_________________________________________________________________
ASSET PURCHASE AGREEMENT
DATED SEPTEMBER 26, 1994
BY AND BETWEEN
VANGUARD CELLULAR SYSTEMS, INC.
AND
SUNSHINE CELLULAR
_________________________________________________________________
TABLE OF CONTENTS
Page
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . 1
SECTION 2. PURCHASE OF ASSETS; CONSIDERATION . . . . . . . 8
2.1 Purchase of Assets. . . . . . . . . . . . . . . 8
2.2 Purchase Price. . . . . . . . . . . . . . . . . 8
2.3 Payment of Purchase Price . . . . . . . . . . . 8
2.4 Adjustments to Purchase Price . . . . . . . . . 14
SECTION 3. ASSUMPTION OF OBLIGATIONS; ACCOUNTS RECEIVABLE 16
3.1 Assumption of Obligations . . . . . . . . . . . 16
3.2 Limitation. . . . . . . . . . . . . . . . . . . 16
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. . 17
4.1 Authority . . . . . . . . . . . . . . . . . . . 17
4.2 Authorization and Binding Obligation. . . . . . 18
4.3 Absence of Certain Changes or Events. . . . . . 18
4.4 Sufficiency of Assets . . . . . . . . . . . . . 19
4.5 No Conflict or Violation. . . . . . . . . . . . 19
4.6 Consents. . . . . . . . . . . . . . . . . . . . 19
4.7 Governmental Authorizations . . . . . . . . . . 19
4.8 Seller Qualifications . . . . . . . . . . . . . 20
4.9 Real Property . . . . . . . . . . . . . . . . . 20
4.10 Personal Property . . . . . . . . . . . . . . . 21
4.11 Subscribers and Suppliers . . . . . . . . . . . 21
4.12 Resale and Roaming Agreements . . . . . . . . . 21
4.13 Financial Statements. . . . . . . . . . . . . . 22
4.14 Contracts . . . . . . . . . . . . . . . . . . . 22
4.15 Seller Indebtedness . . . . . . . . . . . . . . 22
4.16 Intangibles . . . . . . . . . . . . . . . . . . 22
4.17 Taxes . . . . . . . . . . . . . . . . . . . . . 23
4.18 Insurance . . . . . . . . . . . . . . . . . . . 24
4.19 Labor Matters . . . . . . . . . . . . . . . . . 24
4.20 Employee Benefit Plans. . . . . . . . . . . . . 25
4.21 Transaction with Certain Persons. . . . . . . . 25
4.22 Litigation. . . . . . . . . . . . . . . . . . . 25
4.23 Compliance With Laws. . . . . . . . . . . . . . 26
4.24 Bankruptcy. . . . . . . . . . . . . . . . . . . 26
4.25 Environmental and Safety Compliance . . . . . . 26
4.26 Broker. . . . . . . . . . . . . . . . . . . . . 27
4.27 No Other Agreement to Sell. . . . . . . . . . . 27
4.28 No Misstatements or Omissions . . . . . . . . . 27
4.29 Books and Records . . . . . . . . . . . . . . . 28
4.30 Accounts Receivable . . . . . . . . . . . . . . 28
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . 28
5.1 Organization, Standing and Authority. . . . . . 28
5.2 Authorization and Binding Obligation. . . . . . 28
5.3 No Conflict or Violation. . . . . . . . . . . . 29
5.4 Consents. . . . . . . . . . . . . . . . . . . . 29
5.5 Buyer Qualifications. . . . . . . . . . . . . . 29
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5.6 Litigation. . . . . . . . . . . . . . . . . . . 29
5.7 Compliance With Laws. . . . . . . . . . . . . . 30
5.8 Bankruptcy. . . . . . . . . . . . . . . . . . . 30
5.9 Stock . . . . . . . . . . . . . . . . . . . . . 30
5.10 Broker. . . . . . . . . . . . . . . . . . . . . 30
5.11 No Misstatements or Omissions . . . . . . . . . 30
SECTION 6. COVENANTS OF SELLER . . . . . . . . . . . . . . 31
6.1 Pre-Closing Covenants . . . . . . . . . . . . . 31
6.2 Closing Covenant. . . . . . . . . . . . . . . . 34
SECTION 7. CLOSING COVENANTS OF BUYER. . . . . . . . . . . 34
7.1 Pre-Closing Covenants . . . . . . . . . . . . . 34
7.2 Closing Covenant. . . . . . . . . . . . . . . . 34
SECTION 8. SPECIAL COVENANTS AND AGREEMENT . . . . . . . . 35
8.1 FCC ConsentS. . . . . . . . . . . . . . . . . . 35
8.2 Other Consents. . . . . . . . . . . . . . . . . 35
8.3 Cooperation . . . . . . . . . . . . . . . . . . 36
8.4 HSR Filings . . . . . . . . . . . . . . . . . . 36
8.5 Notification of Certain Matter. . . . . . . . . 36
8.6 Employees . . . . . . . . . . . . . . . . . . . 36
8.7 Schedule Revision . . . . . . . . . . . . . . . 37
8.8 Public Announcements. . . . . . . . . . . . . . 37
SECTION 9. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER . 37
9.1 Conditions to Obligations of Buyer. . . . . . . 37
9.2 Conditions to Obligations of Seller . . . . . . 39
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SECTION 10. CLOSING; TERMINATIONS; CLOSING DELIVERIES . . . 40
10.1 Closing; Terminations . . . . . . . . . . . . . 40
10.2 Deliveries by Seller. . . . . . . . . . . . . . 41
10.3 Deliveries by Buyer . . . . . . . . . . . . . . 42
SECTION 11. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING . 43
11.1 Tax Matters; Payments of Debts and Liabilities. 43
11.2 Closing Financial Statements. . . . . . . . . . 44
11.3 Billing . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION . . . . . . . . . . . . . . . . 44
12.1 Representations and Warranties. . . . . . . . . 44
12.2 Indemnification by Seller . . . . . . . . . . . 45
12.3 Indemnification by Buyer. . . . . . . . . . . . 45
12.4 Procedure for Indemnification . . . . . . . . . 46
SECTION 13. CERTAIN REMEDIES. . . . . . . . . . . . . . . . 47
13.1 Seller's Default. . . . . . . . . . . . . . . . 47
13.2 Buyer's Default . . . . . . . . . . . . . . . . 47
13.3 Notice of Default; Cure . . . . . . . . . . . . 48
SECTION 14. ARBITRATION . . . . . . . . . . . . . . . . . . 48
SECTION 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . 48
15.1 Allocation of Purchase Price. . . . . . . . . . 48
15.2 Fees and Expense. . . . . . . . . . . . . . . . 49
15.3 Notices . . . . . . . . . . . . . . . . . . . . 49
15.4 Further Assurances. . . . . . . . . . . . . . . 50
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15.5 Governing Law . . . . . . . . . . . . . . . . . 50
15.6 Headings. . . . . . . . . . . . . . . . . . . . 50
15.7 Seller's Disclosure Schedule. . . . . . . . . . 50
15.8 Gender and Number . . . . . . . . . . . . . . . 50
15.9 Entire Agreement. . . . . . . . . . . . . . . . 50
15.10 Severability. . . . . . . . . . . . . . . . . . 50
15.11 Benefit and Assignment. . . . . . . . . . . . . 51
15.12 Confidential Information. . . . . . . . . . . . 51
15.13 Counterparts. . . . . . . . . . . . . . . . . . 53
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as
of September 26, 1994, by and between VANGUARD CELLULAR SYSTEMS,
INC., a North Carolina corporation ("Buyer"), and SUNSHINE
CELLULAR, a Maryland general partnership ("Seller").
RECITALS
WHEREAS, the Seller holds, among other assets, a license
issued by the Federal Communications Commission to operate the
non-wireline cellular radio telephone system in the Pennsylvania
8 - Union Rural Service Area (Market No. 619A) (the "System");
WHEREAS, Seller desires to sell and Buyer wishes to buy, on
the terms and conditions set forth in this Agreement, any and all
of the assets of Seller used and useful in the operation of the
System;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and for other
good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS.
The following terms, as used in this Agreement, shall have the
meanings set forth in this Section:
"Assets" means all of Seller's right, title and interest in
all of the tangible and intangible assets, real, personal or
mixed, now owned or held by Seller or hereafter acquired by
Seller on or prior to the Closing Date and used or useful in or
necessary for the operation of the System, including, without
limitation, the Real Property, the Personal Property, the
Contracts, the Governmental Authorizations, the Intangibles, the
Books and Records, the accounts receivable, the Subscriber
Agreements and all cash and other current assets.
"Assignment Applications" shall have the meaning assigned to
it in Section 8.1.
"Balance Sheet Date" means April 30, 1994.
"Benefit Arrangement" means any employment, consulting,
severance or other similar contract, arrangement or policy and
each plan, arrangement (written or oral), program, agreement or
commitment providing for insurance coverage (including without
limitation, any self-insured arrangements), workers'
compensation,
disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits (including without limitation any
"voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses,
stock options, stock appreciation rights, stock purchases or
other forms of incentive compensation or post-retirement
insurance, compensation or benefits which:
(A) is not a Welfare Plan, Pension Plan or Multi-
employer Plan,
(B) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by Seller or
under which Seller may incur any liability, and
(C) covers any employee or former employee of Seller
(with respect to their relationship with Seller).
"Books and Records" means all of the books and records of
Seller pertaining to the operation of the System, including
without limitation, (i) books and records relating to the
purchase of materials and supplies, invoices, customer lists,
supplier lists, personnel records, and subscriber information,
(ii) public file materials, logs and engineering records, (iii)
plans, diagrams, blueprints, schematics, filings with
governmental agencies and executed copies of Contracts and
Subscriber Agreements, and (iv) computer software discs, tapes
and data in computer readable and/or human readable form used to
maintain any of the foregoing together with the media on which
such software and data are stored and all documentation relating
thereto, excepting the books and records described in Seller's
Disclosure Schedule as retained by Seller.
"Business Days" means all days except Saturday, Sunday and
the holidays recognized by the U.S. Government for its employees.
"Capital Budget" shall have the meaning assigned to it in
Section 2.4(a).
"Capital Expenditures" shall have the meaning assigned to it
in Section 2.4(a).
"Cell Site" means a location that contains, among other
things, a low-power transmitter-receiver that communicates by
radio signal with cellular telephones located in the Market.
"Claimant" means a party claiming indemnification pursuant
to Section 12 hereof.
"Closing" means the consummation of the transactions
contemplated in this Agreement in accordance with this Agreement.
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"Closing Financial Statements" means the balance sheet and
the related statements of income and cash flow for Seller as of,
and for the period ended on, the Closing Date, prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and
presenting fairly the assets, liabilities and financial position
of the Seller as of the Closing Date and the results of
operations and changes in partner's capital for the period then
ended.
"Closing Date" means the date on which the Closing occurs,
as determined pursuant to Section 10.1(a).
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Communications Act" means the Communications Act of 1934,
as amended, and the regulations promulgated thereunder.
"Consents" means the FCC Consent, the filings required under
the HSR Act, and the other consents, waivers, permits, and
approvals of third parties, including without limitation
governmental authorities, necessary to transfer the Assets to the
Buyer or otherwise to consummate the transactions contemplated
hereby, which Consents are set forth in Seller's Disclosure
Schedule.
"Contracts" means all contracts, leases (for real or
personal property), non-governmental licenses, commitments,
understandings and other agreements, including any amendments or
other modifications thereto, to which Seller is a party, that
relate to the operation of the System, including those described
in Seller's Disclosure Schedule, together with any additions
thereto between the date hereof and the Closing Date, but
excludes Subscriber Agreements and Employment Agreements.
"ECLP" means Estess Cellular Limited Partnership, a Delaware
limited partnership.
"Employment Agreements" shall have the meaning assigned to
it in Section 4.19.
"Effective Time" means 12:01 a.m., local Washington, D.C.
time, on the Closing Date.
"Employee Plans" means all Benefit Arrangements, Multi-
employer Plans, Pension Plans and Welfare Plans, which Employee
Plans are set forth in Seller's Disclosure Schedule.
"Encumbrance" means any conditional sales contract (except
for the sale of cellular telephone service), claim, lien, pledge,
option, charge, easement, security interest, mortgage, deed of
trust, right-of-way, encumbrance or adverse interest of any kind
or
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character, other than Permitted Encumbrances.
"Environmental Laws" shall have the meaning assigned to it
in Section 4.25.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder.
"Escrow Agreement" shall have the meaning assigned to it in
Section 2.3(a).
"Estoppel Certificates" shall have the meaning assigned to
it in Section 6.1(l).
"FCC" means the Federal Communications Commission.
"FCC Authorizations" means those authorizations issued by
the FCC to operate the non-wireline cellular radio telephone
system for the Market, which FCC Authorizations are set forth in
Seller's Disclosure Schedule.
"FCC Consents" means actions by the FCC granting its consent
to the consummation of the transactions contemplated by this
Agreement.
"Final Order" means a written action or order issued by the
FCC or other governmental authority (A) which has not been
reversed, stayed, enjoined, set aside, annulled, or suspended and
(B) with respect to which (i) no requests have been filed and are
still pending for administrative or judicial review,
reconsideration, appeal, or stay, and the time for filing any
such requests and the time for the FCC or other governmental
authority to set aside the action on its own motion have expired,
(ii) in the event of review, reconsideration, or appeal, the time
for further review, reconsideration, or appeal has expired, and
(iii) in the event of a stay, such stay has been dismissed and
the time for review, reconsideration or appeal thereof has
expired.
"Financial Statements" means the balance sheets as of April
30 and June 30, 1994, and December 31 of 1994 (if the Closing
occurs on or after March 1, 1995), 1993, and 1992, and related
statements of income, cash flow and partners' equity for Seller
as of and for the four month period ending April 30, 1994, the
six month period ending June 30, 1994 and the twelve month
periods ended as of December 31, 1994 (if the Closing occurs on
or after March 1, 1995), 1993 and 1992, all of which are
contained in Seller's Disclosure Schedule (other than at December
31, 1994, which is not contained in Seller's Disclosure Schedule
on the date of this Agreement but will be contained therein if
the Closing occurs on or after March 1, 1995).
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"Governmental Authorizations" means all licenses, permits,
franchises, and other authorizations issued by federal, state, or
local governmental authorities in connection with the operation
of the System (including the FCC Authorizations), and all
applications for modification, extension or renewal thereof,
which Governmental Authorizations are set forth in Seller's
Disclosure Schedule.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnitor" means a party from whom indemnification is
claimed pursuant to Section 12 hereof.
