Exhibit 2.16
STOCK PURCHASE AGREEMENT
among
MJD VENTURES, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, CO-TRUSTEES
OF THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST DATED JANUARY 13, 1992,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually,
▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER DECLARATION
OF TRUST DATED OCTOBER 26, 1989,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER DECLARATION
OF TRUST DATED OCTOBER 26, 1989,
and
THE ▇▇▇▇▇▇ TELEPHONE COMPANY
dated as of June 17, 1999
TABLE OF CONTENTS
This Table of Contents is not part of this Agreement but is attached for
convenience only.
ARTICLE I
PURCHASE/REDEMPTION OF STOCK...................................................2
Section 1.1 Purchase and Sale........................................2
Section 1.2 Purchase Price...........................................2
Section 1.3 Redemption. .............................................2
(a) Generally. ..............................................2
(b) Transfer.................................................3
(c) No Other Assets. ........................................3
Section 1.4 ▇▇▇▇ Transaction. .......................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................................3
Section 2.1 Corporate Organization...................................4
Section 2.2 Authorization............................................4
Section 2.3 No Violation.............................................4
Section 2.4 Subsidiaries and Investments.............................5
Section 2.5 Stock Record Book........................................5
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
(a) Generally. ..............................................7
(b) Absence of Change. ......................................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................................12
Section 2.14 Title and Related Matters...............................12
(a) Owned Property..........................................12
(b) Leased Property. .......................................12
(c) Compliance with Regulations. ...........................13
(d) Utilities. .............................................13
(e) Condition. .............................................13
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Section 2.15 Litigation..............................................14
Section 2.16 Tax Matters.............................................14
(a) Generally. .............................................14
(b) Good Faith .............................................15
(c) Claims..................................................15
(d) Course of Business......................................15
(e) Withholdings............................................15
(f) Partnerships............................................15
(g) Accounting Method Adjustments...........................15
(h) Tax Exemptions..........................................16
(i) Tax Return Reviews......................................16
(j) Power of Attorney. .....................................16
(k) True and Complete Copies................................16
Section 2.17 Bank and Brokerage Accounts.............................16
Section 2.18 Compliance with Applicable Laws, Regulations and Orders.16
Section 2.19 Employee Benefit Plans..................................16
Section 2.20 Intellectual Property...................................20
Section 2.21 Environmental Matters...................................20
(a) Generally. .............................................20
(b) Property................................................20
(c) Transportation .........................................21
(d) Notification of Release. ...............................21
(e) Liens. .................................................21
(f) Site Assessments .......................................21
Section 2.22 Capital Expenditures and Investments....................22
Section 2.23 Dealings with Affiliates................................22
Section 2.24 Insurance...............................................22
Section 2.25 Commissions.............................................22
Section 2.26 Permits and Reports.....................................23
(a) Generally. .............................................23
(b) Cable Television Business. .............................24
Section 2.27 Absence of Undisclosed Liabilities......................25
Section 2.28 Year 2000 Compliance....................................25
Section 2.29 Disclosure..............................................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............................26
Section 3.1 Corporate Organization..................................26
Section 3.2 Authorization...........................................26
Section 3.3 No Violation............................................27
Section 3.4 Investment Intent.......................................27
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ARTICLE IV
COVENANTS OF THE SELLER AND THE COMPANY.......................................27
Section 4.1 Regular Course of Business..............................27
(a) Generally. .............................................27
(b) Compensation ...........................................28
(c) Insurance. .............................................28
(d) Claims..................................................28
(e) Supplement .............................................28
Section 4.2 Amendments..............................................28
Section 4.3 Capital Changes.........................................28
Section 4.4 Dividends...............................................28
Section 4.5 Capital Expenditures....................................29
Section 4.6 Borrowing...............................................29
Section 4.7 Property................................................29
Section 4.8 Other Commitments.......................................29
Section 4.9 Interim Financial Information...........................29
Section 4.10 Consents and Authorizations.............................29
(a) Generally. .............................................29
(b) Primary Responsibility .................................29
Section 4.11 Access..................................................30
Section 4.12 Notice of Transfer......................................30
Section 4.13 Payment of Stamp Tax....................................30
Section 4.14 Disclosure..............................................30
Section 4.15 Cooperation with Purchaser. ............................30
ARTICLE V
COVENANTS OF THE PURCHASER....................................................31
Section 5.1 Consents and Authorizations.............................31
(a) Generally. .............................................31
(b) Primary Responsibility .................................31
Section 5.2 Employees...............................................31
Section 5.3 Extension of Purchaser Plan Coverage
to Company Employees. ...........................31
ARTICLE VI
OTHER AGREEMENTS..............................................................32
Section 6.1 Agreement to Defend.....................................32
Section 6.2 Further Assurances......................................32
Section 6.3 Consents................................................32
Section 6.4 No Solicitation or Negotiation..........................33
Section 6.5 No Termination of the Obligations by
Subsequent Dissolution...........................33
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Section 6.6 Public Announcements....................................33
Section 6.7 Records and Information.................................34
(a) Retention of Records....................................34
(b) Access to Information. .................................34
(c) Provisions of Corporate Records. .......................34
(d) Witnesses. .............................................34
Section 6.8 Insurance Policies and Claims Administration............35
(a) Insurance Coverage Prior to the Closing
Date....................................................35
