Exhibit 2.17
STOCK PURCHASE AGREEMENT
among
MJD VENTURES, INC.,
▇. ▇. ▇▇▇▇▇▇▇▇▇▇, III,
▇. ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇,
▇▇▇ ▇. ▇▇▇▇▇,
THOSE OTHER SHAREHOLDERS LISTED ON SCHEDULE 2.7 HERETO
and
PEOPLES MUTUAL TELEPHONE COMPANY
dated as of December 10, 1999
TABLE OF CONTENTS
This Table of Contents is not part of this Agreement but is attached for
convenience only.
ARTICLE I PURCHASE OF STOCK................................................................ 2
Section 1.1 Purchase and Sale.............................................. 2
Section 1.2 Purchase Price................................................. 2
Section 1.3 Post-Closing Adjustments to the Adjusted Purchase Price....... 3
Section 1.4 Excluded Assets and Liabilities................................ 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................... 4
Section 2.1 Corporate Organization......................................... 4
Section 2.2 Authorization.................................................. 5
Section 2.3 No Violation................................................... 5
Section 2.4 Subsidiaries and Investments................................... 5
Section 2.5 Stock Record Book.............................................. 6
Section 2.6 Corporate Books................................................ 6
Section 2.7 Title to Stock................................................. 6
Section 2.8 Options and Rights............................................. 7
Section 2.9 Financial Statements........................................... 7
Section 2.10 Employees...................................................... 8
Section 2.11 Absence of Certain Changes..................................... 9
Section 2.12 Contracts...................................................... 10
(a) Generally............................................................ 10
(b) Compliance........................................................... 11
Section 2.13 True and Complete Copies....................................... 11
Section 2.14 Title and Related Matters...................................... 12
(a) Owned Property, Liens................................................ 12
(b) Leased Property...................................................... 12
(c) Regulatory/Zoning Compliance......................................... 12
(d) Utilities............................................................ 13
(e) Condition............................................................ 13
Section 2.15 Litigation..................................................... 13
Section 2.16 Tax Matters.................................................... 13
(a) Generally............................................................ 13
(b) Good Faith........................................................... 14
(c) Claims............................................................... 14
(d) Course of Business................................................... 15
(e) Withholdings......................................................... 15
(f) Partnerships......................................................... 15
(g) Accounting Method Adjustments........................................ 15
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(h) Tax Exemptions....................................................... 15
(i) Tax Return Reviews................................................... 15
(j) Power of Attorney.................................................... 15
(k) True and Complete Copies............................................. 15
Section 2.17 Bank and Brokerage Accounts.................................... 15
Section 2.18 Compliance with Applicable Laws, Regulations and Orders........ 16
Section 2.19 Employee Benefit Plans......................................... 16
Section 2.20 Intellectual Property.......................................... 19
Section 2.21 Environmental Matters.......................................... 20
(a) Generally............................................................ 20
(b) Property............................................................. 20
(c) Transportation. .................................................... 20
(d) Notification of Release.............................................. 21
(e) Liens................................................................ 21
(f) Site Assessments..................................................... 21
Section 2.22 Capital Expenditures and Investments........................... 21
Section 2.23 Dealings with Affiliates....................................... 21
Section 2.24 Insurance...................................................... 22
Section 2.25 Commissions.................................................... 22
Section 2.26 Permits and Reports............................................ 22
Section 2.27 Absence of Undisclosed Liabilities............................. 23
Section 2.28 Year 2000 Compliance........................................... 24
Section 2.29 Disclosure..................................................... 24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................................. 24
Section 3.1 Corporate Organization......................................... 24
Section 3.2 Authorization.................................................. 25
Section 3.3 No Violation................................................... 25
Section 3.4 Investment Intent.............................................. 25
ARTICLE IV COVENANTS OF THE SELLERS AND THE COMPANY......................................... 26
Section 4.1 Regular Course of Business..................................... 26
(a) Generally............................................................ 26
(b) Compensation......................................................... 26
(c) Insurance............................................................ 26
(d) Claims............................................................... 26
(e) Supplement........................................................... 26
Section 4.2 Amendments..................................................... 26
Section 4.3 Capital Changes................................................ 27
Section 4.4 Dividends...................................................... 27
Section 4.5 Capital Expenditures; Transactions with Affiliates............. 27
Section 4.6 Borrowing...................................................... 27
Section 4.7 Property....................................................... 27
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Section 4.8 Other Commitments.............................................. 27
Section 4.9 Interim Financial Information, Investment K-1s............... 27
Section 4.10 Consents and Authorizations.................................... 28
Section 4.11 Access......................................................... 28
Section 4.12 Notice of Transfer............................................. 28
Section 4.13 Payment of Stamp Tax........................................... 28
Section 4.14 Disclosure..................................................... 28
Section 4.15 Cooperation with Purchaser..................................... 29
ARTICLE V COVENANTS OF THE PURCHASER....................................................... 29
Section 5.1 Consents and Authorizations.................................... 29
Section 5.2 Employees...................................................... 29
ARTICLE VI OTHER AGREEMENTS................................................................. 29
Section 6.1 Agreement to Defend............................................ 29
Section 6.2 Further Assurances............................................. 30
Section 6.3 Consents....................................................... 30
Section 6.4 No Solicitation or Negotiation................................. 30
Section 6.5 No Termination of the Obligations by Subsequent Dissolution.... 30
Section 6.6 Public Announcements........................................... 31
Section 6.7 Records and Information........................................ 31
(a) Retention of Records................................................. 31
(b) Access to Information................................................ 31
(c) Delivery of Corporate Records........................................ 32
(d) Witnesses............................................................ 32
Section 6.8 Insurance Policies and Claims Administration................... 32
(a) Insurance Coverage Prior to the Closing Date......................... 32
(b) Insurance Coverage After the Closing Date............................ 33
Section 6.9 Other Tax Matters.............................................. 33
(a) Tax Returns.......................................................... 33
(b) Information.......................................................... 34
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER................................... 34
Section 7.1 Representations and Warranties................................. 34
Section 7.2 Consents and Approvals......................................... 34
Section 7.3 No Material Adverse Change..................................... 35
Section 7.4 No Proceeding or Litigation.................................... 35
Section 7.5 Secretary's Certificate........................................ 35
Section 7.6 Certificates of Good Standing.................................. 35
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Section 7.7 Opinion of Sellers' Counsel.................................... 35
Section 7.8 Continuation of ▇. ▇▇▇▇▇▇▇▇▇▇, III Employment Agreement........ 36
Section 7.9 Noncompetition Agreement....................................... 36
Section 7.10 ▇. ▇▇▇▇▇ Employment Agreement.................................. 36
Section 7.11 Resignations................................................... 36
Section 7.12 Other Documents................................................ 36
Section 7.13 Liens.......................................................... 36
Section 7.14 Delivery of Minute Books....................................... 36
Section 7.15 Delivery of Financial Statements............................... 36
Section 7.16 Amendment to Lease Agreements.................................. 37
Section 7.17 Renewal of Franchises.......................................... 37
Section 7.18 Completion of Natal Project.................................... 37
Section 7.19 Completion of Environmental Actions............................ 37
ARTICLE VIII CONDITIONS TO THE OBLIGATIONSOF THE SELLERS..................................... 37
Section 8.1 Representations and Warranties................................. 37
Section 8.2 Consents and Approvals......................................... 38
Section 8.3 No Proceeding or Litigation.................................... 38
Section 8.4 Secretary's Certificate........................................ 38
Section 8.5 Opinion of Purchaser's Counsel................................. 38
Section 8.6 Restated Employment Agreement.................................. 38
Section 8.7 Noncompetition Agreement....................................... 38
Section 8.8 ▇. ▇▇▇▇▇ Employment Agreement.................................. 38
Section 8.9 Amendment to Lease Agreements.................................. 38
ARTICLE IX CLOSING......................................................................... 38
Section 9.1 Closing........................................................ 38
Section 9.2 Closing Date Payment and Receipt of Shares..................... 39
ARTICLE X TERMINATION AND ABANDONMENT..................................................... 39
Section 10.1 Methods of Termination......................................... 39
(a) Mutual Consent....................................................... 39
(b) Sellers' Failure to Perform.......................................... 39
(c) Purchaser's Failure to Perform....................................... 40
(d) Failure to Close by March 31, 2000................................... 40
(e) Material Adverse Change.............................................. 40
(f) Remedies............................................................. 40
Section 10.2 Procedure Upon Termination..................................... 40
(a) Return of Records.................................................... 40
(b) Confidentiality...................................................... 41
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ARTICLE XI SURVIVAL OF TERMS; INDEMNIFICATION.............................................. 41
Section 11.1 Survival; Limitations.......................................... 41
Section 11.2 Indemnification by the Sellers................................. 41
(a) Misrepresentation or Breach.......................................... 42
(b) Taxes................................................................ 42
(c) Other Claims......................................................... 42
(d) Related Expenses..................................................... 42
Section 11.3 Indemnification by the Purchaser............................... 42
(a) Misrepresentation or Breach.......................................... 42
(b) Taxes................................................................ 42
(c) Other Claims......................................................... 43
(d) Related Expenses..................................................... 43
Section 11.4 Third Party Claims............................................. 43
(a) Generally............................................................ 43
(b) Counsel.............................................................. 44
Section 11.5 Other Claims................................................... 44
Section 11.6 Continued Liability for Indemnity Claims....................... 46
Section 11.7 Basket Amount.................................................. 46
(a) Indemnification by the Sellers....................................... 46
(b) Indemnification by the Purchaser..................................... 46
(c) Aggregation.......................................................... 46
Section 11.8 Right of Offset................................................ 46
Section 11.9 Escrow of Liquid Assets........................................ 47
ARTICLE XII GENERAL PROVISIONS.............................................................. 48
Section 12.1 Amendment and Modification..................................... 48
Section 12.2 Waiver......................................................... 48
Section 12.3 Certain Definitions............................................ 48
Section 12.4 Notices........................................................ 53
Section 12.5 Assignment..................................................... 54
Section 12.6 Governing Law.................................................. 54
Section 12.7 Counterparts................................................... 54
Section 12.8 Headings....................................................... 54
Section 12.9 Entire Agreement............................................... 54
Section 12.10 No Benefit..................................................... 55
Section 12.11 Delays or Omissions............................................ 55
Section 12.12 Severability................................................... 55
Section 12.13 Expenses....................................................... 55
Section 12.14 Time of the Essence............................................ 55
Section 12.15 Injunctive Relief.............................................. 56
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SCHEDULES
1.4 Excluded Assets and Liabilities
2.3 No Violations
2.4 Subsidiaries and Investments
2.5 Capital Stock
2.6 Corporate Books
2.7 List of Shareholders/No Liens on Shares
2.10 Employees
2.11 Certain Changes
2.12 Contracts
2.14(a) Owned Property, Liens
2.14(b) Leased Property
2.14(c) Regulatory/Zoning Compliance
2.14(e) Condition
2.15 Litigation
2.16 Tax Matters
2.17 Bank and Brokerage Accounts
2.19 Employee Benefit Plans
2.20 Intellectual Property
2.21 Environmental Matters
2.22 Capital Expenditures and Investments
2.23 Dealings with Affiliates
2.24 Insurance
2.25 Brokerage Commission
2.26 Permits
2.27 Absence of Undisclosed Liabilities/Corporate Debt
3.3 Consents and Authorizations of Purchaser
4.9 Interim Financial Information
4.14 Article IV Disclosure Statement
EXHIBITS
7.7 Opinion of Sellers' Counsel
7.8 Restated Employment Agreement
7.9 Noncompetition Agreement
7.10 ▇. ▇▇▇▇▇ Employment Agreement
8.5 Opinion of Purchaser's Counsel
11.9 Escrow Agreement
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AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of the
10th day of December, 1999, among MJD VENTURES, INC., a Delaware corporation
(the "PURCHASER"), ▇. ▇. ▇▇▇▇▇▇▇▇▇▇, III, a Virginia resident ("▇. ▇▇▇▇▇▇▇▇▇▇,
III"), ▇. ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇, a Virginia resident ("▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇"), ▇▇▇ ▇.
▇▇▇▇▇, a Virginia resident ("▇. ▇▇▇▇▇"), those other shareholders listed on
Schedule 2.7 hereto (collectively, the "REMAINING SHAREHOLDERS") (such Remaining
Shareholders, together with ▇. ▇▇▇▇▇▇▇▇▇▇, III, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ and ▇. ▇▇▇▇▇
referred to individually hereinafter as a "SELLER" and collectively as the
"SELLERS", with the term "Sellers" including any and all of such Remaining
Shareholders, ▇. ▇▇▇▇▇▇▇▇▇▇, III, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ and ▇. ▇▇▇▇▇), and PEOPLES
MUTUAL TELEPHONE COMPANY, a Virginia corporation ("PEOPLES" or the "COMPANY").
RECITALS
WHEREAS, ▇. ▇▇▇▇▇▇▇▇▇▇, III owns 24 shares of $25.00 par value common stock
of the Company, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ owns 3,463 shares of $25.00 par value common
stock of the Company, ▇. ▇▇▇▇▇ owns 3,296 shares of $25.00 par value common
stock of the Company, and the Remaining Shareholders collectively own 3,049
shares of $25.00 par value common stock of the Company, such combined 9,832
shares constituting all of the issued and outstanding shares of capital stock of
the Company (the "PEOPLES TELEPHONE CAPITAL STOCK");
WHEREAS, Peoples owns one (1) share of no par common stock of Peoples
Mutual Services Company, a Virginia corporation ("PEOPLES SERVICES"),
constituting all of the issued and outstanding shares of capital stock of
Peoples Services (the "PEOPLES SERVICES CAPITAL STOCK")(any and all shares,
options, warrants, rights and interests, legal or equitable, in or with respect
to the Peoples Telephone Capital Stock and/or the Peoples Services Capital Stock
hereinafter referred to collectively as the "SHARES").
WHEREAS, Peoples is an operating telephone company that provides wireline
telecommunications services in four (4) exchanges in the State of Virginia
(Gretna, ▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇ Level), serving the communities of Gretna,
Brights, Pittsville, Zion, Hurt, Motley, Grit, ▇▇▇▇▇, ▇▇▇▇▇ Level and Lakeside,
with approximately 7,794 access lines (the "Exchange"); and Peoples operates as
a reseller for a local internet service provider, currently providing service to
approximately 600 subscribers (collectively, the businesses of Peoples, Peoples
Services and all of Peoples' other
subsidiaries, if any, are hereinafter referred to as the "COMMUNICATIONS
BUSINESS", the "BUSINESS" or the "BUSINESS");
WHEREAS, the Sellers desire to sell, and the Purchaser desires to purchase,
on the terms and subject to the conditions set forth in this Agreement, the
Shares.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. PURCHASE OF STOCK
a. PURCHASE AND SALE. At the Closing Date, on the terms and subject to
the conditions set forth in this Agreement, the Sellers agree to sell to
the Purchaser, and the Purchaser agrees to purchase from the Sellers, the
Shares.
b. PURCHASE PRICE.
i. The Purchaser shall purchase the Shares of Peoples Telephone
Capital Stock from the Sellers, at a price per share of Peoples
Telephone Capital Stock (the "PRICE PER SHARE") equal to the Adjusted
Purchase Price (as defined below) divided by 9,832 (being the number
of shares of Peoples Telephone Capital Stock issued and outstanding as
of the Closing Date). The Adjusted Purchase Price shall be the sum of
Thirty-Five Million and No/100 Dollars ($35,000,000) minus the
Company's Total Long Term Debt as of the Closing Date, (such sum being
the "BASE PURCHASE Price"), plus or minus "NET WORKING CAPITAL" as
defined in accordance with Section 1.2(b) below, and plus the
"SECURITIES VALUE" as defined in accordance with Section 1.2(c) below.