"Intangibles" means any and all copyrights, trademarks,
trade names, licenses, patents, permits, privileges, proprietary
information, technical information and data, machinery and
equipment warranties, customer lists, and other intangible
property rights and interests applied for, issued to, or owned by
Seller or under which Seller is licensed or franchised and used
or useful in the operation of the System, including those listed
in Seller's Disclosure Schedule, together with any additions
thereto between the date hereof and the Closing Date.
"KCLP" means Kerrigan Cellular Limited Partnership, a
Delaware limited partnership.
"Knowledge" or being "aware" means (i) as to Seller (a) at
the time of the signing hereof, actual knowledge without inquiry,
and (B) at the time of the closing, actual knowledge after
inquiry of MCMG, Inc.; and (ii) as to Buyer, actual knowledge
without inquiry.
"Liabilities" means liabilities, obligations or commitments
of any nature, absolute, accrued, contingent or otherwise, known
or unknown, whether matured or unmatured.
"Market" means the Pennsylvania 8 - Union Rural Service Area
(Market No. 619A), as defined by the FCC.
"Multi-employer Plan" means any "multi-employer plan," as
defined in Sections 4001(a)(3) or (3)(37) of ERISA, (A) which
Seller maintains, administers, contributes to or is required to
contribute to, or after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or
under which Seller may incur any liability and (B) which covers
any employee or former employee of Seller (with respect to their
relationship with Seller).
"Net Current Assets" means current assets (other than
prepaid legal fees), less current liabilities (other than the
current portion of long term debt and accrued interest thereon),
determined in accordance with generally accepted accounting
principles.
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"Noncompetition Agreements" means the noncompetition
agreements to be delivered at or prior to Closing pursuant to
Section 10.2(n).
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multi-employer
Plan) (A) which Seller maintains, administers, contributes to or
is required to contribute to, or, within the five years prior to
the Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which Seller may incur any
liability and (B) which covers any employee or former employee of
Seller (with respect to their relationship with Seller).
"Permitted Encumbrances" means any liens for Taxes,
assessments, or other governmental charges or levies that are not
yet due and payable or which are being contested in good faith in
appropriate proceedings and such other encumbrances set forth in
Seller's Disclosure Schedule and specifically identified as
Permitted Encumbrances.
"Person" means any person or entity, whether an individual,
trustee, corporation, general partnership, limited partnership,
limited liability company, trust, unincorporated organization,
business association, firm, joint venture, governmental agency or
authority.
"Personal Property" means any and all machinery, equipment,
radios, transmitters, towers, antennas, lines, switching
equipment, test equipment, cellular telephone inventory, tools,
vehicles, furniture, leasehold improvements, office equipment,
plant, inventory, and other tangible personal property owned or
held by Seller and used or useful in the operation of the System,
including without limitation the property identified and
described as part of the Personal Property in Seller's Disclosure
Schedule, together with any additions thereto between the date
hereof and the Closing Date, but excluding the property
identified and described as not being part of the Personal
Property in Seller's Disclosure Schedule.
"Pollutant" shall mean any hazardous or toxic substances,
including without limitation petroleum products or by-products,
any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, asbestos, PCBs, phosphates, lead or
other heavy metals, chlorine, radon gas, "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), "hazardous
material" as defined in the Hazardous Materials Transportation
Act, as amended, "hazardous waste" as defined in the Resource
Conservation and Recovery Act, as amended, and regulations
adopted and publications promulgated pursuant to said laws.
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"Post-Closing Escrow Account" shall have the meaning
assigned to it in Section 2.3(a).
"Pro-forma Closing Balance Sheet" shall have the meaning
assigned to it in Section 2.4(b).
"Real Property" means all real estate and all interests in
real property, including all fee interests, all leaseholds,
easements, licenses, rights to access, and rights of way, and all
improvements thereon, owned or held by Seller and used or useful
in the operation of the System, which Real Property is identified
and described in Seller's Disclosure Schedule, together with any
additions thereto between the date hereof and the Closing Date.
"Real Property Leases" shall have the meaning assigned to it
in Section 4.9.
"Seller's Disclosure Schedule" means Seller's Disclosure
Schedule, attached hereto and incorporated herein by reference.
"Seller's General Partnership Agreement" means that certain
"Sunshine Cellular General Partnership Agreement" that governs
the affairs of Seller.
"Seller Indebtedness" means that indebtedness incurred by
Seller for purposes of funding the construction and operation of
the System, which indebtedness is listed in Seller's Disclosure
Schedule.
"Settlement Agreement" means that certain Agreement entered
into as of June 25, 1993 by and among Seller, certain individuals
related to Seller, and Buyer.
"Subscriber Agreements" means Seller's agreements for the
provision of cellular telephone service and/or cellular telephone
equipment to end users.
"Stock" means Class A Common Stock, par value $.01 per
share, of Vanguard Cellular Systems, Inc.
"System" means the non-wireline cellular radio telephone
system that is operated by Seller in the Market.
"Taxes" means all taxes, charges, fees, levies or other
assessments, including without limitation, income, excise, use,
transfer, payroll, occupancy, property, sales, franchise,
unemployment and withholding taxes, imposed by the United States
or any state, country, local or foreign government or subdivision
or agency thereof, and any assessments against the Real Property,
together with any interest, penalties or additional taxes
attributable to such taxes and other assessments.
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"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (A) which Seller maintains,
administers, contributes to or is required to contribute to, or
under which Seller may incur any liability and (B) which covers
any employee or former employee of Seller (with respect to their
relationship with such entity).
q
SECTION 2. PURCHASE OF ASSETS;CONSIDERATION.
2.1 Purchase of Assets. Subject to the terms and conditions
set forth herein, on the Closing Date, Seller shall sell, assign,
transfer and convey to Buyer, and Buyer shall purchase from
Seller, all of the Assets free and clear of all Encumbrances.
2.2 Purchase Price. Subject to adjustment as provided in
Section 2.4 below, the total purchase price (the "Purchase
Price") to be paid for the Assets and the Noncompetition
Agreements shall be Fifty Million Three Hundred Fifty Thousand
Dollars ($50,350,000.00), of which Fifty Million Three Hundred
Forty Thousand Dollars ($50,340,000.00) shall be the
consideration for the Assets and Ten Thousand Dollars
($10,000.00) shall be the consideration for the Noncompetition
Agreements.
2.3 Payment of Purchase Price.
(a) Subject to adjustment as provided in Section 2.4,
Buyer shall pay to Seller at Closing the Purchase Price in cash
or Stock, or any combination thereof as determined in Buyer's
sole discretion and notice of which shall be given to Seller by
Buyer on or before 5:00 PM ET on the fourth trading day prior to
the Closing Date (failure of which, the entire Purchase Price
shall be payable in cash); provided, however, Buyer will pay a
minimum of Fifteen Million Dollars ($15,000,000.00) of the
Purchase Price in cash, of which One Million Dollars
($1,000,000.00 shall be deposited into an escrow account (the
"Post-Closing Escrow Account") pursuant to the terms of the
Escrow Agreement, the form of which is attached hereto as Annex 1
(the "Escrow Agreement"). At the direction of Seller, Buyer will
pay an amount not to exceed the cash portion of the Purchase
Price to Northern Telecom Finance Corporation or other holder of
the Seller Indebtedness to satisfy the Seller Indebtedness. The
Post-Closing Escrow Account shall be disbursed to Buyer to
satisfy any liabilities of Seller arising out of this Agreement,
with the balance thereof to be disbursed to Seller on the first
anniversary of the Closing Date, as more specifically set forth
in the Escrow Agreement. The number of shares of Stock to be
delivered shall be determined by dividing the dollar value of the
portion of the Purchase Price to be paid in Stock by the average
of the high and low sales prices per share of the Stock for each
of the ten (10) trading days ending on the fifth trading day
prior to the Closing, as reported on the National Association of
Securities Dealers, Inc. Automated Quotation System - National
Market System ("NASDAQ - NMS") or such other national securities
exchange on
-8-
which the Stock is listed if such exchange is the
principal market on which the Stock is traded (the "Stock
Valuation Price").
(b) Vanguard Stock. (i) If Buyer elects to pay the
Purchase Price in accordance with subsection (a) above in part
with shares of Stock, then, as a condition to Buyer's right to
deliver such shares in lieu of cash, Buyer shall ensure that at
the time of delivery of such shares to Seller (1) such shares are
subject to a then-currently effective registration statement
under the Securities Act of 1933 (as amended and together with
the rules and regulations promulgated thereunder, the "Securities
Act") and are specifically registered for resale by Seller to the
public pursuant to such registration statement (the "Registration
Statement") free and clear of any restrictions under the
Securities Act except for prospectus delivery requirements; (2)
such shares are listed on the NASDAQ-NMS or on a national
securities exchange, if such exchange is the principal market on
which the Stock is traded; and (3) the delivery of such shares to
Seller is qualified under applicable state securities laws and
the resale of such shares by Seller shall have been qualified
under such state securities laws as Seller shall reasonably
request; provided, however, that Buyer shall not be obligated to
qualify as a foreign corporation or do business under the laws of
or become subject to taxation in, any jurisdiction in which it
shall not be then qualified, or to file any general consent to
service of process.
(ii) From time to time during the period commencing on
the Closing Date and ending upon the earlier of (x) 120 days
after the Closing Date, or (y) such time as Seller shall have
advised Buyer in writing that it has completed its resale of the
Stock delivered hereunder (the "Resale Period"), Buyer shall do
the following:
(A) Prepare and deliver to Seller as many copies
of the Prospectus (as hereafter defined) as Seller may reasonably
request;
(B) Use its best efforts to comply with all
requirements imposed upon it by the Securities Act, by the
Securities Exchange Act of 1934 (as amended and together with the
rules and regulations promulgated thereunder, the "Exchange
Act"), and by the undertakings in the Registration Statement
(including but not limited to the undertakings required by Item
512(g) of Regulation S-K) so far as is necessary to permit the
continuance of sales of Stock by Seller to the public free and
clear of any restrictions under the Securities Act except for
prospectus delivery requirements. If, at any time during the
Resale Period, an event shall occur which makes it necessary to
amend or supplement the Prospectus to comply with law or with the
rules and regulations of the Securities and Exchange Commission
(the "SEC"), Buyer shall forthwith notify Seller of the proposed
amendment or supplement and prepare and furnish to Seller such
number of copies
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of an amended or supplemented Prospectus that
complies with law and with such rules and regulations as Seller
may reasonably request. Seller shall suspend its sales of Stock
pending preparation and delivery of such amendment or supplement
and the Resale Period shall be extended by the time during which
such sales of Stock shall be suspended. Buyer authorizes Seller,
and any brokers or dealers effecting sales of the Stock for the
account of Seller, to use the Prospectus, as from time to time
amended or supplemented, in connection with the sale of the Stock
in accordance with applicable provisions of the Securities Act
and state securities laws. For purposes of this Agreement, the
term "Prospectus" means the final prospectus relating to the
Stock most recently included in the Registration Statement or
filed by Buyer pursuant to Rule 424 of the Securities Act and any
amendments or supplements thereto filed by Buyer pursuant to Rule
424 of the Securities Act and shall include all documents or
information incorporated in any such prospectus by reference.
(C) Promptly advise Seller (I) when any post-
effective amendment of the Registration Statement is filed with
the SEC and when any post-effective amendment becomes effective;
(II) of any request made by the SEC for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information relating thereto; (III) of any suspension
or threatened suspension of the use of any Prospectus in any
state; and (IV) of any proceedings commenced or threatened to be
commenced by the SEC or any state securities commission which
would result in the issuance of any stop order or other order or
suspension of use. Buyer agrees to use its best efforts to
prevent or promptly remove any stop order or other order
preventing or suspending the use of the Prospectus during the
Resale Period and to comply with any such request by the SEC to
amend or supplement the Prospectus. The Resale Period shall be
extended by the aggregate time during which sales of Stock are
suspended as a result of any stop order or other order or
suspension of use of the Prospectus.
(D) Take such action as shall be necessary to
qualify and maintain the qualification of the shares of Stock
covered by such registration under such state securities laws for
offers and sales to the public during the Resale Period as Seller
shall reasonably request; provided, however, that Buyer shall not
be obligated to qualify as a foreign corporation to do business
under the laws of or become subject to taxation in, any
jurisdiction in which it shall not be then qualified, or to file
any general consent to service of process.
(E) Cause the Stock to be registered pursuant to
Section 12(b) or 12(g) of the Exchange Act and continually
listed, subject to notice of issuance, on the NASDAQ-NMS or a
national securities exchange, if such exchange is the principal
market on which the Stock is traded, and not subject to any
restriction or suspension from trading on the NASDAQ-NMS or such
national
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securities exchange; provided, however, that Buyer may
deregister the Stock registered pursuant to Section 12(b) or
12(g) of the Exchange Act if such deregistration is in connection
with a merger, dissolution or other transaction in which the
shareholders of Buyer receive prior to such deregistration either
cash or securities that are listed on the NASDAQ-NMS or a
national securities exchange or some combination of cash and such
securities; provided, further, that Buyer may delist the Stock
from trading on the NASDAQ-NMS or national securities exchange if
Buyer is concurrently listing such stock on the New York Stock
Exchange or the American Stock Exchange.
(iii) If Buyer elects to pay a portion of the
Purchase Price in accordance with subsection (a) above with
shares of Stock, then Buyer shall make generally available to its
security holders (and deliver to Seller), in the manner
contemplated by Rule 158(b) under the Securities Act or
otherwise, as soon as practicable but in any event not later than
120 days after the end of its fiscal quarter in which the first
anniversary date of the Closing Date occurs if the end of such
fiscal quarter is the end of Buyer's fiscal year (and if the end
of such fiscal quarter is not the end of Buyer's fiscal year,
then such period shall be reduced to 50 days), an earnings
statement satisfying the requirements of Section 11(a) of the
Securities Act and covering a period of at least twelve (12)
consecutive months beginning after the Closing Date.
(iv) (A) Buyer shall indemnify, defend and hold
harmless Seller, ECLP, KCLP, and all partners of ECLP and KCLP
against and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other fees and
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or
liability) to which Seller or any of them may become subject
under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions with respect thereto)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except to the extent that any such untrue
statement or omission is based upon written information supplied
by Seller or by any of its representatives for use in such
Registration Statement; provided, however, this indemnity
agreement shall not inure to the benefit of Seller, ECLP, KCLP,
or the partners of ECLP and KCLP on account of any loss, claim,
damage, liability or action arising from the sale of Stock to any
person as a result of Seller's failure to send or give a copy of
the Prospectus (as amended or supplemented) to such person.
(B) Seller shall indemnify, defend and hold
harmless Buyer, its officers and its directors and any
controlling
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persons of Buyer against and in respect of any
losses, claims, damages or liabilities, joint or several
(including legal or other fees and expenses reasonably incurred
by any of them in connection with investigating or defending any
such loss, claim, damage or liability) to which Buyer or any such
persons may become subject under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or
actions with respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent
that any such untrue statement or omission is based upon written
information supplied by Seller or its representatives for use in
such Registration Statement.