(b) Insurance Coverage After the Closing Date. .............35
Section 6.9 Other Tax Matters.......................................35
(a) Tax Returns. ...........................................35
(b) Information. ...........................................36
Section 6.10 Profit-Sharing Plan/COBRA Coverage. ....................36
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER................................37
Section 7.1 Representations and Warranties..........................37
Section 7.2 Consents and Approvals..................................38
Section 7.3 No Material Adverse Change..............................38
Section 7.4 No Proceeding or Litigation.............................38
Section 7.5 Secretary's Certificate.................................38
Section 7.6 Certificates of Good Standing...........................38
Section 7.7 Opinion of Seller's Counsel.............................39
Section 7.8 Noncompetition Agreements ..............................39
Section 7.9 Employment Agreement. ..................................39
Section 7.10 Resignations............................................39
Section 7.11 Other Documents.........................................39
Section 7.12 Liens...................................................39
Section 7.13 Delivery of Minute Books. ..............................39
Section 7.14 Delivery of Financial Statements........................39
Section 7.15 Satisfactory Investigation. ............................39
Section 7.16 Cable Television Franchise Agreements
Renewal. .......................................40
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER...................................41
Section 8.1 Representations and Warranties..........................41
Section 8.2 Consents and Approvals..................................41
Section 8.3 No Proceeding or Litigation.............................41
Section 8.4 Secretary's Certificate.................................41
Section 8.5 Opinion of Purchaser's Counsel..........................42
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ARTICLE IX
CLOSING.......................................................................42
Section 9.1 Closing.................................................42
Section 9.2 Closing Date Payment and Receipt of
Shares...........................................42
ARTICLE X
TERMINATION AND ABANDONMENT...................................................42
Section 10.1 Methods of Termination..................................42
(a) Mutual Consent .........................................43
(b) Seller's Failure to Perform.............................43
(c) Purchaser's Failure to Perform .........................43
(d) Failure to Close by December 31, 1999...................43
(e) Material Adverse Change. ...............................43
(f) Unsatisfactory Investigation............................43
(g) Remedies................................................44
Section 10.2 Procedure Upon Termination..............................44
(a) Return of Records. .....................................44
(b) Confidentiality. .......................................44
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION............................................44
Section 11.1 Survival; Limitations...................................44
Section 11.2 Escrow of Liquid Assets.................................45
Section 11.3 Indemnification by the Seller...........................45
(a) Misrepresentation or Breach. ...........................45
(b) Taxes. .................................................45
(c) Other Claims ...........................................46
(d) Related Expenses .......................................46
Section 11.4 Indemnification by the Purchaser........................46
(a) Misrepresentation or Breach. ...........................46
(b) Taxes. .................................................46
(c) Other Claims ...........................................46
(d) Related Expenses .......................................47
Section 11.5 Third Party Claims......................................47
(a) Generally. .............................................47
(b) Counsel. ...............................................48
Section 11.6 Other Claims............................................48
Section 11.7 Continued Liability for Indemnity Claims................51
Section 11.8 Basket Amount...........................................51
(a) Indemnification by the Seller. .........................51
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(b) Indemnification by the Purchaser .......................51
(c) Aggregation. ...........................................51
Section 11.9 Maximum Liability ......................................52
ARTICLE XII
GENERAL PROVISIONS............................................................52
Section 12.1 Amendment and Modification..............................52
Section 12.2 Waiver..................................................52
Section 12.3 Certain Definitions.....................................52
Section 12.4 Notices.................................................57
Section 12.5 Assignment..............................................57
Section 12.6 Governing Law...........................................58
Section 12.7 Counterparts............................................58
Section 12.8 Headings................................................58
Section 12.9 Entire Agreement........................................58
Section 12.10 No Benefit..............................................58
Section 12.11 Delays or Omissions.....................................58
Section 12.12 Severability............................................59
Section 12.13 Expenses................................................59
(a) Generally. .............................................59
(b) Seller's Payment of Purchaser's Expenses. ..............59
(c) Purchaser's Payment of Certain of Seller's
Expenses................................................59
Section 12.14 Time of the Essence.....................................59
Section 12.15 Injunctive Relief.......................................59
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SCHEDULES
---------
1.3 ▇▇▇▇ Transaction Assets, ▇▇▇▇ Transaction
Liabilities, Personal Items
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
2.9 Changes Since December 31, 1998
2.10 Employees As of April 30, 1999
2.11 Certain Changes
2.12 Contracts
2.14(a) Owned Property
2.14(b) Leased Property
2.14(c) Compliance with Regulations
2.14(e) Condition
2.15 Litigation
2.16 Tax Matters
2.17 Bank and Brokerage Accounts
2.18 Compliance with Applicable Laws, Regulations and Orders
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
2.26 Permits
2.27 Absence of Undisclosed Liabilities/Corporate Debt
3.3 Consents and Authorizations of Purchaser
4.14 Article IV Disclosure Statement
5.3 Extension of Purchaser Plan Coverage to Company
Employees
EXHIBITS
--------
7.7 Opinion of Seller's Counsel
7.8 Noncompetition Agreements
7.9 Employment Agreements
8.5 Opinion of Purchaser's Counsel
11.2 Escrow Agreement
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AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
the 17th day of June, 1999, among MJD VENTURES, INC., a Delaware corporation
(the "Purchaser"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, CO-TRUSTEES OF THE
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST DATED JANUARY 13, 1992, an Ohio sitused trust("▇.
▇▇▇▇▇▇▇▇ TRUST"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually, an Ohio resident ("▇.
▇▇▇▇▇▇▇▇"), ▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER DECLARATION OF TRUST DATED OCTOBER 26,
1989, an Ohio sitused trust ("▇. ▇▇▇▇▇▇▇ Trust"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER
DECLARATION OF TRUST DATED OCTOBER 26, 1989, an Ohio sitused trust ("▇. ▇▇▇▇▇▇▇
Trust"), (the ▇. ▇▇▇▇▇▇▇▇ Trust, ▇. ▇▇▇▇▇▇▇▇, the ▇. ▇▇▇▇▇▇▇ Trust and the ▇.
▇▇▇▇▇▇▇ Trust collectively referred to hereinafter as "Seller" or "Sellers"),
and THE ▇▇▇▇▇▇ TELEPHONE COMPANY, an Ohio corporation ("Orwell" or the
"Company").