The Adjusted Purchase Price shall be payable in accordance with this
Article I, subject to the provisions of Section 9.2 hereof.
ii. The Base Purchase Price shall be adjusted by adding to it or
subtracting from it, as the case may be, the Net Working Capital on
the Closing Date. For the purposes hereof, Net Working Capital shall
be defined as the Company's current assets minus current liabilities,
computed in accordance with GAAP, consistently applied (on a
consolidated basis). To the extent the Company's
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current assets exceed the Company's current liabilities on the Closing
Date, the Base Purchase Price shall be increased, dollar for dollar.
To the extent the Company's current liabilities exceed the Company's
current assets on the Closing Date, the Base Purchase Price shall be
decreased, dollar for dollar. The Net Working Capital of the Company
shall be based on an estimated closing balance sheet of the Company,
which shall be delivered to the Purchaser at least ten (10) days prior
to the Closing Date, prepared in good faith by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇,
Certified Public Accountants, LLP, subject to the Purchaser's review
and approval thereof, which shall not be unreasonably withheld.
iii. The Base Purchase Price shall additionally be adjusted by
adding to it the "Securities Value," determined as follows:
(1) The value of all shares of capital stock of Illuminet
Holdings, Inc. ("ILLUMINET")(NASDAQ Symbol "ILUM") owned by the
Company as of the Closing Date shall be determined by multiplying
the total number of such shares by the average closing price of a
share of Illuminet capital stock on the NASDAQ National Market
for the twenty (20) day period ending ten (10) days prior to the
Closing Date; and
(2) The value of all shares of Class A Common Stock of
Trigon Healthcare, Inc. ("TRIGON")(NYSE Symbol "TGH") owned by
the Company as of the Closing Date shall be determined by
multiplying the total number of such shares by the average
closing price of a share of Trigon Class A Common Stock on the
New York Stock Exchange for the twenty (20) day period ending ten
(10) days prior to the Closing Date.
(iv) The sum of the Base Purchase Price, plus or minus the Net
Working Capital, plus the Securities Value, all as determined above,
shall be referred to herein as the "ADJUSTED PURCHASE PRICE."
c. POST-CLOSING ADJUSTMENTS TO THE ADJUSTED PURCHASE PRICE. The
Adjusted Purchase Price payable by the Purchaser to the Sellers on the
Closing Date pursuant to Sections 1.2 and 9.2 hereof may be adjusted as
follows. Within ninety (90) days after the Closing Date, the Purchaser
shall prepare and
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submit to the Sellers a Closing balance sheet for the Company as of the
close of business on the Closing Date (the "CLOSING BALANCE SHEET"), which
shall be prepared in accordance with GAAP and consistent with the Company's
past practices, and mutually acceptable to the Sellers and the Purchaser
and their respective independent public accountants. Upon the Sellers' and
the Purchaser's mutual agreement as to the form and content of the Closing
Balance Sheet, the amount of the Adjusted Purchase Price shall be increased
or decreased, as the case may be, by the difference, if any, between the
Net Working Capital and the Total Long Term Debt determined in good faith
as of the Closing Date and the Net Working Capital and the Total Long Term
Debt as such is determined based on the Closing Balance Sheet. If, as a
result of the foregoing post-closing adjustment, the Adjusted Purchase
Price is increased, the Purchaser shall pay the Sellers, in accordance with
their percentage interests shown on Schedule 2.5 hereto relative to all
Sellers (the "PERCENTAGE INTERESTS"), the amount of such increase by wire
transfer of same-day funds within ten (10) business days of the date on
which the parties agree on the Closing Balance Sheet. If as a result of the
post-closing adjustment, the Adjusted Purchase Price is decreased, the
Sellers shall refund to the Purchaser, in accordance with their Percentage
Interests, the amount of such decrease by wire transfer of same-day funds
within ten (10) business days of the date on which the parties agree on the
Closing Balance Sheet.
d. EXCLUDED ASSETS AND LIABILITIES. Notwithstanding that this
Agreement relates to the purchase of capital stock from the Sellers by the
Purchaser, which results in the Company retaining any and all of its assets
and liabilities, it is understood and agreed that the Sellers shall remove
from the Company's premises prior to Closing and/or, as appropriate, remove
from the Company's books and records, only those particular assets set
forth on Schedule 1.4 hereto (the "EXCLUDED ASSETS"). Further, the Sellers
shall assume any and all liabilities set forth on Schedule 1.4 hereto (the
"EXCLUDED LIABILITIES"). The Purchaser agrees that it shall cause the
Company to execute, and the Sellers agree to execute, any and all such
bills of sale, deeds, assignments and/or agreements as may be necessary to
transfer title to the Excluded Assets to the Sellers and to assign and/or
transfer the Excluded Liabilities to the Sellers. The parties hereto
further agree that no other assets of the Company, whether tangible or
intangible, shall have been or shall be removed from the Company's premises
or from the Company's books and records except in the ordinary course of
the Company's
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Business as provided herein from and after December 31, 1998 through the
Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to the Purchaser as follows (to
the extent a representation is modified by a knowledge requirement, it shall
speak to the knowledge of any or all of the Sellers and the Company), with
respect to each of Peoples, Peoples Services and all subsidiaries and affiliates
thereof even though such representation and/or warranty shall use only the word
Company (in other words, if any representation or warranty or covenant or
agreement would be untrue as to any of Peoples, Peoples Services or any of their
subsidiaries or Affiliates then the Sellers must so disclose any such untruth):
a. CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing with perpetual duration
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to own, operate and lease its properties and to conduct
its business as presently conducted. Each Seller is a resident of the state
set forth with respect to such Seller on Schedule 2.7 hereto. There are no
Shareholder Agreements in place among any of the Sellers. The Company is
qualified to do business and is in good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its
properties, or the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby requires it to be so
qualified. True, complete and correct copies of the Company's charter and
bylaws (and all amendments thereto) as presently in effect have been
delivered to the Purchaser.
b. AUTHORIZATION. The Sellers and the Company each have full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors (and as
appropriate, the shareholders) of the Company has duly authorized the
execution, delivery and performance of this Agreement, and no other
corporate proceedings on its part are necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement constitutes a legal, valid
and binding obligation of each of the Sellers and the Company enforceable
against each such party in accordance with its terms, subject to equitable
considerations and the effect
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of bankruptcy and other laws affecting the rights of creditors generally.
The Sellers will, at the Closing, have full power and authority to deliver
the Shares and the certificates evidencing the Shares to the Purchaser free
and clear of all Liens as provided for herein.
c. NO VIOLATION. Except as set forth on Schedule 2.3, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by each of the Sellers and the Company
does not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default or event of default
under (with due notice, lapse of time or both), (c) result in the creation
of any Lien upon the Company or its capital stock or assets pursuant to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent,
approval, exemption or other action by, or notice to, any Person pursuant
to (i) the charter or bylaws of the Company, (ii) any applicable Regulation
(including, without limitation, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976), (iii) any Order to which either the Sellers or
the Company or any of their properties are subject, or (iv) any Contract to
which the Sellers or the Company or any of their properties are subject.
The Sellers and the Company have complied with all applicable Regulations
and Orders in connection with the execution, delivery and performance of
this Agreement and the transactions contemplated hereby, subject to the
requirements which are conditions to the Closing.
d. SUBSIDIARIES AND INVESTMENTS. Except as set forth on Schedule 2.4,
the Company has no subsidiaries or investments in any Person. Attached as
set forth on Schedule 2.4 is a true and complete corporate organizational
chart for the Company. Except as set forth on Schedule 2.4, the
transactions contemplated by this Agreement will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement
to which the Company is a party with respect to any such subsidiaries or
investments, nor shall the transactions contemplated by this Agreement
trigger any purchase, put, call or right of first refusal rights in any
Person, nor shall the transactions contemplated by this Agreement result in
a violation of, or require any authorization, consent, approval, exemption
or other action by or notice to any Person. Any such investments constitute
an asset of the Company and the Company is the only Person with any rights
thereto. Except as set forth on Schedule 2.4, the Company does not owe any
indebtedness to or on account of any
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of such subsidiaries or investments, nor has the Company guaranteed any
indebtedness on behalf of, or have any other contingent obligations with
respect to, any such subsidiaries or investments, and the Company has not
pledged any such subsidiaries or investments or any other of its assets in
connection with any obligations relating to any such investment or
subsidiary. The Company is not a general partner in any of its investments,
nor is any employee of the Company an officer or director of any such
investment entity. Except as set forth on Schedule 2.4 hereto, the Company
is not a party to any Partnership, Operating, Shareholders' or
Stockholders' Agreements with respect to any of the entities discussed on
Schedule 2.4 hereto. Also set forth on Schedule 2.4 hereto is a listing of
all dividends and/or distributions made with respect to any such
subsidiaries and/or investments since July 31, 1996.
e. STOCK RECORD BOOK. The stock record book of the Company is complete
and correct in all material respects. No shares of capital stock of the
Company are currently reserved for issuance for any purpose or upon the
occurrence of any event or condition. The Shares constitute all of the
outstanding capital stock of the Company and the Sellers own all of the
outstanding capital stock of the Company. Peoples is the true and lawful
owner of all of the outstanding capital stock of Peoples Services. Schedule
2.5 sets forth the total number of authorized and issued shares of capital
stock for each of Peoples and Peoples Services.
f. CORPORATE BOOKS. The corporate minute books of the Company and of
each of its subsidiaries are complete and correct in all material respects
and contain signed minutes of all of the proceedings of the shareholders
and directors of the Company and of each of its subsidiaries since
incorporation. A true and complete list of the directors and officers of
the Company and of each of its subsidiaries as of the date hereof is set
forth on Schedule 2.6.
g. TITLE TO STOCK. The Shares are owned of record by those
shareholders and only such shareholders in such amounts as are set forth on
Schedule 2.7 hereto. No shares of preferred stock or other class of capital
stock are authorized, issued or outstanding with respect to the Company or
any of its subsidiaries. The Shares have been duly authorized and validly
issued and are fully paid and nonassessable. The Shares were issued
pursuant to applicable exemptions from registration under Federal
securities laws and the securities laws of the State of Virginia, are owned
by the
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Sellers and will be sold pursuant hereto free and clear of all Liens. Upon
payment of the Adjusted Purchase Price to the Sellers in accordance with
this Agreement, the Sellers will convey to the Purchaser good and
marketable title to the Shares, free and clear of all Liens whatsoever. The
assignments, endorsements, stock powers and other instruments of transfer
delivered by the Sellers to the Purchaser at the Closing will be sufficient
to transfer the Sellers' entire interest, and all of the interests, legal
and beneficial, of Sellers and of all other Persons, in and to the Shares
and thereby in the Peoples Services Capital Stock and in the capital stock
of each other subsidiary of the Company. No dividends or other
distributions are owed by the Company in connection with any of the Shares
and, except as specifically set forth on the Financial Statements or on
Schedule 2.7 hereto, none have been made to any shareholder of the Company
or to any of the Sellers since at least December 31, 1996.
h. OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, puts, calls or other Contracts by which the
Company is bound to issue or to repurchase or otherwise acquire shares of
its capital stock, or pursuant to which any Person has a right to purchase
or to acquire, through conversion or otherwise, shares of the Company's
capital stock.
i. FINANCIAL STATEMENTS. The Sellers have delivered to the Purchaser
correct and complete copies of (i) the audited consolidated balance sheets
of the Company as of December 31, 1997 and December 31, 1998 and the
related statements of income, cash flow and retained earnings for the
fiscal year reporting periods then ended, together with all notes and
schedules thereto (the "FINANCIAL STATEMENTS") and (ii) the unaudited
balance sheet of the Company as of the period ending July 31, 1999 and the
related statement of income for such period then ended (the foregoing
unaudited statements, with all monthly unaudited statements delivered
hereafter, the "UNAUDITED FINANCIAL STATEMENTS"). The Financial Statements
have been audited without qualification by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, Certified
Public Accountants, LLP, independent auditors for the Company. The
Financial Statements and the Unaudited Financial Statements (a) have been
prepared in accordance with the books and records of the Company and (b)
fairly present the financial condition and results of operations and cash
flows of the Company as of, and for the respective periods ended on, such
dates, all in conformity with GAAP consistently applied, except, with
respect to the Unaudited Financial Statements, for adjustments and notes
that would result from
-8-
an audit. Since December 31, 1998 and except as fully set forth in the
Financial Statements and the Unaudited Financial Statements, the Company
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events
heretofore entered into or any action or inaction or state of facts
existing, with respect to, or based upon transactions or events heretofore
occurring. On or before March 1, 2000, the Sellers shall deliver to the
Purchaser correct and complete copies of the audited consolidated balance
sheets of the Company as of December 31, 1999, and the related statements
of income, cash flow and retained earnings for the fiscal year reporting
period then ended, together with all notes and schedules thereto, at which
time such balance sheet and statements shall thereafter be included within
the definition of "Financial Statements" for all purposes hereunder.
j. EMPLOYEES.
i. Schedule 2.10 sets forth a list of all of the Company's
employees, officers, directors, consultants and independent
contractors, together with a description of any Contract regarding the
terms of service and the rate and basis for total compensation of such
persons.
ii. Except as set forth on Schedule 2.10 hereto, the Company has
paid or made provision for the payment of all salaries and accrued
wages, accrued vacation and sick leave, and any other form of accrued,
but unpaid, compensation, and has complied in all material respects
with all applicable laws, rules and regulations relating to the
employment of labor, including those relating to wages, hours,
collective bargaining and the payment and withholding of taxes, and
has withheld and paid to the appropriate governmental authority, or is
holding for payment not yet due to such authority, all amounts
required by law or agreement to be withheld from the wages or salaries
of its employees. No amounts have been accrued on the Company's books
for vacation or sick leave in excess of the current year's obligations
and no such obligations exist. No contracts or provisions exist that
would obligate the Company to pay any severance compensation to any
employee should his or her employment with the Company be terminated
for any reason from and after the date hereof. No contracts or
provisions exist that would obligate the Company to pay any amounts to
any Person upon the change of control of the Company.
