by or with respect to the Company and has paid or adequately provided
for all Taxes shown thereon as owing, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, have a material adverse effect on Buyer, the Business, or the Company after
the Effective Date, (ii) all such Tax Returns were or will be correct and
complete in all material respects, (iii) to the knowledge of Seller, all
withholding Tax requirements imposed on or with respect to the Company have
been or will be satisfied in full in all respects, and (iv) all penalties,
interest or other charges that have or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax have been or will
be timely paid in full.
(b) The Company has been subject to normal and routine audits,
examinations and adjustments of Taxes from time to time, but there are no
material current audits or material audits for which notification has been
received (in either case with respect to the Company) other than those set
forth on Schedule 9.1.15(b).
(c) Except as set forth in Schedule 9.1.15(c), there is no material
written claim against the Company for any Taxes, and no material assessment,
deficiency or adjustment has been asserted or, to the knowledge of Seller
proposed with respect to any Tax Return of or with respect to the Company.
(d) Except as set forth in Schedule 9.1.15(d), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect
to the Company.
(e) Except for Taxes due with respect to Tax Returns that will be
paid by Seller, the balance sheet included in the Financial Statements includes
adequate provisions for the payment in full of all federal and state income
taxes of the Company for all taxable periods or portions thereof during the
period beginning with respect to each Tax Return statute of limitations and
ending no later than December 31, 1993. The balance sheet included in the
Financial Statements has attached thereto a schedule (the "Tax Schedule") which
sets forth provisions for such federal and state income taxes.
(f) All accrued rights or obligations under any written or unwritten
Tax allocation or sharing agreements or arrangements affecting the Company are
reflected in the intercompany accounts of the Company. All such Tax allocation
or sharing agreements or arrangements have been or will be cancelled on or
prior to the Effective Date. No payments are or will become due by the Company
after the Effective Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 9.1.15(g), none of the property
of the Company is held in an arrangement for which partnership Tax Returns are
being filed, and the Company does not own any interest in any controlled
foreign corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Schedule 9.1.15(h), none of the property
of the Company or any of its Subsidiaries is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section 168(h) of
the IRC) or "tax-exempt bond financed property" (within the meaning of Section
168(g)(5) of the IRC).
(i) Except as set forth in Schedule 9.1.15(i), the Company will not
be required to include any amount in income for any taxable period beginning
after December 31, 1993 as a result of a change in accounting method for any
taxable period ending on or before December 31, 1992 or pursuant to any
agreement with any Tax authority with respect to any such taxable period.
(j) The Company has not consented to have the provisions of Section
341(f)(2) of the IRC apply with respect to a sale of its stock.
(k) As a result of the transactions contemplated by this Agreement,
neither Buyer nor the Company will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the IRC without regard to whether
such payment is reasonable compensation for personal services performed or to
be performed in the future.
(l) All Taxes that the Company is required by law to withhold or
collect through the Effective Date have been or will be duly withheld or
collected and, to the extend required, have been or will be paid to the proper
governmental authorities or properly deposited as required by applicable laws.
9.1.16 No Material Claims. Except as disclosed in Schedule 9.1.16 or with
respect to Taxes, there are no claims, actions, lawsuits or legal or
administrative proceedings pending, or, to the knowledge of Seller or the
Company, threatened against or affecting the Company or its properties that, if
determined adversely to the Company, would reasonably be expected to have a
material adverse effect on the Company, the Business as a whole or any
significant part of the Property. Neither Seller nor the Company knows of any
reasonable basis for any such action, claim, lawsuit or proceeding or any
governmental or regulatory investigation relative to the Company, the Business
as a whole or the Property. The Company is not in default under any judgment,
order or decree of any Governmental Authority which would reasonably be
expected to have a material adverse effect on the Company, the Business as a
whole or any significant part of the Property after the Effective Date.
9.1.17 FCC Licenses, Franchises and Non-FCC Authorizations.
(a) Listed on Schedule 9.1.17(a) are the FCC Licenses held by the
Company. Each such FCC License is in full force and effect in accordance with
its terms, and there is no outstanding notice of suspension, cancellation or
termination or, to Seller's or the Company's knowledge, any threatened
suspension, cancellation or termination in connection therewith nor are any of
such FCC 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). The FCC Licenses are free from all
security interests, liens, claims, or encumbrances of any nature whatsoever.
Except as set forth on Schedule 9.1.17(a), there are no applications by the
Company or material complaints or material petitions by others or proceedings
pending or threatened before the FCC relating to the Company or the FCC
Licenses.
(b) Listed on Schedule 9.1.17(b) are the Franchising Authorities and
the Franchises, including any amendments thereto, held by the Company. Seller
has made available to Buyer a copy of each Franchise. The Company is in
substantial compliance with each of the Franchises and there has not occurred
any default (without regard to lapse of time or the giving of notice, or both)
by the Company under any of the Franchises, except such defaults which
individually or in the aggregate do not have a material adverse effect on the
Property or the Business and each Franchise is in full force and effect in
accordance with its terms, and there is no outstanding notice of suspension,
cancellation, modification or termination or, to Seller's or the Company's
knowledge, any threatened suspension, cancellation, modification or termination
in connection therewith nor are any of such Franchises subject to any
restrictions or conditions that limit the operations of the Business in any
material respect. Schedule 9.1.17 (b) lists any Franchising Authority which
has an option or right to purchase any Franchise. No Franchising Authority has
notified Seller in writing of its intention to exercise its rights to purchase
any System or portion thereof subject to such Franchise. Except as disclosed
in Schedule 9.1.17(b), the Franchises are free from all security interests,
liens, claims, or encumbrances of any nature whatsoever; there are no
applications by the Company or material complaints or material petitions by
others or proceedings pending or threatened before any Franchising Authority
relating to the Company or the Franchises.
(c) Listed on Schedule 9.1.17(c) are all Non-FCC Authorizations
materially necessary for the conduct of the Business which would include,
without limitation, all FAA radio tower ownership authorizations. Each such
Non-FCC Authorization is in full force and effect in accordance with its terms.
To Seller's and the Company's knowledge, no event has occurred with respect to
any materially necessary Non-FCC Authorization which permits, or after notice
or lapse of time or both would permit, revocation or termination thereof, or
would result in any other material impairment of the rights of the holder of
such materially necessary Non-FCC Authorization.
9.1.18 Employee Matters.
(a) Schedule 9.1.18(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(1) of ERISA maintained or contributed to by the Company or
any of its Affiliates in respect of any Transferred Employee (as defined below)
(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 the Company or its Affiliates in respect of or for the
benefit of any Transferred 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 Transferred Employees or former employees
employed or formerly employed by the Company outside of the United States, as
of the date hereof (collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Seller has supplied Buyer with a true and
complete copy of each Plan and all amendments thereto. Schedule 9.1.18(a) also
includes a list of each material written employment, severance, termination or
similar-type agreement between the Company or its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except to the extent that
any assets, liabilities, or accounts are transferred from the Plans or
Agreements (pursuant to an Employee Transfer Agreement or otherwise) to plan(s)
or agreement(s) maintained or contributed to by Buyer, all such Plans and
Agreements shall remain the liabilities of the Seller or its Affiliates and
Seller shall take any and all steps necessary to ensure that neither Buyer nor
the Company shall be a sponsor of any such Plan or Agreement subsequent to the
Effective Date. Except as otherwise disclosed on Schedule 9.1.18(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 by the Company or its Affiliates to any Transferred 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 by the Company or its Affiliates to any Transferred Employee.
(b) Except as set forth on Schedule 9.1.18(b):
(i) Neither the Company 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 the Company 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 with respect to the ERISA Plans has been incurred or is
reasonably expected to be incurred by the Company or any of its Affiliates
(other than liability for premiums due to the PBGC), unless such liability is
reserved for or otherwise reflected on the Financial Statements or unless such
liability has been, or prior to the Effective Date will be, satisfied in full.
(iii) There is no contract or Employment Agreement covering any
Transferred Employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(iv) Neither the Company nor any of its Affiliates has engaged
in, or is a successor or parent corporation to a person that has engaged in, a
transaction described in Section 4069 of ERISA.
(c) Except as set forth on Schedule 9.1.18(c), with respect to the
ERISA Plans other than those ERISA Plans identified on Schedule 9.1.18(a) as
"multi-employer plans":
(i) the PBGC has not instituted proceedings to terminate any
Plan that is subject to Title IV of ERISA (the "Retirement Plans") and no
condition exists or has existed which could constitute grounds for any
termination by PBGC;
(ii) no filing has been made by the Company, or any of its
Affiliates with the PBGC to terminate any Retirement Plan identified on
Schedule 9.1.18(a);
(iii) 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 Execution Date;
(iv) each of the ERISA Plans has been operated and administered
in all material respects in accordance with its provisions and with all
applicable laws;
(v) 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;
(vi) there are no pending material actions, claims or lawsuits
which have been asserted or instituted against any of the ERISA Plans, the
assets of any of the trusts under such Plan, the plan sponsor, the plan
administrator, trustee or any other fiduciary of such Plans with respect to any
aspect of such ERISA Plans (except for routine benefit claims or routine
expenses).
(d) Except as set forth on Schedule 9.1.18(d), none of the ERISA Plans
is a "multi-employer 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
Schedule 9.1.18(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 the Company that is not reserved for or otherwise reflected on the Financial
Statements.
(e) Except as set forth on Schedule 9.1.18(e), no post-retirement
medical and life insurance benefit obligations exist with respect to any
Transferred Employees of the Company.
(f) No Plan identified on Schedule 9.1.18(a) has any restrictions
against termination or modification, either by its terms or, to Seller's or the
Company's knowledge, due to any written or oral communications by any
representative of the Company nor any of its Affiliates.
(g) Except as set forth on Schedule 9.1.18(g), (i) none of the
Transferred Employees are represented by a labor union or labor organization
and (ii) neither the Company nor any of its Affiliates is a party to nor is the
Company subject to, any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work
stoppages or lockouts by or with respect to any Transferred Employee covered by
collective bargaining agreements. Except as set forth on Schedule 9.1.18(g),
to the best knowledge of Seller and the Company, during the twelve (12) months
preceding the Execution Date there have not been any union organizational
campaigns by or directed at the employees of the Company.
Except as set forth on Schedule 9.1.18(g), no condition has existed or
exists that has caused or could be expected to result in the imposition of any
lien or encumbrance under ERISA or the IRC on any part of the Property.
(h) Seller will make available to Buyer, prior to the Closing Date,
a list of those Transferred Employees that Seller believes to have participated
in the health or dependent care reimbursement accounts of the Company, together
with the elections made prior to the Effective Date with respect to such
accounts through the Effective Date.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will cause any
acceleration of benefits under any Plan.