RECITALS
WHEREAS, the ▇. ▇▇▇▇▇▇▇▇ Trust owns 1,623 shares of common stock, $0.20
par value of the Company, ▇. ▇▇▇▇▇▇▇▇ owns 1,623 shares of common stock of the
Company, the ▇. ▇▇▇▇▇▇▇ Trust owns 812 shares of common stock of the Company,
and the ▇. ▇▇▇▇▇▇▇ Trust owns 811 shares of common stock of the Company, the
4,869 shares constituting all of the issued and outstanding shares of capital
stock of the Company (the "Company Capital Stock");
WHEREAS, the Company owns 500 shares of common stock, $1.00 par value,
of ▇▇▇▇▇▇ Communications, Inc. ("Communications"), constituting all of the
issued and outstanding shares of capital stock of Communications (the
"Communications Capital Stock") (any and all shares, options, warrants, rights
and interests, legal or equitable, in or with respect to the Company Capital
Stock and the Communications Capital Stock hereinafter referred to collectively
as the "Shares");
WHEREAS, ▇▇▇▇▇▇ is an operating telephone company that provides wireline
telecommunications services (the "Orwell Business") in the nine (9) exchanges in
the seven (7) Ohio counties set forth on Schedule 2.26 hereto, with at least
6600 access lines (the "Exchange" or the "Exchanges") and Communications owns
and operates a cable television franchise and internet business in the five (5)
counties in Ohio set forth on Schedule 2.26 hereto and owns a twenty-five
percent (25%) interest in Ohio RSA #3 Limited Partnership, the cellular
partnership in Ashtabula County, Ohio (collectively the businesses of
Communications are hereinafter referred to as the "Communications
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Business") (collectively the businesses of the Company and Communications are
hereinafter referred to as the "Business" or the "business");
WHEREAS, the Seller desires to sell, and the Purchaser desires to
purchase, on the terms and subject to the conditions set forth in this
Agreement, certain of the Seller's shares of Company Capital Stock;
WHEREAS, the parties hereto desire to have the Company redeem from the
Seller certain of the Seller's shares of Company Capital Stock, so that the
purchase and sale described in the previous clause, coupled with the redemption
described in this clause, will completely terminate the Seller's ownership
interest in the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE/REDEMPTION OF STOCK
Section 1.1 Purchase and Sale. At the Closing Date, on the terms and
subject to the conditions set forth in this Agreement, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller,
4,797.4782 shares of Company Capital Stock.
Section 1.2 Purchase Price. In consideration for the conveyance of the
4,797.4782 shares of Company Capital Stock, the Purchaser shall pay to the
Seller on the Closing Date, as provided in Section 9.2 hereof, an amount per
share of $8,686.855 for each of the 4,797.4782 shares of the Company Capital
Stock (the "Purchase Price"), aggregating a total Purchase Price for such shares
of Company Capital Stock of Forty-One Million Six Hundred Seventy-Five Thousand
Dollars ($41,675,000). Schedule 2.7 hereto sets forth the number of shares of
Company Capital Stock each Seller shall sell to the Purchaser and the dollar
amount the Purchaser shall pay therefor.
Section 1.3 Redemption.
(a) Generally. At the Closing Date, on the terms and subject to
the conditions set forth in this Agreement, and contemporaneous with the
purchase and sale of shares of Company Capital Stock as provided in Sections 1.1
and 1.2 hereof, the Seller agrees to
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sell to the Company, and the Company agrees to redeem from the Seller, 71.5218
shares of Company Capital Stock, in consideration for the transfer to the Seller
of those particular assets set forth on Schedule 1.3 hereto (the "▇▇▇▇
Transaction Assets"). Further, Seller shall assume any and all liabilities set
forth on Schedule 1.3 hereto (the "▇▇▇▇ Transaction Liabilities"). Schedule 2.7
hereto sets forth the number of shares of Company Capital Stock the Company
shall redeem from each Seller and Schedule 1.3 hereto sets forth the ▇▇▇▇
Transaction Assets and ▇▇▇▇ Transaction Liabilities that are to be transferred
and/or assigned to each Seller. (b) Transfer. Purchaser agrees that it shall
cause the Company to execute, and Seller agrees to execute, any and all bills of
sale, deeds, assignments and/or agreements as may be necessary to transfer title
to the ▇▇▇▇ Transaction Assets to Seller and to assign and/or transfer the ▇▇▇▇
Transaction Liabilities to Seller. In particular, the Company's transfer of all
of its interest in the Local Multipoint Distribution Service (LMDS) licenses, B
blocks for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ 255B and Sandusky 403B to Seller shall be in
full compliance with all applicable Contracts, agreements, Regulations,
statutes, and ordinances applicable to the ownership, transfer or other
disposition thereof and Purchaser shall be provided with written evidence
thereof to the satisfaction of Purchaser and its counsel.
(c) No Other Assets. The parties hereto further agree that except
as described in this Section 1.3 and/or except for compensation, dividends and
legal fee retainers described in Schedules 2.4, 2.10, 2.23 and 4.14 hereto, 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 Business as provided
herein from and after December 31, 1998 through the Closing Date.
Section 1.4 ▇▇▇▇ Transaction. The parties to this Agreement intend that
the stock redemption provided for in Section 1.3 hereof be characterized for
income tax purposes as a so-called "▇▇▇▇" redemption and termination of interest
under Section 302(b)(3) of the Code. To this end, the parties acknowledge and
agree that: (i) the Company's redemption of shares of Company Capital Stock as
provided for in Section 1.3 hereof is part of an integrated plan which includes
the simultaneous sale of the remainder of the Seller's shares of Company Capital
Stock to the Purchaser, (ii) the redemption of shares of Company Capital Stock
as provided in Section 1.3 hereof, coupled with the simultaneous sale of the
remainder of Seller's shares as provided for in Sections 1.1 and 1.2 hereof,
will completely extinguish Seller's interest in the Company; and (iii) when the
stock redemption and
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simultaneous sale of the remainder of Seller's shares are concluded, Seller will
not retain any beneficial or proprietary interest whatever in the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
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 ▇▇▇▇▇▇, Communications 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 ▇▇▇▇▇▇, Communications or any of their subsidiaries or
affiliates then the Sellers must so disclose any such untruth):
Section 2.1 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 Ohio or an Ohio sitused
trust. 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. Seller
and the Company either have delivered to the Purchaser true, complete and
correct copies of the Company's charter and by-laws as presently in effect, or
will provide the Purchaser with access to such items as provided in Section 4.11
hereof following the signing of this Agreement.
Section 2.2 Authorization. The Seller and the Company each has 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 stockholders) 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
Seller and the Company enforceable against each such party in
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accordance with its terms, subject to equitable considerations and the effect of
bankruptcy and other laws affecting the rights of creditors generally. The
Seller will, at the Closing, have full power and authority to deliver the
Company Capital Stock and the certificates evidencing the Company Capital Stock
to the Purchaser and the Company, as the case may be, free and clear of all
Liens as provided for herein, thereby also having power and authority to deliver
the Communications Capital Stock, free and clear of all Liens as provided for
herein.