-9-
iii. Except as set forth on Schedule 2.10 hereto, the Company is
not a party to any (i) outstanding employment agreements or contracts
with officers or employees that are not terminable at will, or that
provide for payment of any bonus or commission or severance
compensation, (ii) agreement, policy or practice that requires it to
pay termination or severance pay to salaried, exempt, non-exempt or
hourly employees, (iii) collective bargaining agreement or other labor
union contract applicable to persons employed by the Company, nor does
the Sellers or the Company know of any activities or proceedings of
any labor union to organize any such employees. The Company has
furnished to the Purchaser complete and correct copies of all such
agreements, if any ("EMPLOYMENT AND LABOR AGREEMENTS"). The Company
has not breached or otherwise failed to comply with any provisions of
any Employment or Labor Agreement.
iv. Except as set forth on Schedule 2.10 hereto, (i) there is no
unfair labor practice charge or complaint pending before the National
Labor Relations Board ("NLRB"), (ii) there is no labor strike,
material slowdown or material work stoppage or lockout actually
pending or, to the Sellers' or Company's knowledge, threatened,
against or affecting the Company, and the Company has not experienced
any strike, material slowdown or material work stoppage, lockout or
other collective labor action by or with respect to employees of the
Company, (iii) there are no charges with respect to or relating to the
Company pending before the Equal Employment Opportunity Commission,
the Department of Labor or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, and
(iv) the Company has not received formal notice from any Federal,
state, local or foreign agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation
of the Company and, to the knowledge of the Sellers and Company, no
such investigation is in progress.
k. ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 2.11,
since December 31, 1998, there has been no (a) Material Adverse Change in
the business, properties, financial statements, business prospects,
condition (financial or otherwise) or results of operations of the Company,
(b) theft, damage, destruction, removal or loss of assets or properties,
-10-
whether covered by insurance or not, having a Material Adverse Effect on
the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company, (c) declaration,
setting aside or payment of any dividend or distribution (whether in cash,
stock or property) in respect of the Shares, or any redemption of the
Shares, (d) increase in the compensation payable to or to become payable by
the Company to its employees, officers, directors, consultants or
independent contractors except in the ordinary course of business, (e)
entry by the Company into any Contract not in the ordinary course of
business, including, without limitation, any borrowing or capital
expenditure, (f) change in accounting methods or principles used by the
Company, except for any such change which is necessitated by a change in
GAAP, or required by the FCC, VSCC or RTB (which such changes shall be set
forth on Schedule 2.11 hereto), (g) operation of the Company's business
other than in the ordinary course, (h) sale, assignment or transfer of any
assets or properties of the Company except in the ordinary course of
business, (i) amendment or termination of any of the Company's Permits or
Contracts, (j) waiver or release of any material right or claim of the
Company, (k) labor dispute or union activity which affects the operation of
the Company, and (l) agreement by either the Sellers or the Company to take
any of the actions described in the preceding clauses (a) through (k),
except as contemplated by this Agreement.
l. CONTRACTS.
i. GENERALLY. Except as listed on Schedule 2.12, the Company is
not a party to any Contract relating to:
(1) Bonus, pension, profit sharing, retirement, stock
option, employee stock purchase or other plans providing for
deferred compensation.
(2) Collective bargaining agreements or any other Contract
with any labor union.
(3) Hospitalization or medical insurance or other welfare
benefit plans or practices.
(4) Loans to its employees, officers, directors,
shareholders or Affiliates.
(5) The borrowing or loaning of money to or from any Person
or the mortgaging, pledging or otherwise placing a Lien on any
asset of the
-11-
Company, including, but not limited to, any Contract with respect
to the Company's indebtedness.
(6) A guarantee of any obligation.
(7) The ownership, lease (whether as lessee or lessor) or
operation of any property, real or personal.
(8) Intangible property (including Proprietary Rights).
(9) Warranties with respect to its services rendered or its
products sold or leased.
(10) Registration or preemptive rights with respect to any
securities.
(11) Prohibitions preventing it from freely engaging in any
business.
(12) The purchase, acquisition, disposition or supply of
inventory and/or other property and assets.
(13) Employees, independent contractors, consultants, or
other agents.
(14) Sales, commissions, advertising or marketing.
(15) Unconditional purchase or payment obligations.
(16) Agreements between the Sellers and customers of the
Business.
(17) Agreements pertaining to the providing of internet
access or service by the Company.
(18) Leases, licenses, easements, rights of way, pole
attachment agreements, license agreements for joint use of poles
and other agreements regarding property rights to earth stations,
utility poles, real property, fixtures and other similar items
used in the operation of the Business.
-12-
(19) The grant or franchise of telephone franchise rights.
(20) Any investment or subsidiary of the Company, including,
but not limited to, those shown on Schedule 2.4 hereto.
(21) Any other Contract not of the type covered by any of
the foregoing items of this Section 2.12(a) requiring total
payments by the Company in excess of ten thousand dollars
($10,000).
ii. COMPLIANCE. The Company has performed all material
obligations required to be performed by it, and is not in receipt of
any claim of default or breach or notice of audit, under any Contract
to which it is subject (including, without limitation, those required
to be disclosed on Schedule 2.12). Except as disclosed on Schedule
2.12, no event has occurred which with the passage of time or the
giving of notice or both would result in a material default, breach or
event of non-compliance by the Company under any Contract to which it
is subject. Except as disclosed on Schedule 2.12, the Company has no
present expectation or intention of not fully performing all of its
obligations under any Contract to which it is subject and has no
knowledge of any breach or anticipated breach by any other party to
any Contract to which it is subject.
m. TRUE AND COMPLETE COPIES. The Sellers and the Company have
delivered to the Purchaser true and complete copies of all Contracts and
documents listed in the Schedules to this Agreement, as well as of all
minute books and stock books of the Company and of each of its
subsidiaries. Such minute books and stock books are current and contain the
true and complete records kept of such companies.
n. TITLE AND RELATED MATTERS.
i. OWNED PROPERTY, LIENS. Set forth on Schedule 2.14(a) is a
description of all real and personal property owned or used by the
Company. The Company has valid and marketable title to all such
property, free and
-13-
clear of all Liens, except Permitted Liens. All properties used in the
Company's business operations as of July 31, 1999 are reflected in the
Unaudited Financial Statements in accordance with and to the extent
required by GAAP and, as of the date hereof, are fully set forth on
Schedule 2.14(a) hereto. Sellers and the Company have delivered, with
respect to any real property owned by the Company, true and complete
copies of all deeds, title policies, environmental assessments,
surveys, and other title documents relating to such real property.
Further, the Company has valid, good and marketable title to each of
its investments set forth on Schedule 2.4 hereto, free and clear of
all Liens, except as set forth on Schedule 2.14(a) hereto.
ii. LEASED PROPERTY. Set forth on Schedule 2.14(b) is a
description of all real and personal property leased by the Company.
Except as otherwise set forth on Schedule 2.14(b), the Company's
leases are in full force and effect and are valid and enforceable in
accordance with their respective terms. There exists no event of
default or event which constitutes or would constitute (with notice or
lapse of time or both) a default by the Company or any other Person
under any such lease, and neither the Sellers nor the Company have
received notice of such default or event. All rent and other amounts
due and payable with respect to each of the Company's leases have been
paid through the date of this Agreement. Except as set forth on
Schedule 2.14(b), neither the Sellers nor the Company have received
notice that the landlord with respect to any real property or personal
property lease would refuse to renew such lease upon expiration of the
period thereof upon substantially the same terms, except for rent
increases consistent with past experience or current market rates. The
Sellers have delivered to the Purchaser, with respect to any leased
real or personal property, true and complete copies of all such leases
and all amendments, supplements thereto or memoranda thereof.
iii. REGULATORY/ZONING COMPLIANCE. Except as set forth on
Schedule 2.14(c), the real property owned or leased by the Company and
the buildings, structures and improvements included within such real
property (collectively, the "IMPROVEMENTS") comply with all material
applicable restrictions, building ordinances and zoning ordinances and
all Regulations of the applicable health and fire departments. No
alteration, repair,
-14-
improvement or other work which could give rise to a Lien has been
performed with respect to such Improvements within the last one
hundred twenty-nine (129) days. The Company's owned or leased real
property and its continued use, occupancy and operation as currently
used, occupied and operated does not constitute a nonconforming use
under any Regulation or Order affecting such real property, and the
continued existence, use, occupancy and operation of such Improvements
is not dependent on any special permit, exception, approval or
variance. There is no pending or, to the Sellers' or Company's
knowledge, threatened or proposed action or proceeding by any
Authority to modify the zoning classification of, to condemn or take
by the power of eminent domain (or to purchase in lieu thereof), to
classify as a landmark, to impose special assessments on or otherwise
to take or restrict in any way the right to use, develop or alter all
or any part of the Company's owned or leased real property.
iv. UTILITIES. The real property owned or leased by the Company
has access, sufficient for the conduct of the Company's Business as
presently conducted and proposed to be conducted, to public roads and
to all utilities, including electricity, sanitary and storm sewer,
potable water, natural gas and other utilities used in the operation
of the Company's Business as presently conducted. Access to all such
public roads and utilities will be available after the Closing Date in
the same manner and to the same extent as at the Closing Date.
v. CONDITION. Except as set forth on Schedule 2.14(e), since
December 31, 1998, the Company has not sold, transferred, leased,
distributed or disposed of any of its assets or properties, except for
(i) transactions in the ordinary and regular course of business, or
(ii) as otherwise consented to in writing by the Purchaser. The
Company owns, or has all rights necessary to use, all properties and
assets necessary for the conduct of its business as presently
conducted. The assets and properties owned, leased or used by the
Company in the conduct of the Business are in good condition
(reasonable wear and tear excepted), are suitable for their respective
uses, and comply with all applicable Regulations. Further such assets
and properties constitute all of the assets and properties
-15-
necessary for the Company to conduct its Business as now conducted.
o. LITIGATION. Except as set forth on Schedule 2.15, there is (a) no
Claim pending or, to the Sellers' knowledge, threatened against the
Company, (b) no Claim by the Company pending or threatened against any
Person, (c) no outstanding Order relating to the Company, and (d) no Claim
by any Person relating to the Shares.
p. TAX MATTERS
i. GENERALLY. Except as set forth on Schedule 2.16, Peoples,
Peoples Services and all their subsidiaries have timely filed all
Federal, state, local and foreign tax reports, returns, information
returns and any other documents required to be filed by each
(collectively, "TAX RETURNS") and have duly paid all Taxes shown to be
due and payable on such Tax Returns and all estimated or advance
payments required by law. All Taxes for periods ending on or prior to
or including the Closing Date have been or will be as of the Closing
Date fully paid or reserved against on the Unaudited Financial
Statements and on the books of Peoples, Peoples Services and all their
subsidiaries, as appropriate, in accordance with GAAP. All Taxes which
are required to be withheld or collected by Peoples, Peoples Services
and all their subsidiaries have been duly withheld or collected and,
to the extent required, have been paid to the proper Federal, state,
local or foreign authorities or properly segregated or deposited as
required by applicable Regulations. There are no Liens for Taxes upon
any property or assets of Peoples, Peoples Services or any of their
subsidiaries except for Liens for Taxes not yet due and payable or for
Taxes being contested in a manner permitted by applicable law (all as
disclosed on Schedule 2.16 hereto). Except as disclosed on Schedule
2.16, neither Peoples, Peoples Services nor any of their subsidiaries
have requested an extension of time within which to file any Tax
Return and none have waived the statute of limitations on the right of
the IRS or any other taxing authority to assess or collect additional
Taxes or to contest the information reported on any Tax Return. All
Taxes owed by any affiliated group of which Peoples, Peoples Services
or any of their subsidiaries has at any time been a member (whether or
not shown on any Tax Return) have been paid for each taxable period
during which Peoples, Peoples Services or any of their
-16-
subsidiaries was a member of the affiliated group. Neither Peoples,
Peoples Services nor any of their subsidiaries has any liability for
the unpaid Taxes of any Person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract, or otherwise.
ii. GOOD FAITH. All Tax Returns described in Section 2.16(a) have
been prepared in good faith and are correct and complete in all
respects, and there is no basis for assessment of any addition to the
Taxes shown thereon.
iii. CLAIMS. Except as disclosed on Schedule 2.16, (i) there are
no proceedings, examinations or claims currently pending by any taxing
Authority in connection with any Tax Returns described in Section
2.16(a) nor with respect to the periods to which such Tax Returns
relate, and (ii) there are no unresolved issues or unpaid deficiencies
or outstanding or proposed assessments relating to any such
proceedings, examinations, claims or Tax Returns. None of the Tax
Returns described in Section 2.16(a) currently is under audit or has
been audited. The items relating to the Business, properties and
operations of the Company on the Tax Returns filed by the Company
(including the supporting schedules filed therewith), copies of which
have been supplied to the Purchaser, state accurately, in all
respects, the information requested with respect to Peoples, Peoples
Services and their subsidiaries, which information was derived from
the books and records of the Company.
iv. COURSE OF BUSINESS. The Company has not taken any action in
anticipation of the Closing that would have the effect of deferring
any liability for Taxes of Peoples, Peoples Services or any of their
subsidiaries to any period (or portion thereof) ending after the
Closing Date.
v. WITHHOLDINGS. All payments for withholding Taxes, unemployment
insurance and other amounts required to be withheld and deposited or
paid to any relevant taxing Authorities have been so withheld,
deposited or paid by or on behalf of Peoples, Peoples Services and all
of their subsidiaries, as appropriate.
vi. PARTNERSHIPS. Except as disclosed on Schedule 2.16, the
Company is not subject to any joint venture,
-17-
partnership or other arrangement or Contract which is treated as a
partnership for Federal income tax purposes. Any tax-sharing agreement
between the Company and any other Person shall terminate as of the
Closing Date and any such tax-sharing agreement is fully disclosed on
Schedule 2.16 hereto.
vii. ACCOUNTING METHOD ADJUSTMENTS. Except as disclosed on
Schedule 2.16, the Company will not be required to recognize after the
Closing Date any taxable income in respect of accounting method
adjustments required to be made under any Regulation relating to
Taxes, including without limitation, the Tax Reform Act of 1986 and
the Revenue Act of 1987.
viii. TAX EXEMPTIONS. None of the assets of the Company
constitutes tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the IRC, and the Company
is not subject to a lease, safe harbor lease or other arrangement as a
result of which the Company is treated as the owner of leased property
for Federal income tax purposes.
ix. TAX RETURN REVIEWS. An accurate and complete description of
the most recent review, if any, of the Tax Returns of the Company by
the IRS or any other taxing Authority is set forth on Schedule 2.16.
x. POWER OF ATTORNEY. Except as set forth on Schedule 2.16
hereto, no power of attorney has been granted by the Company with
respect to any matter, including, without limitation, the payment of
Taxes, which is currently in force.
xi. TRUE AND COMPLETE COPIES. The Sellers and the Company have
delivered to the Purchaser true and complete copies of all Tax Returns
filed by the Company with respect to its 1994, 1995, 1996, 1997 and
1998 fiscal years.
q. BANK AND BROKERAGE ACCOUNTS. Set forth on Schedule 2.17 hereto is a
list of all of the bank and brokerage accounts maintained by the Company
and the authorized signatories for each such account.
r. COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND ORDERS. The
Company has been and is presently in material RS compliance with all laws,
ordinances, codes, rules,
-18-
Regulations and Orders applicable to the conduct of its Business,
including, without limitation, all Regulations relating to health,
sanitation, fire, zoning, building and occupational safety.
s. EMPLOYEE BENEFIT PLANS.
i. Set forth on Schedule 2.19 hereto is a true and complete list
of:
(1) each employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974 ("ERISA"), maintained by the Company or to which the Company
or the Sellers are required to make contributions ("PENSION
BENEFIT PLAN"); and
(2) each employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by the Company or to which the
Company or the Sellers are required to make contributions
("WELFARE BENEFIT PLAN").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA PLANS") have been delivered to Purchaser
together with, as applicable with respect to each such ERISA Plan, trust
agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and valuation or actuarial reports, accountant's opinions,
financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual
reports for the last three years.
ii. With respect to the ERISA Plans, except as set forth on
Schedule 2.19:
(1) there is no ERISA Plan which is a "multiemployer" plan
as that term is defined in Section 3(37) of ERISA ("MULTIEMPLOYER
PLAN");
(2) no event has occurred or (to the knowledge of the
Sellers or Company) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or
under Section 4975 of the Code;
-19-
(3) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500 (or
5500-C or 5500-R) and predecessors thereof; and
(4) no ERISA Plan is liable for any Federal, state, local or
foreign Taxes.
iii. Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(1) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been
exempt from taxation under Section 501(a) of the Code and is
currently in compliance with applicable Federal laws;
(2) has been operated, since its inception, in accordance
with its terms and there exists no fact which would adversely
affect its qualified status; and
(3) is not currently under investigation, audit or review by
the IRS and (to the knowledge of the Sellers or Company) no such
action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under
Section 401(a) of the Code or that any trust established under a
Pension Benefit Plan is not exempt under Section 501(a) of the
Code.
iv. With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and each defined contribution plan
under Section 414(i) of the Code:
(1) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by
the Company since the effective date of ERISA and all premiums
due and owing to the PBGC have been timely paid;
(2) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of
-20-
proceedings under Section 4042 of ERISA to terminate any such
plan;
(3) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Sellers or Company) is
threatened or about to occur which would constitute a reportable
event within the meaning of Section 4043(b) of ERISA;
(4) No Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code); and
(5) if any of such Pension Benefit Plans were to be
terminated on the Closing Date (A) no liability under Title IV of
ERISA would be incurred by the Company and (B) all benefits
accrued to the day prior to the Closing Date (whether or not
vested) would be fully funded in accordance with the actuarial
assumptions and method utilized by such plan for valuation
purposes.
v. With respect to each Pension Benefit Plan, Schedule 2.19
contains a list of all Pension Benefit Plans to which ERISA has
applied which have been or are being terminated, or for which a
termination is contemplated, and a description of the actions taken by
the PBGC and the IRS with respect thereto.
vi. The aggregate of the amounts of contributions by the Company
to be paid or accrued under Pension Benefit Plans is not expected to
exceed approximately $170,000 for the 1999 fiscal year, all of which
has been or will be properly accrued or reserved for on the Financial
Statements and Unaudited Financial Statements. To the extent required
in accordance with GAAP, the Company's Financial Statements reflect in
the aggregate an accrual of all amounts of employer contributions
accrued but unpaid by the Company under the ERISA Plans as of the date
of the Financial Statements.
vii. With respect to any Multiemployer Plan (1) the Company has
not, since its formation, made or suffered a "complete withdrawal" or
"partial withdrawal" as such terms are respectively defined in
Sections 4203 and 4205 of ERISA; (2) there is no withdrawal liability
of the Company under any Multiemployer Plan, computed as if a
-21-
"complete withdrawal" by the Company had occurred under each such Plan
as of December 31, 1998; and (3) the Company has not received notice
to the effect that any Multiemployer Plan is either in reorganization
(as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
viii. With respect to the Welfare Benefit Plans:
(1) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a
claim filed on or before the Closing Date.