9.1.19 Schedules of the Cable Plant. Seller has set forth on Schedule
9.1.19 copies of schedules (at the level of detail agreed to by the parties but
in any case including details regarding net book value) of the Company's Cable
Plant as of June 30, 1994, including, to the extent available, a schedule
specifically identifying the Cable Plant that is associated with the
Unregulated Business.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) Schedule 9.1.20 (a) sets forth, for each System, a material true
and accurate description of the following information as of the dates
specified:
(i) the number of miles of plant included in the Property as
reported to the FCC in the Annual Reports of Cable Television Systems for 1993
(FCC Form 325);
(ii) the number of Subscribers served by the System as reported to the
FCC in the Annual Reports of Cable Television Systems for 1993 (FCC Form 325);
(iii) the number of Potential Subscribers as served by the System as
reported to the FCC in the Annual Reports of Cable Television Systems for 1993
(FCC Form 325);
(iv) the average monthly billings for the radio services;
(v) the last twelve months total billing for the radio services for
the month ending October 31, 1994;
(vi) the number of radio services customers as of October 1994;
(vii) the significant radio services customers (billings over
$5,000.00 per month);
(viii) a description of basic and optional or tier services
available from the System, the rates charged for each, and the number of
Subscribers receiving each optional or tier service as of June 30, 1994;
(ix) the stations and signals carried by the System and the channel
position of each such signal and station as of June 30, 1994; and
(x) the cities, towns, villages and counties served by the System
as of June 30, 1994.)
(b) Schedule 9.1.20 (b) sets forth a substantially complete list of all
vehicles included in the Property (including trailers, equipment mounted on
trailers and self-propelled equipment) together with the manufacturer, model
and year of each such vehicle, and indicates whether such vehicle is owned or
leased by the Company.
9.1.21 [INTENTIONALLY DELETED]
9.1.22 Payments. All material payments of any kind required to be made by
the Company to third parties under any Contract and maturing prior to the
Effective Date have been, or will be as of the Effective Date, properly and
timely paid or provided for, unless otherwise subject to a bona fide dispute
disclosed in Schedule 9.1.22.
9.1.23 Compliance with Laws.
(a) Except as Seller shall specifically indicate on Schedule
9.1.23(a), (i) the Company is in compliance in all material respects with all
Laws (including, without limitation the Communications Act, the Copyright Act
and the laws, rules and regulations of any Franchising Authority and the FAA)
applicable to it, the Property and the Business and holds all governmental
permits or licenses required in order to conduct the Business and to own and
operate the Property; (ii) the present uses of the Property in the conduct of
the Business do not violate in any material respect any Law and (iii) no
written notice or warning from any governmental or regulatory authority with
respect to any failure or alleged failure by the Company to comply with any Law
or questioning the validity of any governmental permit or license, has been
issued or given, nor to the knowledge of Seller or the Company, is any such
notice or warning proposed or threatened. Neither Seller nor the Company is
aware of any fact, event or circumstance relating to the Company that is
reasonably likely to cause a regulatory agency to deny or withhold its approval
to the transactions contemplated hereby.
(b) Except as Seller shall specifically set forth in Schedule
9.1.23(b), the Company has made all material submissions under any laws, rules
and regulations of the FCC, the U.S. Copyright Office, any Franchising
Authority and the F.A.A.
(c) (i) Except as Seller shall specifically set forth in Schedule
9.1.23(c)(i), the Company has timely filed all required forms and other
materials with the Franchising Authorities and the FCC with regard to the rates
charged by the Company to its subscribers and, except as Seller shall
specifically set forth on Schedule 9.1.23(c)(i), to the best of Seller's and
the Company's knowledge, the rates presently charged by the Company are in
compliance with the FCC's rate regulations.
(ii) Schedule 9.1.23(c)(ii) lists all of the Franchising
Authorities which have been certified to regulate the rates charged by the
Company and the status of all rate proceedings pending before said Franchising
Authorities.
(iii) Schedule 9.1.23(c)(iii) lists all complaints filed with the
FCC or any other Governmental Authority regarding the rates charged by the
Company in connection with the NCCSI Systems and the status of these
complaints.
(d) Except as Seller shall specifically disclose in Schedule 9.1.23(d),
the Company is authorized to use all frequencies in the aeronautical bands
currently being used in the Business.
9.1.24 Correct Records. The financial records, ledgers, account books and
other accounting records of the Company are current, correct and complete and
reasonably well organized, in all material respects and to the knowledge of
Seller and the Company, to the extent required by applicable Law, conform in
all material respects with the rules and regulations of the FCC. The Company
and its Affiliates have retained substantially all Original Cost Documents
regarding the expenditures made by the Company within the immediately preceding
two-year period that relate to the Company's Net Telecommunications Plant, and
such Original Cost Documents are correct and complete in all material respects.
9.1.25 Materials and Supplies. As of the Effective Date, the value (as
reflected on the Company's books) of the Company's materials and supplies
relating to the Business which are obsolete or in excess of the requirements of
the Business, will not materially exceed the Company's reserve for obsolete or
excess Materials and Supplies as reflected on the Company's books.
9.1.26 Assets Necessary to the Business. The Property includes all of
the assets and properties (including all licenses and agreements) currently
being used or which are reasonably necessary to carry on the Business as
currently conducted, other than the assets and properties included in the
Excluded Property.
9.1.27 Indian and BIA Consents.
(a) Schedule 9.1.27 sets forth all easements, rights-of-way,
franchises, licenses, permits, consents, approvals, certificates and other
authorizations of tribal authorities and the United States Bureau of Indian
Affairs (the "BIA") held by the Company (collectively "Indian Authorizations").
All such Indian Authorizations are in full force and effect, the Company is not
in material default thereunder, and there are no other Indian Authorizations
required to be obtained by the Company from, or filings required to be made by
the Company with, any tribal authority or the BIA; except where the failure to
obtain such Indian Authorizations or to make such filings would not have a
material adverse effect on the Company, the Business as a whole or on any
significant part of the Property after the Effective Date.
(b) Except as disclosed on Schedule 9.1.27, there are no material
claims, actions, lawsuits or other proceedings pending, or, to the knowledge of
Seller or the Company threatened, with respect to any of the Property located,
or any operations of the Business conducted, on Indian reservations or tribal
lands, and no tribal authority has given written notice of or, to Seller's or
the Company's knowledge, has threatened, any cancellation, revocation,
termination or material amendment or modification of any Indian Authorization.
(c) Except as set forth on Schedule 9.1.27, no consent, approval or
waiver from, or filing with, any tribal authority or the BIA is required to be
obtained or made in connection with the execution and delivery by Seller of
this Agreement, or Seller's fulfillment of its obligations under this
Agreement.
9.1.28 Unregulated Business. Schedule 2.2(b) is an accurate summary
description of the Unregulated Business, in detail reasonably acceptable to
Buyer.
9.1.29. Capital Improvements Required by the Franchising Authorities.
Except as set forth on Schedule 9.1.29, there are no changes, modifications,
upgrades or enhancements required by the Franchising Authorities to be made to
the Property or the operation thereof.
9.1.30 Undisclosed Liabilities. Except as contemplated by this Agreement
or as otherwise set forth in Schedule 9.1.30 the Company has no liabilities or
obligations of any nature, secured or unsecured (absolute, accrued, contingent
or otherwise and whether due or to become due), of a nature required to be
recorded or disclosed in a corporate balance sheet prepared in accordance with
GAAP, except liabilities and obligations which are not materially in excess of
amounts reflected, reserved against or disclosed in the December 31, 1993
Financial Statements or the notes thereto and except for liabilities and
obligations incurred in the ordinary course of business since December 31,
1993. Except as may be reflected in the December 31, 1993 Financial Statements
or the notes thereto or on Schedule 9.1.30, the Company has no obligations
under guarantees, endorsements or indemnities of the obligations of any other
person or entity.
9.1.31 Banks. Schedule 9.1.31 lists the name of each bank in which the
Company has an account or safe deposit box, and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons
holding a power of attorney from the Company.
9.1.32 Ownership of Shares. Seller is the record and beneficial owner of
the Shares, which comprise 100% of the outstanding shares of all classes of
capital stock of the Company. Seller has legal, valid and marketable title to
the Shares, free and clear of all liens, claims, options, security interests or
other encumbrances of any character whatsoever ("Encumbrances"). The sale and
delivery of the Shares to Buyer pursuant to Article 2 will vest in Buyer legal,
valid and marketable title to the Shares free and clear of all Encumbrances
other than Encumbrances created or suffered by Buyer and restrictions on sales
of the Shares under applicable federal and state securities laws.
9.1.33 Capital Stock. The Common Stock is the only capital stock
authorized to be issued by the Company. The Shares are the only shares of
Common Stock outstanding. All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. Except as described on Schedule 9.1.33,
there are outstanding no securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of the Company nor are there
any subscriptions, warrants, options, rights or other arrangements or
commitments (other than this Agreement) which could obligate Seller or the
Company to issue any shares of capital stock or dispose of any ownership
interest therein. There are no outstanding obligations of the Company to issue
or deliver, or to repurchase, redeem or otherwise acquire any capital stock or
other securities of the Company.
9.1.34 Investments. Set forth on Schedule 9.1.34 is the name of each
corporation, partnership, joint venture or other entity in which the Company
has, or pursuant to any agreement will have, directly or indirectly, the right
to acquire by any means, an equity interest therein, together with a
description of the Company's interest (or right to acquire the same) in such
entity, including any Encumbrances on such interest.
9.1.35 Corporation Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Texas;
it has full corporate power and authority to own its properties and to carry on
the Business as it is now being conducted, and to own or hold under the lease,
the Property.
9.1.36 Copyright.
(a) Except as disclosed on Schedule 9.1.36(a), for each relevant
semi-annual reporting period within the last three years, the Company has
timely filed with the U.S. Copyright Office all required statements of account
in materially true and correct form, and has paid when due all required
copyright royalty fee payments in correct amount, relating to the NCCSI
Systems' carriage of television broadcast signals.
(b) Except as disclosed on Schedule 9.1.36(b), the Company within
the last three years has responded to all written inquiries received by the
Company or brought to the Company's attention from the U. S. Copyright Office
with respect to statements of account and other documents and instruments filed
with respect to the NCCSI Systems, and has submitted or will submit factual
information, amended statements of account and supplemental royalty fee
payments as appropriate in response to such inquiries.
9.1.37 FAA Authorization. All necessary FAA approvals have been obtained
with respect to the operation of the towers on which the equipment used or held
for use in the Business is located, and all towers owned by the Company are
properly marked and lighted pursuant to FAA regulations except where the
failure to mark and light such towers would not have a materially adverse
effect on the Company as a whole, the Business as a whole or any significant
part of the Property after the Effective Date.
9.1.38 Overbuilds. Except as disclosed on Schedule 9.1.38, (i) to the
best knowledge of the Seller and the Company, the Company is currently the only
cable television operator providing or intending to provide cable television in
the service area of the Systems; and (ii) to the best knowledge of the Seller
and the Company, no person other than the Company possesses a valid cable
television franchise to serve any of the communities or unincorporated areas
presently served by the Systems.
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 Delaware
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 under its Certificate of Incorporation and Bylaws
to execute and deliver this Agreement, to own the Shares 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 Shares upon the consummation of the transactions contemplated by this
Agreement. 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, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and subject to the qualifications that general equitable principles may limit
the enforcement of certain remedies, including the remedy of specific
performance.
9.2.3 No Restrictions Against Purchase of the Shares. 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, constitute
default under, or accelerate the performance required by any Contract to which
Buyer is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, 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 (i) the filings and
approvals described in Article 5, and (ii) the filings and approvals listed on
Schedule 9.2.3.