Section 2.3 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 Seller and the Company 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 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 by-laws of
the Company, (ii) any applicable Regulation (including, without limitation, the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976), (iii) any Order to which
either the Seller or the Company is subject, or (iv) any Contract to which the
Seller or the Company or any of their properties are subject. The Seller 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.
Section 2.4 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 of such
subsidiaries or
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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 2.6.
The Company is not a party to any 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 December 31,
1996.
Section 2.5 Stock Record Book. The stock record books of the Company
and/or of Communications are complete and correct in all material respects. No
shares of capital stock of the Company and/or of Communications are currently
reserved for issuance for any purpose or upon the occurrence of any event or
condition. The Company Capital Stock constitutes all of the outstanding capital
stock of the Company and the Seller owns all outstanding capital stock of the
Company. ▇▇▇▇▇▇ is the true and lawful owner of all of the outstanding capital
stock of Communications. Schedule 2.5 sets forth the total number of authorized
and issued shares of capital stock for each of ▇▇▇▇▇▇ and Communications.
Section 2.6 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
1957, the year in which the Seller gained control of the Company. 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. Seller and the
Company will provide the Purchaser with access to all of the corporate minute
books and stock record books of the Company and Communications for all periods
since their respective incorporation.
Section 2.7 Title to Stock. The shares of Company Capital Stock 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 of Company Capital Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
The shares of Company Capital Stock were issued pursuant to applicable
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exemptions from registration under Federal securities laws and the securities
laws of the State of Ohio, are owned by the Seller and will be sold pursuant
hereto free and clear of all Liens. Upon payment of the Purchase Price to the
Seller and the transfer and/or assignment of the ▇▇▇▇ Transaction Assets and the
▇▇▇▇ Transaction Liabilities to the Seller in accordance with this Agreement,
the Seller will convey to the Purchaser and the Company, as the case may be,
good and marketable title to the shares of Company Capital Stock, free and clear
of all Liens whatsoever, and thereby also to the Communications Capital Stock,
free and clear of all Liens whatsoever. The assignments, endorsements, stock
powers and other instruments of transfer delivered by the Seller to the
Purchaser and the Company, as the case may be, at the Closing will be sufficient
to transfer the Seller's entire interest, and all of the interests, legal and
beneficial, of Seller and of all other Persons, in and to the shares of Company
Capital Stock and thereby in the Communications 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 of
Company Capital Stock and/or the shares of Communications Capital Stock and none
have been made to any stockholder of the Company or to any Seller since at least
December 31, 1998, except as set forth on Schedule 2.7.
Section 2.8 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.
Section 2.9 Financial Statements.
(a) Generally. The Seller has delivered to the Purchaser correct
and complete copies of (i) the audited balance sheets of the Company as of
December 31, 1995, December 31, 1996, 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 monthly balance
sheets of the Company as of January 31, 1999, February 28, 1999, March 31, 1999
and April 30, 1999 and the related monthly statements of income, cash flow and
retained earnings for the period then ended, together with all notes and
schedules thereto (the January 31, 1999, February 28, 1999, March 31, 1999 and
April 30, 1999 statements, with all monthly unaudited statements delivered to
Purchaser hereafter, the "Unaudited
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Financial Statements"). The Financial Statements have been audited without
qualification by ▇▇▇▇▇▇▇▇ & Associates, 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 year-end adjustments and notes and/or adjustments and
notes that would result from 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, other than those incurred in the ordinary course of business since
April 30, 1999, which individually and in the aggregate are not Material.
(b) Absence of Change. Except as set forth on Schedule 2.9
hereto, since December 31, 1998, (i) the Company's business has been operated
only in the ordinary course; (ii) there has been no Material Adverse Change in,
and, to the Seller's and Company's knowledge, no event has occurred which is
likely, individually or in the aggregate, to result in any Material Adverse
Change in, the business, properties, business prospects, financial condition, or
results of operations of the Company; provided, however, that the "knowledge
qualification" of this clause (ii) shall apply only with respect to the acts or
actions of unaffiliated third parties which may be unknown to the Seller or
Company or which Seller or Company should reasonably not have known in the
ordinary course of their business, (iii) there has been no sale, assignment or
transfer of any assets or properties of the Company except in the ordinary
course of business, or any theft, damage, removal or destruction of such assets
or properties or any casualty loss affecting the Company or its business; (iv)
there has been no amendment or termination of any of the Company's Permits or
material Contracts; (v) there has been no waiver or release of any material
right or claim of the Company; (vi) there has been no labor dispute or union
activity which affects the operation of the Company; and (vii) there has been no
agreement by either the Seller or the Company to take any of the actions
described in the preceding clauses (i) through (vi), except as contemplated by
this Agreement.
Section 2.10 Employees.
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(a) 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.
(b) 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.
(c) 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 Seller or the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company
either has furnished to Purchaser complete and correct copies of all such
agreements, if any, or will provide the Purchaser with access to such items as
provided in Section 4.11 hereof following the signing of this Agreement
("Employment and Labor Agreements"). The Company has not breached or otherwise
failed to comply with any provisions of any Employment or Labor Agreement.
(d) Except as set forth on Schedule 2.10 hereto, (i) there is no
unfair labor practice charge or complaint pending before the
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National Labor Relations Board ("NLRB"), (ii) there is no labor strike, material
slowdown or material work stoppage or lockout actually pending or, to the
Seller's or Company's knowledge, threatened, against or affecting the Company,
and the Company has not experienced any strike, material slow down 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 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.
Section 2.11 Absence of Certain Changes. Except as set forth on Schedule
2.11, since December 31, 1998, there has been no (a) Material Adverse Change in
the business, properties, financial statements, business prospects, financial
condition or results of operations of the Company, (b) damage, destruction or
loss, whether covered by insurance or not, having a Material Adverse Effect on
the business, properties, business prospects, financial condition 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 otherwise (including, without by way of limitation, in respect of the
Communications Capital Stock) or any redemption of the Shares (including,
without by way of limitation, in respect of the Communications Capital Stock),
(d) increase in the compensation payable to or to become payable by the Company
to its employees, officers, directors, shareholders, consultants or independent
contractors, (e) entry by the Company into any Contract not in the ordinary
course of business, including, without limitation, any borrowing or capital
expenditure, or (f) change in accounting methods or principles used by the
Company, except for any such change which is necessitated by a change in GAAP
(which such changes shall be set forth on Schedule 2.11 hereto).