(C) The indemnification obligations of the
parties hereunder shall be subject to Section 12.4 hereof and,
notwithstanding any other provision of this Agreement, shall
survive indefinitely and shall not be subject to the
indemnification set forth in Section 12.2 or Section 12.3 hereof.
These obligations each are the consideration of the other and
shall apply whether or not the party to be indemnified is in
breach of this Agreement (other than a breach of the indemnity
under this Section).
(D) If for any reason the indemnification
provided for in the preceding clauses is unavailable to an
indemnified party as contemplated by the preceding clauses, then
the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations.
(v) Notwithstanding anything in this Agreement to the
contrary, if Seller shall have failed to provide all information
to Buyer required to be included in the Registration Statement as
to Seller within five (5) Business Days of request by Buyer or
such later date, not later than sixty (60) days prior to the
Closing Date, as is sufficient to enable the condition in
subsection (b)(i) to be satisfied prior to the Closing, then (A)
subsection (b)(i) shall not be a condition precedent to Buyer's
right to deliver Stock in partial payment of the Purchase Price
and (B) Buyer's obligations under subsection (b)(ii) shall be
suspended until the period beginning sixty (60) days from the
date all such information is delivered to Buyer and thereafter
shall continue in force until the end of the Resale Period. If
Seller desires that any Stock that may be delivered at Closing be
registered for resale under the Securities Act by its partners,
or partners thereof, rather than
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Seller, then Seller shall so
notify Buyer in writing and provide in such notification the
names and addresses of such partners (the "Designated Partners").
If Seller so notifies Buyer, then each Designated Partner shall
be entitled to the rights and subject to the obligations of
Seller under this subsection (b) and otherwise treated as Seller
for all purposes of this subsection (b) as to the shares of Stock
registered for the account of such Designated Partner.
(vi) If Seller sells shares of Stock delivered in
partial payment of the Purchase Price within the Resale Period
and the average net sales price per share of all shares sold
(after deduction of brokerage commissions or discounts) (the
"Average Net Sales Price") is less than the Stock Valuation
Price, the Buyer will pay to Seller an amount equal to:
(A) if the closing sales price of the Stock on the
first trading day after the Closing Date (the "Day After Closing
Price") is equal to or less than the Average Net Sales Price,
100% of the product of (x) the number of shares of Stock sold
within the Resale Period times (y) the difference between the
Stock Valuation Price and the Average Net Sales Price;
(B) if the Day After Closing Price is greater than
the Average Net Sales Price but less than the Stock Valuation
Price, 100% of the product of (x) the number of shares of Stock
sold within the Resale Period times (y) the difference between
the Stock Valuation Price and the Day After Closing Price; plus
80% of the product of (x) the number of shares of Stock sold
within the Resale Period times (y) the difference between the Day
After Closing Price and the Average Net Sales Price; or
(C) if the Day After Closing Price is equal to or
greater than the Stock Valuation Price, or if Seller sells any
shares of Stock prior to the commencement of the second trading
day after the Closing Date, 80% of the product of (x) the number
of shares of Stock sold within the Resale Period times (y) the
difference between the Stock Valuation Price and the Average Net
Sales Price.
Any payments pursuant to the foregoing shall be made in cash
within five (5) Business Days following the end of the Resale
Period. In order to be entitled to receive such payment, Seller
must deliver to the General Counsel of Buyer evidence of the sale
or sales of Stock reasonably satisfactory to Buyer, including a
copy of the brokers' confirmation statements, within two (2)
Business Days following the end of the Resale Period. Buyer
shall not be obligated to make any payment to Seller if the
Average Net Sales Price is greater than the Stock Valuation
Price.
(vii) All sales of Stock by Seller will be effected in
a reasonable and prudent manner by Seller. Sales that meet the
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following shall be deemed to be "reasonable and prudent" for
purposes of this Section: payment of commissions, discounts or
other adjustments to price no greater than those customary in
transactions of similar size and nature and that are part of
transactions that do not involve side or other agreements with
marketmakers that differ from arrangements in which such
marketmakers normally engage. Any purchase or sale by Seller or
any Designated Partner of puts, calls, straddles or any similar
strategy recognized in the investment community that is legal and
to which Buyer consents, which consent will not be unreasonably
withheld, relating to the Stock during the period from the fourth
day prior to the Closing Date and any time thereafter shall not
cause any sales of Stock by Seller to be considered effected in
any manner other than the reasonable and prudent manner required
by this paragraph.
2.4 Adjustments to Purchase Price.
(a) Capital Expenditures. The Purchase Price shall be
increased by an amount, if any, necessary to reimburse Seller for
Seller's capital expenditures ("Capital Expenditures") incurred
since the Balance Sheet Date in accordance with Seller's
1994/1995 capital expenditure budget (the "Capital Budget"),
which Capital Budget is contained in Seller's Disclosure
Schedule, provided the documentation specified below is provided
to Buyer and any amounts in excess of the Capital Budget are
approved, if necessary, as set forth below. Seller and Buyer
acknowledge that Seller's actual Capital Expenditures may vary
from the Capital Budget. In the event the Capital Expenditures
vary from the attached Capital Budget by ten percent (10%) or
less, Seller shall not be required to obtain the approval of
Buyer. In the event Seller's actual Capital Expenditures in the
aggregate will vary from the Capital Expenditures Budget by more
than ten percent (10%), Seller shall obtain the prior written
approval of Buyer, which approval shall not be unreasonably
withheld. Within forty-five (45) days of the last day of each
month from the date hereof until the Closing (and on or prior to
the Closing Date with respect to Capital Expenditures incurred
since the beginning of the month in which the Closing occurs),
Seller will provide Buyer with statements of Capital Expenditures
incurred during the previous month (or, if applicable, the month
in which Closing occurs) along with reasonable back-up
documentation demonstrating that such expenditures were actually
incurred.
(b) Net Current Assets. The Purchase Price shall be
increased by the extent to which Net Current Assets as of the
Closing Date exceed Net Current Assets as reflected on the April
30, 1994 balance sheet of Seller, or decreased by the extent to
which Net Current Assets as of the Closing Date fall short of Net
Current Assets as reflected on the April 30, 1994 balance sheet
of Seller (the "Net Current Asset Payment"). The parties agree
that the Net Current Assets on April 30, 1994 were $598,512.38
An
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estimated Net Current Asset Payment will be made at Closing
based upon a pro-forma balance sheet prepared by Seller as of the
Closing Date, which Seller shall use its best efforts to
estimate, prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
covered thereby (the "Pro-forma Closing Balance Sheet"). The
actual Net Current Asset Payment will be determined pursuant to
Section 2.4(c).
(c) Net Current Asset Payment. (i) At least two (2)
Business Days prior to the Closing Date, Seller will provide
Buyer with the Pro-forma Closing Balance Sheet and a calculation
of the estimated Net Current Asset Payment, which estimate,
unless otherwise agreed, shall in no event exceed the Net Current
Assets as of the then most recent month end for which a balance
sheet has been prepared by Seller in good faith on a basis
consistent with prior periods. The line items set forth in the
April 30, 1994 balance sheet, the Pro-forma Closing Balance Sheet
and the closing balance sheet contained in the Closing Financial
Statements (the "Closing Balance Sheet") will be the same for
purposes of the Net Current Asset Payment calculation. It is the
intention of the parties that the balance sheets will be as
similarly constituted as possible. For example, if a line item
for Seller's prepaid legal fees is excluded on the Closing
Balance Sheet and the Pro-forma Closing Balance Sheet, it will
also be excluded on the April 30, 1994 balance sheet for purposes
of the Net Current Asset Payment calculation. Additionally, any
current Liabilities that will be the responsibility of Seller to
satisfy (e.g. pro rated Taxes) will be excluded for purposes of
the Net Current Asset calculation.
(ii) Pursuant to Section 11.2, within 45 days after
the Closing Date, Seller shall provide to Buyer the Closing
Financial Statements, which shall include a calculation in
reasonable detail of the actual Net Current Asset Payment (the
"Tentative Net Current Asset Payment"). Subject to Section
2.4(c)(iii) and (iv) below, within ten (10) days after Seller's
delivery of such Closing Financial Statements to Buyer, Buyer or
Seller, as appropriate, shall pay the difference between the
estimated Net Current Asset Payment and the Tentative Net Current
Asset Payment in cash to the other party.
(iii) If Buyer reasonably believes that the Tentative
Net Current Asset Payment is incorrect, Buyer shall promptly
inform Seller of the disputed amount and the basis for the
Buyer's dispute in reasonable detail. If Seller and Buyer do not
agree on the amount of the Tentative Net Current Asset Payment
within ten (10) days thereafter, Seller and Buyer, at Buyer's
cost, shall submit such dispute to Arthur Andersen & Co. for its
independent calculation of the Net Current Asset Payment. The
parties will request that Arthur Andersen & Co. provide its
findings to the parties within forty-five (45) days after
submission of the dispute to Arthur Andersen & Co. The parties
will have ten (10) days to solve any dispute they have with
Arthur Andersen & Co.'s findings.
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At the end of such ten (10)
day period, Arthur Andersen & Co. will provide the parties with
its final decision, which decision shall be final, conclusive and
binding on the parties. Within ten (10) days after receipt of
such final decision, Buyer or Seller, as appropriate,shall pay
the difference between the estimated Net Current Asset Payment
and the Tentative Net Current Asset Payment in cash to the other
party.
(d) Credit. The Purchase Price shall be reduced by Two
Hundred Seventy-Five Thousand Dollars ($275,000.00), representing
satisfaction of a credit due to Buyer pursuant to the terms of
Section 5 of the Settlement Agreement. Buyer and Seller
acknowledge that the foregoing credit shall be deemed to be
complete satisfaction of any credit due pursuant to the
Settlement Agreement.
(e) Incentive Compensation Payment. The Purchase Price
shall be increased by an amount equal to the Incentive
Compensation Payment, as defined in Annex 2, which amount shall
be payable as set forth in Annex 2.
(f) Tax And Other Pro Rations. All Taxes and other
assessments on the Assets shall be pro rated between Buyer and
Seller as of the Closing Date and any pro rations chargeable to
Seller shall reduce the Purchase Price.
SECTION 3. ASSUMPTION OF OBLIGATIONS; ACCOUNTS RECEIVABLE.
3.1 Assumption of Obligations. Buyer shall assume and
undertake to pay, satisfy or discharge (a) the current
Liabilities (but not including the current portion of long term
liabilities including accrued interest thereon) of Seller on and
as of the Closing Date, and (b) the Liabilities, obligations and
commitments of Seller arising on or after the Closing Date under:
(i) the Contracts listed with an asterisk in Seller's Disclosure
Schedule; (ii) the Subscriber Agreements; (iii) any accounts
payable of Seller outstanding at Closing (excluding any interest
and penalties resulting from any such payables being overdue), if
any, which represent reimbursable Capital Expenditures pursuant
to Section 2.4(a) above; and (iv) all contracts and commitments
approved in writing by Buyer after the date of this Agreement as
contemplated by Section 6.1(b)(iii) below. Buyer shall also be
responsible for all Liabilities arising from the ownership and
use of the Assets and the operation of the System on and after
the Closing Date.
3.2 Limitation. Except as set forth in Section 3.1
hereof, Buyer shall not assume, or otherwise be responsible for,
any liabilities or obligations of Seller, whether actual or
contingent, matured or unmatured, liquidated or unliquidated, or
known or unknown, whether arising out of occurrences prior to, at
or after the date hereof, which include, without limitation:
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(a) Except as set forth in Seller's Disclosure
Schedule, any liability or obligation to or in respect of any
employees or former employees of Seller including without
limitation (i) any employment agreement, whether or not written,
between Seller and any person, (ii) any liability under any
Employee Plan at any time maintained, contributed to or required
to be contributed to by or with respect to Seller or under which
Seller may incur liability, or any contributions, benefits or
liabilities therefor, or any liability with respect to Seller's
withdrawal or partial withdrawal from or termination of any
Employee Plan and (iii) any claim of an unfair labor practice, or
any claim under any state unemployment compensation or worker's
compensation law or regulation or under any federal or state
employment discrimination law or regulation, which shall have
been asserted on or prior to the Closing Date or is based on acts
or omissions which occurred on or prior to the Closing Date;
(b) Any liability or obligation of Seller in respect
of any Taxes;
(c) Any liability arising from any injury to or death
of any person or damage to or destruction of any property,
whether based on negligence, breach of warranty, strict
liability, enterprise liability or any other legal or equitable
theory arising from defects in products manufactured or from
services performed by or on behalf of Seller or in connection
with the operation of the System on or prior to the Closing Date;
(d) Any liability or obligation of Seller arising out
of or related to any action against Seller or any action which
adversely affects the Assets and which shall have been asserted
on or prior to the Closing Date or to the extent the basis of
which shall have arisen on or prior to the Closing Date;
(e) Any liability or obligation of Seller resulting
from entering into, performing its obligations pursuant to or
consummating the transactions contemplated by, this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that, except as set
forth in Seller's Disclosure Schedule:
4.1 Authority. Seller is a general partnership, duly
organized, validly existing and in good standing under the laws
of the State of Maryland and is duly qualified to conduct
business in the Commonwealth of Pennsylvania to the extent such
qualification is required. Seller's general partners are KCLP
and ECLP. Seller has the requisite power and authority required
to acquire, own, lease, and operate the Assets and to conduct the
business of the System. Seller has the requisite power and
authority to execute, deliver, and perform this Agreement and the
documents contemplated
-17-
thereby according to their respective
terms. Seller is not a participant in any joint venture or
partnership with any other Person relating to the System.
4.2 Authorization and Binding Obligation. Seller has
taken all partnership action necessary to enter into this
Agreement and consummate the transactions contemplated hereby and
perform its obligations hereunder. This Agreement has been duly
executed by Seller and constitutes a legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance
with its terms, except for the effect thereon of any applicable
bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting the rights of creditors generally. Each agreement
executed by Seller in connection with the Closing will be duly
executed and delivered by Seller and will constitute a legal,
valid, and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except for the effect
thereon of any applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting the rights of creditors
generally.