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 Brokers. Buyer 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 claim against Seller for any broker's or finder's
fees or similar fees or expenses.
9.2.6 No Material Claims. There are no claims, actions, lawsuits or legal
proceedings pending or, to the knowledge of Buyer, threatened against Buyer or
its properties that would prevent the consummation of the transactions
contemplated by this Agreement.
9.2.7 [INTENTIONALLY DELETED]
9.2.8 Investment. Buyer understands that the Shares that it will acquire
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Act"), and cannot be offered for sale, sold or otherwise
transferred unless the Shares subsequently are so registered or qualified for
exemption from registration under the Act. The Shares are being acquired under
this Agreement by Buyer in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Act. The Shares will not be offered for sale, sold or otherwise
transferred by Buyer without either registration or exemption from registration
under the Act and applicable state securities laws. Buyer has such knowledge
and experience in financial and business matters that Buyer is capable of
evaluating the merits and risks of Buyer's investment in the Shares. Buyer
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding the Shares for an indefinite
period of time, inasmuch as the Shares have not been registered under the Act).
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Services Agreement. If requested in writing by Buyer on
or prior to March 15, 1995, the parties shall, as promptly as practicable but
in any event within 30 days after Buyer's written request, negotiate in good
faith and enter into a Transition Services Agreement, to be effective no later
than the Effective Date, pursuant to which Seller will provide to the Company,
at the Company's expense, such financial, accounting, billing, computer,
network, administrative and other services (including services relating to the
conversion of systems and processes) as may be reasonably requested by Buyer,
which agreement shall be in form and substance as mutually agreed to by both
Buyer and Seller (the "Transition Services Agreement").
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
11.1.1 Definition. "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.
11.1.2 Grant by Seller.
(a) Subject to the terms and conditions of this Agreement Seller
will use its best efforts to assist the Company (provided that Buyer shall be
responsible for any fees associated therewith) in obtaining the consent of any
necessary third party for the use of any Intellectual Property that the Company
has placed in public use on, or prior to, the Effective Date and that is
presently used by the Company, but excluding any Intellectual Property listed
in Schedule 11.22(h).
(b) The above Section 11.1.2(a) sets forth Seller's entire
obligation with respect to the Intellectual Property to the Company. Except as
specifically provided otherwise in this Agreement or any other agreement
between Buyer and Seller, Seller shall have no continuing obligation beyond the
Effective Date to provide support of any kind in the Company's use of such
Intellectual Property.
(c) Buyer agrees and understands that Seller or its Affiliates shall
retain ownership of all Intellectual Property owned by Seller or its Affiliates
as of the Effective Date. Buyer further agrees and understands that the
retained ownership shall include the right of Seller to grant licenses to
vendors and customers of Seller, and to other third parties.
(d) Additional agreements, if any, between Buyer and Seller
regarding possession and use by the Company of computer software that is owned
by Seller, or that is licensed by an Affiliate of Seller to Seller, are set
forth in Schedule 11.1.2.
11.1.3 Nonassertion. Seller agrees that, with respect to the Intellectual
Property that as of the Effective Date the Company owns or controls or under
which it has the right to grant licenses, Seller shall not assert against
Buyer, or Affiliates of Buyer, or vendees, mediate or immediate, of Buyer or
the Company, a claim of infringement, misappropriation or misuse of such
Intellectual Property right arising from the Company's activities practiced in
the ordinary and normal course of the Business.
11.1.4 Infringement.
(a) Notwithstanding any other provision of this Agreement and
subject to the representation in Section 11.1.3, Buyer understands that Seller
has not made or given, and does not make or give, any warranty as to the value,
enforceability, or validity of any Intellectual Property or that the use by the
Company of any Intellectual Property under this Agreement will not infringe
other intellectual property rights not licensed under this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
agreement by, or obligation of, Seller to bring or prosecute actions or suits
against third parties for infringement or violation of any Intellectual
Property licensed hereunder.
(c) Seller shall have no obligation to defend, indemnify or hold
harmless the Company or Buyer from any damages, costs or expenses resulting
from any obligation, proceeding or suit based upon any claim that any activity,
subsequent to the Effective Date, engaged in by Buyer, the Company, a customer
of Buyer's or the Company's or anyone claiming under Buyer or the Company
constitutes direct or contributory infringement or misuse of any intellectual
property rights not licensed under this Agreement.
(d) Buyer shall be liable for and shall hold Seller and its
Affiliates harmless from and against any and all Indemnifiable Losses resulting
from any obligation, proceeding or suit based upon any claim that any activity
conducted or engaged in, subsequent to the Effective Date, by Buyer, the
Company, a customer of Buyer's or the Company's, or anyone claiming under Buyer
or the Company constitutes direct or contributory infringement, or misuse, or
misappropriation of any intellectual property right of any third party.
11.1.5 Trademark Phaseout; Corporate Name Change.
(a) Buyer acknowledges that Seller or its Affiliates are the owners
of, and have permitted the Company to use, certain trade names, trade dress,
trademarks, service marks, logos and related intangible property (collectively,
"Marks") used in connection with the Business, including, without limitation,
the items listed on Schedule 11.1.5, and Buyer understands and agrees that the
Marks, or any right or license of the Company 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
cause the Company not to use the Marks (or any names or Marks confusingly
similar to the Marks) except as expressly set forth in this Section 11.1.5.
After the Effective Date, Buyer shall cause the Company to replace all Marks of
Seller as soon as possible, but in no event later than one hundred eighty (180)
days after the Effective Date for Marks affixed to items with a valid
continuing use in the Company'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
Effective Date, Buyer will cause the Company to not use, and will destroy or
deliver to Seller, all such items with Marks affixed to them that have no valid
continuing use in the Company's conduct of the Business, including items
affecting customer or employee relations or items that do not reflect the
Company'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.
(b) Within two business days after the Effective Date, Buyer shall
take all action necessary to change the corporate name of the Company so as to
reflect that the Company is no longer an Affiliate of Seller.
11.1.6 Goodwill. Buyer recognizes the 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.
11.1.7 Quality of Goods. Buyer agrees that the conduct of the Business
after the Effective Date by the Company 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 standard and skill equivalent to that employed
prior to the Effective Date.
11.1.8 Seller's Remedies for Unauthorized Use of Marks. Buyer
acknowledges that the Company's 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 damage 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, and 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 injunction or any other relief available under
this Agreement.
11.2 Effect of Due Diligence and Related Matters. Buyer represents that
it is a sophisticated entity that was advised by knowledgeable counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement and by the Effective Date will have conducted its own independent
review and evaluation of the Company. Accordingly, Buyer covenants and agrees
that (i) except for the representations and warranties set forth in this
Agreement and the Schedules (and the Financial Statements, the Additional
Financial Statements, and actuarial reports required pursuant to the Employee
Transfer 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, (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 in any other written agreement
entered into with Seller or any of its Affiliates in connection with 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 or in such other written agreements.
11.3 Confidentiality. Whether or not the Closing occurs, the parties
hereto and their respective officers, directors, employees and representatives
will comply with the Confidentiality Agreement, the provisions of which are
expressly incorporated herein in their entirety by this reference.
11.4 Additional Financial Statements.
Seller shall deliver to Buyer the following financial statements of the
Company (collectively, the "Additional Financial Statements") within the time
periods set forth below:
(a) Within forty-five (45) days after the Execution Date for the
month of October, 1994, and within forty-five (45) days after the close of each
month beginning with November, 1994, and continuing up to and including the
month next preceding the month in which the Closing occurs, a balance sheet and
income statement as of and for such month, and as of and for the year-to-date
period then ended; and
(b) By April 30, 1995, a balance sheet for the year ended December
31, 1994, and an income statement and statement of cash flows for 1994,
together with the auditor's report thereon.
11.5 Conduct of Business. From the Execution Date until the Effective
Date, except as described in Section 11.22, Seller shall cause the Company to
conduct the Business in the ordinary course in accordance with prudent business
judgment and consistent with past practice and policy and to (i) preserve the
Business as an ongoing business, (ii) keep available to the Business its
services and the services of its Affiliates at least to the same extent as such
were generally available from January 1, 1994 through the Execution Date 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' Franchises, certificates, licenses, authorizations and other rights.
From the Execution Date to the Effective Date, except as described in
Section 11.22 and except with the prior written consent of Buyer, which the
Buyer shall not unreasonably withhold:
(a) The Business will be conducted in substantially the same manner
as it is presently being conducted on the Execution Date. Seller will cause
the Company to refrain from entering into any material transaction or contract
other than in the ordinary course of business and to not make any material
change in the general nature of the Business or in its methods of management,
marketing, accounting or operations (including repair and maintenance
functions).
(b) Seller will cause the Company not to (i) create or incur any
indebtedness for borrowed money or otherwise, except in the ordinary course of
business, (ii) enter into or terminate, as lessor or lessee, any Lease other
than in the ordinary course of business, (iii) create any liens or other
security interest, except in the ordinary course of business, or (iv) change in
any material respect or terminate any of the insurance policies referred to in
Section 9.1.14, unless equivalent coverage is obtained.
(c) Except as listed or described on Schedule 11.5(c), and except
for dispositions of salvaged property that has been replaced in accordance with
the plans attached in Schedule 11.5(c), Seller will cause the Company not to
sell, lease, dispose of or otherwise transfer, or make any contract for the
sale, lease, disposition or transfer of any Property other than, with respect
to any individual item (other than vehicles) having a value of less than
Seventy-Five Thousand Dollars ($75,000.00) and with respect to all items (other
than vehicles) the aggregate value of which shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(d) Without prior reasonable notification to Buyer, or unless
otherwise expressly directed by a Franchising Authority, Seller will cause the
Company not to (i) institute any proceeding with respect to, or otherwise
change, amend, supplement, terminate, renew, suspend or abrogate any Franchise
or (ii) enter into or agree to any stipulation, order, or decree of, or
settlement with any Franchising Authority that in the case of (i) or (ii)
above, would have a material adverse effect on the revenue, authorized return
on equity or earnings of the Business. Seller will cause the Company not to
file any application, petition, motion, brief, testimony, settlement agreement
or other pleading in any proceeding before any Franchising Authority, or before
the FCC or appeals related thereto, unless Seller shall have first provided
Buyer with a copy of the same and provided Buyer with a reasonable opportunity
to comment to Seller with respect thereto. If Buyer determines it should
intervene in any proceeding before any Franchising Authority in which Buyer's
position is or may be different from the Seller's or the Company's, Seller will
not, and will cause the Company not to oppose Buyer's intervention in such
proceeding, without waiving any other rights related thereto.
(e) Except as listed on Schedule 11.5(e) or as required by law or in
the ordinary course of business of the Company or pursuant to any Contract,
Seller will cause the Company not to (i) enter into or amend any employment
agreement with any individual that will become a Transferred Employee, or enter
into or amend any union agreement or commitment (including any new commitment
to pay retirement or other benefits, or amendments to the Company's retirement
plans), (ii) effect any net increase over five percent (5%) since the Execution
Date in the number of employees of the Company who will become Transferred
Employees, or (iii) increase over 5% the benefit provided under any plans
concerning employee benefits or increase the general rates of compensation of
the Transferred Employees, or change the manner by which compensation
(including fringe benefits) is determined and paid to any Transferred Employee.