Section 2.12 Contracts.
(a) Generally. Except as listed on Schedule 2.12, the Company is
not a party to any Contract relating to:
(i) Bonus, pension, profit sharing, retirement, stock
option, employee stock purchase or other plans providing for
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deferred compensation and/or commitments to provide life insurance
coverage or any other similar continuing commitments.
(ii) Collective bargaining agreements or any other
Contract with any labor union.
(iii) Hospitalization or medical insurance or other
welfare benefit plans or practices.
(iv) Loans to its employees, officers, directors,
shareholders or Affiliates.
(v) 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 Company, including, but not limited to, any Contract with
respect to the Company's indebtedness.
(vi) A guarantee of any obligation.
(vii) The ownership, lease (whether as lessee or lessor)
or operation of any property, real or personal.
(viii) Intangible property (including Proprietary Rights).
(ix) Warranties with respect to its services rendered or
its products sold or leased.
(x) Registration or preemptive rights with respect to any
securities.
(xi) Prohibitions preventing it from freely engaging in
any business.
(xii) The purchase, acquisition, disposition or supply of
inventory and/or other property and assets.
(xiii) Employees, independent contractors, consultants, or
other agents.
(xiv) Sales, commissions, advertising or marketing.
(xv) Unconditional purchase or payment obligations.
(xvi) Agreements between Seller and customers of the
Business.
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(xvii) All cable television programming and franchise
agreements and internet provider agreements entered into by the
Business.
(xviii) Leases, licenses, easements, rights of way, pole
attachment agreements, pole rights agreements, conduit attachment
agreements, conduit rights agreements, satellite program carriage
agreements, license agreements for joint use of poles and other
agreements regarding property rights to earth stations, radio licenses,
paging licenses, utility poles, real property, fixtures and other
similar items used in the operation of the Business.
(xix) The grant or franchise of telephone or cable
television franchise rights.
(xx) Any investment or subsidiary of the Company,
including, but not limited to, those shown on Schedule 2.4 hereto.
(xxi) 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).
(b) 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. Except as disclosed on Schedule 2.12, each Contract to which the
Company is subject (including, without limitation, those required to be
disclosed on Schedule 2.12) is presently in effect, and neither the Company nor,
to the Seller's knowledge, any other party to any such Contract has claimed any
breach thereof, nor provided any indication of its intent to modify or terminate
such Contract prior to its current expiration date.
Section 2.13 True and Complete Copies. Seller and the Company either
have delivered to the Purchaser true and complete copies of all Contracts and
documents listed in the Schedules to this Agreement, as
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well as of all minute books and stock books of the Company and of each of its
subsidiaries, or will provide the Purchaser with access to such items as
provided in Section 4.11 hereof following the signing of this Agreement. Such
minute books and stock books are current and contain the true and complete
records kept of such companies. Seller and the Company agree to modify Schedule
2.12 within twenty (20) days following the signing of this Agreement to list all
Contracts with particularity, including setting forth the terms of any verbal
Contracts (including any restrictions upon immediate termination) and the date
and parties to any written Contracts, as well as such Contract's expiration
date.
Section 2.14 Title and Related Matters.
(a) Owned Property. Set forth on Schedule 2.14(a) is a
description of all real and personal property owned by the Company. The Company
has valid and marketable title to all such property, free and clear of all
Liens, except Permitted Liens and those liens shown on Schedule 2.14(a) hereto.
All properties used in the Company's business operations as of December 31, 1998
are reflected in the 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. Seller and the Company either have delivered, with respect to
any real property owned by the Company, true and complete copies of all deeds,
title policies, environmental assessments, surveys, title policies and other
title documents relating to such real property, or will provide the Purchaser
with access to such items as provided in Section 4.11 hereof following the
signing of this Agreement. 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.
(b) Leased Property. Set forth on Schedule 2.14(b) is a
description of all real and personal property leased by the Company. No real or
personal property is used by the Company which it does not own or validly lease,
except as set forth on Schedule 2.14(b) hereto. 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, to the Seller's or Company's
knowledge, 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
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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 market rentals. Seller and
the Company either 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, or will provide the
Purchaser with access to such items as provided in Section 4.11 hereof following
the signing of this Agreement.
(c) Compliance with Regulations. 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") substantially comply with all applicable restrictions,
building ordinances and zoning ordinances and all Regulations of the applicable
health and fire departments. No alteration, repair, improvement or other work
which could give rise to a Lien has been performed with respect to such
Improvements within the last seventy-five (75) days. The Company's owned or
leased real property and its continued use, occupancy and operation as currently
used, occupied and operated does not, to the Seller's or Company's knowledge,
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 Seller's 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.
(d) Utilities. The real property owned or leased by the Company
has access, sufficient for the conduct of the Company's Business as presently
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. To the Seller's or
Company's knowledge, 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.
(e) Condition. Except as set forth on Schedule 2.14(e), since
December 31, 1998, the Company has not sold, transferred, leased,
-14-
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. Except as set forth on Schedule 2.14(e),
the assets and properties owned or leased 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 substantially comply with all applicable
Regulations. Further such assets and properties constitute all of the assets and
properties necessary for the Company to conduct its Business as now conducted.
Section 2.15 Litigation. Except as set forth on Schedule 2.15, there is
(a) no Claim pending or, to the Seller's 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.
Section 2.16 Tax Matters.
(a) Generally. Except as set forth on Schedule 2.16, ▇▇▇▇▇▇,
Communications 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. Except as set forth on Schedule
2.16, all Taxes through the Closing Date have been fully paid or reserved
against on the Unaudited Financial Statements and on the books of ▇▇▇▇▇▇,
Communications and all their subsidiaries in accordance with GAAP. All Taxes
which are required to be withheld or collected by ▇▇▇▇▇▇, Communications and all
their subsidiaries through the Closing Date have been duly withheld or collected
(and/or as of the Closing Date will 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 and/or as of the Closing Date will have been so paid,
properly segregated or deposited. There are no Liens for Taxes upon any property
or assets of ▇▇▇▇▇▇, Communications nor 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 ▇▇▇▇▇▇, Communications nor any of their
subsidiaries have requested an extension of time within which to file any Tax
Return which has not since been filed, and none have waived the statute of
limitations on the right of the IRS or any other taxing authority to
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assess or collect additional Taxes or to contest the information reported on any
Tax Return. All Taxes owed by any affiliated group of which ▇▇▇▇▇▇,
Communications or any of their subsidiaries has at any time been a member
(whether or not shown on any Tax Return) have been, or will be prior to Closing,
paid for each taxable period through the Closing Date during which ▇▇▇▇▇▇,
Communications or any of their subsidiaries was a member of the affiliated
group. Neither ▇▇▇▇▇▇, Communications 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.