4.3 Absence of Certain Changes or Events. Since the
Balance Sheet Date there has not been any:
(a) change in the condition (financial or otherwise) of
the Assets, Liabilities, working capital, reserves, earnings,
business or prospects of Seller, or the System except for changes
contemplated hereby or changes which have not, individually or in
the aggregate, been material and adverse;
(b) (i) material increase in compensation payable or to
become payable to any of the employees of Seller or any bonus
payment made or promised to any such employee other than in the
ordinary course of business and consistent with past practices,
or (ii) material change in personnel policies, insurance,
retirement, health or other employee benefits or any other
compensation arrangements affecting such employees other than in
the ordinary course of business;
(c) amendment, cancellation or termination of any
Governmental Authorization (other than modifications of licenses,
terminations of licenses which are renewed, replaced or
reinstated prior to Closing, or terminations of non-material
licenses, in the ordinary course of business);
(d) change in accounting methods or practices by
Seller;
(e) revaluation by Seller of any of the Assets, except
in the ordinary course of business and consistent with past
practice;
(f) amendment of Seller's General Partnership Agreement
which adversely affects the System or the Assets or the ability
of Seller to perform its obligations under this Agreement; or
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(g) agreement (whether written or oral) by Seller to do
any of the foregoing.
4.4 Sufficiency of Assets. The Assets constitute all of
the assets, rights and properties, tangible or intangible, real
or personal used in the operation of the System as it is
presently conducted and as at the Balance Sheet Date (other than
deletions in the ordinary course of business when replaced by
assets of substantially equivalent value and function).
4.5 No Conflict or Violation. The execution, delivery, and
performance by Seller of this Agreement and the documents
contemplated hereby and the consummation of the transactions
contemplated hereby: (a) will not conflict with any provision of
Seller's General Partnership Agreement; (b) will not conflict
with or constitute a violation of any applicable statute, law,
rule, code, judgment, order, ordinance, writ, injunction,
regulation, decree, award or ruling of any court or other
governmental instrumentality or result in an event which with
notice, lapse of time or both, would result in any such conflict
or violation; and (c) provided the Consents are obtained, will
not conflict with, constitute grounds for termination of, result
in a breach of, constitute a default under, or accelerate or
permit the acceleration of any performance required by the terms
of any Contract, Governmental Authorization, or other agreement,
instrument, license, or permit to which Seller is a party or by
which Seller is bound or subject, or result in an event which
with notice, lapse of time or both, would result in any such
conflict, grounds, breach, default, or acceleration.
4.6 Consents. No consent, approval, permit, or
authorization of, declaration to or filing or registration with
any governmental or regulatory authority or any other Party
(including without limitation any Consent necessary for the valid
assignment of any Contract) is required to be made or obtained in
connection with the execution, delivery and performance of this
Agreement by Seller and the transactions contemplated hereby,
including enabling Buyer to own the Assets and operate the
System.
4.7 Governmental Authorizations. Seller's Disclosure
Schedule contains a true and complete list of the Governmental
Authorizations. Seller has delivered to Buyer true and complete
copies of the Governmental Authorizations. Each Governmental
Authorization has been validly issued to Seller. The
Governmental Authorizations comprise all the licenses, permits,
and other authorizations required from governmental and
regulatory authorities for the lawful conduct of the operation of
the System. The Governmental Authorizations are in full force
and effect and are unimpaired by any acts or omissions of Seller,
and are valid for the balance of the current license term, if
any, applicable generally to each such Governmental
Authorization. The operation of the System is in compliance with
the Governmental
-19-
Authorizations. Seller has no reason to believe
that any of the Governmental Authorizations would not be renewed
by the granting authority in the ordinary course if Seller were
the applicant. Seller is the exclusive holder of the FCC
Authorizations. To the knowledge of Seller, there are no pending
or threatened proceedings by or before the FCC which would result
in the revocation, cancellation, suspension or adverse
modification of the FCC Authorizations, nor to Seller's knowledge
are there any facts that would give rise to or form the basis for
such a proceeding. Assuming all Consents are obtained, Seller
has the right, power and authority under the Communications Act
to transfer the Assets to Buyer upon consummation of the
transactions contemplated hereby in accordance with the terms of
this Agreement. No renewal of any FCC Authorization would
constitute a major environmental action under the current Rules
of the FCC. The FCC actions granting the current FCC
Authorizations together with all underlying construction permits,
are Final Orders of the FCC. Seller is not aware of any reason
why (i) those of the FCC Authorizations subject to expiration
would not be renewed in the ordinary course of business if Seller
were the applicant or (ii) any of the FCC authorizations would be
revoked. The initial FCC Form 489 to commence operation of the
System was filed with the FCC on December 6, 1991. None of the
Governmental Authorizations is subject to any Encumbrance, other
than any liens securing Seller Indebtedness, all of which liens
shall be extinguished by Seller prior to or at Closing.
4.8 Seller Qualifications. Seller is legally, technically,
financially and otherwise qualified to hold the FCC
Authorizations and upon obtaining the FCC Consents will be so
qualified to consummate the transactions contemplated hereby.
4.9 Real Property. Seller's Disclosure Schedule contains
a complete description of all of Seller's interests and rights in
Real Property used or intended for use in connection with the
operation of the System. Seller leases all of its Real Property,
all of which leases are identified in Seller's Disclosure
Schedule (the "Real Property Leases"). Each Cell Site that is
part of the Assets is the subject of a Real Property Lease. To
the knowledge of Seller, there are no pending or threatened
condemnation proceedings relating to any of the Real Property.
All improvements included in the Real Property are in good
operating condition (ordinary wear and tear excepted) with no
known material defects. To the knowledge of Seller, no
improvements on any Real Property encroach upon adjoining real
estate, and all such improvements are constructed in conformity
with all "setback" lines, easements, and other restrictions, or
rights of record, that have been established by any applicable
building or safety codes or zoning ordinances. To the knowledge
of Seller, no utility lines serving the System pass over the
lands of others except where appropriate easements have been
obtained. All towers and other structures on the Real Property
are marked in accordance with the requirements of the FCC
Authorizations, the Federal Aviation Administration and all
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applicable state and local laws. Seller has no knowledge of any
written notice for assessments for public improvements against
any Real Property which remains unpaid. Seller has not granted
any oral or written lease, sublease or license granting to any
Person any right to the possession, use, occupancy or enjoyment
of any of the Real Property. All Real Property is supplied with
utilities (including without limitation water, sewage, disposal,
electricity, gas and telephone) and other services necessary for
the operation of such Real Property as currently operated. None
of the Real Property is subject to any Encumbrance that could
reasonably be expected to materially and adversely affect the use
or usefulness of the Real Property, other than any liens securing
Seller Indebtedness, all of which liens shall be extinguished by
Seller prior to or at Closing. Other than any liens securing
Seller Indebtedness, Seller is not aware of any potential claim
or Encumbrance that could reasonably be expected to materially
and adversely affect the use or usefulness of the Real Property.
Seller has delivered to Buyer true and complete copies of all
Real Property Leases. Seller has full legal and practical access
to all Real Property. All easements, rights of way, and real
property licenses relating to the Real Property Leases have been
properly recorded in the appropriate public recording offices, to
the extent required by law.
4.10 Personal Property. Without material exception,
Seller's Disclosure Schedule contains descriptions of all
Seller's fixed assets which are part of its Personal Property.
Seller owns and has good and marketable title to each item of
Personal Property, except for the Personal Property that is
specifically identified in Seller's Disclosure Schedule as leased
pursuant to one of the Contracts. None of the Personal Property
is subject to any Encumbrance, except for any liens securing
Seller Indebtedness, all of which shall be extinguished by Seller
prior to or at Closing. All of the Personal Property is in good
operating condition and repair (ordinary wear and tear excepted),
and is available for immediate use in the operation of the
System. The Personal Property is sufficient to permit the System
to operate in all material respects in accordance with the terms
of the FCC Authorizations.
4.11 Subscribers and Suppliers. Copies of all Subscriber
Agreements are contained in Seller's Books and Records. As of
the Balance Sheet Date, Seller had approximately 5,082 subscriber
accounts, each telephone number being a separate account. Seller
has not entered into any Subscriber Agreements outside the
ordinary course of business or for consideration other than cash.
To Seller's knowledge, none of its material Subscribers or
suppliers has threatened to terminate or change in a material way
its relationship with Seller.
4.12 Resale and Roaming Agreements. Seller is not a party
to any Resale Agreements. Seller's Disclosure Schedule contains
a list of (i) all carriers with which Seller has roaming
agreements
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and (ii) all special wholesale and retail rates
relating thereto.
4.13 Financial Statements. The Financial Statements are
contained in Seller's Disclosure Schedule. The Financial
Statements do and will, as appropriate, and the Closing Financial
Statement will, fairly present the Assets, Liabilities and
financial condition and results of the System's operations
indicated in accordance with generally accepted accounting
principles consistently applied, subject to normal year-end
adjustments in the case of any interim financial statements.
4.14 Contracts. The Contracts listed in Seller's Disclosure
Schedule comprise all Seller's Contracts (including Real Property
Leases). Seller has delivered to Buyer true and complete copies
of all such Contracts, together will all amendments and
extensions to date. All such Contracts are in full force and
effect, are valid, binding, and enforceable in accordance with
their terms, except for the effect thereon of any applicable
bankruptcy, insolvency reorganization, moratorium and similar
laws affecting the rights of creditors generally in respect only
to the parties contracting with Seller, are paid currently, and
have not been materially impaired by any acts or omissions of
Seller. No material Contract requires the consent of any other
contracting party to the transactions contemplated by this
Agreement. Seller is not in material default under any Contract.
To Seller's knowledge, no other party is in material default
under any Contract identified with an asterisk in Seller's
Disclosure Schedule. Seller is not aware of any intent by any
party to any Contract to terminate or amend the terms thereof, to
refuse to renew the Contract upon expiration of its term, or to
renew the Contract upon expiration only on terms and conditions
that could be less advantageous to the System than those
currently pertaining. No Contract contains any unfulfilled
requirement that Seller incur capital or other expenses.
4.15 Seller Indebtedness. Seller's Disclosure Schedule
contains a true and complete list of all agreements relating to
any Seller Indebtedness and any other indebtedness of Seller
relating to the System. Seller has delivered to Buyer true and
complete copies of all such agreements and evidences of
indebtedness or the relevant portions thereof. All of such
agreements and evidences of indebtedness are in full force and
effect and Seller is not in material default thereunder. To
Seller's knowledge, no other party is in material default
thereunder.
4.16 Intangibles. Seller's Disclosure Schedule a true and
complete list of all Seller's copyrights, trademarks, tradenames,
licenses, permits, patents and patent applications. Seller has
no licenses granted by or to it or any other agreements to which
it is a party, relating in whole or in part to any of the
Intangibles. Seller owns and has marketable title to the
Intangibles. None of the Intangibles is subject to any
Encumbrance, except for any liens securing Seller Indebtedness,
all of which liens shall be
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extinguished by Seller prior to or at
Closing. Seller has delivered to Buyer copies of all documents
establishing the Intangibles to the extent material to Seller's
business and the balance thereof is, and at Closing will be, on
the Real Property. To the best of Seller's knowledge, Seller is
not infringing upon any trademarks, trade names, copyrights,
patents, patent applications, know-how, methods, or processes
owned by any other Person or Persons, and there is no claim or
action pending, or to the best knowledge of Seller, threatened
with respect thereto. No Person has a right to receive a royalty
or similar payment in respect of any Intangibles.
4.17 Taxes.
(a) Filing of Tax Returns. Seller has filed with the
appropriate taxing authorities all returns (including without
limitation information returns and other material information) in
respect to all taxes and other assessments and levies (including
all interest and penalties), in respect of Taxes required to be
filed through the date hereof and will timely file any such
returns required to be filed on or prior to the Closing Date.
The returns and other information filed are complete and accurate
in all material respects. Seller has delivered to Buyer complete
and accurate copies of Seller's federal and state tax returns for
the years 1993 and 1992, its 1993 property tax return, and its
1994 sales and use tax return.
(b) Payment of Taxes. All Taxes, in respect of
periods beginning before the Closing Date, have been timely paid,
or will be timely paid, or an adequate reserve has been or will
be established therefor, as set forth in the Financial
Statements, and Seller does not have any material liability for
Taxes in excess of the amounts so paid or reserve so established.
(c) Audits, Investigations or Claims. The Federal
income tax returns of Seller have not been examined by the
Internal Revenue Service, and no material deficiencies for Taxes
have been claimed, proposed or assessed by any taxing or other
governmental authority against Seller. There are no pending or,
to Seller's knowledge, threatened audits, investigations or
claims for or relating to any material additional liability in
respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that in the
reasonable judgment of Seller, or its counsel, is likely to
result in a material additional liability for Taxes for which
Buyer may be liable or which is likely to result in any
Encumbrance on the Assets. Audits of federal, state, and local
returns for Taxes by the relevant taxing authorities which have
been completed for any period are set forth on Seller's
Disclosure Schedule and, except as set forth Seller's Disclosure
Schedule, Seller has not been notified that any taxing authority
intends to audit a return for any period. No extension of a
statute of limitations relating to Taxes is in
-23-
effect with respect to Seller.
(d) Liens. There are no liens for Taxes (other than
for current Taxes not yet due and payable) on the Assets.
(e) Safe Harbor Lease Property. None of the Assets is
property that is required to be treated as being owned by any
other Person pursuant to the so-called safe harbor lease
provisions of former Section 168(f)(8) of the Code.
(f) Security for Tax-Exempt Obligations. None of the
Assets directly or indirectly secures any debt the interest on
which is tax-exempt under Section 103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Assets is
"tax-exempt use property" within the meaning of Section 168(h) of
the Code.
(h) Foreign Person. Seller is not a person other than
a United States person within the meaning of the Code.
(i) No Withholding. The disposition of the Assets
contemplated hereby is not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code.
4.18 Insurance. Seller's Disclosure Schedule contains a
complete and accurate list of all policies and binders of
insurance (showing as to each policy and binder the carrier,
policy number, coverage limits, expiration dates, annual premiums
and a general description of the types of coverage provided)
maintained by Seller. All of such policies are sufficient for
compliance with all requirements of law and all of the Contracts.
Seller is not in default under any of such policies or binders
and has not failed to give any notice or to present any claim
under any such policy or binder in a due and timely fashion.
Seller is not aware of any facts existing prior to Closing upon
which an insurer is entitled under existing policies or binders
to reduce coverage or increase premiums. There are no
outstanding unpaid claims under any such policies or binders.
Such policies or binders provide replacement cost insurance
coverage for all Personal Property and all improvements upon the
Real Property. Such policies and binders are in full force and
effect on the date hereof and shall be kept in full force and
effect by Seller through the Closing Date.
4.19 Labor Matters. Seller's Disclosure Schedule contains a
true and complete list of all persons currently employed by
Seller in connection with the System, together with the job
title, the present compensation rate (including commissions and
bonuses), accrued, unpaid vacation days, and any accrued
severance pay liability for each such person. Seller has
delivered to Buyer true and correct copies of any employment
agreements (the "Employment
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Agreements") relating to its
employees. Seller (i) is not a party to any labor agreement with
respect to its employees with any labor organization, group or
association, and (ii) has not been notified at any time during
the past three years of any attempt by organized labor or its
representatives to make Seller conform to demands of organized
labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of
Seller. There is no unfair labor practice charge, complaint or
grievance against Seller pending before the National Labor
Relations Board or any other governmental agency arising out of
Seller's activities, and to the best of Seller's knowledge, there
are no facts or information that would give rise thereto. There
is no labor strike or labor disturbance pending, or the best
knowledge of Seller, threatened against it.
