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 Navajo Communications Co., Inc.
a New Mexico 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 local
exchange and exchange access telecommunications services and other related
regulated and non-regulated activities, services and products associated with
the Exchanges, 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 Exchanges (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.
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.
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.
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.
Exchanges is defined in Section 2.2.
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 Exchanges.
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,
the Company's interest in any cellular telephone or personal communications
services business, and, in each case, any applications or licenses granted
with respect thereto, 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.
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, the PUC, or any other
Governmental Authority, as to which: (a) no request for stay of the action
by the FCC, the PUC, 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, the PUC,
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, the PUC, 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, the PUC'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.
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).
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).
Original Cost Documents means all original cost documentation relating
to the Telephone Plant.
NECA means the National Exchange Carrier Association.
Non-FCC Authorizations is defined in 2.2.6.
PBGC means the Pension Benefit Guaranty Corporation.
Permitted Exceptions is defined in Section 11.16.
Plans is defined in Section 9.1.18.
Press Release is defined in Section 17.2.
PUC means the Public Service Commission of New Mexico, the Arizona
Corporation Commission, and the Public Service Commission of Utah.
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 4,487,900 shares of the Common Stock owned by Seller.
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.
Telephone Plant is defined in Section 2.2. 1.
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.
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 Telephone Plant, Contracts and Leases (to the extent permitted
following compliance with Section 5.3), Company Books and Records, FCC
Licenses, 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
telephone exchanges listed in Schedule 2.2(a) (the "Exchanges"), and (ii) the
Unregulated Business described on Schedule 2.2(b).
2.2.1 Telephone Plant. For purposes of this Agreement, "Telephone
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, telephone cable
(wherever located and whether in service or under construction), microwave
facilities (including frequency spectrum assignments), telephone line
facilities, telephones, machinery, furniture, fixtures, tools, implements,
conduits, stations, substations, equipment (including, without limitation,
central office equipment, subscribers' station equipment and other equipment
in general), instruments, house-wiring connections and all other equipment
of every nature and kind owned by 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. Without limiting the generality of the foregoing, the
Telephone Plant includes the assets that would be properly included in the
fixed asset accounts referenced in Part 32 of the FCC's Rules and Regulations
(47 C.F.R. Part 32), as such accounts are reflected in Schedule 9.1.19.
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), detailed continuing property record lists, plans,
blueprints, specifications, designs, drawings, surveys, engineering reports,
personnel records (where applicable), Original Cost Documents (where located
in the Exchanges 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, including,
without limitation, Section 214 authorizations where applicable, granted to
the Company by the FCC.
2.2.5 [INTENTIONALLY DELETED]
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) 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 Fifty Four Million One Hundred One
Thousand Dollars ($54,101,000.00), 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 PUC and with respect to 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 PUC and other appropriate
Governmental 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(b)) from Seller to Buyer
(the "FCC Consents"). The parties each agree that in connection with taking
the immediately above described actions, they will not file any application
or request for a waiver of Part 36 (study areas), Part 61 (tariffs), and
Part 69 (price caps and study areas) of the FCC Rules, and that on the
Effective Date the study areas relating to the Exchanges shall remain in the
National Exchange Carrier Association Tariff F.C.C. No. 5, provided, however,
that such study areas shall remain in the NECA Tariff FCC No. 5 after the
Effective Date only for so long as Buyer, in its sole discretion, shall
determine. 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 interexchange carriers having business relationships with the Company,
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 interexchange carriers, 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 11.24. 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.
7.2 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 and the PUC. 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 the PUC; 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 and the PUC.
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 Company's tariffs or 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 Tariffs: FCC Licenses, Non-FCC Authorizations.
(a) With respect to federal tariffs, the Company is an issuing
carrier in the National Exchange Carrier Association Tariff F.C.C. No. 5 for
the purpose of providing interstate access service. Except as described on
Schedule 9.1.17(a), the state regulatory tariffs applicable to the Company
stand in full force and effect on the date of this Agreement in accordance
with all terms of such state tariffs, 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 is the Company subject to any restrictions or
conditions applicable to its state regulatory tariffs that limit or would
limit the operation of the Business (other than restrictions or conditions
generally applicable to tariffs of that type). Except as described on
Schedule 9.1.17(a), each such state tariff has been duly and validly approved
by the appropriate state regulatory agency. Except as otherwise disclosed
on Schedule 9.1.17(a), the Company is not in material violation under the
terms and conditions of any such state tariff, and there is no basis for any
claim of material violation by the Company in any material respect under any
such state tariff. Except as described in Schedule 9.1.17(a), there are no
applications by the Company or complaints or petitions by others or
proceedings pending or threatened before the state regulatory authority
relating to the Company, the Business or its operations or the state
regulatory tariffs. To the knowledge of Seller and the Company, there are
no material violations by subscribers or others under any such state tariff
that would be material to the Company or the Business. A true and correct
copy of each state tariff applicable to the Company or the Business has been
delivered to Buyer.