(b) Good Faith. All Tax Returns described in Section 2.16(a) have
been prepared in good faith and are correct and complete in all Material
respects, and, except as disclosed on Schedule 2.16, there is no basis for
assessment of any addition to the Taxes shown thereon.
(c) 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. Except as
disclosed on Schedule 2.16, 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) state
accurately, in all Material respects, the information requested with respect to
▇▇▇▇▇▇, Communications and their subsidiaries, which information was derived
from the books and records of the Company.
(d) 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 ▇▇▇▇▇▇, Communications or any of their subsidiaries to
any period (or portion thereof) ending after the Closing Date.
(e) Withholdings. All payments for withholding Taxes,
unemployment insurance and other amounts required to be withheld and deposited
or paid to any relevant taxing Authorities as of the Closing Date have been so
withheld, deposited or paid by or on behalf of ▇▇▇▇▇▇, Communications and all of
their subsidiaries, as appropriate
-16-
and/or as of the Closing Date will have been so withheld, deposited or paid.
(f) Partnerships. Except as disclosed on Schedule 2.16, the
Company is not subject to any joint venture, 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.
(g) 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.
(h) 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 not
treated as the owner of leased property for Federal income tax purposes.
(i) 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.
(j) 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.
(k) True and Complete Copies. Seller and the Company either have
delivered to the Purchaser true and complete copies of all Tax Returns filed by
the Company with respect to its 1993, 1994, 1995, 1996, 1997 and 1998 fiscal
years, or will provide the Purchaser with access to such items as provided in
Section 4.11 hereof following the signing of this Agreement.
Section 2.17 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.
-17-
Section 2.18 Compliance with Applicable Laws, Regulations and Orders.
Except as set forth on Schedule 2.18 hereto, the Company, Communications and all
their subsidiaries have been and are presently in Material compliance with all
laws, ordinances, codes, rules, 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 and cable
television signal leakage.
Section 2.19 Employee Benefit Plans.
(a) Set forth on Schedule 2.19 hereto is a true and complete list
of:
(i) 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
Seller is required to make contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by the Company or to which the Company
or the Seller is required to make contributions ("Welfare Benefit
Plan").
The Seller and the Company either have delivered to the Purchaser
true and complete copies of all Pension Benefit Plans and Welfare Benefit Plans
(collectively, "ERISA Plans"), 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, or will provide
the Purchaser with access to such items as provided in Section 4.11 hereof
following the signing of this Agreement.
(b) With respect to the ERISA Plans, except as set forth
on Schedule 2.19:
(i) there is no ERISA Plan which is a "multi-employer"
plan as that term is defined in Section 3(37) of ERISA ("Multi-employer
Plan");
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(ii) no event has occurred or (to the knowledge of the
Seller 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;
(iii) each ERISA Plan has operated since its inception
substantially 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;
(iv) no ERISA Plan is liable for any Federal,
state, local or foreign Taxes; and
(v) there is no ERISA Plan (and has not been any ERISA
Plan at any time during the last five (5) years) which is a defined
benefit plan under Section 414(j) of the Code or Section 3(35) of ERISA,
and there is no ERISA Plan subject to the minimum funding requirements
of Section 412 of the Code or Section 302 of ERISA.
(c) Except as set forth on Schedule 2.19, each Pension Benefit
Plan intended to be qualified under Section 401(a) of the Code:
(i) 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
material compliance with applicable Federal laws;
(ii) has been operated, since its inception substantially
in accordance with its terms and there exists no fact which would
adversely affect its qualified status; and
(iii) is not currently under investigation, audit or
review by the IRS and (to the knowledge of the Seller 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.
(d) [Intentionally omitted.]
(e) 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
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a termination is contemplated, and a description of the actions taken by the
PBGC and the IRS with respect thereto.
(f) The aggregate of the amounts of contributions by the Company
to be paid or accrued under ERISA Plans is not expected to exceed approximately
$350,000 for the current fiscal year, all of which has been 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.
(g) With respect to the Welfare Benefit Plans:
(i) 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.
(ii) No claims for benefits are in dispute or in
litigation.
(h) Set forth on Schedule 2.19 hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance (including any
commitments to provide life insurance coverage, either generally or
tailored to any particular employees), 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
(ii) 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).
(i) The Seller and the Company either have provided to the
Purchaser true and complete copies of all of the written plans,
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arrangements and agreements referred to on Schedule 2.19 ("Compensation
Commitments"), 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, or will
provide the Purchaser with access to such items as provided in Section 4.11
hereof following the signing of this Agreement. The Seller and the Company
either have provided to the Purchaser an accurate and complete written summary
with respect to any Compensation Commitment which is unwritten, or will provide
the Purchaser with such summary within twenty (20) days of the signing of this
Agreement.
(j) Each Compensation Commitment:
(i) since its inception, has been implemented in all
material respects in accordance with its terms;
(ii) 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;
(iii) has no liability for any Federal, state, local or
foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the
Code; and
(vi) has been implemented since its inception in material
compliance with the reporting and disclosure requirements imposed under
ERISA and the Code.
Section 2.20 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 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 Seller's 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
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business as presently conducted and proposed to be conducted, with all such
licenses being specified on Schedule 2.20.
Section 2.21 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 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 Company Capital Stock as contemplated hereby. In addition, except as set
forth on Schedule 2.21:
(a) 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 Seller's 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").
(b) Property. Except as set forth on Schedule 2.21:
(i) The Company has not handled any Hazardous Material on
any property now or previously owned or leased by the Company.
(ii) No PCB or asbestos is or has been present at any
property now or previously owned or leased by the Company.
(iii) There are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously owned
or leased by the Company.
(iv) There has been no Release of Hazardous Materials at,
on or under any property now or previously owned or leased by the
Company.
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(c) Transportation. The Company has not (i) transported or
arranged for the transportation of any 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.