(2) No claims for benefits are in dispute or in litigation.
ix. Set forth on Schedule 2.19 hereto is a true and complete list
of:
(1) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance,
bonus, incentive, vacation pay, holiday pay, insurance,
severance, retirement, excess benefit or other plan, trust or
arrangement which is not an ERISA Plan whether written or oral,
which the Company maintains or is required to make contributions
to; and
(2) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any
current or former employee, officer, director or consultant of
the Company pursuant to which payments may be required to be made
at any time following the date hereof (including, without
limitation, any employment, deferred compensation, severance,
supplemental pension, termination or consulting agreement or
arrangement).
x. True and complete copies of all of the written plans,
arrangements and agreements referred to on Schedule 2.19
("COMPENSATION COMMITMENTS") have been provided to Purchaser together
with, where prepared by or for the Company, any valuation, actuarial
or accountant's opinion or other financial reports with respect to
each Compensation Commitment for the last three years. An accurate and
complete written summary has been provided
-22-
to Purchaser with respect to any Compensation Commitment which is
unwritten.
xi. Each Compensation Commitment:
(1) since its inception, has been implemented in all
material respects in accordance with its terms;
(2) is not currently under investigation, audit or review by
the IRS or any other Federal or state agency and (to the
knowledge of the Sellers and Company) no such action is
contemplated or under consideration;
(3) has no liability for any Federal, state, local or
foreign Taxes;
(4) has no claims subject to dispute or litigation;
(5) has met all applicable requirements, if any, of the
Code; and
(6) has been implemented since its inception in material
compliance with the reporting and disclosure requirements imposed
under ERISA and the Code.
t. INTELLECTUAL PROPERTY. Schedule 2.20 sets forth a complete and
accurate list of the Proprietary Rights owned or used by the Company. The
Company has no written documents or oral arrangements relating to the
Company's ownership or use of the Proprietary Rights other than as listed
on Schedule 2.20. No other Person has any rights to such Proprietary
Rights, except pursuant to agreements or licenses specified on Schedule
2.20. To the Sellers' and Company's knowledge, no other Person is
infringing, violating or misappropriating any such Proprietary Right. If
necessary, the Company owns or holds valid licenses to use all Proprietary
Rights used in the operation of its business as presently conducted and
proposed to be conducted, with all such licenses being specified on
Schedule 2.20.
u. ENVIRONMENTAL MATTERS. The Company has obtained all Environmental
Permits required in connection with the operation of its business. The
Company is and has been, and is capable of continuing to be, in compliance
in all respects
-23-
with (i) the terms and conditions of all such Environmental Permits and
(ii) all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables of any
applicable Environmental Law or Regulation, Order, code, plan, decree,
judgment, injunction or demand letter issued, entered, promulgated or
approved thereunder. The Company currently possesses and maintains such
Environmental Permits in its name, and no amendments or modifications to
such Environmental Permits or filings with any permitting Authority are
required to permit the acquisition of the Shares as contemplated hereby. In
addition, except as set forth on Schedule 2.21:
i. GENERALLY. No notice, notification, demand, request for
information, citation, summons or Order has been issued, no complaint
has been filed, no penalty has been assessed and no investigation or
review is pending or, to the Sellers' and Company's knowledge,
threatened by any Authority or other entity with respect to the
Company relating to any Environmental Permit, license or authorization
required in connection with the conduct of the business of the Company
or with respect to the generation, treatment, storage, recycling,
transportation, disposal or Release of any substance regulated under
Environmental Laws ("HAZARDOUS MATERIALS").
ii. PROPERTY.
(1) The Company has not handled any Hazardous Material on
any property now or previously owned or leased by the Company.
(2) No PCB or asbestos is or has been present at any
property now or previously owned or leased by the Company.
(3) There are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously
owned or leased by the Company.
(4) There has been no Release of Hazardous Materials at, on
or under any property now or previously owned or leased by the
Company.
iii. TRANSPORTATION. The Company has not (i) transported or
arranged for the transportation of any
-24-
Hazardous Material to any location which is listed on the National
Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed
for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System ("CERCLIS") or on any
similar state list or which is the subject of Federal, state or local
enforcement actions or other investigations or (ii) stored, treated,
transported or disposed, or arranged for storage, treatment, transport
or disposal of any Hazardous Materials, other than in compliance with
Environmental Law.
iv. NOTIFICATION OF RELEASE. No oral or written notification of a
Release of a Hazardous Material has been filed by or on behalf of the
Company, and no property now or previously owned or leased by the
Company is listed or proposed for listing on the National Priorities
List under CERCLA, on CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
v. LIENS. There are no Liens arising under or pursuant to any
Environmental Laws on any of the real property owned or leased by the
Company, and no government actions have been taken or are threatened
which could subject any of such properties to such Liens. The Company
is not required to place any notice or restriction relating to the
presence of Hazardous Materials at any property owned by it in any
deed to such property.
vi. SITE ASSESSMENTS. Except as set forth on Schedule 2.21, there
have been no Phase I or Phase II environmental site assessments
conducted by or which are in the possession of the Sellers or the
Company in relation to any property or facility now or previously
owned or leased by the Company.
v. CAPITAL EXPENDITURES AND INVESTMENTS. The Company has no
outstanding Contracts or commitments for capital expenditures and
investments, except as set forth on Schedule 2.22 attached hereto, which
Schedule includes a list of all disbursements on account of capital
expenditures and investments by the Company since December 31, 1998. There
has been no order or ruling from the VSCC or any other regulatory body and
none is threatened or expected by the Company
-25-
requiring or recommending that the Company undertake any capital
expenditures or investments. Attached to Schedule 2.22 are copies of the
Company's 1999 and 2000 fiscal years capital expenditures budgets (by
project) and, with respect to the 1999 budget, a comparison of the actual
expenditures to budget (by project) year to date.
w. DEALINGS WITH AFFILIATES. Schedule 2.23 sets forth a complete and
accurate list of all oral or written Contracts between the Company and any
one or more of its Affiliates. Except as set forth on Schedule 2.23, since
December, 31, 1998, the Company has not made any payments, loaned any funds
or property or made any credit arrangement with any Affiliate or employee
except for the payment of employee salaries in the ordinary course of
business.
x. INSURANCE. The Company currently is covered by insurance policies
which provide for coverages that are usual and customary as to amount and
scope in the business of the Company. Descriptions of all such policies,
including the names of the insurer and the insured, the amount of premiums,
and the types and amounts of coverage, are set forth on Schedule 2.24. All
of such policies are in full force and effect, all premiums with respect
thereto have been paid or accrued therefor, and no notice of cancellation
or termination has been received with respect to any such policy. Such
policies are sufficient for compliance with (i) all applicable Regulations
and (ii) all Contracts to which the Company is a party. The Company has not
breached or otherwise failed to perform its obligations under any of such
policies, nor has the Company received any adverse notice from any of the
insurers party to such policies with respect to any alleged breach or
failure in connection with any of such policies which would have a Material
Adverse Effect on the Company. Such policies will not terminate or lapse by
reason of the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby. Except as set forth on Schedule
2.24, there are no pending or, to the Sellers' or Company's knowledge,
threatened claims under any policy relating to the Company. Also set forth
on Schedule 2.24 is a true and complete listing of any and all claims made
by the Company under any policy since December 31, 1996.
y. COMMISSIONS. Except as set forth on Schedule 2.25 hereto, there are
and will be no claims for brokerage commissions, finder's fees, fees for
fairness opinions or financial advisory services or similar compensation in
connection with the transactions contemplated by this
-26-
Agreement based on any arrangement or agreement made by or on behalf of the
Sellers, the Company, or any of their Affiliates (collectively,
"COMMISSIONS"). Any and all such Commissions shall be paid solely by the
Sellers, and not by Peoples, Peoples Services or the Purchaser.
z. PERMITS AND REPORTS. Schedule 2.26 hereto sets forth a list of all
permits, licenses, registrations, certificates, franchises, Orders,
approvals or other authorizations from any Authority or other Person
including, without limitation, the FCC and the VSCC and any municipalities
("PERMITS") issued to or held by the Company in connection with its
operations or the Business. Such Permits are the only Permits that are
required for the Company to conduct its business as presently conducted and
proposed to be conducted. Each such Permit is in full force and effect, and
the Company has not received notice that any suspension, cancellation or
modification of the terms of any such Permit is threatened. The Company is
in full compliance with the terms of each such Permit, and each of the
Company and the Sellers are not aware of any reason not set forth in said
Permit why any such Permit would not be renewed, upon substantially the
same terms as currently exist, upon expiration of such Permit. Except to
the extent set forth on Schedule 2.26 hereto, no other Person is currently
operating or providing telephone service within the Business' telephone
exchange area and, to the Sellers' and Company's knowledge, no Person is
anticipating or contemplating doing so. Except as set forth on Schedule
2.26, no authorization, consent or notification of or filing with any
Authority is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby, and each Permit issued to or held by the Company will continue in
full force and effect following the Closing Date. Except as set forth on
Schedule 2.26, (i) all returns, reports, applications, statements and other
documents required to be filed by the Company with the FCC, the VSCC and
any other regulatory or governmental authority or municipality (including
taxing authorities) with respect to the Business on or before the date
hereof have been duly filed or properly extended as permitted by law
(details of such extensions, if any, are set forth on Schedule 2.26 hereto)
and are true and complete in all material respects, and (ii) all reporting
requirements of the FCC, the VSCC and other regulatory or governmental
authorities or municipalities (including taxing authorities) having
jurisdiction thereof have been complied with in all material respects. A
listing of all returns, reports, applications, statements and other
documents which
-27-
are unique to the Business and which were filed by the Company within the
past three (3) years with the FCC, the VSCC and any other regulatory or
governmental authority (including taxing authorities) or municipality is
attached hereto as Schedule 2.26; true and complete copies of all such
returns, reports, applications, statements and other documents set forth on
Schedule 2.26 have been previously provided to the Purchaser by the
Sellers. The transactions contemplated by this Agreement shall not cause
the Business' study area to change. Peoples is currently an average
schedule company and neither the Company nor the Sellers know of any reason
such study area or average schedule company status should not continue to
be available to the Company after the Closing Date.
aa. ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or
arrangements as described in Section 2.19 hereof or liabilities for Taxes
(as defined in Section 2.16 hereof) or liabilities for under-reporting,
under-billing or under-collection of revenues or underpayment of revenues
to a third party or liabilities relating to investments or subsidiaries,
except for (i) liabilities stated or reserved against in the Financial
Statements, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after the date of the Financial
Statements which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, and (iii)
liabilities disclosed on Schedule 2.27 hereto. All obligations and
liabilities relating in any way to the Company's investments and
subsidiaries (including future capital contributions or guaranty
commitments) are set forth on Schedule 2.4 hereto, setting forth the
maximum amount of the Company's potential obligations and the expected
payment schedule therefor. The Company is not a party to any Contract, or
subject to any articles of incorporation or bylaw provision, any other
corporate limitation or any legal requirement which has, or can reasonably
be expected to have, a Material Adverse Effect. Any and all long term
obligations and liabilities of the Company as of the date hereof are set
forth on Schedule 2.27 hereto.
bb. YEAR 2000 COMPLIANCE. The Company has (a) initiated a review and
assessment of all areas within its Business and operations that could be
adversely affected by the "Year 2000
-28-
Problem" (that is, the risk that computer applications used by the Company
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to, including and any date after December 31,
1999), (b) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (c) to date implemented that plan in
accordance with that timetable. The Sellers and the Company reasonably
believe that all computer applications that are material to the Company's
Business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before, including and after January
1, 2000. A true and complete copy of such plan and timeline has been
provided to Purchaser.
cc. DISCLOSURE. Neither this Agreement nor any of the attachments,
Schedules, Exhibits, written statements, documents, certificates or other
items prepared for or supplied to the Purchaser by or on behalf of the
Sellers or the Company with respect to the transactions contemplated hereby
contains any untrue statement of a material fact or omits any material fact
necessary to make each statement contained herein or therein not
misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
a. CORPORATE ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
own, operate and lease its properties and to conduct its business as
presently conducted and proposed to be conducted. The Purchaser is
qualified to do business and is in good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its
properties, or the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby requires it to be so
qualified.
b. AUTHORIZATION. The Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Board of Directors of the Purchaser has duly
authorized the execution, delivery and performance of this Agreement, and
no other corporate proceedings on its part are necessary to
-29-
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement
constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to
equitable considerations and the effect of bankruptcy and other laws
affecting the rights of creditors generally.
c. NO VIOLATION. Except as set forth on Schedule 3.3 hereto, the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by the Purchaser do not and will
not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with due
notice, lapse of time or both), (c) result in the creation of any Lien upon
the Purchaser or its capital stock (except upon the Shares as part of
Purchaser's financing of this transaction) or assets pursuant to, (d) give
any third party the right to accelerate any obligation under, (e) result in
a violation of or (f) require any authorization, consent, approval,
exemption or other action by, or notice to, any Person pursuant to the
charter or bylaws of the Purchaser, any applicable Regulation (including,
without limitation, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976), any Order to which the Purchaser is subject or any Contract to which
the Purchaser or any of its properties are subject. The Purchaser has
complied with all applicable Regulations and Orders in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, subject to the requirements which are conditions to
the Closing.
d. INVESTMENT INTENT. The Purchaser represents and warrants to the
Sellers that it is purchasing the Shares for investment purposes and not
with a view to distribution thereof and agrees that it shall not make any
sale, transfer, or other disposition of the Shares in violation of the
Securities Act of 1933, as amended, or the Regulations thereunder or under
any other applicable securities laws.