(b) Listed on Schedule 9.1.17(b) 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(b), 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.
(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 Telephone 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 and
continuing property records lists associated therewith) of the Company's
Telephone Plant as of June 30, 1994, including, to the extent available, a
schedule specifically identifying the Telephone Plant that is associated with
the Unregulated Business. The account balances reflected on the schedule of
Telephone Plant correspond, in all material respects, to the associated
account balances reflected on the Company's Continuing Property Records.
9.1.20. Accuracy of Certain Information. With respect to the Company's
Business, Seller hereby represents and warrants to Buyer as follows:
(a) The information regarding type of central office switch and
number of access lines in service for each exchange set forth on Schedule
9.1.20 (a) is true and complete in all material respects as of the respective
dates set forth thereon.
(b) The information set forth only with respect to the 1993 column
of the "Capital Budget-Network Modernization Forecast" attached as Schedule
9.1.20 (b) is true and complete as of December 31, 1993.
(c) Schedule 9.1.20 (c) 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.
(d) [INTENTIONALLY DELETED]
(e) Schedule 9.1.20(e) sets forth a true and complete list of the
interstate billing and collection revenues and intrastate interlata billing
and collection revenues of the Company for the year 1993.
9.1.21 Rate Base. Except as set forth on Schedule 9.1.21, the Company
has no materials and supplies, plant or equipment that has been disallowed
from rate base or excluded from the revenue calculations for any pool (unless
due to the deregulation of the service for which such assets are used) or in
the most recent rate order issued by the PUC or the FCC or any determination
by an administrator of an interstate or intrastate pool, and has not received
written notification that the PUC or the FCC or any pool administrator
proposes to exclude any assets from rate base or revenue calculations for the
pools, or any tariff filed with or approved in the most recent rate order of
the PUC or the FCC, in each case which materials and supplies, plant or
equipment, in the aggregate, would be in excess of one percent (1%) of Net
Telecommunications Plant.
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. Except as Seller shall specifically
indicate on Schedule 9.1.23, (i) the Company is in compliance in all material
respects with all Laws 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.
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 and PUC.
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 PUC and Government Authorities.
Except as set forth on Schedule 9.1.29, there are no changes, modifications,
upgrades or enhancements required by the PUC or any Government Authority 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. 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 New Mexico; 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.
9.2 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 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC's Licenses, as described in Section 5.4,
Buyer will not file any application or request for a waiver of Part 36 (study
areas), Part 61 (tariffs), and Part 69 (price caps and study areas) of the
FCC Rules, and that on the Effective Date the study areas relating to the
Exchanges shall remain in the National Exchange Carrier Association Tariff
FCC No. 5, provided, however, that such study areas shall remain in the NECA
Tariff FCC No. 5 after the Effective Date only for so long as Buyer, in its
sole discretion, shall determine.
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.
(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. The one hundred eighty (180) day time period for replacement
of Marks affixed to telephone directories that were already published or
closed for publication as of the Effective Date shall be extended to the
production of replacements for such directories.
(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' tariffs, 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 the PUC, Seller will cause the Company not
to (i) institute any proceeding with respect to, or otherwise change, amend
or supplement any tariff or (ii) enter into or agree to any stipulation,
order, or decree of, or settlement with the PUC 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 the PUC, or before the
FCC (except for filings on behalf of all of Seller's local exchange telephone
companies) 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 the PUC 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, without waiving any other rights
related thereto, oppose Buyer's intervention in such proceeding.
(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 Two Million Seven Hundred Five Thousand
Fifty Dollars ($2,705,050.00), 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 Two
Million Seven Hundred Five Thousand Fifty Dollars ($2,705,050.00), 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 Settlements and Cost Studies. The parties agree that, with
respect to all toll revenues, settlements, pools, separations studies,
Universal Service Fund payments or similar activities, Seller shall receive
the benefit or suffer the burden of the results of any such activities that
are related to the conduct of the Business or the ownership or operation of
the Company on or before the Effective Date.
11.11 [INTENTIONALLY DELETED]
11.12 Other Contracts.
11.12.1 Telephone Directories Published by ALLTEL Publishing
Corporation. The Directory Publishing Agreement dated as of November 15,
1994, by and between Company and ALLTEL Publishing Corporation (the
"Directory Publishing Agreement") is an Excluded Contract on Schedule
11.22(h), except as hereinafter provided. Within thirty days after the
Execution Date, Buyer shall cause its existing directory provider to indicate
in writing whether it will provide directory production services to the
Company, as of the Effective Date (or as of such later date as described
below) with regard to all of the Exchanges on the same terms and conditions
as it is presently providing such services to Buyer, and Buyer shall inform
Seller within such thirty day period of Buyer's existing telephone directory
provider's written intention. If Buyer's existing directory provider's
indication is that it will not provide directory publication services for all
of the Exchanges on the same terms and conditions that it is presently
providing such services to Buyer, then the Directory Publishing Agreement
shall be deemed to become a Contract for the purposes of this Agreement.