(f) Seller will cause the Company not to engage in any intercompany
transactions with any Affiliate thereof, except for transactions consistent
with past practice.
(g) Seller shall cause the Company to maintain the Property in good
repair, order and condition, reasonable wear and use excepted, and shall
maintain the Company Books and Records in the usual, regular and ordinary
manner on a basis consistent with prior years.
(h) Seller will cause the Company not to make any commitment to take
any actions prohibited by the provisions of this Section 11.5.
(i) Seller will cause the Company not to issue, sell, purchase or
redeem, to grant any option or right to purchase, or to otherwise agree to
issue, sell, purchase or redeem any shares of its capital stock or any other
securities.
(j) Seller will cause the Company not to amend its Articles of
Incorporation or Bylaws.
(k) Seller will not permit the Company to merge or consolidate with
any other person or entity or acquire a material amount of assets of any other
person or entity.
11.6 Construction Projects and Capital Budget. By December 31, 1994,
Buyer and Seller shall have met and reviewed the Company's construction and
other capital expenditure plans for the calendar years 1994 and 1995 (or such
later date agreed to by the parties). The construction and capital expenditure
plans which Buyer shall have approved (both as to the type of project and the
dollars expended) shall be set forth on Schedule 11.6, and the parties agree
that when such expenditures have been incurred they will constitute an addition
to a component of Net Telecommunications Plant thereby becoming subject to
Section 3.2(c). Seller agrees to cause the Company to use its best efforts
substantially to complete such plans within the projected time schedules;
provided, that the Company will not incur any liability for unbudgeted
expenditures in excess of $200,000.00 in the aggregate without the prior
written consent of Buyer. All construction work that is in progress on the
Effective Date will be accounted for by identifying and accruing all associated
time reporting, material invoices or contractor invoices inputted or received
on or before the Effective Date, and all payments therefor shall be the
responsibility of the Company and will constitute an addition to a component of
Seller's Net Telecommunications Plant thereby becoming subject to Section
3.2(c).
11.7 Further Assurances. After the Closing, Seller will furnish to Buyer
such other instruments and information about the Company as Buyer may
reasonably request in order to convey to Buyer title to the Shares, to be
delivered from time to time upon Buyer's reasonable request.
11.8 [INTENTIONALLY DELETED]
11.9 Risk of Loss Prior to the Effective Date. If any material damage,
loss or destruction of any sort (including, without limitation, by theft,
unauthorized use, fire, act of
God or condemnation) occurs prior to the
Effective Date to any of the tangible properties that constitute the Property,
Seller shall promptly notify Buyer thereof (the "Casualty Notice").
(a) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace such damaged, lost or destroyed Properties
(the "Damaged Property") will exceed One Hundred Sixty-Seven Thousand Eight
Hundred Dollars ($167,800.00), either party may, by written notice to the other
party (the "Casualty Termination Notice") within thirty (30) days after the
date of delivery of the Casualty Notice, terminate this Agreement.
(b) If Seller and Buyer, by mutual agreement, reasonably estimate
that the cost to repair or replace the Damaged Property will not exceed One
Hundred Sixty-Seven Thousand Eight Hundred Dollars ($167,800.00), or the
Casualty Termination Notice is not given by either party, then Seller, within
forty-five (45) days after the damage or destruction, shall agree in writing to
take all action, and to cause the Company to take all action,
(i) to repair or replace, prior to the Effective Date, at the
Company's sole cost and expense, the Damaged Property, and the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property;
or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will obtain as
a substitute therefor an equivalent item or items of Property if the Damaged
Property is personal property, and Real Property if the Damaged Property is
Real Property, but only if such substituted personal property or Real Property
is satisfactory to Buyer, and the Company will be entitled to make all claims
related to the Damaged Property and to receive and retain all proceeds of
insurance payable with respect to the Damaged Property.
(c) If Seller fails to make an election pursuant to Section
11.9(b)(i) or (ii), the Buyer shall have the option, within thirty (30) days
after the initial forty-five (45) day period, to elect one of the following
options:
(i) subject to the other terms and conditions of this Agreement,
the parties will proceed to Closing in the manner contemplated by this
Agreement, the Damaged Property will remain part of the Property, the
adjustment to the Purchase Price contemplated by Section 3.2(a)(1) will be
made, and the Company will be entitled to make, all claims related to the
Damaged Property and to receive and retain any proceeds of insurance with
respect to the Damaged Property; or
(ii) subject to the other terms and conditions of this
Agreement, prior to the Effective Date, the Damaged Property will be excluded
from the Company and will become Excluded Property, the Company will be
entitled to make all claims related to the Damaged Property and to receive and
retain all proceeds of insurance payable with respect to the Damaged Property,
and the Purchase Price Adjustment contemplated by Section 3.2(a)(2) will be
made.
(d) Notwithstanding the other provisions of this Section 11.9, if
the time periods pursuant to this Section 11.9 continue beyond the Effective
Date or if Seller has not fully performed its obligations pursuant to Section
11.9(b)(i) or 11.9(b)(ii) prior to the Effective Date (or otherwise made
reasonably satisfactory arrangements with Buyer), either party hereto may elect
to postpone the Closing and the Effective Date, until the expiration of any
such periods or the full performance of such obligations, which election shall
be binding upon all parties hereto.
11.10 [INTENTIONALLY DELETED]
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Equipment Manufacturers. Seller shall use its best efforts to
assist Buyer, on behalf of the Company, in obtaining a written agreement with
such equipment manufacturers (collectively "Equipment Manufacturers") as Buyer
may request, covering such software license agreements and other agreements as
are necessary to enable the Company after the Effective Date to operate the
equipment manufactured and sold by the Equipment Manufacturers included in the
Property in substantially the same manner as operated by the Company prior to
the Effective Date. The agreements shall contain material terms and conditions
(including license and warranty, but not necessarily including pricing) that
are substantially the same as those provisions in the corresponding agreements
between the Company and the Equipment Manufacturers as of the Effective Date.
Buyer understands and agrees that the price and fee provisions of such
agreements will be as negotiated between Buyer, on behalf of the Company, and
the Equipment Manufacturers. The above obligation of Seller shall be expressly
conditioned upon the acceptance by Buyer, on behalf of the Company, of all
material obligations accepted by Seller in such corresponding agreements. It
is the responsibility of Buyer, on behalf of the Company, to enter into
appropriate agreements with the Equipment Manufacturers in respect of service,
support, training, maintenance, and future development (hardware and software)
for the Property, such agreements to include terms and conditions agreed to
between Buyer, on behalf of the Company, and the Equipment Manufacturers.
Seller agrees to assist Buyer, on behalf of the Company, in obtaining the
Equipment Manufacturers' consent, if necessary, to enable the Company after the
Effective Date to avail itself of all training credits remaining at the
Effective Date on Property furnished by the Equipment Manufacturers.
11.12.2 Integrated Contracts. Seller and Buyer acknowledge that certain
agreements between the Company (or Affiliates of the Company) and third parties
relate both to the Property and the Excluded Property. Seller agrees to use
its best efforts to assist Buyer in obtaining, on behalf of the Company,
contractual arrangements with such third parties relating to the Property,
which arrangements will be reasonably satisfactory to Buyer; provided that
neither the Company nor any Affiliate of the Company shall be obligated under
this Section 11.12.5 to make any payment to any such third party unless such
payment is expressly provided for in such agreement.
11.13 Retention of Books and Records. After the Effective Date, Seller
will retain the Retained Books and Records, and Buyer will cause the Company to
retain the Company Books and Records, in either case, until the shorter of the
date that other party consents in writing to their destruction or the seventh
anniversary of the Effective Date. Each party shall provide full and free
access to the Company Books and Records and Retained Books and Records, as the
case may be, to duly authorized representatives of the other party at any time
during regular business hours for the period in which such Books and Records
are required to be retained. Either party may make copies of any such Books
and Records as it deems desirable, at its own expense. After the Effective
Date, upon reasonable notice, Seller shall provide Buyer and the Company with
reasonable assistance in locating any of the Company's Original Cost Documents
which Buyer may reasonably request after the Effective Date.
11.14 [INTENTIONALLY DELETED]
11.15 [INTENTIONALLY DELETED]
11.16 Real Property Title Insurance. Within sixty (60) days after the
Execution Date, Seller shall deliver to Buyer copies of all existing title
insurance policies and surveys covering the Real Property. Thereafter, no
later than sixty (60) days before the Effective Date, Seller shall deliver (at
its expense) to Buyer a preliminary title binder (on a standard form reasonably
acceptable to Buyer), issued by Lawyers Title Insurance Company or another
title insurance company reasonably acceptable to Buyer, with respect to all
Real Property included in the Property and in which the Company purports to own
fee title. Such title binders shall be in form, substance and amount
reasonably satisfactory to Buyer (ALTA Owners Policies where available but
based upon boundary surveys as set forth below) and shall be current as of a
date no earlier than ninety (90) days prior to the Effective Date. The parties
agree that the dollar amount of title insurance to be inserted on each policy
shall equal the dollar value set forth on the Company's continuing property
records list as of December 31, 1993 for land and buildings. Such title
binders shall reflect that the Company is vested with good, fee simple,
marketable and insurable title to such Real Property, subject only to (i)
standard printed exceptions; (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the Business, (v)
Leases, (vi) survey exceptions that do not individually or in the aggregate
materially detract from the value or impair the use of the Real Property
affected thereby, (vii) title plat exceptions to the extent the matters shown
on such title plats do not individually or in the aggregate materially detract
from the value or impair the use of the Real Property affected thereby, and
(viii) water rights exceptions (collectively, the "Permitted Exceptions"). If
a preliminary title binder indicates an exception other than a Permitted
Exception that would impair marketability in any material respect, Seller
shall, at its expense, cause such exception to be removed on or before the
Effective Date. With respect to each parcel of Real Property covered by a
preliminary title binder, Seller shall deliver to Buyer (at Seller's expense
and on or prior to sixty (60) days before the Effective Date) a certified
current boundary survey showing (x) access to the property and (y) all
improvements on the property and any encroachments across the property line by
any improvements of the Company or owners of adjacent property and (at Seller's
expense and within sixty (60) days after the Effective Date) owner's title
insurance policies for the Real Property (ALTA Owners Policies where available
but based upon boundary surveys as set forth above).
11.17 [INTENTIONALLY DELETED]
11.18 [INTENTIONALLY DELETED]
11.19 Customer Notification. For a period of at least two (2) months
prior to the Effective Date, Seller will cause the Company to permit Buyer to
insert preprinted single-page subscriber education materials into billing
documentation to be delivered during such period to subscribers affected by the
sale. All reasonable costs and expenses related to such insertion and delivery
shall be borne and paid by the Company. 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) or earlier than
three (3) months prior to the Effective Date.