-30-
4. COVENANTS OF THE SELLERS AND THE COMPANY
Subject to the provisions of Section 4.14 hereof, from and after December
31, 1998 until the Closing Date, each of the Sellers and the Company agree that
they shall have acted and shall act, or refrain from acting where so required,
to comply (and in the case of the Sellers, to cause the Company to comply) with
the following (the term "Company" as used in this Article IV shall mean and
include Peoples, Peoples Services and any and all of their subsidiaries and
Affiliates):
a. REGULAR COURSE OF BUSINESS.
i. GENERALLY. The Company shall operate its business diligently
and in good faith, consistent with past management practices, shall
maintain all of its properties in customary repair, order and
condition, shall maintain (except for expiration due to lapse of time
or cancellation by another party pursuant to the terms thereof) in the
ordinary course of business all leases and Contracts in effect without
change except as expressly provided herein and shall comply with the
provisions of all Regulations, Orders and Permits applicable to the
Company and the conduct of its business. The Company shall maintain
its financial and accounting records in a manner consistent with that
employed at December 31, 1998.
ii. COMPENSATION. The Company shall not hire any employee and
shall not grant any increase in the compensation of any employee,
officer, board member, consultant or independent contractor.
iii. INSURANCE. The Company shall maintain current its insurance
policies with the coverage and in the amounts set forth on Schedule
2.24.
iv. CLAIMS. The Company shall promptly notify the Purchaser of
any Claims that may be commenced against it, as well as of any
threatened, suspected or expected Claims of which the Company or the
Sellers may be aware.
v. SUPPLEMENT. From time to time prior to the Closing Date, the
Sellers shall promptly notify the Purchaser of any changes with
respect to the information set forth in this Agreement or the
Schedules hereto and of any matters hereafter arising which, if in
existence
-31-
at the date hereof, would have been required to be set forth in this
Agreement or the Schedules hereto.
b. AMENDMENTS. No change or amendment shall be made to the charter or
bylaws of the Company, and the Company shall not merge into or consolidate
with any other Person or change the character of its Business.
c. CAPITAL CHANGES. The Company shall not issue, sell, purchase or
redeem any shares of its capital stock of any class or issue or sell any
securities convertible into, or options, warrants or other rights to
subscribe for, any shares of its capital stock. The Company shall not
pledge or otherwise encumber any shares of its capital stock, nor shall the
Company allow the transfer of any shares of its capital stock on its stock
transfer ledger or other books and records.
d. DIVIDENDS. The Company shall not declare, pay or set aside for
payment any dividend or other distribution in respect of its capital stock.
e. CAPITAL EXPENDITURES; TANSACTIONS WITH AFFILIATES. The Company
shall not make any capital expenditures, or commitments with respect
thereto, except as provided on Schedule 2.22. Further, the Company shall
timely make the capital expenditures set forth on Schedule 2.22 or discuss
with the Purchaser, after written notice of the Company's proposed changes,
its reasons for not so performing. The Company shall also make capital
expenditures in the ordinary course consistent with past practices. The
Company shall not make or accept any loan or advance to or from any of its
Affiliates or Affiliates of the Sellers.
f. BORROWING. The Company shall not incur, assume or guarantee any
indebtedness or obligation not reflected on the Financial Statements,
except for amounts not to exceed ten thousand dollars ($10,000) in the
ordinary course of business. Further, the Company shall not incur, assume
or guarantee any indebtedness or obligation of any of its subsidiaries or
investments.
g. PROPERTY. The Company shall not sell, transfer, or dispose of any
of its assets and properties, other than in the ordinary course of
business, or allow any of its assets and properties to become subject to a
Lien.
h. OTHER COMMITMENTS. Except as set forth in this Agreement or
permitted in writing by the Purchaser from and
-32-
after the date hereof, the Company shall not enter into any transaction,
make any commitment or incur any obligation other than in the ordinary
course of business.
i. INTERIM FINANCIAL INFORMATION, INVESTMENT K-1s. Except as set forth
in Schedule 4.9 hereof, from and after the date hereof, the Company shall
supply the Purchaser with a copy of its internal monthly Unaudited
Financial Statements within forty-five (45) days after the end of each
month. Additionally, the Company shall supply the Purchaser with a copy of
the Financial Statements for the fiscal year ending December 31, 1999 as
provided in Section 2.9 hereof. Further, the Company shall provide the
Purchaser with any and all financial statements, K-1s and/or reports
received with respect to investments set forth on Schedule 2.4 hereto
promptly following receipt thereof by the Company or the Sellers.
j. CONSENTS AND AUTHORIZATIONS. The Sellers and the Company shall,
promptly after the date hereof, commence efforts to obtain the consents,
waivers and authorizations listed on Schedules 2.3 and 2.26 hereto. The
Sellers and the Company shall diligently pursue and use their best efforts
to obtain such consents, waivers and authorizations as promptly as
practicable prior to the Closing Date.
k. ACCESS. Each of the Sellers and the Company shall afford to the
Purchaser and its counsel, accountants, agents and other authorized
representatives and to financial institutions specified by the Purchaser
reasonable access during business hours to the Company's plants,
properties, books and records in order that the Purchaser may have full
opportunity to make such reasonable investigations as it shall desire to
make of the affairs of the Company. The Company shall cause its officers,
employees and auditors to furnish such additional financial and operating
data and other information as the Purchaser or its lender shall from time
to time reasonably request.
l. NOTICE OF TRANSFER. Each of the Sellers and the Company shall
cooperate in providing any required notices to the appropriate Authority
regarding any issues of ownership or control or change thereof (including,
without limitation, any such issues relating to the Permits).
m. PAYMENT OF STAMP TAX. All transfer (including any real estate
transfer tax), documentary, sales, use, stamp, registration and other such
Taxes and fees (including any
-33-
penalties and interest) incurred in connection with this Agreement shall be
borne one-half (1/2) by the Sellers (collectively) and one-half (1/2) by
the Purchaser when due, and the parties will file on a timely basis all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable Regulation, will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
n. DISCLOSURE. To the extent the Company shall have taken any actions
contrary to any of the covenants set forth in this Article IV, from and
after December 31, 1998 and prior to the date hereof, such actions are set
forth on Schedule 4.14 hereto. From and after the date hereof, the Company
shall not take any actions contrary to any of the covenants set forth in
this Article IV without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld.
o. COOPERATION WITH PURCHASER. Each of the Sellers and the Company
shall cooperate with Purchaser as shall be necessary for Purchaser to
consummate this transaction and to obtain financing therefor, including
giving access to the Company's properties and business records as shall be
necessary for Purchaser to, among other things, obtain surveys of the real
property, a title commitment with respect to the real property and/or
environmental assessments.
5. COVENANTS OF THE PURCHASER
a. CONSENTS AND AUTHORIZATIONS. The Purchaser shall, promptly after
the date hereof, commence efforts to obtain the consents, waivers and
authorizations listed on Schedule 3.3. The Purchaser shall diligently
pursue and use its best efforts to obtain such consents, waivers and
authorizations as promptly as practicable prior to the Closing Date.
Purchaser shall, at its expense, manage the process of obtaining, with the
Sellers and the Company's assistance, all government consents and approvals
required to carry out the transactions contemplated by this Agreement.
b. EMPLOYEES. For a period of eighteen (18) months following the
Closing, the Purchaser shall cause the Company to continue to employ, with
the exception of ▇. ▇▇▇▇▇▇▇▇▇▇,
-34-
IV, all of those employees set forth on Schedule 2.10 hereto (the "RETAINED
EMPLOYEES"); provided, however, that the Company shall retain the right to
terminate any employee at any time for cause. During such eighteen (18)
month period, each of the Retained Employees shall be compensated at a
level which is at least equal to such Retained Employee's salary level at
the time of Closing, and no such Retained Employee shall be required to
relocate his or her office outside of the Exchange.
6. OTHER AGREEMENTS
The parties hereto further agree as follows:
a. AGREEMENT TO DEFEND. In the event any claim of the nature specified
in Section 7.4 or Section 8.3 hereof is commenced, whether before or after
the Closing Date, the parties hereto agree to cooperate and use all
reasonable efforts to defend against and respond thereto.
b. FURTHER ASSURANCES. On the terms and subject to the conditions of
this Agreement, the parties hereto shall use all reasonable efforts at
their own expense to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable Regulations to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement, and to cooperate
with each other in connection with the foregoing, including, without
limitation, using all reasonable efforts (a) to obtain all necessary
waivers, consents and approvals from other parties to loan agreements,
leases, mortgages and other Contracts, (b) to obtain all necessary
consents, approvals and authorizations as are required to be obtained under
any Regulations or in connection with any Permits, (c) to lift or rescind
any injunction or restraining order or other Order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby
and (d) to fulfill all conditions to the obligations of the parties under
this Agreement. Each of the parties hereto further covenants and agrees
that it shall use all reasonable efforts to prevent a threatened or pending
preliminary or permanent injunction or other Order.
c. CONSENTS. Without limiting the generality of Section 6.2, each of
the parties hereto shall use all
-35-
reasonable efforts to obtain all waivers, Permits, authorizations, consents
and approvals of, or notice to, all Persons and Authorities necessary,
proper or advisable in connection with the consummation of the transactions
contemplated by this Agreement prior to the Closing Date.
d. NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement is
terminated, neither the Sellers nor the Company shall, and each shall use
best efforts to cause its Affiliates, and the directors, officers,
employees, representatives, agents, advisors, accountants, shareholders and
attorneys of each of them, not to initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal with respect to, or
engage in negotiations concerning, or provide any confidential information
or data to any Person with respect to, or have any discussions with any
Person relating to, any acquisition, business combination or purchase of
all or any significant asset of, or any equity interest in, directly or
indirectly, the Company, or otherwise facilitate any effort or attempt to
do or seek any of the foregoing and shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
e. NO TERMINATION OF THE OBLIGATIONS BY SUBSEQUENT DISSOLUTION. Each
of the parties hereto specifically agrees that its obligations hereunder,
including, without limitation, obligations pursuant to this Article VI,
shall not be terminated by the dissolution of such party, whether by
operation of law, Regulations or otherwise.
f. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, no party hereto
nor any Affiliate, representative or shareholder of such party, shall
disclose any of the terms of this Agreement to any third party, except as
required by law or in connection with a securities filing, or to obtain the
consents, waivers and authorizations listed on Schedules 2.3, 2.26 and 3.3
and in connection with the Purchaser's financing of the transactions
contemplated hereby, without the other parties' prior written consent.
Prior to the Closing Date, the form, content and timing of all press
releases, public announcements or publicity statements (but excluding
disclosures necessitated by any securities filing) with respect to this
Agreement and the transactions contemplated hereby shall be subject to the
prior approval of both the Sellers and the Purchaser, which approval shall
not be unreasonably withheld; PROVIDED, HOWEVER, that either party
-36-
may withhold such approval in its sole discretion with respect to any of
the foregoing which discloses any of the financial terms of this
transaction. Prior to the Closing Date, no press releases, public
announcements or publicity statements shall be released by either party
without such prior mutual agreement. Notwithstanding the foregoing, prior
to the Closing Date, except as otherwise required by law or in connection
with a securities filing, no party hereto will disclose the Purchase Price
or the manner in which the Purchase Price is calculated, without the prior
written consent of the Purchaser and the Sellers. Additionally, the parties
agree that the Company may, following the execution of this Agreement,
announce the existence of the pending sale transaction contemplated by this
Agreement to the Company's employees. The Purchaser shall, at the request
of the Sellers and the Company, participate in any such announcement to the
Company's employees as the Sellers and the Company determine appropriate.
g. RECORDS AND INFORMATION.
i. RETENTION OF RECORDS. Except as otherwise required by
Regulation or agreed to in writing, the Sellers and the Purchaser
shall each retain, and shall cause their respective Affiliates to
retain, for a period of at least four (4) years, or the period
required by applicable Regulation, following the Closing Date, all
records, books, contracts, instruments, computer data and other data
and information (collectively, "INFORMATION") relating to the Company.
ii. ACCESS TO INFORMATION. From and after the Closing Date, the
Sellers shall afford to the Purchaser and its authorized accountants,
counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to Persons or firms
possessing Information) and duplicating rights during normal business
hours to all Information within the Sellers' possession relating to
the Company, insofar as such access is reasonably required by the
Purchaser. Similarly, the Purchaser shall afford to the Sellers and
their authorized accountants, counsel, and other designated
representatives reasonable access (including reasonable efforts to
give access to Persons or firms possessing Information) and
duplicating rights during normal business hours to Information within
the Purchaser's possession relating to the Company or its
-37-
business as conducted prior to the Closing Date, insofar as such
access is reasonably required by the Sellers.
iii. DELIVERY OF CORPORATE RECORDS. The Sellers shall arrange, as
soon as practicable following the Closing Date, to the extent not
previously delivered in connection with the transactions contemplated
herein, for transportation at the Sellers' cost to the Purchaser of
the records in the Sellers' possession relating to the Company,
including, without limitation, the corporate minute books, stock
ledgers and certificates and corporate seals of the Company, and all
Contracts and litigation files relating to the Company, except to the
extent (i) such items are already in the possession of the Purchaser
or the Company or (ii) it is necessary or appropriate for the Sellers
to retain such records for use in preparation of Tax Returns under the
provisions hereof. The Sellers may make and retain copies of all or
any of such records or documents at the Sellers' expense.
iv. WITNESSES. At all times from and after the Closing Date, each
of the Sellers and the Purchaser shall use reasonable efforts to make
available to the other, upon written request, its and its Affiliates'
officers, directors, employees and agents as witnesses to the extent
that such Persons may reasonably be required in connection with any
legal, administrative or other proceedings in which the requesting
party may from time to time be involved, at no cost; PROVIDED,
however, that a party producing such witnesses shall be entitled to
receive from the requesting party, upon presentation therefor, payment
for such out-of-pocket costs and disbursements as may be reasonably
incurred in producing such witnesses.
h. INSURANCE POLICIES AND CLAIMS ADMINISTRATION.
i. INSURANCE COVERAGE PRIOR TO THE CLOSING DATE. The Sellers
shall be responsible for the administration of all claims under the
Company's insurance policies relating to periods prior to the Closing
Date. If any claim is asserted against the Company relating to periods
prior to the Closing Date, the Sellers shall, if requested by the
Purchaser, promptly assert and pursue coverage and payment for such
claim with the appropriate insurance carrier, and the Purchaser shall,
and shall cause the Company to, provide reasonable cooperation and
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assistance to Sellers in asserting and pursuing such coverage. In
particular, the Purchaser shall, upon request by Sellers, cause the
Company to file all necessary claims and take all such other action as
may reasonably be requested by Sellers to pursue such coverage. As
between the Sellers, on the one hand, and the Purchaser and the
Company, on the other hand, the Purchaser and the Company shall be
entitled to recover all insurance proceeds with respect to any claim,
except to the extent the Sellers have previously provided
indemnification therefor to the Purchaser or the Company under this
Agreement. If the Purchaser shall pursue coverage and payment for any
claim relating to periods prior to the Closing Date on behalf of the
Company, then the Sellers shall provide reasonable cooperation and
assistance to the Company and the Purchaser.
ii. INSURANCE COVERAGE AFTER THE CLOSING DATE. Each party shall
be responsible for establishing and maintaining its own property and
casualty insurance (including, without limitation, primary and excess
general liability, automobile, workers' compensation, property,
director and officer liability, fire, crime, surety and other similar
insurance policies) for the activities and claims of such party and
its Affiliates on and after the Closing Date; provided, however, the
Purchaser shall, if it so desires, continue the Company's policies in
place as at the Closing Date and the Sellers shall be obligated to
obtain new insurance policies on any of the operations and assets
distributed to any of them as Excluded Assets as provided herein.
i. OTHER TAX MATTERS.
i. TAX RETURNS. The Purchaser, the Sellers, the Company and their
successors shall cooperate in the preparation of all Tax Returns and
reports and shall make available all necessary records and timely take
all action necessary to allow for the preparation and filing of all
Tax Returns and reports. Within ten (10) days following the Closing,
the Sellers shall deliver or shall cause to be delivered to the
Purchaser all books, records, returns, schedules, work papers, and
other documents (including without limitation, appraisals and other
background information) which are in the possession of the Sellers or
which are not on the Company premises, and which relate to any Taxes
of the Company for any taxable period. Prior to the delivery of the
materials
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described in the preceding sentence, the Sellers shall cooperate with
the Purchaser in providing access to such materials as is reasonably
required by the Purchaser.