4.20 Employee Benefit Plans. All Employee Plans that cover
or have covered employees of Seller are set forth in Seller's
Disclosure Schedule. All Employee Plans maintained by Seller
conform in all material respects when applicable with the
provisions of ERISA and have been administered in substantial
compliance with the terms of such plans and with all filing,
reporting and disclosure requirements of the Code and ERISA when
applicable. There is no pending or threatened litigation, claim
or assessment against any such Employee Plan. Each Employee Plan
that is a "Pension Plan" is qualified under Section 4001 of the
Code. Seller has never maintained or sponsored, or been required
to contribute to, or withdrawn from, any Multi-employer Plan.
Seller has not been subject to any "withdrawal liability" (as
defined in Section 4201 of ERISA) at any time assessed against
Seller with respect to any Multi-employer Plan. Seller has
maintained all Employee Plans with respect to its employees in a
manner that will not give rise to any successor liability to
Buyer under ERISA or the Code.
4.21 Transactions with Certain Persons. No partner or
employee of Seller, or any member of any such Person's immediate
family, is presently a party to any material transaction with
Seller relating to the System, including without limitation, any
contract, agreement or other arrangement (i) providing for the
furnishing of material services by or to, (ii) providing for the
rental of material real or personal property from or to, or (iii)
otherwise requiring material payments to (other than for services
as partners or employees of Seller) any such Person or any
corporation, partnership, trust or other entity in which any such
Person has a substantial interest as a shareholder, officer,
director, trustee or partner.
4.22 Litigation. Seller is not subject to any judgment,
award, order, writ, injunction, arbitration decision or decree
which adversely affects the conduct of the business of the System
or the Assets or which could materially adversely affect Seller's
ability to perform its obligations hereunder. There is no
-25-
litigation, proceeding or investigation pending or, to Seller's
knowledge, threatened against Seller or relating to the business
or operations of the System in any federal, state or local court,
or before any administrative agency or arbitrator or before any
other tribunal duly authorized to resolve disputes, which could
reasonably be expected to have a material adverse effect upon the
business, property, Assets or condition (financial or otherwise)
of the System or which seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement or which could
materially adversely affect Seller's ability to perform its
obligations under this Agreement.
4.23 Compliance With Laws. Seller has not received any
notice asserting any noncompliance by it in connection with the
business or operation of the System with any applicable statute,
rule or regulation, whether federal, state or local. Seller is
not in default with respect to any judgment, order, injunction or
decree of any court, administrative agency or other Governmental
Authority or any other tribunal duly authorized to resolve
disputes in any respect material to the transactions contemplated
hereby. Seller is in compliance with all laws, regulations and
governmental orders applicable to the Assets and the conduct of
the business and operations of the System, the failure to comply
with which could reasonably be expected to have a material
adverse effect on the business, operations or condition
(financial or otherwise) of the System.
4.24 Bankruptcy. No insolvency proceedings of any
character, including without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, affecting Seller (other than
as a creditor) or any of the Assets, are pending, or to Seller's
knowledge, threatened, and Seller has not made any assignment for
the benefit of creditors or taken any action in contemplation of
or which would constitute the basis for the institution of such
insolvency proceedings.
4.25 Environmental and Safety Compliance. Neither the
operation of the business of the System nor the Assets violate in
any material respect any applicable federal, state or local law,
rule, regulation or order relating to air, water or noise
pollution, employee health and safety, or the production,
storage, labeling, transportation or disposition of waste or
hazardous or toxic substances (collectively, "Environmental
Laws"). Seller has timely obtained all licenses and permits and
timely filed all reports required to be filed under any
applicable Environmental Laws, such licenses and permits being
listed in Seller's Disclosure Schedule. Seller has not, and, to
Seller's knowledge, no other Person has, stored any Pollutant on,
beneath or about any of the Real Property. Seller is not aware of
any condition relating to or resulting from the release or
discharge of Pollutants into the
-26-
soil, surface waters,
groundwater, drinking water supplies, navigable waters, land,
surface or subsurface strata, or ambient air which has resulted
or could reasonably be expected to result in any material damage,
loss, cost, expense, claim, demand, order or liability to or
against Seller or Buyer by a governmental authority or other
Party relating to or resulting from the operation of the business
of the System, the Assets or otherwise relating to the Real
Property, irrespective of the cause of such condition. Seller
has not received any notice from any governmental authority or
private or public entity advising Seller that it is potentially
responsible for response costs with respect to a release or
threatened release of any Pollutant. Seller has not, and, to
Seller's knowledge, no other Person has, buried, dumped or
otherwise disposed of any Pollutants on, beneath or about any of
the Real Property. Seller has not received any notice of
violation of any Environmental Law or zoning or land use
ordinance, law or regulation relating to the operation of the
business of the System or the Assets including, but not limited
to, CERCLA, the Toxic Substance Control Act of 1976, as amended,
the Resource Conservation and Recovery Act of 1976, as amended,
the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, or the Occupational Safety and Health
Act of 1970, as amended. Seller's Disclosure Schedule also
contains a list and brief description of all material filings by
Seller with, material notices to Seller from, and related
material reports to all governmental authorities administering
Environmental Laws, within three years prior to the date hereof,
including without limitation, filings made, corrective action
taken, or citations received by Seller. No written environmental
assessments or impact statements or reports relating to the Real
Property have been prepared for, or received by, Seller prior to
the date hereof.
4.26 Broker. Seller has not employed the services of any
broker or any similar Person or entity that will require the
payment by Buyer of any finder's fee, commission or similar
payment in connection with this Agreement or any matter related
hereto. Buyer shall not be liable for any commissions, finder's
fees, or similar payments to any Person or entity acting on
Seller's behalf in connection with this Agreement or any matter
relating hereto.
4.27 No Other Agreement to Sell. Seller has no legal
obligation, absolute or contingent, to any other Person to sell
Seller or the System (in whole or in part) or the Assets (in
whole or in part), or effect any merger, consolidation or other
reorganization of Seller, or to enter into any agreement with
respect thereto.
4.28 No Misstatements or Omissions. None of the
representations and warranties of Seller set forth in this
Agreement, or any document, exhibit, statement, certificate or
schedule furnished to Buyer pursuant hereto, when such
representations, warranties, documents, exhibits, statements,
-27-
certificates and schedules are taken as a whole, is false or
misleading as to any material fact or omits to state a material
fact required to be stated therein or necessary in order to make
any of the statements made therein, in light of the circumstances
under which they were made, not misleading. Seller is not aware
of any information other than that which has been disclosed to
Buyer which could reasonably be expected to have a material
adverse effect on the Assets or the conduct or operation of the
business of the System.
4.29 Books and Records. Seller has made and kept (and given
Buyer access to) the Books and Records and accounts, which, in
reasonable detail, accurately and fairly reflect the activities
of Seller.
4.30 Accounts Receivable. The accounts receivable reflected
in the April 30, 1994 balance sheet contained in the Financial
Statements, and all accounts receivable arising since the Balance
Sheet Date, represent bona fide claims of Seller against debtors
for sales, services performed or other charges arising on or
before the date hereof, and all the goods delivered and services
performed which gave rise to said accounts were delivered or
performed in accordance with the applicable orders, Contracts or
customer requirements. Said accounts receivable are subject to
no defenses, counterclaims or rights of setoff and are fully
collectible in the ordinary course of Seller's business without
cost in collection efforts therefor, except to the extent of the
appropriate reserves for bad debts on accounts receivable as set
forth on the April 30, 1994 balance sheet and, in the case of
accounts receivable arising since the Balance Sheet Date, to the
extent of a reasonable reserve rate for bad debts on accounts
receivable which is not greater than the rate reflected by the
reserve for bad debts on the April 30, 1994 balance sheet.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows:
5.1 Organization, Standing and Authority. Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of North Carolina and is
duly qualified to conduct business in the Commonwealth of
Pennsylvania. Buyer has the requisite corporate power and
authority to execute, deliver, and perform this Agreement and the
documents contemplated hereby according to their respective
terms.
5.2 Authorization and Binding Obligation. Buyer has taken
all corporate action necessary to enter into this Agreement,
consummate the transactions contemplated hereby and perform its
obligations hereunder. This Agreement has been duly executed and
delivered by Buyer, and constitutes a legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with
-28-
its terms, except for the effect thereon of any applicable
bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting the rights of creditors generally. Each agreement
executed by Buyer in connection with the Closing will be duly
executed and delivered by Buyer, and will constitute a legal,
valid, and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except for the effect thereon of
any applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting the rights of creditors
generally.
5.3 No Conflict or Violation. The execution, delivery, and
performance by Buyer of this Agreement and the documents
contemplated hereby and the consummation of the transactions
contemplated hereby: (a) will not conflict with the Certificate
of Incorporation or By-Laws of Buyer, (b) will not conflict with
or result in a violation of any applicable statute, law, rule,
code, judgment, order, ordinance, writ, injunction, regulation,
decree, award or ruling of any court or governmental
instrumentality or result in an event which with notice, lapse of
time or both, would result in any such conflict or violation; or
(c) provided the Consents are obtained, will not conflict with,
constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of, any
agreement, instrument, license, permit, franchise or other
authorization issued by federal, state, or local governmental
authorities to which Buyer is a party or by which Buyer is bound
or subject, or result in an event which with notice, lapse of
time or both, would result in any such conflict, grounds, breach,
default, or acceleration.
5.4 Consents. Except for the Consents, no consent,
approval, permit or authorization of, declaration to or filing or
registration with any governmental or regulatory authority or any
other third Party is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, including
enabling Buyer to own the Assets and operate the System.
5.5 Buyer Qualifications. Buyer is legally, technically
financially and otherwise qualified to hold the FCC
Authorizations and to consummate the transactions contemplated
hereby. Buyer has no knowledge of any fact that would, under
existing law (including the Communications Act) disqualify Buyer
as an assignee of the FCC Authorizations. There has been no
material adverse change in the condition, financial or otherwise,
of Buyer since the date of its audited 1993 financial statements
as filed with the SEC as part of its Annual Report on Form 10-K.
5.6 Litigation. Buyer is not subject to any judgment,
award, order, writ, injunction, judgment, arbitration decision or
decree which could materially adversely affect Buyer's ability to
perform its obligations hereunder. There is no litigation,
proceeding or
-29-
investigation pending or, to Buyer's knowledge,
threatened against Buyer in any federal, state or local court, or
before any administrative agency or arbitrator or before any
other tribunal duly authorized to resolve disputes which seeks to
enjoin or prohibit, or otherwise questions the validity of, any
action taken or to be taken pursuant to or in connection with
this Agreement or which could materially adversely affect Buyer's
ability to perform its obligations under this Agreement.
5.7 Compliance With Laws. Buyer is not in default with
respect to any judgment, order, injunction or decree of any
court, administrative agency or other governmental authority or
any other tribunal duly authorized to resolve disputes in any
respect material to the transactions contemplated hereby.
5.8 Bankruptcy. No insolvency proceedings of any
character, including without limitation, bankruptcy,
receivership, reorganization, composition, or arrangement with
creditors, voluntary or involuntary, affecting Buyer (other than
as a creditor) are pending, or to Buyer's knowledge, threatened,
and Buyer has not made any assignment for the benefit of
creditors or taken any action in contemplation of or which would
constitute the basis for the institution of such insolvency
proceedings.
5.9 Stock. The shares of Stock, if any, to be delivered to
Seller will be duly authorized, fully paid, validly issued and
nonassessable when so delivered.
5.10 Broker. Buyer has not employed the services of any
broker or any similar Person or entity that will require the
payment by Seller of any finder's fees, commission or similar
payment in connection with this Agreement or any matter relating
hereto. Seller shall not be liable for any commissions, finder's
fees, or similar payments to any Person or entity acting on
Buyer's behalf in connection with this Agreement or any matter
related hereto.
5.11 No Misstatements or Omissions. None of the
representations and warranties of Buyer set forth in this
Agreement, or any document, exhibit, statement, certificate or
schedule furnished to Seller pursuant hereto, when such
representations, warranties, documents, exhibits, statements,
certificates and schedules are taken as a whole, is false or
misleading as to any material fact or omits to state a material
fact required to be stated therein or necessary in order to make
any of the statements made therein, in light of the circumstances
under which they were made, not misleading. Buyer is not aware
of any impending or contemplated event or occurrence that would
cause any of the foregoing representations or the representation
made by Seller in the first sentence of Section 4.28 not to be
true and complete in all material respects on or after the date
of such event or occurrence as if made on or after that date.
-30-
SECTION 6. COVENANTS OF SELLER.
6.1 Pre-Closing Covenants. Seller covenants and agrees
with Buyer that for the period from the date hereof through the
Closing:
(a) Maintenance of the System. Seller shall carry on its
business in the ordinary course consistent with past practice or
its 1994 and 1995 operating budgets, which are set forth in Annex
3. Seller shall use its reasonable best efforts to maintain the
present character and quality of the business and maintain in all
material respects the present customers, market share and
business relations of the System.
(b) Certain Prohibited Transactions. Without limiting the
generality of subsection (a) above, Seller shall not, without the
prior written approval of Buyer (which approval shall not be
unreasonably withheld):
(i) mortgage, pledge or otherwise encumber any of its
Assets or sell, transfer or otherwise dispose of any of its
Assets except (y) for the sale or rental of inventory in the
ordinary course of business consistent with past practice, and
(z) for the sale of cellular telephone equipment in the ordinary
course of business and consistent with past practice when
replaced by equipment of substantially equivalent value and
function;
(ii) cancel, release or assign any Subscriber
Agreements except in the ordinary course of business and
consistent with past practice;
(iii) enter into any contract or commitment relating to
the System or the Assets (unless such contract or commitment will
be assumed by Buyer under this Agreement), except for entry into
Subscriber Agreements in the ordinary course of business and
consistent with past practice, or amend, terminate, or waive any
substantial right under any Contract (including, without
limitation, any lease for real property, tower space or equipment
building space, but excluding Seller's contracts relating to
Seller Indebtedness and any other Contract not assumed by Buyer
under this Agreement) or Subscriber Agreement;
(iv) change its billing vendor;
(v) make any material change in any method of
accounting or accounting practice;
(vi) suffer any significant write-down of the value of
any of the Assets or any significant write-off as uncollectible
of any accounts receivable exceeding in the aggregate two and one
half percent (2.5%) of subscriber revenue.