11.20. Delivery of Schedules. Except as provided in Section 11.26, Seller
shall have a period of ten (10) business days after the Execution Date (the
"Supplemental Schedule Period") to supplement or otherwise modify the Schedules
to this Agreement by delivering to Buyer, within the Supplemental Schedule
Period, a substitute schedule or schedules (collectively, the "Supplemental
Schedules"), bearing the legend "This Schedule _, dated _______________, is
executed and delivered in accordance with Section 11.20 of the Stock Purchase
Agreement, dated as of November 28, 1994 which shall be duly executed by Seller
and submitted to Buyer. Buyer shall have a period of ten (10) business days
after the expiration of the Supplemental Schedule Period to review the
Supplemental Schedules and within such ten (10) business day period notify
Seller in writing (which writing may be transmitted by facsimile) of any
objections thereto. If Buyer's objections are not resolved to the satisfaction
of Buyer within five (5) days of such notification, Buyer may terminate this
Agreement, effective immediately upon written notification of that termination.
In the event that Buyer does not terminate this Agreement, then Buyer waives
all rights to a claim of indemnification based upon or as the result of any
changes in the Schedules as reflected in the Supplemental Schedules. For
purposes of determining breaches of representations, warranties or covenants
hereunder, the Supplemental Schedules provided by Seller shall be deemed
Schedules for all purposes.
11.21 [INTENTIONALLY DELETED]
11.22 Pre-Effective Date Balance Sheet Transactions. Seller shall take,
and shall cause the Company to take, all action necessary to effect, on or
prior to the Effective Date, the following transactions:
(a) The Company shall dispose of, transfer, dividend or otherwise
cause to be zero as of the Effective Date, all "Cash" (item 1 - Assets on the
Company's Balance Sheet).
(b) All "Accounts Receivable-Affiliates" (item 4 - Assets on the
Company's Balance Sheet) and "Dividends Receivable-Affiliates" (item 7 --
Assets on the Company's Balance Sheet) (collectively, "Affiliate Receivables")
shall be netted against all "Advances and Notes-Parent Company" (item 2 -
Liabilities on the Company's Balance Sheet), "Accounts Payable-Affiliates"
(item 5 - Liabilities on the Company's Balance Sheet), "Dividends Accrued -
Affiliates" (item 10 - Liabilities on the Company's Balance Sheet) and
"Interest Accrued - Alltel" (item 12 - Liabilities on the Company's Balance
Sheet) (collectively, "Affiliate Payables"). To the extent there is a net
excess of Affiliate Receivables, a cash payment or payments will be made to the
Company which cash will then be disposed of by the Company, and to the extent
there is a net excess of Affiliate Payables, such Affiliate Payables will be
contributed to the Company as a contribution to the Company's capital, and take
any other action necessary, such that the balances of each of the Affiliate
Receivable and Affiliate Payable accounts, and of any other intercompany
accounts, as of the Effective Date will be zero.
(c) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Excess Cost Over Equity" (item 13 - Assets
on the Company's Balance Sheet) and all "Investments in Affiliates" (item 14 -
Assets on the Company's Balance Sheet).
(d) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Other Investments At Cost" (item 15 -
Assets on the Company's Balance Sheet), except to the extent such investments
consist of RTB Stock which relates to REA Debt which is to remain outstanding
immediately after the Effective Date, and all "Unamortized Debt Expense" (Item
16 - Assets on the Company's Balance Sheet), except to the extent such
unamortized debt expense relates to debt which is to remain outstanding
immediately after the Effective Date.
(e) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, all "Regulatory Assets" (item 18 - Assets on the
Company's Balance Sheet).
(f) The Company shall dispose of, transfer or otherwise cause to be
zero as of the Effective Date, (i) all "Other Current Assets" (item 10 - Assets
on the Company's Balance Sheet) to the extent such other current assets
represent cash accounts, and (ii) all "Other Non-Current Assets" (item 19 -
Assets on the Company's Balance Sheet).
(g) The Company shall pay off or otherwise cause to be zero as of
the Effective Date all Total Long-Term Debt, to the extent that such debt is
not to remain outstanding immediately after the Effective Date.
(h) The Company shall dispose of, transfer or assign, the Excluded
Books and Records, the Marks listed on Schedule 11.1.5, the Company's interest
in any business other than the Business, and those other assets, including
agreements and contracts ("Excluded Contracts"), set forth on Schedule
11.22(h).
(i) The balance in the Company's Total Deferred Credits shall be
zero as of the Effective Date except for that portion of the Company's "Other
Deferred Credits" (item 25 - Liabilities on the Company's Balance Sheet) that
relates to liabilities associated with the requirements of Financial Accounting
Standard 106 attributable to Transferred Employees.
(j) The balance in the Company's Taxes Accrued-Federal Income (item
8 -Liabilities on the Company's Balance Sheet) shall be zero as of the
Effective Date.
(k) The balance in the Company's Other Current Liabilities (item
14 - Liabilities on the Company's Balance Sheet), Notes Payable-Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding (item
4 - Liabilities on the Company's Balance Sheet) and Dividends Accrued - Other
(item 11 - Liabilities on the Company's Balance Sheet) accounts shall be zero
as of the Effective Date.
(l) The balance in the Company's Current Maturities of Long-Term
Debt (item 1 - Liabilities on the Company's Balance Sheet) and Interest Accrued
- - Other (item 13 - Liabilities on the Company's Balance Sheet), to the extent
each of such amounts relate to debt which is not to remain outstanding
immediately after the Effective Date, shall be zero as of the Effective Date.
11.23 Taxes.
11.23.1 Certain Tax Matters.
(a) Except as otherwise expressly provided in this Section 11.23.1,
Buyer and Seller will share equally all sales, use, transfer, stamp,
conveyance, value added or other similar taxes, duties, excise or governmental
charges imposed by any taxing jurisdiction (but not including Income Taxes, as
hereinafter defined, which shall be paid by Seller), and all recording or
filing fees, notarial fees and other similar costs of Closing with respect to
the transfer of the Shares or otherwise on account of this Agreement or the
transactions contemplated herein (but not including any transactions
contemplated by this Agreement to be effected pursuant to the transactions
contemplated by Section 11.22 or otherwise between Seller and the Company,
which shall be paid by Seller).
(b) Seller will cause to be included in its consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) for all periods
ending on or before or which include the Effective Date, all items of income,
gain, loss, deduction, and credit or other items (collectively "Tax Items")
attributable to the operations of the Company during such periods or portions
thereof determined by an interim closing of the books as of the Effective Date.
Seller will sign and file timely all such Tax Returns with the appropriate
United States, state and local Governmental Authorities. Buyer will provide or
cause to be provided any consent request to file such Tax Returns on behalf of
the Company. Seller will make all payments shown thereon as owing with respect
to any such Tax Returns.
(c) With respect to any taxable period that would otherwise include
but not end on the Effective Date, to the extent permissible pursuant to
applicable Law, Seller will, and Buyer will cause the Company to, take all
steps as are or may be reasonably necessary, including without limitation the
filing of elections or returns with applicable taxing authorities, to cause
such period to end on the Effective Date.
(d) Seller will prepare or cause to be prepared all state Income Tax
Returns (other than Tax Returns described in Section 10.5.1(b)) for the Company
required to be filed with the appropriate United States, state, and local
Governmental Authorities for any taxable period that ends on or before the
Effective Date that have not been filed prior to the Effective Date. Seller
will sign and file timely all such Tax Returns with the applicable Governmental
Authority and make all payments shown thereon as owing with respect to such Tax
Returns. If requested by Seller, Buyer will deliver or cause the Company to
deliver to Seller a power of attorney authorizing Seller to sign such Tax
Returns. Notwithstanding the foregoing, if Seller is legally precluded from
filing any such Tax Return, Buyer shall sign such Tax Return. Seller shall
deliver a copy of each such Tax Return to Buyer within 10 days prior to filing
such Tax Return.
(e) Except as otherwise provided in Section 11.23.1(b) or Section
11.23.1(d), Seller will have no obligation to file any Tax Return for the
Company, and Buyer will prepare and file or cause to be prepared and filed all
Tax Returns for the Company that are required to be filed with the appropriate
United States, state, and local Governmental Authorities for any taxable period
which begins before and ends after the Effective Date. In the case of Income
Taxes, Buyer shall cause such Tax Return to be prepared and shall cause to be
included in such Tax Return all Tax Items required to be included therein.
Buyer shall determine (by an interim closing of the books as of the Effective
Date) the portion, if any, of the Income Tax due with respect to the period
covered by such Tax Return which is attributable to the Company for a Pre-
Effective Date Taxable Period (as hereinafter defined). At least 15 days prior
to the due date (taking into account all extensions of due date) of such Tax
Return, Buyer shall deliver to Seller a copy of such Tax Return and of its
determinations. If the amount reflected as a liability for Income Taxes on the
Tax Schedule less Prior Reimbursements (as hereafter defined) is less than the
amount of Income Tax so determined to be attributable to the Pre-Effective Date
Taxable Period, Seller shall pay to Buyer the amount of such shortfall not less
than 5 days prior to the due date (taking into account all extensions of due
dates) of such Tax Return (or the due date of the applicable estimated Tax
payments, if earlier). If the amount of Income Tax so determined to be
attributable to the Pre-Effective Date Taxable Period is less than the amount
reflected as a liability for Income Taxes on the Tax Schedule, to the extent
not previously paid to Seller or the applicable Governmental Authority by the
Company and subject to Section 11.23.1(f), Buyer will pay to Seller the amount
of such excess not less than 5 days prior to the due date (taking into account
all extensions of due dates) of such Tax Return (or the due date of the
applicable estimated Tax payments, if earlier). As used in this Agreement,
"Pre-Effective Date Taxable Period" means all or a portion of (i) any taxable
period up to and including the Effective Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax Items, assets, capital
or operations of the Company arising on or before, or existing as of, the
Effective Date. As used in this Agreement, "Income Taxes" means all Taxes
measured in whole or in part on or by net income imposed by the United States,
any state of the United States or any political subdivision thereof, and will
include any such Taxes even if denominated as franchise taxes.
(f) The amount paid by Buyer (or by the Company at the Buyer's
direction or consent) to Seller pursuant to Section 11.23.1(b), Section
11.23.1(d) or Section 11.23.1(e) will not exceed (i) the amount reflected as a
liability for Income Taxes on the Tax Schedule, reduced by (ii) Prior
Reimbursements. As used in this Agreement, "Prior Reimbursements" means all
amounts reflected as a liability for Income Taxes on the Tax Schedule that have
previously been (A) paid by Buyer (or by the Company at the Buyer's direction
or consent) to Seller pursuant to Section 11.23.1(b), Section 11.23.1(d) or
Section 11.23.1(e) or (B) paid by Buyer or the Company to Seller or to the
applicable Governmental Authority with respect to Income Taxes properly
attributable to Pre-Effective Date Taxable Periods that are reflected on Tax
Returns described in Section 11.23.1(b), Section 11.23.1(d) or Section
11.23.1(e).
(g) In order to assist Seller in the preparation of all Tax Returns
that Seller is required to prepare pursuant to Section 11.23.1(b) and
11.23.1(d), Buyer will provide or cause to be provided to Seller access to such
information and personnel as Seller may require in order to properly prepare
such Tax Returns.