The parties hereto agree that the Sellers shall prepare, and pay (but only
to the extent not fully paid or reserved against on the Financial Statements or
the Unaudited Financial Statements) all Taxes arising therefrom, all Tax Returns
for the Company for the periods on or before the Closing Date and for all Taxes
arising as a result of the transactions contemplated by this Agreement (except
as provided in Section 4.13 hereof). Upon mutual agreement between the Sellers
and the Purchaser, the Company may prepare any such required Tax Returns. The
Purchaser shall prepare, and pay all Taxes arising therefrom, all Tax Returns
for the Company for the periods after the Closing Date.
ii. INFORMATION. The Purchaser and the Sellers agree to furnish
or cause to be furnished to each other, as promptly as practicable,
such information (including access to books and records) and
assistance relating to the Company as is reasonably requested for the
filing of any Tax Return, in determining a Tax liability or right to
refund, for the preparation of any audit or other proceeding, and for
the prosecution of any claim, suit or proceeding relating to a
proposed Tax adjustment. The Purchaser and the Sellers shall cooperate
with each other in the conduct of any Tax audit or other Tax
proceedings involving the Company. The parties shall execute and
deliver such powers of attorney and other documents as are reasonably
requested to carry out the administration of the Tax provisions of
this Agreement.
7. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement shall be subject to
the satisfaction of each of the following conditions unless waived in writing by
the Purchaser:
a. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Sellers and the Company contained in Article II hereof and elsewhere
in this Agreement and all information contained in any Exhibit, Schedule or
attachment hereto shall be true and correct in all material respects when
made and on the Closing Date as though then made. The Sellers and the
Company shall have performed and complied in all material respects with all
agreements, covenants and
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conditions required by this Agreement to be performed and complied with by
them prior to the Closing Date. The Sellers shall have delivered to the
Purchaser a certificate, dated the Closing Date, in a form reasonably
satisfactory to the Purchaser, certifying to the foregoing, and providing
such supplemental information, agreements and disclosures as shall be
necessary to make such representations and warranties as accurate on the
Closing Date as on the date originally given. The Sellers shall deliver to
the Purchaser all of the certificates, stock powers and other documentation
referenced in Section 9.2 hereof, evidencing the transfer to the Purchaser
of clear title to all of the Shares at the Closing, all in form and
substance satisfactory to the Purchaser and its counsel in their sole
discretion.
b. CONSENTS AND APPROVALS. The Sellers, the Company and the Purchaser
shall have obtained all consents, approvals, Orders, qualifications,
licenses, Permits, regulatory approvals (including but not limited to any
necessary consent, approval, exemption or notice as required by (A) the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (B) the Virginia State
Corporation Commission, and (C) the Towns of Gretna and Hurt, Virginia, and
such other municipalities as may be necessary) and other authorizations,
whether specified on Schedules 2.3, 2.26 and 3.3 hereto or not, and shall
have given all notices, required by all applicable Regulations, Orders and
Contracts binding on any of the Sellers, the Company or the Purchaser or
any of their respective properties and assets, with respect to the
execution, delivery and performance of this Agreement, the financing and
consummation of the transactions contemplated herein and the conduct of the
Business of the Company in the same manner after the Closing Date as before
the Closing Date.
c. NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change in the business, properties, Financial Statements, Unaudited
Financial Statements, Schedules to this Agreement, business prospects,
regulatory climate, condition (financial or otherwise) or results of
operations of the Company since December 31, 1998 through the Closing Date.
The Purchaser shall have received a certificate, dated the Closing Date,
from the Sellers, in a form reasonably satisfactory to the Purchaser,
certifying to the foregoing.
d. NO PROCEEDING OR LITIGATION. No Order or Regulation shall be in
effect and no litigation shall have been
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consummated or threatened which would prevent the consummation of the
transactions contemplated hereby.
e. SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, signed by the Secretaries of Peoples and Peoples Services
dated the Closing Date, as to the charter (attaching a Secretary of State
certified copy thereof, with all amendments) and bylaws of Peoples and
Peoples Services, respectively, and the resolutions adopted by the
shareholders and directors of Peoples and Peoples Services in connection
with this Agreement in a form reasonably satisfactory to the Purchaser.
f. CERTIFICATES OF GOOD STANDING. At the Closing, the Company shall
have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing of Peoples, Peoples
Services and each of their subsidiaries in their respective jurisdictions
of incorporation and in each jurisdiction in which each is qualified to do
business as a foreign corporation as of a date not more than fifteen (15)
days prior to the Closing Date.
g. OPINION OF SELLERS' COUNSEL. The Sellers shall deliver at Closing
an opinion of counsel to the Sellers addressed to the Purchaser and the
Purchaser's lender in substantially the form attached hereto as Exhibit
7.7.
h. CONTINUATION OF ▇. ▇▇▇▇▇▇▇▇▇▇, III EMPLOYMENT AGREEMENT. Following
the Closing, the Purchaser shall cause ENT the Company to continue the
employment agreement currently in place between Peoples and ▇. ▇▇▇▇▇▇▇▇▇▇,
III for the remainder of the initial five (5) year term thereof. ▇.
▇▇▇▇▇▇▇▇▇▇, III shall execute an agreement, in substantially the form
attached hereto as Exhibit 7.8, restating the terms and conditions thereof
(the "RESTATED EMPLOYMENT AGREEMENT").
i. NONCOMPETITION AGREEMENT. ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ shall enter into a
Noncompetition Agreement with the Company and the Purchaser in
substantially the form attached here as Exhibit 7.9 (the "NONCOMPETITION
AGREEMENT").
▇. ▇. ▇▇▇▇▇ EMPLOYMENT AGREEMENT. ▇. ▇▇▇▇▇ shall enter into an
Employment Agreement in substantially the form attached hereto as Exhibit
7.10 (the "▇. ▇▇▇▇▇ EMPLOYMENT AGREEMENT").
k. RESIGNATIONS. The Sellers shall have caused all directors and
officers of Peoples and Peoples Services and all
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of their subsidiaries to have resigned. Further, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ shall
have resigned as an employee of the Company.
l. OTHER DOCUMENTS. The Purchaser shall have been furnished with such
other and further documents and certificates, including certificates of the
Sellers, Peoples' and Peoples Services' officers, directors and others, as
the Purchaser shall reasonably request to evidence compliance with the
conditions set forth in this Agreement.
m. LIENS. The Sellers shall have removed all Liens on the Shares
and/or on the assets and properties of the Company other than Permitted
Liens.
n. DELIVERY OF MINUTE BOOKS. The Sellers shall deliver at Closing all
original minute books, corporate seals and stock transfer records of
Peoples, Peoples Services and of all their direct and indirect
subsidiaries, as well as original evidence of all their respective
investments.
o. DELIVERY OF FINANCIAL STATEMENTS. The Sellers shall deliver the
Financial Statements for the fiscal year ended December 31, 1999, to the
Purchaser as provided in Section 2.9 hereof, and shall deliver the
Unaudited Financial Statements on a monthly basis from and after the date
hereof as soon as such Unaudited Financial Statements shall have been
prepared, all as provided in Section 4.9 hereof.
p. AMENDMENT TO LEASE AGREEMENTS. Each of the Company's lease
agreements (collectively, the "LEASES") set forth on Schedule 2.14(b)
hereto shall be amended in a manner mutually satisfactory to the Purchaser
and the Lessors thereunder.
q. RENEWAL OF FRANCHISES. The Sellers shall have renewed for at least
ten (10) years from the date of Closing the telephone franchise agreements
granted by the Towns of Gretna and Hurt, Virginia, and shall have similarly
renewed any other franchise agreements currently in existence or required
in connection with the Company's Business as presently conducted.
r. COMPLETION OF NATAL PROJECT. The Company's Natal capital
improvement project (with respect to the installation of a new Nortel
remote, as more particularly disclosed on Schedule 2.22) shall be
completed, operational and fully paid for by the Company.
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s. COMPLETION OF ENVIRONMENTAL ACTIONS. The Company shall have fully
complied with and completed all recommended actions detailed in that
certain letter of Engineering Consulting Services, Ltd. as dated November
19, 1999, a copy of which is attached to Schedule 2.21 hereto, and the
Company shall have fully paid all amounts due to Engineering Consulting
Services, Ltd., any Authority and/or any other third party in connection
therewith.
8. CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement shall be subject to the
satisfaction of each of the following conditions unless waived in writing by
Sellers:
a. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser contained in Article III hereof and elsewhere in this
Agreement and all information contained in any Exhibit, Schedule or
attachment hereto shall be true and correct in all material respects when
made and on the Closing Date as though then made, except as expressly
provided herein or therein. The Purchaser shall have performed and complied
in all material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by it prior to
the Closing Date. An officer of the Purchaser in his capacity as such shall
have delivered to the Sellers a certificate, dated the Closing Date, in a
form reasonably satisfactory to the Sellers, certifying to the foregoing,
and providing such supplemental information, agreements and disclosures as
shall be necessary to make such representations and warranties as accurate
on the Closing Date as on the date originally given.
b. CONSENTS AND APPROVALS. The Purchaser, the Sellers and the Company
shall have obtained all consents, approvals, orders, qualifications,
licenses, Permits, regulatory approvals, (including but not limited to any
necessary consent, approval, exemption or notice as required by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976), and other
authorizations, whether specified on Schedules 2.3, 2.26 and 3.3 hereto or
not, and shall have given all notices, required by all applicable
Regulations, Orders and Contracts binding on the Purchaser, the Sellers or
the Company or any of their respective properties and assets with respect
to the execution, delivery and performance of this Agreement.
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c. NO PROCEEDING OR LITIGATION. No Order or Regulation shall be in
effect and no litigation shall have been consummated or threatened which
would prevent the consummation of the transactions contemplated hereby.
d. SECRETARY'S CERTIFICATE. The Sellers shall have received a
certificate, signed by the Secretary of the Purchaser, dated the Closing
Date, as to the charter and bylaws of the Purchaser and the resolutions
adopted by the directors of the Purchaser in connection with this Agreement
in a form reasonably satisfactory to the Sellers.
e. OPINION OF PURCHASER'S COUNSEL. The Purchaser shall deliver at
Closing an opinion of counsel to the Purchaser addressed to the Sellers in
substantially the form attached hereto as Exhibit 8.5.
f. RESTATED EMPLOYMENT AGREEMENT. The Purchaser shall have caused the
Company to enter into the Restated Employment Agreement with ▇. ▇▇▇▇▇▇▇▇▇▇,
III.
g. NONCOMPETITION AGREEMENT. The Purchaser and E. FitzgeraldIV shall
have entered into the Noncompetition Agreement.
▇. ▇. ▇▇▇▇▇ EMPLOYMENT AGREEMENT. The Purchaser shall have caused the
Company to enter into the ▇. ▇▇▇▇▇ Employment Agreement with ▇. ▇▇▇▇▇.
i. AMENDMENT TO LEASE AGREEMENTS. Each of the Company's Leases shall
be amended in a manner mutually satisfactory to the Purchaser and the
Lessors thereunder.
9. CLOSING
a. CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held
on or before March 31, 2000, (or on such date either before or after March
31, 2000 as the parties hereto shall mutually agree, which shall be on the
first day of the month which is at least ten (10) days after receipt of all
VSCC, FCC, ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and other approvals required as a precondition
to Closing) (the "CLOSING DATE") in the offices of the Sellers' counsel;
PROVIDED, that the Closing shall occur as soon as practicable
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after the satisfaction of the conditions contained in Articles VII and VIII
hereof.
b. CLOSING DATE PAYMENT AND RECEIPT OF SHARES. On the Closing Date (i)
the Sellers will assign and transfer to the Purchaser good and valid title
in and to the Shares, free and clear of all Liens, by delivering to the
Purchaser stock certificates representing the Shares, duly endorsed for
transfer or accompanied by duly executed stock powers endorsed in blank
with requisite stock transfer tax stamps, if any, attached; (ii) the
Purchaser shall, by wire transfer of same-day funds, deposit in an escrow
account Escrow Funds of Three Hundred Thousand Dollars ($300,000), all as
provided in Section 11.9 hereof; (iii) the Purchaser shall, by wire
transfer of same-day funds, pay to the Sellers (care of the ▇▇▇▇▇▇ & ▇▇▇▇▇
Trust Account), in accordance with their Percentage Interests, the amount
of the Adjusted Purchase Price for all of the Shares, less the Escrow
Funds; and (iv) the parties shall deliver to each other the documents
required under this Agreement to be delivered at the Closing.
10. TERMINATION AND ABANDONMENT
a. METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
i. MUTUAL CONSENT. By mutual written consent of the Purchaser and
the Sellers.
ii. SELLERS' FAILURE TO PERFORM. By the Purchaser if as of the
Closing Date any of the conditions specified in Article VII hereof
have not been satisfied (and remain so unsatisfied for more than ten
(10) days after the Purchaser has notified the Sellers in writing
thereof) or if any of the Sellers or the Company are otherwise in
default in any material respect under this Agreement (and remains in
default for more than ten (10) days after the Purchaser has notified
the Sellers in writing of such default) or if at any time prior to the
Closing Date it becomes apparent to the Purchaser (on reasonable
grounds) that any of the Sellers or the Company will be unable to
satisfy one or more of the representations and warranties in Article
II hereof or one or more of the covenants or agreements in Articles
IV, VI or VII hereof,
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iii. PURCHASER'S FAILURE TO PERFORM. By the Sellers if as of the
Closing Date any of the conditions specified in Article VIII hereof
have not been satisfied (and remain so unsatisfied for more than ten
(10) days after the Sellers have notified the Purchaser in writing
thereof) or if the Purchaser is otherwise in default in any material
respect under this Agreement (and remains in default for more than ten
(10) days after the Sellers have notified the Purchaser in writing of
such default) or if at any time prior to the Closing Date it becomes
apparent to the Sellers (on reasonable grounds) that the Purchaser
will be unable to satisfy one or more of its representations and
warranties in Article III hereof or one or more of the covenants or
agreements in Articles V, VI or VIII hereof.
iv. FAILURE TO CLOSE BY MARCH 31, 2000. By either party in the
event the Closing has not occurred by March 31, 2000, unless such
failure to close shall be due to a breach of this Agreement by the
party seeking to terminate the Agreement, or such failure to close
shall be due to the nonreceipt of approval from the VSCC, which
approval has been diligently sought, in which last case this date
shall be extended for one hundred twenty (120) days automatically.
v. MATERIAL ADVERSE CHANGE. By the Purchaser if a Material
Adverse Change shall be shown or indicated (in the sole discretion of
the Purchaser) in any of the Unaudited Financial Statements delivered
after the date hereof or in the December 31, 1999 Financial Statements
or otherwise with respect to any of the conditions to Closing set
forth in Section 7.3 hereof, and written notice of termination of this
Agreement shall have been given by the Purchaser within thirty (30)
business days of the Purchaser's receipt of such Unaudited Financial
Statements or December 31, 1999 Financial Statements or the
Purchaser's discovery of such Material Adverse Changes.
vi. REMEDIES. In the event of any failure to perform as described
in this Section 10.1, the nonbreaching party shall have such remedies
for breach of contract as are allowed by law in addition to or in
substitution of the right of termination.
b. PROCEDURE UPON TERMINATION. If this Agreement is terminated as
provided herein:
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i. RETURN OF RECORDS. Each party shall as promptly as practicable
redeliver to the party furnishing the same, all data, information and
other written material (including all copies thereof) of any other
party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof.
ii. CONFIDENTIALITY. All information received by any party hereto
with respect to the business of any other party (other than
information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for
public distribution or filed as public information with any
governmental authority) shall not at any time be used by such party,
or disclosed to third parties.