Promptly, thereafter, the Buyer and ALLTEL Publishing Corporation shall agree
to meet in good faith to negotiate any necessary amendments to the Directory
Publishing Agreement, to be effective as of the Effective Date, to provide
for a retention rate equal to or greater than the higher of (x) 60% or
(y) the retention rate provided for in any substantially similar directory
publishing agreement between ALLTEL Publishing Corporation and a non-
Affiliate of ALLTEL Publishing Corporation that was entered into within 18
months prior to the Effective Date. If Buyer's existing directory provider
indicates that it will provide directory publication for all the Exchanges,
as provided above, the Directory Publishing Agreement shall remain in effect
as to the directory of each of the Exchanges for which (i) the directory is
scheduled to be or is published prior to the Effective Date or (ii) the
canvass for the directory has begun prior to the Effective Date and it is
scheduled to be published after the Effective Date. Under such
circumstances, the Buyer's existing directory provider will not begin
providing directory publication services for such Exchange until canvass and
production begins for the next succeeding directory related to such Exchange.
11.12.2 Telephone Directories-General. If Buyer's existing directory
provider indicates that it will provide directory publication for all of the
Exchanges, as provided in Section 11.12.1 of this Agreement, Seller and Buyer
agree to cooperate and to use their best efforts as follows:
(a) Seller will deliver to Buyer on a date mutually agreeable to
Buyer and Seller, copies of all records, documents, and materials of the
Seller even if in the possession of a third party (the "Directory Records")
related to directories of the Exchanges that are published by Seller or its
Affiliate.
(b) Except as otherwise agreed between the parties, Seller and its
Affiliate shall have no responsibility for the canvass and production
functions of any directories related to the Exchanges that are scheduled to
begin canvassing and publication after the Effective Date.
(c) Seller and Seller's Affiliates and Buyer shall provide the
other reasonable access to such documentation, reports and accounting records
related to directory publication as may be necessary to insure a proper
transition of directory publication in accordance with the terms of such
agreements in effect on the Effective Date.
(d) As promptly as practicable after receipt by Seller of Buyer's
existing directory provider's indication that it will provide directory
publication services for all of the Company's Exchanges, Seller or its
Affiliate (ALLTEL Publishing Corporation), and Buyer will meet to negotiate
in good faith to agree upon the services or work, if any, that Seller or its
Affiliate (ALLTEL Publishing Corporation) will provide, and the compensation
that the Buyer will pay for such services and work, related to any
directories that will be canvassed and published by Buyer's existing
directory provider.
11.12.3 B&C Agreements. Seller and Buyer shall, prior to the Closing,
use their best efforts to allow Buyer to negotiate, on behalf of the Company,
a billing and collection agreement ("B&C Agreement") reasonably satisfactory
to Buyer with each interexchange carrier ("IXC") and each local exchange
carrier ("LEC") for which the Company provides, on the Execution Date,
billing and collection services in any Exchange (each such IXC or LEC is
hereinafter referred to as a "Carrier"). Seller and Buyer shall cooperate
with each other and make available to each other all documents and records
relevant and necessary to allow the Company to finalize negotiations of B&C
Agreements, as necessary, and to perform such B&C Agreements after the
Effective Date.
11.12.4 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 (such as Northern Telecom and Stromberg-Carlson;
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.
11.12.5 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) standard 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) standard 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 otherwise provided in Section
11.24, 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 FCC Tariffs. In connection with obtaining consent to the transfer
of control of the Company's FCC Licenses, as described in Section 5.4, during
the period from the Execution Date until the Effective Date, neither party
shall file any application or request for a waiver of Part 36 (study areas),
Part 61 (tariffs), and Part 69 (price caps and study areas) of the FCC Rules,
and that on the Effective Date the study areas relating to the Exchanges
shall remain in the Natural Exchange Carrier Association Tariff FCC No. 5;
provided, however, that such study areas shall remain in the NECA Tariff FCC
No. 5 after the Effective Date only for so long as Buyer, in its sole
discretion, shall determine.
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 Notes Payable - Other (item 3 -
Liabilities on the Company's Balance Sheet), Commercial Paper Outstanding
(item 4 - Liabilities on the Company's Balance Sheet), Other Current
Liabilities (item 14 - 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 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) 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, 11.10, 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 One Hundred Thirty
Five Thousand Two Hundred Fifty Two Dollars ($135,252.00) 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 Four
Million Fifty Seven Thousand Five Hundred Seventy Five Dollars
($4,057,575.00).
(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, including without limitation all toll revenues, settlements,
pools, separations studies or similar activities for which Seller is
responsible pursuant to Section 11.10; 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 One Million Eighty Two Thousand Twenty
Dollars ($1,082,020.00) (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 Two Million Twenty Eight Thousand Seven
Hundred Eighty Seven Dollars ($2,028,787.00).
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