(h) Buyer will pay or cause to be paid to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable Governmental Authority) received by Buyer after the Effective
Date and attributable to Taxes paid by Seller or the Company (or any
predecessor or Affiliate thereof) with respect to any Pre-Effective Date
Taxable Period (or, in the cases of Taxes other than Income Taxes, taxable
periods or portions thereof ending on or before the Effective Date), net of any
Taxes imposed upon Buyer or the Company by reason of the receipt of such
refund, credit or interest (calculated at the maximum statutory rate of Tax
without regard to any other Tax Items). Such payment will be made to Seller
within 30 days after receipt of any such refund from, or allowance of such
credit by, the relevant Governmental Authority.
(i) If after the Effective Date Seller or any affiliate receives or
is credited with a refund of any Tax attributable to the utilization or
carryback of any Tax Item of the Company arising after the Effective Date,
Seller shall pay to Buyer an amount equal to the amount of such refund together
with any interest received from or credited thereon the applicable Governmental
Authority, net of any Taxes imposed upon Seller or any affiliate by reason of
the receipt of such refund, credit or interest (calculated at the maximum
statutory rate of Tax without regard to any other Tax Items).
(j) Buyer is eligible to and will make a timely and effective
election under Section 338(g) of the IRC (and any comparable provision of state
or local Law) with respect to the purchase of the Shares hereunder. Both
Seller, as the common parent of the affiliated group of corporations (which
includes the Company) that file a consolidated federal income Tax Return and
Buyer are eligible to and will make a timely and effective election under
Section 338(h)(10) of the IRC (and any comparable provision of state or local
Law) with respect to such purchase (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
Law, the "Section 338(h)(10) Elections"). To facilitate such election, within
thirty (30) days of the Closing, Buyer will deliver to Seller a completed
Internal Revenue Service Form 8023 and the required schedules thereto and any
similar forms under applicable state or local Law (the "Forms") with respect to
Buyer's purchase of the Shares, which Forms shall have been duly executed by an
authorized person for Buyer. Provided that the information on such Forms is,
in the reasonable determination of Seller, correct and complete in all material
respects, Seller will, at the Closing, cause such Forms to be duly executed by
an authorized person for Seller and deliver such Forms to Buyer. If any
changes or supplements are required to the Forms as a result of information
that is first available after the Closing, Seller and Buyer will promptly agree
upon and make such changes. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1T or the corresponding provisions of applicable state or local
Law, and will provide written evidence to Seller that it has done so. Buyer
and Seller agree that neither of them will take, or permit their affiliates to
take, any action to modify or revoke the elections contained in or the content
of any Forms without the express written consent of the other.
(k) Seller agrees that it will cause any and all tax sharing
agreements between Seller and the Company to be terminated on or prior to the
Effective Date.
11.23.2 Tax Indemnifications.
(a) Seller hereby agrees to protect, defend, indemnify and hold
harmless Buyer and the Company from and against, and agrees to pay, all Taxes
imposed and all indemnifiable Losses incurred (all herein referred to as "Tax
Losses") as a result of:
(i) A proposed adjustment, notice of deficiency Authority, or
assessment by, or any obligation owing to, any Governmental Authority for:
(A) Any income Taxes of the Company attributable to any Pre-
Effective Date Taxable Period;
(B) Any Taxes other than Income Taxes of the Company
attributable to any taxable period or portion thereof ending prior to the
Effective Date;
(C) Any Taxes of any corporation (other than the Company)
that (i) is or was a member of any affiliated group of corporations of which
the Company was a member at any time prior to the Effective Date or (ii)
joined in the filing of a combined or unitary Tax Return with the Company on or
prior to the Effective Date;
(D) Any Taxes resulting from the Section 338(h)(10)
Elections; and
(E) Except as otherwise provided in Section 11.23.1(a), any
Taxes attributable to the transactions contemplated by this Agreement; and
(ii) Any breach of any representation, warranty or covenants of
Seller under this Agreement.
(b) Buyer agrees to protect, defend, indemnify and hold harmless
Seller from and against, and agrees to pay, all Tax Losses incurred as a result
of:
(i) A proposed adjustment, notice of deficiency, or assessment
by, or any obligation owing to, any Governmental Authority for any Taxes of the
Company which Taxes are not attributable to any Pre-Effective Date Taxable
Period; and
(ii) Any breach of any representation, warranty or covenant of
Buyer under this Agreement.
(c) (i) If a proposed adjustment shall be made by any
Governmental Authority that, if successful, would result in the indemnification
of a party under this Section 11.23.2 (referred to herein as a "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Section 11.23.2 to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 11.23.2(c)(i) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than 5 days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests that such
claim be contested, (B) the Tax Indemnifying Party shall have agreed to pay the
Tax Indemnified Party all costs and expenses that the Tax Indemnified Party
incurs in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable Law) after the
giving of the notice required by Section 11.23.2(c)(i), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(iii) Subject to the provisions of Section 11.23.2(c)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Authority or prosecute such contest to a determination
in a court or other tribunal of initial or appellate jurisdiction, all as the
Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section
11.23.2(c)(ii)(B), the extent of the liability of the Tax Indemnified Party
with respect to the claim shall be established by the final judgment or decree
of a court or other tribunal or a final and binding settlement with an
administrative agency having jurisdiction thereof, the Tax Indemnified Party
shall promptly repay to the Tax Indemnifying Party the amount advanced to the
extent of any refund received by the Tax Indemnified Party with respect to a
claim together with any interest received thereon from the applicable
Governmental Authority and any recovery of legal fees from such Governmental
Authority, net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated at the
maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Agreement.
(v) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 11.23.2.
(d) Anything to the contrary in this Agreement notwithstanding, the
representations, warranties, covenants, agreements, rights and obligations of
the parties hereto with respect to any Tax covered by this Agreement shall
survive the Effective Date and shall not terminate until sixty days after the
expiration of the statute of limitations (including extensions) applicable to
such Tax.
11.24 Cable Regulatory Due Diligence. Within twenty (20) business days
after the Execution Date, Seller shall have complied with all reasonable
requests by Buyer for copies of documentation, including but not limited to
reports, filings, correspondence and complaints, relating to the NCCSI Systems
or Business, made, filed, sent, received, or submitted by or on behalf of the
Company with the FCC, the Franchising Authorities, the FAA or the U.S.
Copyright Office (the "Cable Regulatory Due Diligence"). Buyer has provided
Seller with an initial list of such requested documents to Seller. The Buyer
shall have a period of thirty (30) business days after the expiration of such
20 business day period to review the Cable Regulatory Due Diligence and provide
the Seller with a list of items from its review of the Cable Regulatory Due
Diligence which list, taken as a whole, reasonably could be expected to have a
materially adverse effect on the Company as a whole, the Business as a whole or
any significant part of the Property. Within ten (10) business days
thereafter, Seller and Buyer will discuss the list and agree on which items
require corrective action and the corrective action that the Seller should
cause the Company to take. Thereafter, the Seller will, at its or the
Company's expense, cause the Company to take the agreed upon corrective action
so as to correct the agreed upon problems before the Effective Date.
11.25 Renewal of Franchises. Seller and Buyer agree to have their
representatives meet within sixty (60) days after the Execution Date to discuss
the desirability of filing requests for renewals under Section 626(a) of the
Cable Act of 1992, with the proper Governmental Authorities with respect to
each Franchise (Zuni and Needles) expiring within 36 months after the Effective
Date. Thereafter, the parties will agree to the action, reasonably
satisfactorily to the parties, that should be taken with respect to such
renewals and the parties shall take the agreed upon action at the appropriate
agreed upon time.
11.26 Post-Execution Lease and Contract Review. Buyer shall have a period
of forty-five (45) calendar days after the Execution Date to review the Leases
and Contracts listed on Schedules 9.1.9 and 9.1.13 respectively, and to notify
Seller in writing (which writing may be transmitted by facsimile) of the
identity of those Leases and Contracts that Buyer reasonably believes are
material to the operation of the Business as a whole or any significant part of
the Property and which by their terms will require Seller, in accordance with
Section 7.1.6, to obtain a third party consent as a condition to the transfer
of control of the Company to Buyer as a result of Buyer's purchase of the
Shares, before the Effective Date can occur. If Buyer does not notify Seller
in writing within such forty-five (45) calendar day period of the identity of
the material Leases and Contracts requiring consent, then Buyer shall be deemed
to have agreed that none of the Leases and Contracts which are listed on
Schedules 9.1.9 and 9.1.13 require consent, in accordance with Section 7.1.6,
before the Effective Date can occur. If Buyer does notify Seller in writing
within such forty-five (45) calendar day period of the identity of the material
Leases and Contracts requiring consent, then Seller shall have a period of ten
(10) business days upon receipt of such notification to notify Buyer in writing
(which writing may be transmitted by facsimile) of any objections thereto.
Thereafter, Buyer and Seller shall negotiate in good faith and agree in writing
as to the identity of those Leases and Contracts which are material to the
operation of the Business as a whole or any significant part of the Property
and which by their terms will require Seller, in accordance with Section 7.1.6,
to obtain a third party consent as a condition to the transfer of control of
the Company to Buyer as a result of Buyer's purchase of the Shares, before the
Effective Date can occur (the "Material Leases and Contracts"). The parties
shall reflect their written agreement as to the identity of the Material Leases
and Contracts by placing an asterisk next to the appropriate Lease or Contract
on Schedule 9.1.9 or 9.1.13, which revised Schedule 9.1.9 or 9.1.13 shall be
deemed to be an amendment to this Agreement.
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 Employee Transfer Agreement, the terms and provisions of which are
incorporated into this Agreement as if fully set forth herein and a copy of
which is attached hereto as Schedule 12.1 (the "Employee Transfer Agreement").
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
(a) The representations and warranties made pursuant to this
Agreement shall survive the Closing for the following periods after the
Effective Date:
(i) The representations and warranties set forth in Sections
9.1.6, 9.1.8, 9.1.32, 9.1.33, and 9.2.5 shall survive without limitation as to
time.
(ii) The representations and warranties set forth in Section
9.1.15 shall survive as set forth in Section 11.23.2(d).
(iii) The representations and warranties set forth in Section
9.1.36 shall survive the Effective Date and shall not terminate until sixty
days after the expiration of the applicable statute of limitations (including
extensions) as set forth within 17 U.S.C.. Section 507.
(iv) All other representations and warranties shall survive for
eighteen (18) months.
The date of expiration of any representation or warranty shall be referred
to herein as the "Termination Date." Representations and warranties under this
Agreement shall be of no further force or effect after the applicable
Termination 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 prior to the Termination Date,
may not be pursued and is irrevocably waived and released 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 or a Direct Claim.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Section 5.2, Section 5.3, this Article 13, and in Sections 11.1, 11.2, 11.3,
11.6, 11.7, 11.12, 11.13, 11.16 and Articles 16 and 17 and in the Employee
Transfer Agreement, will survive the Closing and remain in effect indefinitely.
Covenants regarding Taxes shall survive as set forth in Section 11.23.2(d).