(d) 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,
to the Seller's and Company's knowledge, 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.
(e) 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, to the Seller's and Company's
knowledge, 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.
(f) 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.
Section 2.22 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
PUCO or any other regulatory body and, to the Seller's and Company's knowledge,
none is threatened or expected by the Company requiring or recommending that the
Company undertake any capital expenditures or investments.
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Section 2.23 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.
Section 2.24 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 which 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. 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 Seller's
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, 1995.
Section 2.25 Commissions. 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 Agreement based on any arrangement or agreement made by or
on behalf of the Seller, the Company, or any of their Affiliates.
Section 2.26 Permits and Reports.
(a) Generally. 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 PUCO and the municipalities of ▇▇▇▇▇▇ Village,
Leipsic Village, Pandora Village, Gilboa Village, Continental Village, ▇▇▇▇▇▇
City Village, Oakwood Village, Melrose Village, and West Leipsic, Ohio and such
other
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municipalities and townships set forth on Schedule 2.26 hereto, ("Permits")
issued to or held by the Company in connection with its operations, the ▇▇▇▇▇▇
Business, the Exchange or the Communications Business. Such Permits are the only
Permits that are required for ▇▇▇▇▇▇ and Communications 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 Seller is 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. No other Person is
currently operating or providing cable television or telephone service within
the ▇▇▇▇▇▇ or Communications cable television franchise area or telephone
exchange area and, to the Seller's 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 ▇▇▇▇▇▇ and Communications 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 PUCO 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 PUCO 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 radio licenses, earth stations and/or other FCC
regulated activity is set forth on Schedule 2.26 hereto. A listing of all
returns, reports, applications, statements and other documents filed by the
Company within the past three (3) years with the FCC, the PUCO and any other
regulatory or governmental authority (including taxing authorities) or
municipality is attached hereto as Schedule 2.26; the Seller and the Company
either have provided true and complete copies of all such returns, reports,
applications, statements and other documents set forth on Schedule 2.26 to
Purchaser, or will provide the Purchaser with access to such items as provided
in Section 4.11 hereof following the signing of this Agreement. To the Seller's
and Company's knowledge, the transactions contemplated by this
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Agreement shall not cause the Exchange's cost study area to change. ▇▇▇▇▇▇ is
currently an average schedule company and neither the Company nor the Seller
know of any reason such average schedule company status should not continue to
be available to the Company after the Closing Date. There are currently no
restrictions imposed by any Authority upon the Company's rights to declare
dividends or make distributions, other than such restrictions as may arise in
connection with the Company's indebtedness to the Rural Electrification
Administration and/or the Rural Telephone Bank.
(b) Cable Television Business. Without limiting the foregoing,
the Sellers hereby expressly represent and warrant, with respect to all of the
Company's cable television ("CATV") business, that except as set forth on
Schedule 2.26 hereto:
(i) each CATV system operated by the Company is in
full compliance with all of the material requirements of its
current franchise;
(ii) no franchise authority has notified the Company that
any existing CATV system operated by the Company is in violation of any
of the terms of its present franchise, or that the quality of service
provided with respect to such CATV system has not been reasonable;
(iii) the Company has not received notice or any form of
correspondence from or on behalf of the FCC regarding failure to
properly file FCC Form 320 signal leakage reports with respect to any
CATV system operated by the Company;
(iv) all of the CATV systems operated by the Company are
in full compliance with the FCC's aeronautical band usage notice
requirements; have filed complete and correct FCC Form 320 signal
leakage reports for each year in which such report was required,
including, without way of limitation, the years 1998, 1997, 1996 and
1995; are in full compliance and shall remain in full compliance through
the Closing with all applicable FCC signal leakage standards and
requirements;
(v) the Company's semi-annual Copyright Statements of
Account for 1995, 1996, 1997, 1998 and 1999 (the February filing) have
all been filed in a timely fashion, and all appropriate royalty fees (as
well as all interest penalties) have been properly computed and paid;
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(vi) All of the CATV systems operated by the Company are
in substantial compliance with any and all "must carry" and or
"retransmission consent" requirements pursuant to the 1992 Cable Act
and/or applicable FCC rules and regulations, and there are no lawsuits,
FCC complaints or other proceedings pending, or, to the Seller's
knowledge, threatened or likely to be initiated against any such CATV
system with respect to alleged violations of such requirements; and
(vii) with respect to each CATV system operated by the
Company which currently serves one thousand (1,000) or more subscribers,
all technical tests required by the FCC for such system have been
performed, and such CATV system is in substantial compliance with all
applicable technical standards and requirements.
Section 2.27 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 and the Unaudited
Financial Statements, (ii) current liabilities incurred in the ordinary course
of business and consistent with past practice after the date of the Financial
Statements and the Unaudited 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.
Except as disclosed on Schedule 2.12 hereto, 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.
Section 2.28 Year 2000 Compliance. The Company has (a)
initiated a review and assessment of all areas within its Business
and
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operations that could be adversely affected by the "Year 2000 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. The Seller and Company either have provided a true and
complete copy of such plan and timeline to Purchaser, or will provide the
Purchaser with access to such items as provided in Section 4.11 hereof following
the signing of this Agreement.
Section 2.29 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
Seller 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
Section 3.1 Corporate Organization. The Purchaser 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 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.
Section 3.2 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
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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 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.
Section 3.3 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 (i) the charter or by-laws of the Purchaser, (ii) any
applicable Regulation (including, without limitation, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976), (iii) any Order to which the Purchaser is
subject, or (iv) 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.
Section 3.4 Investment Intent. The Purchaser represents and warrants to
the Seller that it is purchasing the Company Capital Stock 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.
ARTICLE IV
COVENANTS OF THE SELLER 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 Seller and the
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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 Seller, to cause the
Company to comply) with the following (the term "Company" as used in this
Article IV shall mean and include ▇▇▇▇▇▇, Communications and any and all of
their subsidiaries and Affiliates):
Section 4.1 Regular Course of Business.
(a) 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 comply, without
modification, with all Contracts and commitments relating to capital
expenditures as set forth on Schedule 2.22. The Company shall maintain its
financial and accounting records in a manner consistent with that employed at
December 31, 1998.
(b) 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.
(c) Insurance. The Company shall maintain current its insurance
policies with the coverage and in the amounts set forth on Schedule 2.24.