(vii) make any capital expenditures, or hire or fire
any employees, outside the ordinary course of business and
inconsistent with past practice and its 1994 or 1995 operating
budgets or the Capital Budget;
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(viii) enter into any agreement to make any commitment
or offer to provide cellular telephone service to subscribers
other than in the ordinary course of business at rates and other
terms consistent with past practice;
(ix) waive any material rights relating to the System
or the Assets;
(x) subject the System or the Assets to any rights of
first refusal by any third Parties;
(xi) transfer or grant any right under, or enter into
any settlement regarding the breach or infringement of, any
Intangibles or modify any existing right with respect thereto; or
(xii) do any other act (y) that would cause any
representation or warranty of Seller to be or become untrue in
any material respect or (z) that is not in the ordinary course of
business consistent with past practice or its 1994 or 1995
operating budgets.
(c) Governmental Authorizations. Seller shall not cause or
permit, by any act or failure to act, any of the Governmental
Authorizations to expire or to be surrendered or modified, or
take any action that would cause any governmental authority to
institute proceedings for the suspension, revocation, or material
and adverse modification of any of the Governmental
Authorizations or fail to prosecute with due diligence any
pending applications for any governmental authority in connection
with the operation of the System, or take any other action within
its control that would result in the System being in
noncompliance with the requirements of any law, rule or
regulation such that the System would be materially and adversely
affected.
(d) Access to Information. Subject to Section 15.12
hereof, Seller shall give to Buyer and its counsel, accountants,
engineers, and other representatives reasonable access to the
System, and to all books and records relating thereto, and to the
officers, employees, and agents of Seller, and to all Books and
Records, and will furnish or cause to be furnished to Buyer and
its representatives all information relating to the Assets, the
System, and Seller that they reasonably request. Seller promptly
shall provide Buyer and its accountants and other representatives
access to financial statements and other financial information
that is required to be filed with the SEC by Buyer in any filings
made by Buyer with the SEC after the date of execution of this
Agreement. Notwithstanding the provisions of Section 15.12
hereof, Seller hereby authorizes Buyer to include the foregoing
financial statements and other financial data, and information
derived therefrom required to be filed in connection therewith,
in such SEC filings and required prospectus materials. Seller
will cooperate with Buyer in the auditing of the financial
statements and the gathering and presentation of other
information required for filing. All such financial statements
shall be audited and, except as provided in Section 6.1(e), the
cost of such audit shall be borne by Buyer.
-32-
(e) Monthly Financials. Seller shall provide Buyer with a
balance sheet and related statements of income and cash flow
within 45 calendar days after the end of each month, which
financial statements shall fairly present the Assets, Liabilities
and financial condition and results of the System's operations in
accordance with generally accepted accounting principles
consistently applied, subject to normal year-end adjustments.
Seller shall make its best efforts to provide Buyer with December
31, 1994 audited financial statements and footnotes by February
15, 1995. Seller and Buyer will cooperate in the preparation of
such year end audited financial statements, and Buyer will pay
the amount by which the cost of the audit exceeds Seller's cost
of its audit for its December 31, 1993 financial statements. The
unavailability of such audited financial statements on the
Closing Date shall not constitute a basis upon which either Buyer
or Seller may refuse to close the transactions contemplated
hereby.
(f) Maintenance of Assets. Seller shall take all actions
necessary to maintain all the Assets in good and working order
and in the condition represented in this Agreement, ordinary wear
and tear excepted, and will maintain supplies of inventory and
spare parts consistent with past practice. If any loss, damage,
impairment, confiscation, or condemnation to any of the Assets
occurs, Seller shall take all actions necessary to repair,
replace, or restore the Assets to their prior condition as
represented herein as soon thereafter as possible, and the
proceeds of any claim under any insurance policy shall be used
solely to repair, replace, or restore any of the Assets that are
lost, damaged, impaired, or destroyed to the extent necessary to
make such repair, replacement or restoration.
(g) Compliance With Laws. Seller shall comply in all
material respects with all laws, rules and regulations in
connection with the Assets and the System and the matters related
to this Agreement. Upon receipt of notice of violation of any
laws, rule or regulation, Seller shall contest in good faith or
cure the violation prior to the Closing Date to the extent
necessary to satisfy the covenant set forth in the first sentence
of this subsection.
(h) Insurance. Seller shall take all action necessary to
keep in full force and effect any existing insurance policies, or
comparable coverage, for the Assets and the System as set forth
in Seller's Disclosure Schedule.
(i) No Inconsistent Action. Seller shall not take any
action that is inconsistent with Seller's obligations under this
Agreement or that could hinder or delay the consummation of the
transactions contemplated by this Agreement.
(j) Taxes. Seller shall take all actions necessary to file
in a timely manner all federal, state, and local tax and
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information returns hereafter required to be filed by Seller
relating to or in connection with the Assets and the operation of
the System, and will pay all taxes (and any other charges,
duties, penalties, interest, or fines) which become due pursuant
to those returns or pursuant to any assessment which becomes due
and payable unless contested in good faith.
(k) No Shop. Neither Seller (nor any of its partners,
representatives, employees, agents or affiliates) will, directly
or indirectly, solicit, initiate, encourage or participate in
negotiations with respect to, or furnish or cause or permit to be
furnished any information to any Person (other than such parties'
respective affiliates or their representatives) in connection
with any inquiry or offer for any purchase or sale of the System,
the Assets or any part thereof.
(l) Estoppel Certificates. Seller shall use its reasonable
best efforts to obtain an estoppel certificate with respect to
each of the Real Property Leases, each in form and substance
reasonably acceptable to Buyer (the "Estoppel Certificates").
(m) Actions Affecting Stock. Neither Seller nor any of its
partners, representatives, employees, agents or affiliates will,
directly or indirectly, take any actions outside the scope of its
ordinary course of business to affect or influence the trading
price of the Stock prior to the close of the markets on the day
after the Closing Date.
6.2 Closing Covenant. On the Closing Date, if the
conditions set forth in Section 9.2 have been satisfied, Seller
shall transfer, convey, assign, and deliver to Buyer the Assets
as provided in Section 2 and make the deliveries provided in
Section 10.2.
SECTION 7. CLOSING COVENANTS OF BUYER.
7.1 Pre-Closing Covenants. Buyer covenants and agrees with
Seller that between the date hereof and the Closing Date, Buyer
shall act so that each representation and warranty in Section 5
shall continue to be true on and as of the Closing Date in all
material respects as if made on and as of the Closing Date.
Buyer shall not take any action that is inconsistent with Buyer's
obligations under this Agreement or that could hinder or delay
the consummation of the transactions contemplated hereby.
7.2 Closing Covenant. On the Closing Date, if the
conditions set forth in Section 9.1 have been satisfied, Buyer
shall purchase the Assets from Seller as provided in Section 2 of
this Agreement, and shall make the deliveries provided in Section
10.3 of this Agreement.
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SECTION 8. SPECIAL COVENANTS AND AGREEMENTS.
8.1 FCC Consents. The sale of the Assets as contemplated
by this Agreement is subject to the prior consent and approval of
the FCC. Within ten (10) Business Days from the date hereof,
Buyer and Seller shall file with the FCC applications for the FCC
Consents (the "Assignment Applications"). Buyer and Seller agree
to use their best efforts to: (i) prosecute the Assignment
Applications with all reasonable diligence; (ii) amend the
Assignment Applications as may be required or desirable to
effectuate the transactions contemplated hereunder; (iii) oppose
any petition to deny or other opposition filed against the
Assignment Applications; and (iv) otherwise use their best
efforts to obtain a grant of the Assignment Applications as
expeditiously as practicable. Neither Buyer nor Seller shall
seek, nor cause any of their agents to seek, and each shall use
its best efforts to oppose, any request for reconsideration,
application for review or any other attempt to seek any form of
review of the FCC Consents. The failure by either party to
timely file or diligently prosecute its portion of the Assignment
Applications as required by this Section shall be a material
breach of this Agreement. All fees charged by the FCC in
connection with filing the Assignment Applications shall be split
between the parties.
8.2 Other Consents.
(a) Within ten (10) days of the date of this Agreement,
Seller and Buyer shall join in any applications, filings or
registrations required by any state or local governmental
regulatory authority (including, without limitation, the
Pennsylvania Public Utilities Commission) to request issuance of
orders approving the transactions contemplated by this Agreement
(if such orders are requisite to the completion of these
transactions) and they will diligently and expeditiously take all
steps reasonably necessary to prosecute any such applications.
The failure by either party to timely file or diligently
prosecute its portion of any such applications as required by
this Section shall be a material breach of this Agreement. All
filing and grant fees charged by such state regulatory authority
in connection with such applications shall be split between the
parties.
(b) Seller shall commence, as soon as practicable, all
action reasonably necessary to obtain all other Consents, without
any material adverse change in the terms or conditions of any
Contract or Governmental Authorization that could be materially
less advantageous to the System than those pertaining under the
Contract or Governmental Authorization as in effect on the date
hereof; provided however, that Seller's failure to receive any
such Consents shall not be deemed to be a breach of this
covenant. Seller shall promptly advise Buyer of any
difficulties experienced in obtaining any of the Consents and of
any conditions proposed, considered, or requested for any of the
Consents.
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8.3 Cooperation. The Parties shall cooperate fully with
each other in connection with any actions required to be taken as
part of their obligations under this Agreement, and will use
their best efforts to consummate the transactions contemplated
hereby and to fulfill their obligations hereunder. If one or
more of the Consents are not received, the parties agree to use
their best efforts to work together to find some alternative
course of action which will ameliorate to the fullest extent
possible the failure to receive the Consent; provided however,
this shall not alleviate Buyer's rights to satisfaction or waiver
of the conditions set forth in Section 9.1.
8.4 HSR Filings. Within thirty (30) days of the date of
this Agreement, Buyer shall make any and all filings that the
parties determine are required under the HSR Act. All filing and
grant fees in connection with such HSR Act filings shall be paid
by Buyer.
8.5 Notification of Certain Matters. Seller and Buyer
shall each give prompt notice to the other party of (i) the
occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty
of such party contained in this Agreement to be untrue or
inaccurate in any material respect any time from the date hereof
to the Closing Date and (ii) any material failure of such party
to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, and such party
shall use all reasonable efforts to remedy the same.
8.6 Employees. Seller shall update the list of its
employees set forth in Seller's Disclosure Schedule approximately
sixty (60) days from the date hereof. Buyer will notify Seller
within ten days of receipt of such updated schedule of any
employees to whom it does not anticipate extending offers of
employment upon Closing so that Seller can give such employees
adequate notice. Seller shall terminate the employment of all of
its employees immediately prior to Closing and will pay them for
accrued, unused vacation days and Seller represents and agrees
that such termination shall be without any liability to Buyer.
It is Buyer's present stated intention that it will offer
employment to substantially all of Seller's employees on
substantially the same terms and conditions as their current
employment with Seller, subject to the standard terms and
conditions applicable to Buyer's other comparable employees.
Buyer's offers of employment shall be on terms and conditions
that Buyer shall determine in its sole discretion. Buyer will
grandfather the seniority of the employees hired for purposes of
determining vacation benefits and eligibility for Buyer's group
health insurance. Seller and Buyer acknowledge that any hired
employees will be subject to the waiting period for pre-existing
conditions under Buyer's group health insurance. Such seniority
shall be based upon the term of service with Seller only. Seller
waives any claims against Buyer or any of the employees
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hired by
Buyer arising from such employment, including without limitation
any claims arising from any employment agreement or non-compete
agreement. Nothing contained in this Agreement shall confer upon
any employee hired by Buyer any right with respect to continued
employment by Buyer, nor shall anything contained herein
interfere with the right of Buyer to terminate the employment of
any employee hired by Buyer at any time, with or without cause,
or restrict Buyer in the exercise of its independent business
judgment in establishing or modifying any of the terms and
conditions of the employment of the employees hired by Buyer. No
provision of this Agreement shall create any third party
beneficiary rights in any employee hired by Buyer, any
beneficiary or dependents thereof, or any collective bargaining
representative thereof, with respect to the compensation, terms
and conditions of employment and benefits that may be provided to
such employee by Buyer or under any benefit plan that Buyer may
maintain; provided however, that to the extent permitted by
Buyer's 401(k) Plan and applicable law, employees hired by Buyer
may make rollover contributions to Buyer's 401(k) Plan of amounts
received from Seller's 401(k) Plan.
8.7 Schedule Revision. Prior to Closing, Seller shall
compile a revised Seller's Disclosure Schedule, which revised
Seller's Disclosure Schedule shall reflect accurate and complete
information as of the Closing Date.
8.8 Public Announcements. Buyer shall use its best
efforts not to take any action, including without limitation the
making of public announcements, which could reasonably be
expected to adversely affect the trading price of the Stock
during the fifteen trading days prior to Closing. It shall be
conclusively presumed that Buyer has used best efforts with
respect to any action, the taking and time of taking of which has
been taken and made on the written advice of counsel.
SECTION 9. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER.
9.1 Conditions to Obligations of Buyer. All obligations of
Buyer to purchase the Assets and to complete the related
transactions contemplated by this Agreement are subject to the
satisfaction or waiver (in the discretion of Buyer in respect to
the waiver of such conditions) by Buyer, on or prior to the
Closing Date, of each of the following conditions:
(a) Representation, Warranties and Covenants. All
representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at
and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date, and Seller
shall have performed in all material respects all agreements,
covenants and conditions required hereby to be performed by it,
prior to or at the Closing Date. There shall be delivered to
Buyer at Closing a certificate signed by the general partners of
Seller
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to the foregoing effect ("Seller's Closing Certificate").
(b) Consents. The FCC Consents shall have become
Final Orders and shall not contain conditions that are material
and adverse to Buyer. All Consents identified with an asterisk
in Seller's Disclosure Schedule shall have been obtained without
any material adverse change in the terms or conditions of any
Contract or Governmental Authorizations to which such Consents
relate; provided, however, if Seller is unable to obtain any such
Consents relating to the Real Property Leases, Seller may
alternatively deliver replacement office/cell site facilities
that are reasonably equivalent in location and, as to cell sites,
engineering coverage on or before sixty (60) days after the
Closing Date.
(c) Governmental Authorizations. Seller shall be the
holder of all Governmental Authorizations identified with an
asterisk in Seller's Disclosure Schedule without any material
adverse change in the terms or conditions thereof. No proceeding
shall be pending the effect of which could be to revoke, cancel,
fail to renew, suspend, or modify adversely in any material
respect any of the Governmental Authorizations.
(d) Deliveries. Seller shall have made all the
deliveries to Buyer set forth in Section 10.2.