All other covenants contained in this Agreement will terminate, without further
action, upon the occurrence of the Effective Date and any claim following the
Effective Date for an alleged breach of any such covenant may not be pursued,
and is irrevocably waived, upon the occurrence of the Effective Date, except
that Buyer may make a claim for Seller's breach of the covenants contained in
Section 11.5 at any time within eighteen months after the Effective Date. The
immediately preceding sentence shall not apply to, or limit to preclude, a
party's rights and remedies if the sale contemplated by this Agreement is not
concluded as a result of the other party's breach of this Agreement.
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, costs, fines,
penalties, damages (actual, punitive or other), 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 as a result of
the Indemnifiable Losses involved and (y) provided that the underlying
liability or obligation is not solely the result of any action taken or omitted
to be taken by the Indemnitee.
(b) 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., except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement. 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, and except for claims or causes of action arising due to the actual
fraud under the common law, not otherwise implied or imputed.
(c) 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) (except with respect to
indemnification for a breach of the representations contained in Sections
9.1.6, 9.1.8, 9.1.32 and 9.1.33) or 13.3(b)(i) (except with respect to
indemnification for a breach of the representations contained in Section 9.2.5)
until the aggregate amount of claims that may be asserted for such
Indemnifiable Losses incurred by the Indemnitee exceeds Eight Thousand Three
Hundred Ninety Dollars ($8,390.00) and then only to the extent of the excess.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 13.3(a)(i) (except with
respect to indemnification for a breach of the representations contained in
Sections 9.1.6, 9.1.8, 9.1.32, and 9.1.33) and of Buyer under Section
13.3(b)(i) (except with respect to indemnification for a breach of the
representations contained in Section 9.2.5) will not exceed the sum of Two
Hundred Fifty-One Thousand Seven Hundred Dollars ($251,700.00).
(e) Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnity 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 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
indemnity, defend and hold harmless Buyer and its Affiliates (including the
Company after the Effective Date), 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, except for any such breach of
representations and warranties which was specified on Seller's Closing
Certificate all of which are waived upon Closing, (ii) a breach by Seller of
any covenant of Seller contained in this Agreement or in the Employee Transfer
Agreement, except for any such breach of covenants which was specified on
Seller's Closing Certificate all of which are waived upon Closing, (iii) the
Retained Liabilities, (iv) any Third Party Claim, whether filed, asserted, or
sought before or after the Effective Date, in respect of the operations of the
Company or the conduct of the Business or any part of the Business (including
contractual obligations in connection with sales or transfers of assets made by
the Company prior to the Effective Date), or the ownership or operation of the
Business, on or prior to the Effective Date, regardless of whether known or
unknown, asserted or unasserted, on the Effective Date.
As used in this Agreement, "Retained Liabilities" means all liabilities,
responsibilities and obligations (whether known or unknown, fixed, contingent
or otherwise) of the Company relating to, arising out of, or in connection
with, or resulting from the use or ownership of the Property or the conduct of
the Business during, the period ending on the Effective Date, including,
without limitation,:
(i) all liabilities, responsibilities and obligations with respect to
the Excluded Property and the Excluded Contracts;
(ii) all liabilities and obligations for prior period adjustments of
revenues from the Business and for any customer overbillings and prospective
refunds of overcharges (including rates collected under bond but excluding
prospective rate reduction) occurring or relating to the period prior to the
Effective Date; and
(iii) All liabilities, responsibilities and obligations arising out of or
related to the litigation, claims and other matters set forth on Schedule
9.1.16 and any other litigation, claims, actions, lawsuits or legal proceedings
based on facts, circumstances or conditions arising, existing or occurring on
or before the Effective Date, regardless of whether known or unknown, asserted
or unasserted, as of the Effective Date;
but excluding all liabilities, responsibilities and obligations of the Company
Date to the extent Buyer receives a Purchase Price adjustment in its favor
pursuant to Section 3.2 therefor;
(b) Subject to the other sections of this Article 13, Buyer will
indemnity, defend and hold harmless Seller and its Affiliates, and their
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, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (ii) a breach by Buyer of any covenant of Buyer contained
in this Agreement or in the Employee Transfer Agreement, except for any such
breach which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, (iii) any Third Party Claim, filed, asserted, or sought
after the Effective Date, in respect of the operations of the Company or the
conduct of the Business or any part of the Business or the ownership or
operation of the Company or the Business, after the Effective Date.
(c) All Tax and environmental matters or issues, including without
limitation, the indemnification obligations with respect to Taxes and
Environmental Liabilities, are to be governed by Sections 9.1.15 and 11.23 and
Article 14, respectively, and are not addressed, limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 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 anything to the
contrary contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment 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, proceeding, or investigation by any
entity or person 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 thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnity the Indemnitee pursuant to this Article
13 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified.
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
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 a 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
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct 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 the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 13.1(a) in order for such party to be indemnified. 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.
ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Environmental Due Diligence.
14.1.1 Right to Conduct Due Diligence. Buyer shall have the opportunity
to conduct environmental due diligence regarding the Property in accordance
with this Section 14.1, for a period not to exceed 120 days after the
Environmental Data Delivery Date (as defined below).
14.1.2 Treatment of Data. All information collected and generated as a
result of the environmental due diligence authorized by this Section 14.1 will
be subject to the terms and conditions of the Confidentiality Agreement, except
as otherwise expressly provided in this Section 14.l. Buyer shall provide to
Seller copies of all reports, assessments and other information composed or
compiled by Buyer's environmental consultant(s) and shall treat all such
information in accordance with the procedures of Section 14.1.5(c). Within
thirty (30) days after the Execution Date (the "Environmental Data Delivery
Date"), Seller will provide to Buyer copies of all surveys and reports in
Seller's or the Company's possession concerning the existence or possible
existence of asbestos or materials containing asbestos relating to any of the
Real Property, a list of all underground storage tanks which to Seller's or the
Company's knowledge are located on, or have been removed within the last three
years from, any Real Property owned or real estate leased or operated by the
Company in connection with the Business and any other reports, studies or
documents in Seller's or the Company's possession relating to the Company's
potential liability under any Existing Environmental Requirements. 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 the Effective Date
(which changes require the removal of asbestos), the removal will be at the
expense of Buyer.
14.1.3 Environmental Consultants. Buyer may retain one or more outside
environmental consultants to assist in its environmental due diligence
concerning the Property and shall notify Seller of the environmental consultant
or consultants Buyer intends to retain. Thereafter, Seller shall have five (5)
business days after receipt of such notification to notify Buyer in writing of
Seller's objection (which must be for good cause) and substantiate the basis
for that objection. If Seller does not object for good cause and substantiate
that objection within said five (5) business day period, Seller shall be deemed
to have consented to Buyer's selection.
14.1.4 Phase I Reviews. Buyer may conduct the usual Phase I environmental
assessment activities of the Property, including inspecting individual sites,
submitting environmental questionnaires to Seller and the Company and reviewing
existing environmental reports, correspondence, permits and related materials
regarding the Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing other than tank tightness testing and
hand auger soil testing.
(a) Buyer shall give Seller at least three (3) business days' notice
prior to any entry onto the Property.
(b) If Buyer enters the Property, a representative of Seller may be,
but is not required to be, present during such entry on the Property.
(c) All activities of Buyer regarding environmental due diligence
shall be conducted to minimize any inconvenience or interruption of the normal
use and enjoyment of the Business and the Property.
14.1.5 Phase II Reviews. Buyer may conduct the usual Phase II
environmental assessment activities of the Property (including, but not limited
to, the taking and analysis of soil, surface water and groundwater samples,
testing of buildings, drilling wells and taking soil borings) after first
conducting a Phase I assessment of a particular site provided that such Phase
II assessment activities are conducted in accordance with this Section 14.1.5.
(a) If Buyer desires to perform sampling or intrusive testing at a
site included in the 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. If Seller does not notify Buyer in writing of Seller's
objection to such proposed sampling or testing within five (5) business days
after receipt of such notice, Seller shall be deemed to have consented to the
proposed sampling or testing. Seller shall not unreasonably object to Buyer's
request to perform sampling or 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.
(c) It is understood and agreed that neither Buyer nor its
environmental consultant(s) shall disclose or release any Environmental Data
without the prior written consent of Seller and that all such information shall
be kept strictly confidential. The Environmental Data shall be prepared at the
request of counsel to Buyer and, to the fullest extent permitted by law, shall
be the work product of such counsel and constitute confidential attorney/client
communications. The Environmental Data shall be transferred among Buyer and
its consultant(s) in a manner that will preserve, to the greatest extent
possible, such privileges. Buyer expressly agrees that until the Closing, it
will not distribute the Environmental Data to any third party without Seller's
written consent. After the Closing, Buyer agrees that it will not distribute
the Environmental Data to any third party without Seller's written consent,
except as required by law or by express provisions of Buyer's corporate
compliance program if Seller is provided written notice at least ten (10)
business days prior to such distribution, provided, however, that for a period
of two (2) years after the Effective Date, Buyer may distribute the
Environmental Data to any potential purchaser of the Company or the Property
only after first notifying the Seller, and without such notice at any time
after such two (2) year period.
14.1.6 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 reasonable attorneys' fees and
disbursements, and reasonable 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 Property and resulting
from any 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 merely discovered by the environmental due diligence performed
by Buyer or its environmental consultants. In addition, in the event the
transactions contemplated herein with regard to any portion of the Property do
not close, Buyer agrees to restore such portion of the Property to the
condition which existed prior to Buyer's inspections and testing thereof to the
extent such portion of the Property was damaged by such inspections and
testing.
14.1.7 Effect of Due Diligence Results.
(a) Subject to Section 14.1.7(b) below, Buyer conditionally may
terminate this Agreement by written notice to Seller at any time during the
period set forth in Section 14.1.1 if:
(i) the results of Buyer's environmental due diligence
investigation, conducted in accordance with this Section 14. 1, indicate
Environmental Liabilities based upon Existing Environmental Requirements with
respect to one or more items of the Property or with respect to the Company;
and
(ii) Buyer reasonably determines (on the basis of its
environmental due diligence) that responding to and remediating the foregoing
Environmental Liabilities based upon Existing Environmental Requirements cannot
be completed for less than Sixty-Seven Thousand One Hundred Twenty Dollars
($67,120.00) (the "Environmental Liabilities Amount") To be effective, any
such conditional termination of this Agreement must be delivered in writing to
Seller, which writing must specifically acknowledge that the termination is
subject to the provisions of paragraph (b) below.
(b) In the case of a conditional termination of this Agreement by
Buyer in accordance with Section 14.1.7(a) above, Seller may nullify the
termination by agreeing to:
(i) cause the Company to respond to and fully remediate the
Environmental Liabilities based upon Existing Environmental Requirements; or
(ii) pay Buyer the cost thereof; or
(iii) make other adjustments to the terms and conditions of the
sale contemplated by this Agreement all in such manner and on such terms and
conditions as are mutually satisfactory to Buyer and Seller.
Seller's election to nullify Buyer's conditional termination by selecting
one of the above options shall be, in each case, specified in a writing
mutually satisfactory to the parties, and thereafter on or before the Closing
(subject to Section 14.1.7(d)), Seller shall perform its obligations under that
writing in full. If the parties fail to sign the writing specifying Seller's
obligations within thirty (30) days following Buyer's conditional termination
(or such longer period acceptable to Buyer) or sign that writing but the
Company fails to perform its obligations thereunder in full on or before the
Closing (subject to Section 14.1.7(d)), Buyer's conditional termination under
paragraph (a) above automatically shall become final and unconditional unless
the parties agree otherwise.