11. SURVIVAL OF TERMS; INDEMNIFICATION
a. SURVIVAL; LIMITATIONS. All of the terms and conditions of this
Agreement, together with the representations, warranties and covenants
contained herein or in any instrument or document delivered or to be
delivered pursuant to this Agreement and the agreements of the parties to
indemnify each other as set forth in this Article XI shall survive the
execution of this Agreement and the Closing Date notwithstanding any
investigation heretofore or hereafter made by or on behalf of any party
hereto and shall continue for, and all claims with respect thereto shall be
made prior to the end of, eighteen (18) months from the Closing Date (the
"INDEMNIFICATION PERIOD"); provided, however, that with respect to the
representations set forth in Sections 2.7 and 2.8 hereof, the
Indemnification Period shall survive in perpetuity, and provided further
that with respect to any income tax liability of Peoples, Peoples Services
or any of their subsidiaries or Affiliates attributable to any activities
or transactions occurring by any of them on or prior to the Closing Date,
the agreement of the Sellers to indemnify the Purchaser and its Affiliates
shall survive until, and all claims with respect thereto shall be made
prior to, the expiration of the applicable statute of limitations
prescribed by Section 6501 of the IRC, as such statutes of limitations may
have been or be extended by agreement from time to time.
-48-
b. INDEMNIFICATION BY THE SELLERS. After the Closing Date, subject to
the limitations set forth in Section 11.1 hereof, the Purchaser and its
Affiliates (including, without limitation, Peoples and Peoples Services)
and their respective officers, directors, employees, shareholders,
representatives and agents shall be indemnified and held harmless jointly
and severally by the Sellers, their respective heirs, successors,
representatives and assigns, against and in respect of any and all damage,
loss, liability, cost or expense (including, unless otherwise provided
herein, the reasonable fees and expenses of counsel and any Tax liability
resulting from any indemnity payment made hereunder) resulting from, or in
respect of, any of the following:
i. MISREPRESENTATION OR BREACH. Any misrepresentation or breach
of warranty of any of the Sellers or the Company, or nonfulfillment of
any obligation on the part of the Company (to be performed on or prior
to the Closing) or any of the Sellers under this Agreement, or
contained in any Schedule or Exhibit to this Agreement or from any
misrepresentation in or omission from any certificate, Schedule,
Exhibit, related agreement, Financial Statement, Unaudited Financial
Statement, or instrument delivered by or on behalf of the Sellers or
the Company hereunder.
ii. TAXES. All Taxes of the Sellers, of Peoples, Peoples Services
or any of their subsidiaries or Affiliates or with respect to their
investments, including but not limited to any and all investments sold
or otherwise disposed of prior to the Closing Date, Peoples' interest
in the Virginia Independent Telephone Alliance, L.C., and Peoples
Services' interest in the Virginia PCS Alliance, L.C., attributable to
any period prior to or on the Closing Date.
iii. OTHER CLAIMS. Any Claim of a third party arising out of the
business or operations of the Company prior to or on the Closing Date
or any Claim relating to the Excluded Liabilities or Excluded Assets
either prior to or after the Closing Date, or any Claim resulting from
or arising out of the ownership, management or use of the Shares
and/or the business of the Company prior to or on the Closing Date.
iv. RELATED EXPENSES. All expenses and costs, including but not
limited to legal fees, reasonably paid
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or incurred in connection with any such indemnified Claim.
c. INDEMNIFICATION BY THE PURCHASER. After the Closing, subject to the
limitations set forth in Section 11.1, the Sellers and their respective
heirs, successors, representatives and assigns shall be indemnified and
held harmless by the Purchaser against and in respect of any and all
damage, loss, liability, cost or expense (including, unless otherwise
provided herein, the reasonable fees and expenses of counsel and any Tax
liability resulting from any indemnity payment made hereunder) resulting
from, or in respect of, any of the following:
i. MISREPRESENTATION OR BREACH. Any misrepresentation or breach
of warranty of the Purchaser, or nonfulfillment of any obligation on
the part of the Company (to be performed after the Closing) or the
Purchaser under this Agreement, or contained in any Schedule or
Exhibit to this Agreement or from any misrepresentation in or omission
from any certificate, Schedule, Exhibit, related agreement or
instrument delivered by or on behalf of the Purchaser hereunder.
ii. TAXES. All Taxes of the Purchaser or of the Company
attributable to any period after the Closing Date.
iii. OTHER CLAIMS. Any Claim of a third party arising out of the
business or operations of the Company after the Closing Date, or any
Claim resulting from or arising out of the ownership, management or
use of the Shares and/or the Business of the Company after the Closing
Date.
iv. RELATED EXPENSES. All expenses and costs, including but not
limited to legal fees, reasonably paid or incurred in connection with
any such indemnified Claim.
d. THIRD PARTY CLAIMS.
i. GENERALLY. Except as otherwise provided in this Agreement, the
following procedures shall be applicable with respect to
indemnification for third party Claims. Promptly after receipt by the
party seeking indemnification hereunder (hereinafter referred to as
the "INDEMNITEE") of notice of the commencement of
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any action or the assertion of any Claim, liability or obligation by a
third party (whether by legal process or otherwise), against which
Claim, liability or obligation another party to this Agreement
(hereinafter the "INDEMNITOR") is, or may be, required under this
Agreement to indemnify such Indemnitee, the Indemnitee shall, if a
claim thereon is to be, or may be, made against the Indemnitor,
immediately notify the Indemnitor in writing of the commencement or
assertion thereof and give the Indemnitor a copy of such Claim or
process and all legal pleadings. The Indemnitee's failure to give
timely notice as required by this Section 11.4(a) shall not serve to
eliminate or limit the Indemnitor's obligation to indemnify the
Indemnitee unless such failure prejudices the rights of the
Indemnitor, and then only to the extent of such prejudice. Moreover,
the Indemnitee shall have the right to take any actions or steps it
deems reasonable to avoid the occurrence of any prejudice to the
rights of the Indemnitee. The Indemnitor shall have the right to
assume the defense of such action with counsel of reputable standing
unless with respect to such action (A) injunctive or equitable
remedies have been sought therein in respect of the Indemnitee or its
business or (B) such action is for an alleged amount of less than Five
Thousand Dollars ($5,000); PROVIDED, that the Indemnitee and counsel
to the Indemnitee shall have the right to participate in the defense
of any and all Claims pursuant to the provisions of Section 11.4(b)
hereof. The Indemnitor and the Indemnitee shall reasonably cooperate
in the defense of such Claims. If the Indemnitee shall be required by
judgment or a settlement agreement to pay any amount in respect of any
obligation or liability against which the Indemnitor has agreed to
indemnify the Indemnitee under this Agreement, the Indemnitor shall
immediately pay such amount to the Indemnitee in order to enable the
Indemnitee to make such payment, and otherwise shall promptly
reimburse the Indemnitee in an amount equal to the amount of such
payment, in either case, plus all reasonable out-of-pocket expenses
(including legal fees and expenses) incurred by such Indemnitee at the
specific request of the Indemnitor, as provided above, or as otherwise
authorized by Section 11.4(b) hereof, in connection with such
obligation or liability subject to this Article XI. No Indemnitor, in
the defense of any such Claim, shall, except with the consent of the
Indemnitee, consent to entry of any judgment or enter into any
settlement which does not include as an
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unconditional term thereof the giving by the claimant or plaintiff
to such Indemnitee of a release from all liability with respect to
such Claim. In the event that the Indemnitor does not accept the
defense of any matter for which it is entitled to assume such defense
as provided in this Section 11.4(a), the Indemnitee shall have the
full right to defend against any such Claim and shall be entitled to
settle or agree to pay in full such Claim in its sole discretion. With
respect to any matter as to which the Indemnitor is not entitled to
assume the defense pursuant to the terms of this Section 11.4(a), the
Indemnitee shall not enter into any settlement for which an
indemnification Claim will be made hereunder without the approval of
the Indemnitor, which shall not be unreasonably withheld.
ii. COUNSEL. An Indemnitee shall have the right to employ its own
counsel, but the fees and expenses of such counsel shall be at the
expense of the Indemnitee, unless (i) the employment of such counsel
shall have been authorized in writing by the Indemnitor in connection
with the defense of such Claim and the Indemnitor has agreed in
writing to pay such fees and expenses, or (ii) the Indemnitor shall
not have employed counsel in the defense of such Claim (which counsel
may be in-house counsel unless and until a lawsuit has been
commenced). In either of which events, such fees and expenses of not
more than one additional counsel for the Indemnitee shall be borne by
the Indemnitor.
e. OTHER CLAIMS.
i. In the event an Indemnitee should have a claim under this
Article XI against an Indemnitor that does not involve a third party
Claim, the Indemnitee shall promptly give notice (the "INDEMNITEE
NOTICE") and the details thereof, including copies of all relevant
information and documents, to the Indemnitor within a period of thirty
(30) days following the discovery of the claim by the Indemnitee (the
"CLAIM NOTICE PERIOD"). The failure by any Indemnitee to give the
Indemnitee Notice within the Claim Notice Period shall not impair the
Indemnitee's rights hereunder except to the extent that the Indemnitor
demonstrates that it has been prejudiced thereby. The Indemnitor will
notify the Indemnitee within a period of ten (10) days after the
receipt of the Indemnitee Notice by the Indemnitor (the "INDEMNITY
RESPONSE PERIOD") whether the Indemnitor disputes its
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liability to the Indemnitee under this Article XI with respect to such
Claim. If the Indemnitor notifies the Indemnitee that it does not
dispute the Claim described in such Indemnitee Notice or fails to
notify the Indemnitee within the Indemnity Response Period whether the
Indemnitor disputes the claim described in such Indemnitee Notice, the
actual damages as finally determined will be conclusively deemed to be
a liability of the Indemnitor under this Article XI and the Indemnitor
shall pay the amount of such damages to the Indemnitee on demand. If
the Indemnitor notifies the Indemnitee within the Indemnity Response
Period that the Indemnitor disputes its liability with respect to such
Claim, the Indemnitor and the Indemnitee will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within a period of thirty (30) days from the date of such
notice or such longer period as may be agreed to by the parties in
writing, such dispute shall be resolved by arbitration in accordance
with Section 11.5(b) hereof.
ii. Any dispute required to be submitted to arbitration pursuant
to this Section 11.5 shall be finally and conclusively determined in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "RULES OF ARBITRATION") then in effect by
the decision of three (3) arbitrators (the "BOARD OF ARBITRATION")
selected in accordance with the Rules of Arbitration. The Board of
Arbitration shall meet in Charlotte, North Carolina and shall render a
decision in writing (concurred in by a majority of the members of the
Board of Arbitration) with respect to and stating the amount, if any,
which the Indemnitor is required to pay to the Indemnitee in respect
of the claim made by the Indemnitee. The decision of the Board of
Arbitration shall be rendered as soon as practical following
commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to the
Indemnitee and the Indemnitor. Any decision made by the Board of
Arbitration shall be final, binding and conclusive on the Indemnitee
and the Indemnitor and entitled to be enforced to the fullest extent
permitted by law and entered in any court of competent jurisdiction.
The parties hereto hereby consent to the jurisdiction of the foregoing
Board of Arbitration and to the jurisdiction of any local, state or Federal
court located in the State of North
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Carolina for the purpose of enforcing the decision or award of the Board of
Arbitration or otherwise. The parties hereto agree that all service of process
may be made on any such party by personal delivery or by registered or certified
mail addressed to the appropriate party at the address for such party set forth
in this Agreement.
All fees, costs and expenses of the prevailing party in any arbitration,
including, but not limited to, attorneys' fees, shall be paid by the losing
party and shall be awarded to the prevailing party as part of the decision of
the Board of Arbitration. For purposes hereof, a "PREVAILING PARTY" shall mean
the party which substantially prevails in its position in arbitration. Each and
every arbitration proceeding commenced pursuant to this Section 11.5(b) shall be
consolidated with any arbitration proceedings simultaneously or previously
commenced (but not concluded) under this Section 11.5(b).
f. CONTINUED LIABILITY FOR INDEMNITY CLAIMS. The liability of any
Indemnitor hereunder with respect to Claims hereunder shall continue for so
long as any Claims for indemnification may be made hereunder pursuant to
this Article XI and, with respect to any such indemnification Claims duly
and timely made, thereafter until the Indemnitor's liability therefore is
finally determined and satisfied.
g. BASKET AMOUNT.
i. INDEMNIFICATION BY THE SELLERS. Notwithstanding anything to
the contrary herein, Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 11.2 of this Agreement until the total of all damages suffered
by the Purchaser and/or its Affiliates exceeds Fifty Thousand Dollars
($50,000.00)(the "Basket Amount"), and then only for the amount by
which such damages exceed the Basket Amount.
ii. INDEMNIFICATION BY THE PURCHASER. Further, notwithstanding
anything to the contrary herein, Purchaser will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 11.3 of this Agreement (other than the nonfulfillment, in
whole or in part, of any obligation on the part of the Purchaser under
this Agreement which relates to the payment of the Adjusted Purchase
Price) until the total of all damages suffered by the Sellers and/or
their Affiliates exceeds the Basket Amount and
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then only for the amount by which such damages exceed the Basket
Amount.
iii. AGGREGATION. Notwithstanding the foregoing, to the extent
indemnification is sought under Sections 11.2(a) or 11.3(a) of this
Agreement, any and all misrepresentations or breaches or
nonfullfilments shall be aggregated for purposes of determining if the
Basket Amount has been met. By way of example, and not by way of
limitation, if Sellers shall have failed to perform three obligations
of the type referred to in Section 2.12(b) hereof, each causing
damages of $20,000, then payment in the amount of $10,000 shall be
made to Purchaser as provided herein (representing the excess of such
damages over the Basket Amount of $50,000).
h. RIGHT OF OFFSET. From and after the Closing Date through the longer
of (a) the Indemnification Period or (b) any continuation thereof as
provided in Section 11.6, the Purchaser shall have the right to set off
against any and all payments due from the Purchaser to any or all of the
Sellers under their respective Noncompetition and/or Employment Agreements
any amount for which the Purchaser is entitled to indemnification by the
Sellers under this Article XI.
i. ESCROW OF LIQUID ASSETS.
i. ESTABLISHMENT OF ESCROW ACCOUNT. Three Hundred Thousand
Dollars ($300,000) of the Adjusted Purchase Price otherwise payable to
the Sellers for their Shares hereunder (inclusive of any investment
earnings thereon, the "ESCROW FUNDS") shall be maintained in an escrow
account (the "ESCROW ACCOUNT"), with Centura Bank (the "ESCROW
AGENT"), pursuant to the terms and provisions of an Escrow Agreement
to be executed at Closing in substantially the form attached hereto as
Exhibit 11.9 hereto (the "ESCROW AGREEMENT").
ii. PURPOSE OF ESCROW ACCOUNT. The Company formerly owned a
Twenty-Five Percent (25%) interest in 360 Communications of Danville
Limited Partnership ("360"). The Sellers and the Company acknowledge
that the IRS is currently conducting audits of the tax returns filed
on behalf of 360 with respect to 360's 1993 and 1994 tax years. The
subject of such audits is set forth in two 60 Day Letters from the IRS
to the Company, each dated March 8, 1999 and identified by reference
codes CP:E:ESS 03081999-0327 and CP:E:ESS 03081999-0330,
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respectively (collectively, with all attachments thereto, the "60 DAY
LETTERS"), and in the June 3, 1999 Protest Letter to the IRS by 360's
Tax Matters Partner (the "PROTEST LETTER")(the subject matter of such
audits, as specifically set forth in the 60 Day Letters and/or the
Protest Letter, is hereinafter referred to as the "360 AUDIT ISSUES").