(e) Opinions of Counsel. Seller shall have delivered
to Buyer opinions of Seller's Counsel (which shall be White &
Case; Venable, Baetjer and Howard; Lukas, McGowan, Nace &
Gutierrez; and Drinker, Biddle & Reath, or such other law firms
as shall be reasonably acceptable to Buyer), dated as of the
Closing Date, addressed to Buyer in a form reasonably acceptable
to Buyer. Buyer and Seller shall negotiate in good faith and
agree to forms of opinions by the firms set forth above by
Friday, September 30, 1994, and such forms will be added to this
Agreement as Annex 4.
(f) Adverse Changes. Between the Balance Sheet Date
and the Closing Date there shall have been no material adverse
change in the Assets, condition (financial or otherwise) of the
business of Seller or the System, other than changes resulting
from actions taken by Buyer or its affiliate.
(g) No Governmental Proceeding or Litigation. No suit,
action, investigation, inquiry or other proceeding by any
governmental authority or other Person shall have been instituted
or threatened that questions the validity or legality of the
transactions contemplated hereby or which would reasonably be
expected to affect materially and adversely the value of the
Assets (unless such proceeding was instigated by or on behalf of
Buyer or its affiliate).
(h) HSR Act. The applicable waiting periods, including
any extension thereof, under the HSR Act shall have expired or
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shall have been terminated and neither the U.S. Department of
Justice nor the FTC shall have taken any action to prevent the
transactions contemplated by this Agreement.
(i) Clearance Certificate. Subject to Section 15.2, if
required, at Closing, Seller shall provide to Buyer clearance
certificate(s) or similar document(s) that may be required by any
state taxing authority in order to relieve Buyer of any
withholding obligation in respect of the transfers contemplated
hereunder.
(j) Non-foreign Affidavit. At Closing, Seller shall
furnish to Buyer an affidavit stating, under penalty of perjury,
that the indicated number is its United States taxpayer
identification number and that it is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
(k) Billing Vendor. Celltech, Seller's billing
vendor, shall have provided written assurance reasonably
satisfactory to Buyer that Celltech will continue to provide
billing services to Buyer during the transition period identified
in Section 11.3, at rates not higher than 10% in excess of the
rates charged to Seller for the billing period prior to Closing
or, Seller shall have agreed to pay for any charges in excess of
the foregoing amounts.
Notwithstanding anything in this Agreement to the contrary, no
condition to Buyer's obligation to close shall be deemed to be
unsatisfied by either (a) the imposition of any condition in the
FCC Consents that relates to Buyer's character or other
qualifications of Buyer to own or operate the Assets or be an FCC
licensee, or (b) conditions to the FCC Consents or modifications
or conditions to the Governmental Authorizations, implied,
expressed or effective, that are imposed upon an industry-wide
basis as a result of any matter presently existing, including
without limitation, the following matters (i) legislative or
administrative proceedings that have been initiated in any form
as of the date of execution of this Agreement, (ii) Congressional
and FCC allocation and related proceedings involving Personal
Communications Services, (iii)legislative and FCC proceedings
involving equal access, and competitive changes in the wireless
industry generally, and (iv) changes in governing legislation or
the FCC Rules involving cellular roaming requirements and
cellular operations generally.
9.2 Conditions to Obligations of Seller. The obligations
of Seller to sell, transfer and convey the Assets and complete
the related transactions contemplated by this Agreement are
subject to the satisfaction or waiver (in the discretion of
Seller with respect to the waiver of such conditions) by Seller,
on or prior to the Closing Date, of each of the following
conditions:
(a) Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as
if such representations and warranties were made at and as of the
Closing Date, and Buyer shall have performed in all material
respects all agreements, covenants and conditions required hereby
to be performed by it, prior to or at the Closing Date. There
shall be
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delivered to Seller at Closing a certificate of the
President of Buyer to the foregoing effect ("Buyer's Closing
Certificate").
(b) Deliveries. Buyer shall have made all the
deliveries set forth in Section 10.3.
(c) Opinion of Counsel. Buyer shall have delivered to
Seller an opinion of Buyer's counsel (which shall be Latham &
Watkins or such other law firm as shall be reasonably acceptable
to Seller), dated as of the Closing Date, addressed to Seller in
a form reasonably acceptable to Seller. Buyer and Seller shall
negotiate in good faith and agree to the form of opinion by the
firm set forth above by Friday, September 30, 1994, and such form
will be added to this Agreement as Annex 5.
(d) FCC and Other Consents. The FCC Consents shall
have become Final Orders.
(e) No Governmental Proceeding or Litigation. No
suit, action, investigation, inquiry or other proceeding by any
governmental authority or other Person shall have been instituted
or threatened that questions the validity or legality of the
transactions contemplated hereby (unless such proceeding was
instigated by or on behalf of Seller or its affiliate).
(f) HSR Act. The applicable waiting period, including
any extension thereof, under the HSR Act shall have expired or
shall have been terminated and neither the U.S. Department of
Justice nor the FTC shall have taken any action to prevent the
transactions contemplated by this Agreement.
(g) No Stop Order. No stop order shall be in effect
with respect to the registration under the Securities Act of any
shares of Stock to be delivered to or at the direction of Seller
at the Closing.
SECTION 10. CLOSING; TERMINATION; CLOSING DELIVERIES.
10.1 Closing;Termination.
(a) Closing Date. The Closing shall take place within
ten (10) days after the grant of the FCC Consents by Final Order
on such date as Buyer shall fix by notice in writing to Seller
given at least two (2) Business Days prior thereto, but in no
event prior to January 3, 1995 or after March 1, 1996. This
Agreement shall terminate automatically if Final Orders granting
the FCC Consents are not issued by March 1, 1996, in which event,
except as provided below, neither party hereto shall have any
further obligation to the other party to consummate the
transactions contemplated hereby, and (i) all rights of the
parties theretofore accrued hereunder for breach hereof,
including without limitation, rights to specific performance,
shall not thereby be extinguished and may be prosecuted hereunder
as provided in Section 14 to the extent the claimant has been
materially damaged (defined as $250,000 or more for purposes of
this provision) by such breach by the other party, (ii) each
party will promptly redeliver all documents, work papers
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and other materials of the other party relating to the transactions
contemplated hereby, whether obtained before or after the
execution hereof to the party furnishing the same, (iii) the
obligations of the parties under Section 15.12 shall survive and
all other obligations of the parties under this Agreement shall
terminate.
(b) Closing Place. The Closing shall be held at the
offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W.,
Suite 1300, Washington, D.C. 20004 or any other place that is
agreed upon in writing by Buyer and Seller.
10.2 Deliveries by Seller. Prior to or on the Closing Date,
Seller shall deliver to Buyer the following, in form and
substance reasonably satisfactory to Buyer and its counsel:
(a) All warranty deeds and bills of sale, assignments
and other instruments of conveyance and transfer, effecting the
sale, transfer, assignment and conveyance of the Assets to Buyer,
or at Buyer's election and consistent with the Consents to a
subsidiary of Buyer, including, without limitation, the
following:
(i) one or more assignments of lease with respect
to Real Property Leases, substantially in the form of Annex 6
hereto;
(ii) one or more bills of conveyance with respect
to the Personal Property, substantially in the form of Annex 7
hereto;
(iii) one or more assignments with respect to
the Contracts and Subscriber Agreements, substantially in the
form of Annex 8 hereto;
(iv) one or more assignments with respect to the
Governmental Authorizations, substantially in the form of Annex 9
hereto;
(v) one or more assignments with respect to the
Intangibles, substantially in the form of Annex 10 hereto; and
(vii) such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title to the
Assets free and clear from all Encumbrances in accordance with
the provisions hereof.
(b) the Books and Records;
(c) all Consents and Estoppel Certificates that have
been obtained;
(d) evidence of the satisfaction of the Seller
Indebtedness, unless Buyer satisfies such indebtedness out of the
Purchase Price pursuant to Section 2.3(a);
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(e) copies of resolutions adopted by the general
partners of Seller, duly authorizing and approving the execution
of this Agreement and the consummation of the transactions
contemplated hereby, certified by each of the general partners of
the Seller as being true and correct on the Closing Date;
(f) Seller's Closing Certificate;
(g) the opinions described in Section 9.1(e);
(h) a copy of Seller's General Partnership Agreement
certified by the each of the general partners of Seller;
(i) all such other documents and instruments as Buyer
or its counsel shall reasonably request and which shall be
reasonably required to consummate the transactions contemplated
hereby;
(j) all clearance certificates required by Section
9.1(i), if any;
(k) the Non-foreign Affidavit described in Section
9.1(j);
(l) a statement of all Capital Expenditures to be
reimbursed pursuant to Section 2.4(a), along with reasonable
documentation demonstrating that such expenditures were actually
incurred, whether or not such documentation has been previously
delivered;
(m) the Pro-forma Closing Balance Sheet and a
calculation of the estimated Net Current Asset Payment pursuant
to Section 2.4;
(n) The Noncompetition Agreements in the form attached
as Annex 11, duly executed by Seller, ECLP, KCLP and the
individuals identified in Annex 11;
(o) a revised Seller's Disclosure Schedule pursuant to
Section 8.8; and
(p) the written assurance of Cell-Tech described in
Section 9.1(k), if obtained.
10.3 Deliveries by Buyer. Prior to or on the Closing Date,
Buyer shall deliver to Seller the following, in form and
substance reasonably satisfactory to Seller and its counsel:
(a) The Purchase Price, as adjusted pursuant to
Section 2.4, payable in cash by wire transfer of immediate funds
to one or more accounts, not to exceed three, as designated by
Seller no later than two (2) Business Days prior to the Closing
Date and certificate(s) evidencing the portion, if any, to be
paid in Stock, as provided in Section 2.3(a), and issued in the
name of Seller or, if Seller has given notification under Section
2.3(b)(v), in the names of the Designated Partners as and in the
amounts designated in such notice.
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(b) Copies of resolutions adopted by the board of
directors of Buyer, duly authorizing and approving the execution
of this Agreement and the consummation of the transactions
contemplated hereby, certified by its Secretary as being true and
correct on the Closing Date;
(c) Buyer's Closing Certificate;
(d) the opinion described in Section 9.2(c);
(e) an assumption by Buyer of all the Liabilities set
forth in Section 3.1(a);
(f) the SEC order declaring effective the post-
effective amendment to the registration statement registering all
of the shares of Stock to be delivered by Buyer to Seller at
Closing, and evidence (which may be in the form of an opinion of
Buyer's counsel) of listing of such shares on the NASDAQ-NMS or
the national securities exchange which is the principal market on
which the Stock is traded, all as contemplated by Section 2.3(b);
and
(g) all such other documents and instruments as Seller
or its counsel shall reasonably request and which shall be
reasonably required to consummate the transactions contemplated
hereby.
SECTION 11. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
11.1 Tax Matters; Payments of Debts and Liabilities.
(a) Books and Records. Each party agrees that it will
cooperate with and make available to the other party, during
normal business hours, all Books and Records, information and
employees (without substantial disruption of employment) retained
and remaining in existence after the Closing which are necessary
or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any
other matter requiring any such Books and Records, information or
employees for any reasonable business purpose. The party
requesting any such Books and Records, information or employees
shall bear all of the out-of-pocket costs and expenses (including
without limitation attorneys' fees, but excluding reimbursement
for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or
employees. All information received pursuant to this Section
11.1(a) shall be subject to the terms of Section 15.12.
(b) Cooperation and Records Retention. Seller and
Buyer shall (i) each provide the other with such assistance as
may reasonably be requested by any of them in connection with the
preparation of any return, audit, or other examination by any
taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the
other with
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any records or other information that may be relevant
to such return, audit or examination, proceeding or
determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any
tax return of the other for any period. Without limiting the
generality of the foregoing, Buyer and Seller shall each retain,
until the applicable statutes of limitations (including any
extensions) have expired, copies of all tax returns, supporting
work schedules, and other records or information that may be
relevant to such returns for all tax periods or portions thereof
ending on or before the Closing Date and shall not destroy or
otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the
same.
(c) Following the Closing Date, Seller shall promptly
pay when due all of its debts and Liabilities, including any
liability for Taxes and excluding any debts and Liabilities
expressly assumed by Buyer hereunder; provided, however, this
covenant shall not apply to any debt or Liability or portion
thereof, that Seller is contesting in good faith by appropriate
proceedings; and provided further, that Seller shall pay promptly
all or that portion of such contested debt or liability that is
found to be owing at the completion of such proceedings.
11.2 Closing Financial Statements. Seller shall deliver
the Closing Financial Statements within forty-five (45) days
after the Closing Date. The Closing Financial Statements shall
be accompanied by a certificate of the general partners of Seller
to the effect that such financial statements have been prepared
in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and
presenting fairly the assets, liabilities and financial position
of the Seller as of the Closing Date and the results of
operations and changes in partner's capital for the period then
ended. Buyer and Seller will cooperate in the preparation or
audit, if deemed necessary by Buyer, at Buyer's expense (except
as otherwise provided in Section 6.1(e)), of any Financial
Statements.
11.3 Billing. Seller will cooperate with Buyer to assure a
reasonable transition onto a new billing vendor, such period not
to exceed ninety (90) days after the Closing Date. Buyer shall
be responsible for all charges relating to billing services for
periods from and after the Closing Date.
SECTION 12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION.
12.1 Representations and Warranties. All representations
and warranties of the parties hereto contained in this Agreement
shall be deemed continuing representations and warranties and
shall survive the Closing for a period of one hundred twenty
(120) days;
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provided however, that the representations and
warranties of Seller under (i) Section 4.5, the fourth and fifth
sentences of Section 4.10, the second, fifth, sixth and seventh
sentences of Section 4.16 and Section 4.23 shall survive the
Closing for a period of one year; (ii) Section 4.1, 4.2, the
first, second and third sentences of Section 4.10, the first,
third and fourth sentences of Section 4.16 and Section 4.22 shall
survive the Closing for a period of two years; and (iii) Section
4.17, 4.20 and 4.25 shall survive until the expiration of the
applicable statutes of limitations (with regard to extensions
thereof) with respect to matters addressed in Section 4.17, 4.20
and 4.25, respectively. Any investigations by or on behalf of
any party hereto shall not constitute a waiver as to enforcement
of any representation, warranty, or covenant contained herein.
No notice or information delivered by Seller shall affect Buyer's
right to rely on any representation or warranty made by Seller or
relieve Seller of any obligations hereunder as the result of a
breach of any of its representations and warranties.