(c) If the results of Buyer's environmental due diligence conducted
in accordance with this Section 14.1 indicate that the costs of responding to
and remediating Environmental Liabilities based upon Existing Environmental
Requirements with respect to one or more items of the Property or with respect
to the Company are less than the Environmental Liabilities Amount in the
aggregate, Seller agrees, to cause the Company at the Company's sole cost, to
either (i) make a mutually satisfactory adjustment to the terms and conditions
of the transactions contemplated by this Agreement prior to the Closing in
accordance with Section 14.1.7(b)(iii) above, or (ii) prior to the Closing
(subject to Section 14.1.7(d)), otherwise respond to and remediate those
Environmental Liabilities based upon Existing Environmental Requirements in
accordance with Section 14.1.7(b)(i) or Section 14.1.7(b)(ii) above, unless the
cost of conducting such response action would exceed the Environmental
Liabilities Amount in which case Seller's sole obligation under this Section
14.1.7(c) shall be to pay the Environmental Liabilities Amount toward the
completion of such response and remediation actions. If Seller discharges its
obligations under this Section 14.1.7 by expending the Environmental
Liabilities Amount on such response and remediation action (such expenses to be
verified by Seller by delivery by Seller to Buyer of a reasonably detailed
statement setting forth such expenses), or paying to Buyer the Environmental
Liabilities Amount, Buyer shall sign and deliver to Seller at the Closing a
release of Seller from any further liability to Buyer for such remediation and
shall indemnify Seller against any liability for such Environmental Liabilities
or Environmental Requirements.
(d) If Seller elects to cause the Company to respond to and fully
remediate Environmental Liabilities based upon Existing Environmental
Requirements pursuant to Section 14.1.7(b)(i) or (c)(ii), and such response and
remediation has not been completed by the date scheduled for Closing, the
parties on or prior to Closing shall enter into an Environmental Remediation
Agreement in form and substance reasonably satisfactory to the parties and
proceed to Closing; provided, however, that in the case of response and
remediation under Section 14.1.7(b)(i), Buyer may elect to postpone the Closing
until sufficient response and remediation has been completed so that the
remaining response and remediation is equal to or less than the Environmental
Liabilities Amount.
14.2 Environmental Indemnification.
14.2.1 Sole Remedy and Release. It is the intent of the parties that the
indemnification provided under this Section 14.2 shall be the sole remedy for
allocating responsibility regarding environmental matters related to the sale
contemplated by this Agreement, the Company, the Business and the Property of
which Buyer does not receive notice prior to the Closing (either from Seller in
Schedule 14.3 or pursuant to notice given pursuant to Section 17.1 or in any
written communication made to Buyer from Buyer's environmental consultants
(collectively the "Known Environmental Matters")). Except as expressly
provided in this Section 14.2, at Closing each party, for itself and its
successors and assigns, by virtue of consummating the sale contemplated by this
Agreement and without further action on the part of such party, shall waive and
release the other party from any and all liability under any other cause of
action at law or in equity concerning the Known Environmental 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. Subject to the provisions of Sections 14.2.3,
14.2.4 and 14.2.5, Seller agrees to indemnify and hold harmless Buyer, its
Affiliates (including the Company after the Effective Date) 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 with respect to, or from
the use or ownership of, or any condition or circumstance relating to, the
Company or the Property that occurred or arose prior to or on the Effective
Date. The foregoing indemnity in this Section 14.2.2 shall only apply to
matters that do not constitute Known Environmental Matters (such matters being
referred to as the "Unknown Environmental Matters"). Such indemnification
under this Section 14.2.2 shall be provided only for claims for Unknown
Environmental Matters noticed to the other party pursuant to the procedures of
Section 14.2.3, within eighteen (18) months after the Effective Date. Subject
to the provisions of Sections 14.2.3 and 14.2.4, Buyer agrees to indemnify and
hold harmless Seller, its Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against any and all
Environmental Liabilities, with respect to any Environmental Requirements in
existence now or hereafter in effect, arising from acts or omissions occurring
after the Effective Date, or from the use or ownership of the Property after
the Effective Date, or any condition or circumstance relating to the Company,
the Property or the Business that occurred or arose after the Effective Date on
the Property or in connection with the Company or the operation of the Business
after the Effective Date.
14.2.3 Notice. A party seeking indemnification under this Section 14.2
must give written notice to the other party, including 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 that all costs incurred or to be
incurred by the party to be indemnified under this Section 14.2 are required by
Environmental Requirements, as applicable to Buyer, and Existing Environmental
Requirements, as applicable to Seller, and are reasonable and cost-effective.
If the indemnifying party disagrees with the party to be indemnified as to the
necessity of costs or the reasonableness or cost-effectiveness of the
remediation method selected, the parties shall negotiate in good faith to
achieve at a mutually satisfactory solution. If the parties cannot agree as to
costs or methods of remediation, the matter shall be resolved in accordance
with Article 16.
14.2.4 Actual Damages. Any indemnifiable claim under this Section 14.2
shall not include incidental or consequential damages except to the extent such
damages have been recovered by a third person and are the subject of a Third
Party claim for which indemnification is available under the express terms of
this Article 14. Any indemnifiable claim under this Section 14.2 shall be
reduced to account for any insurance, storage tank fund, or other proceeds
received by the party to be indemnified, as a result of the indemnifiable
losses involved. The parties agree to take all reasonable steps to mitigate
any indemnifiable claim under this Section 14.2, including complying with any
registration and reporting requirements necessary to qualify for reimbursement
from any storage tank fund.
14.2.5 Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, this Article 14, or any applicable law, the
indemnification obligations of Seller under this Section 14.2 shall not exceed
the aggregate amount of One Hundred Twenty-Five Thousand Eight Hundred Fifty
Dollars ($125,850.00).
14.2.6 Adjustments to Purchase Price. Payments made under this 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 anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any adjustment 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.
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
breach on the part of the other party of its respective representations,
warranties or covenants set forth in this Agreement; provided, however, that a
party shall not be entitled to exercise its right of termination under this
subsection (b) if the breach is capable of being cured to the non-breaching
party's reasonable satisfaction and the breaching party is proceeding
diligently with its best efforts to effect such cure.
(c) by Buyer, pursuant to Section 11.20 (Delivery of Schedules);
(d) by Buyer and Seller, as the result of Section 14.1.7(a);
(e) by Buyer or Seller, pursuant to Section 11.9;
(f) by Seller or Buyer, if the Closing shall not have occurred by
December 31, 1995 due to no fault or delay attributable to the party seeking
termination; provided, however, that a party shall not be entitled to exercise
any right of termination pursuant to this subsection (f) 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;
(g) by Buyer if a Governmental Authority, the approval of which is a
condition to Buyer's obligations under Section 7.1, has provided written notice
that it shall not consent to or approve the transactions contemplated hereby;
or
(h) by Seller, if a Governmental Authority, the approval of which is
a condition to Seller's obligations under Section 7.2, has provided written
notice that it shall not consent to or approve the transactions contemplated
hereby.
15.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15. 1 (a),
(c), (d), (e), (f), (g) or (h), this Agreement shall be of no further force and
effect and there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or other
representatives.
(b) A party's exercise of its right of termination under Section
15.1(b) shall not constitute a waiver of its rights to recover damages, whether
pursuant to breach of contract or in tort, or other remedies available at law
or in equity, from the other party as a result of the other party's breach of
this Agreement.
(c) 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, 17.14 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 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 a mutually agreeable location.
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 will bear its own costs and
expenses in submitting and presenting its position with respect to any such
dispute to the arbitrator, and the fees and expenses of such arbitration
procedures, including the fees of the arbitrator will be shared equally by
Buyer and Seller, except that a party seeking discovery shall reimburse the
responding party the cost of production of documents (including search time and
reproduction costs); provided, however, that if the arbitrator determines that
the position taken in the dispute by the non-prevailing party taken as a whole
is unreasonable, the nonprevailing party will bear all such fees and expenses,
and reimburse the prevailing party for all of its reasonable costs and expenses
in submitting and presenting its position.
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 claim arising out of the provisions of Section 11.1, or
the Confidentiality Agreement, or to a party's seeking to proceed under Section
17.14, 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, or
in the event that a party seeks to proceed under Section 17.14, the non-
defaulting 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, 17.14 or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices, consents 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:
Mr. Donald K. Roberton
Vice President-Telecommunications
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4627
and
L. Russell Mitten, II, Esq.
Vice President-General Counsel
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
with a copy to:
Jeffry L. Hardin, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
(b) If to Seller to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: President
Facsimile No.: 501/661-0962
with a copy to:
ALLTEL Corporation
One Allied Drive
Little Rock, AR 72203
Attn: General Counsel
Facsimile No.: 501/661-0962
or to such other persons or 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
forth 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 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. All regulatory filing fees required pursuant to Sections 5.1, 5.4
and 5.5 shall be split equally between the parties. Each party will pay the
appropriate costs and filing fees relating to any other applications required
to be filed by such party.
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. Buyer may not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Seller; provided that
Buyer may assign or delegate its rights and obligations under this Agreement
without the prior written consent of Seller, to any directly or indirectly
wholly owned subsidiary of Buyer provided such subsidiary assumes in writing
all of the duties and obligations of Buyer hereunder, but no such assignment
and assumption shall in any way operate to enlarge, alter or change any
obligation of or due to Seller or relieve Buyer of its obligations hereunder
and provided that Buyer agrees to cause such subsidiary to perform each of its
agreements and covenants herein, and shall be jointly and severally liable for
any non-performance thereof. Seller may not assign or delegate any of its
rights or duties hereunder without the prior written consent of the Buyer.
Upon the sale, assignment or transfer by Buyer of the Company, the Business or
the Property to a non-Affiliate of Buyer not in the ordinary course of business
of Buyer, Seller's representations and warranties and indemnification
obligation for breach thereof shall terminate. Any assignment made in
violation of the foregoing provisions shall be void.
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, any agreements expressly incorporated
herein, and the Confidentiality Agreement. 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
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 Delaware
(except that no effect shall be given to any conflicts of law principles of the
State of Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
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.
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, (iii) all
references to the "knowledge of a party" will be deemed to refer to the actual
knowledge of the Executive Officers of the party after reasonable
investigation, and (iv) all references to a party's "best efforts" and
references of like import will be deemed to refer to the best efforts of such
party in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
(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.
17.14 Specific Performance. In addition to all other rights and remedies
available at law or in equity, any party hereto may pursue, to the fullest
extent available, the remedy of specific performance in order to compel the
other party to close pursuant to Article 8.
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.
ALLTEL CORPORATION
By: /s/ Max E. Bobbitt
-----------------------
Name: Max E. Bobbitt
Title: President and
Chief Operating Officer
CITIZENS UTILITIES COMPANY
By: /s/ Leonard Tow
------------------------
Name: Leonard Tow
Title: Chairman of the Board and
Chief Executive Officer