The Company sold all of its interest in 360 in 1998. The Company and the
Sellers acknowledge, however, that the 360 Audit Issues may result in the
payment of taxes, penalties, fees, fines and/or other expenses (including legal
fees) by the Company with respect to the tax years 1993, 1994, 1995, 1996, 1997
and 1998 (any and all such taxes, penalties, fees, fines and/or other expenses
pertaining to or arising from the 360 Audit Issues are hereinafter referred to
collectively as the "360 AUDIT PAYABLES").
The Sellers acknowledge that under the terms of Sections 11.1 and 11.2
hereof, they are liable for the 360 Audit Payables. However, due to the ongoing
nature of the IRS audits, it is not possible at this time to determine with
certainty the amount of the 360 Audit Payables. Further, the Purchaser does not
desire to have to seek such indemnification and the Sellers do not desire to be
in a position of having to seek payment from one another to cover indemnity
obligations at such time as the amount of the 360 Audit Payables becomes known.
Therefore, the Sellers and the Purchaser have agreed that a reasonable estimate
of the 360 Audit Payables is $300,000, and have agreed to establish the Esrow
Account and set aside the Escrow Funds for the payment of the 360 Audit Payables
at such time as the IRS audits are resolved.
iii. TERM OF ESCROW; ADMINISTRATION. The term of the Escrow
Agreement (the "ESCROW TERM") shall commence upon the Closing and
continue until the sooner of (i) the exhaustion of the Escrow Funds as
a result of the payment of the 360 Audit Payables, (ii) the final
resolution of all IRS audits with respect to all of the 360 Audit
Issues for the tax years 1993 through 1998, or (iii) the expiration of
the applicable statutes of limitations (including any extensions
thereof) with respect to all of the 360 Audit Issues for the tax years
1993 through 1998. During the Escrow Term, the Purchaser (acting on
its own behalf or through the Company) shall be responsible for and
have sole authority with respect to all correspondence, negotiations
and settlements with the IRS regarding the 360 Audit Issues. The
Purchaser and the Sellers agree to provide each other with reasonable
cooperation throughout the continuation of all audits
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regarding the 360 Audit Issues, so as to keep one another informed of
the current status of such audits and to assist one another with any
necessary data production, document preparation or negotiations.
iv. ESCROW AS SOLE REMEDY. The Sellers agree that the Basket
Amount set forth in Section 11.7 hereof shall not apply with respect
to the 360 Audit Payables. The Purchaser agrees that the 360 Audit
Payables shall be paid solely from the Escrow Funds and that to the
extent the 360 Audit Payables exceed the Escrow Funds, the Purchaser
shall not be entitled to seek indemnification from the Sellers with
respect to any such excess.
12. GENERAL PROVISIONS
a. AMENDMENT AND MODIFICATION. Subject to applicable Regulations, this
Agreement may be amended, modified and supplemented at any time with
respect to any of the terms contained herein, by a written agreement signed
by all of the parties hereto.
b. WAIVER. The failure of any party hereto to comply with any
obligation, covenant, agreement or condition herein may be waived in
writing by the other parties hereto, but such waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
Whenever this Agreement requires or permits consent by or on behalf of any
party hereto, such consent shall be given in writing.
c. CERTAIN DEFINITIONS.
"ADJUSTED PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"AFFILIATE" shall mean, with regard to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person and, with respect to any Person who is an individual, the
spouse, ancestors and descendants (lineal or by marriage) thereof. "CONTROL"
(including, with correlative meaning, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by Contract or otherwise.
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"AGREEMENT" shall have the meaning ascribed to such term in the preamble
hereof.
"AUTHORITY" shall mean any governmental authority, including, without
limitation, the FCC and the VSCC and all municipalities in which Peoples,
Peoples Services and/or any of their subsidiaries or Affiliates engage in
business, and any other governmental, regulatory or administrative body, agency,
commission, board of arbitrators, or any court or judicial authority, whether
Federal, state, local or foreign.
"BASE PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday and that
in Gretna, Virginia, or Charlotte, North Carolina, is not a day on which banking
institutions are generally authorized or obligated by Regulation to close.
"CERCLA" shall have the meaning ascribed to such term in Section 2.21(c)
hereof.
"CERCLIS" shall have the meaning ascribed to such term in Section 2.21(c)
hereof.
"CLAIM" shall mean any action, written claim, complaint, lawsuit, written
demand, suit, notice of a violation, litigation, proceeding, arbitration or
other dispute noticed in writing, or otherwise, whether civil, criminal,
administrative or otherwise, by any Authority or other Person.
"CLOSING" shall have the meaning ascribed to such term in Section 9.1
hereof.
"CLOSING DATE" shall have the meaning ascribed to such term in Section 9.1
hereof.
"CLOSING BALANCE SHEET" shall have the meaning ascribed to such term in
Section 1.3 hereof.
"COMPANY" shall have the meaning ascribed to such term in the preamble
hereof, but with respect to all representations, warranties, covenants and
agreements contained herein or in any Exhibit or Schedule hereto shall mean
Peoples, Peoples Services and all of their subsidiaries and Affiliates.
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"CONTRACT" shall mean any agreement, contract, commitment, instrument or
other binding arrangement or understanding, whether written or oral.
"ENVIRONMENTAL LAW" shall mean any Regulation or Order, including, but not
limited to, any term or condition included in a validly issued Permit to
construct or operate a facility subject to any Regulation or Order, which
relates to or otherwise imposes liability or standards of conduct concerning
environmental matters, mining or reclamation of mined land, discharges,
emissions, releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials, whether as
matter or energy, into ambient air, water or land or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants or
hazardous wastes, substances or materials, including (but not limited to)
CERCLA, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, the Toxic
Substances Control Act of 1976, as amended, the Federal Water Pollution Control
Act Amendments of 1972, the Clean Water Act of 1977, as amended, any so-called
"SUPERLIEN" law and any other similar Regulation by any Authority in effect on
or before the Closing Date.
"ENVIRONMENTAL PERMIT" shall mean a Permit relating to or required by any
Environmental Law.
"ERISA" shall have the meaning ascribed to such term in Section 2.19
hereof.
"ERISA PLANS" shall have the meaning ascribed to such term in Section 2.19
hereof.
"FCC" shall mean the Federal Communications Commission.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term in
Section 2.9 hereof.
"GAAP" shall mean United States generally accepted accounting principles,
consistently applied, as in existence at the date hereof and/or at the Closing
Date.
"HAZARDOUS MATERIALS" shall have the meaning ascribed to such term in
Section 2.21(a) hereof.
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"IMPROVEMENTS" shall have the meaning ascribed to such term in Section
2.14(c) hereof.
"INDEMNITEE" shall have the meaning ascribed to such term in Section
11.4(a) hereof.
"INDEMNITOR" shall have the meaning ascribed to such term in Section
11.4(a) hereof.
"IRC" or the "CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"LIEN" shall mean any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, claim, easement, restriction (on transfer or
otherwise) or interest of another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" shall mean any developments or changes which
would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, any
circumstances, state of facts or matters which could reasonably be expected,
either individually or in conjunction with any other circumstance, state of
facts or matter, to have a material adverse effect in respect of such Person's
business, business prospects, properties, assets, regulatory climate, condition
(financial or otherwise) or results of operations.
"NET WORKING CAPITAL" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"ORDER" shall mean any judgment, decree (consent or otherwise), order,
injunction (preliminary or permanent), stipulation, ruling, decree or consent of
or by an Authority.
"PCB" shall mean polychlorinated biphenyls.
"PERCENTAGE INTERESTS" shall have the meaning ascribed to such term in
Section 1.3 hereof.
"PERMITS" shall have the meaning ascribed to such term in Section 2.26
hereof.
"PERMITTED LIENS" shall mean (i) statutory Liens for Taxes not yet due and
payable, (ii) such imperfections or irregularities of
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title, liens, easements, charges or encumbrances as do not interfere with the
present use of the properties or assets subject thereto or affected thereby, do
not otherwise impair present business operations at such properties, or do not
have a Material Adverse Effect on the value of such properties and assets and
(iii) Liens existing at the Closing Date with respect to the Total Long Term
Debt, but only to the extent such particular items of Total Long Term Debt are
accounted for in determining the Adjusted Purchase Price, and such Liens are
fully disclosed on Schedule 2.14(a) hereto.
"PERSON" shall mean any corporation, partnership, joint venture,
organization, entity, Authority or natural person, together with any and all
heirs, successors, representatives and assigns thereof.
"PENSION BENEFIT PLAN" shall have the meaning ascribed to such term in
Section 2.19 hereof.
"PRICE PER SHARE" shall have the meaning ascribed to such term in Section
1.2 hereof.
"PROPRIETARY RIGHTS" shall mean all (i) patents, patent applications,
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model, certificate of invention and
design patents, registrations and applications for registrations, (ii)
trademarks, service marks, logos, trade names and corporate names and
registrations and applications for registration thereof and (iii) copyrights and
registrations and applications for registration thereof.
"PURCHASER" shall have the meaning ascribed to such term in the preamble
hereof.
"REGULATION" shall mean any law, statute, regulation, ordinance,
requirement, rule, executive order or binding action of or by an Authority.
"RELEASE" shall have the meaning ascribed to such term in Section 9601(22)
of Title 42 of the United States Code.
"SELLER" or "SELLERS" shall have the meaning ascribed to such term in the
preamble hereof.
"SHARES" shall have the meaning ascribed to such term in the recitals
hereof.
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"TAX RETURNS" shall have the meaning ascribed to such term in Section
2.16(a) hereof.
"TAX" or "TAXES" means any income, gross receipt, net proceeds, alternative
or add-on minimum, AD VALOREM, value added, estimated, turnover, sales, use,
property, personal property (tangible and intangible), stamp, leasing, lease,
user, excise, duty, franchise, transfer, license, withholding, payroll,
employment, foreign, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and other taxes, charges, fees, levies
or other assessments of any kind whatsoever (including interest, penalties,
fines and additions thereto) imposed by any taxing Authority, Federal, state,
local or foreign.
"TOTAL LONG TERM DEBT" shall have the meaning defined in the Financial
Statements, computed in accordance with GAAP, consistently applied. By way of
example and not limitation, "Total Long Term Debt" shall specifically not
include future capital contribution requirements and/or guarantees of
indebtedness by the Company with respect to the Virginia PCS Alliance, L.C.
"UNAUDITED FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 2.9 hereof.
"VSCC" shall mean the Virginia State Corporation Commission.
"WELFARE BENEFIT PLAN" shall have the meaning ascribed to such term in
Section 2.19 hereof.
d. NOTICES. All notices, claims, requests, demands or other
communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered by hand, by first
class certified mail, return receipt requested, with postage paid, or by
receipted overnight courier service to the intended recipient at the
address specified below or at such other address as shall be designated by
such party in any notice to the other parties.
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NOTICES TO PURCHASER: WITH A COPY TO:
--------------------- ---------------
MJD Ventures, Inc. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
Suite 250 ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Suite 2020
ATTN: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Chairman and Executive Vice ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
President (▇▇▇) ▇▇▇-▇▇▇▇ (Phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (Phone) (▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax) ▇▇▇@▇▇▇▇.▇▇▇ (E-Mail)
▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇.▇▇▇(E-Mail)
NOTICES TO THE
COMPANY AND TO THE SELLERS: WITH A COPY TO:
--------------------------- ---------------
▇▇. ▇. ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (Phone) ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(▇▇▇)▇▇▇-▇▇▇▇ (Phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
(E-Mail)
e. ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties hereto; PROVIDED, that the Purchaser may, without the prior written
consent of the Sellers or any other party hereto, assign its rights and
obligations hereunder and under any other Contracts or documents executed
or delivered in connection herewith to (i) an Affiliate of the Purchaser,
including but not limited to MJD Communications, Inc. or MJD Services
Corp., or (ii) its lenders as collateral in connection with the financing
of the transactions contemplated hereby. No such assignment shall relieve
the assignor of such assignor's liability for any and all continuing
obligations hereunder, however.
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f. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Virginia, without regard to its principles of conflict of laws.
g. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
h. HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
i. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto with regard to the subject matter
hereof and supersedes all prior agreements, representations, warranties,
promises, covenants, arrangements and understandings, oral or written,
express or implied, among the parties with respect to such subject matter.
There are no agreements, representations, warranties, promises, covenants,
arrangements or understandings among the parties with respect to such
subject matter other than those expressly set forth or referred to herein.
j. NO BENEFIT. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
k. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach or default of
another party hereto under this Agreement shall impair any such right,
power or remedy of such party nor shall it be construed to be a waiver of
any such breach or default or an acquiescence therein or of or in any
similar breach or default thereafter occurring. All remedies, whether under
this Agreement, by Regulation or otherwise, afforded to any party shall be
cumulative and not alternative.
l. SEVERABILITY. Unless otherwise provided herein, if any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
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m. EXPENSES. Each of the parties hereto shall bear its own expenses,
including, without limitation, legal fees, taxes and expenses, with respect
to this Agreement and the transactions contemplated hereby (which, with
respect to such expenses incurred by or on behalf of the Sellers or the
Company, shall be paid by the Sellers and not by the Company).
Notwithstanding the foregoing, in the event a breach of Section 6.4 hereof
occurs and the transactions contemplated hereby are not consummated, the
Sellers shall pay to the Purchaser the Purchaser's out-of-pocket fees,
including, without limitation, legal fees and expenses, incurred in
connection with the transactions contemplated hereby. Additionally,
notwithstanding the foregoing, (A) with respect to any ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
filing necessitated by the transactions contemplated herein, (1) the
Purchaser shall pay any and all applicable filing fees, and (2) each of the
parties shall bear its own fees and expenses otherwise incurred in
connection with the preparation of such filing, and (B) with respect to
compliance with any notice and/or approval requirements of the Virginia
State Corporation Commission necessitated by the transactions contemplated
herein, any and all legal fees, filing fees and expenses of regulatory
counsel incurred in connection therewith shall be paid one-half (1/2) by
the Purchaser and one-half (1/2) by the Sellers (collectively).
n. TIME OF THE ESSENCE. Time is strictly of the essence with respect
to the provisions of this Agreement.
o. INJUNCTIVE RELIEF. The parties hereby agree that any remedy at law
for any breach of the provisions of this Agreement shall be inadequate and
that the nonbreaching party shall be entitled to injunctive relief in
addition to any other remedy which such nonbreaching party might have at
law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MJD VENTURES, INC.
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PEOPLES MUTUAL TELEPHONE COMPANY
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WINNIE ▇▇▇▇▇ ▇▇▇▇▇
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