12.2 Indemnification by Seller. Notwithstanding the
Closing, and regardless of any investigation made at any time by
or on behalf of Buyer or any information Buyer may have, Seller
hereby agrees to indemnify and hold Buyer harmless against and
with respect to, and shall reimburse Buyer for:
(a) Breach. Any and all losses, Liabilities, or
damages (collectively, "Damages") resulting from any untrue
representation, breach of warranty, or nonfulfillment of any
covenant by Seller contained herein or in any certificate,
document, or instrument delivered by Seller to Buyer hereunder;
and
(b) Legal Matters. Any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, and
expenses, including reasonable legal fees and expenses
(collectively, "Claims"), incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity;
provided, however, that Seller shall not be required to indemnify
and hold harmless Buyer under this Section 12.2 with respect to
any Damages or Claims (and no claim shall be made against Seller
therefor) unless and until the Damages and/or Claims for which
such indemnification is sought under this Section 12.2 shall
exceed in the aggregate $250,000.00 (in which case
indemnification shall relate back to the first dollar of such
claim), and provided further, the aggregate amount for which
Seller shall be required to indemnify and hold harmless Buyer
under this Section 12.2 with respect to Damages and/or Claims
shall not exceed the amount of the Purchase Price.
12.3 Indemnification by Buyer. Notwithstanding the Closing,
and regardless of any investigation made at any time by or on
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behalf of Seller or any information Seller may have, Buyer hereby
agrees to indemnify and hold Seller harmless against and with
respect to, and shall reimburse Seller for:
(a) Breach. Any and all Damages resulting from any
untrue representation, breach of warranty, or nonfulfillment of
any covenant by Buyer contained herein or in any certificate,
document, or instrument delivered by Buyer to Seller hereunder;
and
(b) Legal Matters. Any and Claims, incident to any of
the foregoing or incurred in investigating or attempting to avoid
the same or to oppose the imposition thereof, or in enforcing
this indemnity;
provided, however, that Buyer shall not be required to indemnify
and hold harmless Seller under this Section 12.3 with respect to
any Damages or Claims (and no claim shall be made against Buyer
therefor) unless and until the Damages and/or Claims for which
such indemnification is sought under this Section 12.3 shall
exceed in the aggregate $250,000.00 (in which case
indemnification shall relate back to the first dollar of such
claim), and provided further, the aggregate amount for which
Buyer shall be required to indemnify and hold harmless Seller
under this Section 12.3 with respect to Damages and/or Claims
shall not exceed the amount of the Purchase Price.
12.4 Procedure for Indemnification. The procedure for
indemnification shall be as follows:
(a) Notice. The Claimant shall promptly give notice
to the Indemnitor of any Damage or Claim, whether solely between
the parties or brought by another Party, specifying the factual
basis for the claim and the amount of thereof.
(b) Investigation. With respect to claims between the
parties, following receipt of notice from the Claimant of a
claim, the Indemnitor shall have thirty days to make any
investigation of the claim that the Indemnitor deems necessary or
desirable. For the purposes of this investigation, the Claimant
agrees to make available to the Indemnitor and/or its authorized
representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnitor
cannot agree as to the validity and amount of the claim within
the thirty-day period (or any mutually agreed upon extension
thereof), the Claimant may seek appropriate legal remedy.
(c) Control of Claim. With respect to any claim by a
third party as to which the Claimant is entitled to
indemnification hereunder, the Indemnitor shall have the right at
its own expense to participate in or assume control of the
defense of the claim, and the Claimant shall cooperate fully with
the Indemnitor, subject to reimbursement for actual out-of-pocket
expenses incurred by the
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Claimant as the result of a request by
the Indemnitor. If the Indemnitor elects to assume control of
the defense of any third-party claim, the Claimant shall have the
right to participate in the defense of the claim at its own
expense. If the Indemnitor does not elect to assume control or
otherwise participate in the defense of any third party claim, it
shall be bound by the results obtained by the Claimant with
respect to the claim.
(d) No Indemnitor shall be liable for any settlement
effected without its written consent.
SECTION 13. CERTAIN REMEDIES.
13.1 Remedies.
13.1 Seller's Default. If Seller fails or refuses to
perform any of Seller's obligations set forth in this Agreement
in any respect which results in the Closing not occurring,
Buyer's sole and exclusive remedy therefor shall be to elect, at
its sole option, either to (a) terminate this Agreement and be
paid Five Million Dollars ($5,000,000) by Seller as agreed and
liquidated damages in full settlement of all claims of Buyer
against Seller related to the transactions which are the subject
of this Agreement, it being specifically acknowledged and agreed
that in such event the amount of Buyer's damages are not
ascertainable and that such liquidated damage amount constitutes
a reasonable payment to Buyer as a result of Seller's default and
does not constitute a penalty, and that thereafter Sections 14,
15.5 and 15.12 of this Agreement shall survive and the remainder
of this Agreement shall be null and void and the parties hereto
shall have no further rights or obligations hereunder, or (b)
obtain specific performance of Seller's obligations under this
Agreement, in which event Seller shall waive the defense that
there is an adequate remedy at law. If, after the Closing,
Seller fails or refuses to perform any of its obligations under
this Agreement that survive Closing, Buyer shall be entitled to
all remedies therefor available at law or in equity.
13.2 Buyer's Default. If Buyer fails or refuses to perform
any of Buyer's obligations set forth in this Agreement in any
respect which results in the Closing not occurring, Seller's sole
and exclusive remedy therefor shall be to terminate this
Agreement and be paid Five Million Dollars ($5,000,000) by Buyer
as agreed and liquidated damages in full settlement of all claims
of Seller against Buyer related to the transactions which are the
subject of this Agreement, it being specifically acknowledged and
agreed that in such event the amount of Seller's damages are not
ascertainable and that such liquidated damage amount constitutes
a reasonable payment to Seller as a result of Buyer's default and
does not constitute a penalty, and that thereafter Sections 14,
15.5 and 15.12 of this Agreement shall survive and the remainder
of this Agreement shall be null and void and the parties hereto
shall have
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no further rights or obligations hereunder. If, after
the Closing, Buyer fails or refuses to perform any of its
obligations under this Agreement that survive Closing, Seller
shall be entitled to all remedies therefor available at law or in
equity.
13.3 Notice of Default; Cure. Before either party may take
advantage of the foregoing remedies, the party desiring to
enforce such remedies shall notify the other party (the
"Defaulting Party") of its default hereunder. The Defaulting
Party shall have fifteen 15 Business Days from receipt of such
notice in which to cure the default. If the Defaulting Party
cures the default within said fifteen (15) days, the other party
shall not be entitled to pursue its remedies hereunder. If the
Closing Date is scheduled to occur during the cure period, the
Closing Date shall be postponed until the first Business Day
after expiration of the cure period.
SECTION 14. Arbitration.
Within ten (10) days following the date that a dispute
arises hereunder, Buyer and Seller shall select a mutually
acceptable arbitrator located in the Atlanta, Georgia
metropolitan area to resolve such dispute. If the parties are
unable to agree upon the arbitrator within the ten (10) day
period, then three arbitrators shall be selected pursuant to the
rules of the American Arbitration Association. Such arbitration
shall be conducted in Atlanta, Georgia pursuant to the rules of
the American Arbitration Association, and shall be concluded as
soon as reasonable practicable. The arbitrators shall render a
written decision, which shall include findings of fact and
conclusions of law. The decision of the arbitrators shall be
final, conclusive and binding on the parties and judgment thereon
may be entered in any Court having jurisdiction. The party not
prevailing shall be responsible for all fees and expenses,
including attorneys fees, in connection with such arbitration.
SECTION 15. MISCELLANEOUS.
15.1 Allocation of Purchase Price. Buyer and Seller shall,
negotiate in good faith regarding an allocation among the Assets
of the purchase price for the Assets, consistent with the
requirements of Section 1060 of the Code. If agreement on the
allocation is reached before the due date of the earlier of the
parties' due dates for filing their federal income tax returns
for the taxable year in which the Closing occurs (the "Allocation
Deadline"), Buyer and Seller (i) shall jointly complete and
separately file in a timely fashion Form 8594 with each of their
federal income tax returns for the year required and (ii) shall
not take any position on any income, transfer or gains tax return
before any governmental agency charged with the collection of any
such tax or in any judicial proceeding that is in any manner
inconsistent with the terms of the agreed upon allocation without
the written consent of the other. If Buyer and Seller cannot
reach agreement on the
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allocation on or before the allocation
deadline despite a good faith attempt to do so, Buyer and Seller
shall have no further obligation under this Section 15.1.
15.2 Fees and Expense. Buyer shall pay any transfer taxes,
sales taxes, document stamps, or other charges levied by any
governmental entity on account of the transfer and conveyance of
the Assets from Seller to Buyer ("Transfer Taxes"); provided
however, that Seller shall pay any Transfer Taxes levied in
connection with the transfer and conveyance to Buyer of the FCC
Authorizations. Except as otherwise provided in this Agreement,
each party shall pay its own expenses incurred in connection with
the authorization, preparation, execution, and performance of
this Agreement, including all fees and expenses of counsel,
accountants, agents, and representatives.
15.3 Notices. All notices, demands, and requests required
or permitted to be given under the provisions of this Agreement
shall be in writing and shall be deemed to have been duly
delivered and received (a) on the date of personal delivery
(which shall include delivery by facsimile if received between
the hours of 9:00 AM and 5:00 PM, local time, on any Business
Day), or (b) on the date of receipt (as shown on the return
receipt) if mailed by registered or certified mail, postage
prepaid and return receipt requested, in each case addressed as
follows:
If to Seller, marked personal and confidential:
Sunshine Cellular
400 East Government Street
Pensacola, Florida 32501
Attention: Managing Partner
Facsimile: (904) 444-4495
With copies (which shall not constitute notice) to:
Darryl B. Deaktor, Esq.
White & Case
First Union Financial Center
200 South Biscayne Boulevard
Suite 4900
Miami, Florida 33131-2352; and
Facsimile: (904) 358-5744
MCMG, Inc.
1262 Old Hillsboro Road
Franklin, TN 37064
Attention: Don Hillenmeyer
Facsimile: (615) 791-0477
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If to Buyer: Vanguard Cellular Systems, Inc.
2002 Pisgah Church Road, Ste. 300
Greensboro, North Carolina 27455
Attention: Richard C. Rowlenson,
Senior Vice President and
General Counsel
Facsimile: (910) 545-2219
or to any other or additional persons and addresses as the
parties may from time to time designate in a writing delivered in
accordance with this Section 15.3.
15.4 Further Assurances. The parties shall take any actions
and execute any other documents that reasonably may be necessary
or desirable to the implementation and consummation of this
Agreement.
15.5 Governing Law. This Agreement shall be governed,
construed, and enforced in accordance with the laws of the state
of New York (without regard to the choice of law provisions
thereof).
15.6 Headings. The headings herein are included for ease of
reference only and shall not control or affect the meaning or
construction of the provisions of this Agreement.
15.7 Seller's Disclosure Schedule. Seller's Disclosure
Schedule is divided into sections for convenience of reference
only, and the location of any disclosure made therein shall be
irrelevant for all purposes.
15.8 Gender and Number. Words used herein, regardless of
the gender and number specifically used, shall be deemed and
construed to include any other gender, masculine, feminine, or
neuter, and another number, singular or plural, as the context
requires.
15.9 Entire Agreement. This Agreement, all schedules and
exhibits hereto, and all certificates and other documents to be
delivered by the parties pursuant hereto, collectively represent
the entire understanding and agreement between the Parties with
respect to the subject matter hereof. This Agreement supersedes
all prior negotiations and agreements between the parties,
including without limitation the Confidentiality Agreement
previously entered into between the parties, and specifically
excluding the Settlement Agreement (other than as modified
pursuant to Section 2.4(d) hereof). This Agreement cannot be
amended, supplemented, or changed except by an agreement in
writing that makes specific reference to this Agreement
and which is signed by the party against which
enforcement of any such amendment, supplement, or modification is
sought.
15.10 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any
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circumstances, is held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way
impaired or affected, it being intended that all the rights and
privileges established hereunder shall be enforceable to the
fullest extent permitted by
law.
15.11 Benefit and Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto
and their respective successors and permitted assigns. This
Agreement may not be assigned by Seller. This Agreement may be
assigned by Buyer to any wholly owned subsidiary.
15.12 Confidential Information. Seller shall not disclose
the transaction contemplated herein until such time as Buyer
makes a public announcement regarding the transaction, which
Buyer intends to do at or shortly after execution of this
Agreement. Buyer and Seller will provide a copy of any proposed
public announcement to the other party for comment prior to its
release. Neither Seller nor Buyer shall make any public
disclosure of the specific terms of this Agreement, except as
required by law or to the extent such terms are publicly
available other than by unauthorized disclosure. In connection
with the negotiation of this Agreement and the preparation for
the consummation of the transactions contemplated hereby, each
party acknowledges that it has had and will have access to
confidential information relating to the other party. Each party
shall treat such information as confidential, preserve the
confidentiality thereof and not duplicate or use such
information, except to advisors, consultants and affiliates in
connection with the transactions contemplated hereby. Seller, at
a time and in a manner which it reasonably determines and after
prior notice to and consultation with Buyer, may notify
employees, unions and bargaining agents of the fact of the
subject transaction. In the event of the termination of this
Agreement for any reason whatsoever, each party shall return (or
destroy with delivery of a certificate confirming such
destruction) to the other all documents, work papers and other
material (including all copies thereof) obtained in connection
with the transactions contemplated hereby and will use all
reasonable efforts, including instructing its employees and
others who have had access to such information, to keep
confidential and not to use any such information, unless such
information is now, or is hereafter disclosed, through no act or
omission of such party, in any manner making it available to the
general public. Seller acknowledges, but does not represent or
warrant, that portions of the Assets including but not limited to
subscriber lists and Subscriber Agreements, constitute trade
secrets and confidential business information. Except as
provided in the last sentence of this Section 15.12, Seller
agrees not to disclose any such information to any party other
than Buyer. This Section 15.12 shall survive Closing
indefinitely. Buyer acknowledges that Seller has heretofore
disclosed some or all of
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such portions of the Assets to others,
and Buyer agrees that prior to the Closing Seller may disclose
such information to its employees, accountants, representatives
and advisors in the ordinary course of Seller's business and in
connection with the negotiation, performance and enforcement of
this Agreement.
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15.13 Counterparts. This Agreement may be signed in
counterparts with the same effect as if the signature on each
counterpart were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
BUYER:
ATTEST: VANGUARD CELLULAR SYSTEMS, INC.
________________________ By: _______________________________
______________ Secretary
Title: ____________________________
SELLER:
SUNSHINE CELLULAR
By: ESTESS CELLULAR LIMITED
PARTNERSHIP, its General Partner
ATTEST: By: ESTESS CELLULAR CORPORATION,
its General Partner
_________________________ By:________________________
_____________Secretary President
By: KERRIGAN CELLULAR LIMITED
PARTNERSHIP, its General Partner
ATTEST: By: KERRIGAN CELLULAR CORPORATION,
its General Partner
_________________________ By:________________________
_____________Secretary President
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