(d) 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 Seller may be aware.
(e) Supplement. From time to time prior to the Closing Date, the
Seller 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 at the date hereof, would have
been required to be set forth in this Agreement or the Schedules hereto.
Section 4.2 Amendments. No change or amendment shall be made to the
charter or by-laws of the Company, and the Company shall not merge into or
consolidate with any other Person or change the character of its Business.
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Section 4.3 Capital Changes. Except as otherwise provided in Section 1.3
hereof, 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, other
than a transfer of shares of Company Capital Stock from the Seller to an
Affiliate of the Seller.
Section 4.4 Dividends. Except as otherwise provided in Section 1.3
hereof and except as set forth on Schedule 2.4 hereto, the Company shall not
declare, pay or set aside for payment any dividend or other distribution in
respect of its capital stock, other than in such amounts as were paid in 1998,
computed on a pro rata basis for the year. Upon any such dividend or
distribution payment, Purchaser shall be advised in writing.
Section 4.5 Capital Expenditures. The Company shall not make any capital
expenditures, or commitments with respect thereto, except as provided on
Schedule 2.22. Except as disclosed on Schedule 2.4, the Company shall not make
or accept any loan or advance to or from any of its Affiliates or Affiliates of
the Seller.
Section 4.6 Borrowing. The Company shall not incur, assume or guarantee
any indebtedness or obligation not reflected on the Financial Statements or the
Unaudited Financial Statements delivered to Purchaser prior to the date hereof,
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 or
Affiliates.
Section 4.7 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.
Section 4.8 Other Commitments. Except as set forth in this Agreement or
permitted in writing by the Purchaser from and 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.
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Section 4.9 Interim Financial Information. From and after the date
hereof, the Company shall deliver to the Purchaser a copy of its internal
monthly Unaudited Financial Statements within forty-five (45) days after the end
of each month.
Section 4.10 Consents and Authorizations.
(a) Generally. Except as otherwise provided in Section 5.1
hereof, the Seller and the Company shall, promptly after the end of the
investigation period described in Section 7.15 hereof, commence efforts to
obtain the consents, waivers and authorizations listed on Schedules 2.3 and
2.26. Except as otherwise provided in Sections 5.1 and 7.15 hereof, the Seller
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.
(b) Primary Responsibility. The Seller shall, at Seller's expense
(including the Seller's payment of filing fees, attorney fees and other
associated expenses), have primary responsibility for and shall manage the
process of obtaining, with the Purchaser's assistance, the approval of the FCC
and/or any other state or local authority necessary with respect to the transfer
of the LMDS licenses referred to in Section 1.3(b) and Schedule 2.3 hereto.
Section 4.11 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 normal 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 and shall assemble any such documents in a central
location at the Company as Purchaser shall reasonably request. 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.
Section 4.12 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).
Section 4.13 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 penalties and interest)
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incurred in connection with this Agreement shall be borne equally by the Seller
and 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.
Section 4.14 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 or delayed.
Section 4.15 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
reasonable access during normal business hours to the Company's properties and
business records as shall be necessary for Purchaser to, among other things,
obtain surveys of the real property, title commitments with respect to the real
property and/or environmental assessments.
ARTICLE V
COVENANTS OF THE PURCHASER
Section 5.1 Consents and Authorizations.
(a) Generally. The Purchaser shall, promptly after the end of the
investigation period described in Section 7.15 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.
(b) Primary Responsibility. Purchaser shall, at its expense
(including the Purchaser's payment of filing fees, attorney fees and other
associated expenses), have primary responsibility for and shall manage the
process of obtaining, with the Sellers' and the Company's assistance, all
consents and approvals required to carry out the transactions contemplated by
this Agreement, whether from any
-33-
local, state or Federal Authority or otherwise, other than the approval of the
FCC and/or any other state or local authority necessary with respect to the
transfer of the LMDS licenses referred to in Section 4.10(b) hereof. Purchaser
acknowledges and agrees that the Sellers and/or the Company shall retain the
right to act independently of Purchaser with respect to efforts to obtain such
consents and approvals for which Purchaser has primary responsibility and
process management responsibility hereunder; provided, however, that any
expenses (including filing fees, attorney fees and other associated expenses)
attributable to any such independent action shall be paid by the Sellers.
Section 5.2 Employees. Purchaser shall cause the Company to continue to
employ the following employees of the Company after the Closing for at least
three (3) years thereafter absent grounds to terminate such employee(s) for
cause (as cause is defined in such employee's employment agreement with the
Company):
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
Section 5.3 Extension of Purchaser Plan Coverage to Company Employees.
As soon as practicable after the Closing, the Purchaser shall take such action
as is necessary and appropriate to extend coverage under its then existing
defined contribution profit-sharing plan qualified under Sections 401(a) and
401(k) of the Code maintained and established by the Purchaser ("Purchaser's
Plan"), as such Plan shall be amended or modified from time to time, to those
employees of the Company as at Closing who remain employees of the Company or
become employees of the Purchaser or one of its Affiliates after the Closing.
Under Purchaser's Plan, the Company's employees shall be credited with service
for eligibility and vesting since their date of original hire with the Company,
as such service credits are set forth for each of the Company's continuing
employees on Schedule 5.3 hereof.
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree as follows:
Section 6.1 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
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cooperate and use all reasonable efforts to defend against and respond thereto.
Section 6.2 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.
Section 6.3 Consents. Without limiting the generality of Section 6.2, on
the terms and subject to the conditions of this Agreement, each of the parties
hereto shall use all 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.
Section 6.4 No Solicitation or Negotiation. Unless and until this
Agreement is terminated, neither the Seller 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
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negotiations with any parties conducted heretofore with respect to any of the
foregoing.
Section 6.5 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.
Section 6.6 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 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 with respect to this
Agreement and the transactions contemplated hereby shall be subject to the prior
approval of both Seller and the Purchaser, which approval shall not be
unreasonably withheld; provided, however, that either party 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 or except as otherwise required by law
or in connection with a securities offering, 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 Seller.
Section 6.7 Records and Information.
(a) Retention of Records. Except as otherwise required by
Regulation or agreed to in writing, each of the Seller and the Purchaser shall
retain, and shall cause its 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, Communications and all subsidiaries and Affiliates thereof.
(b) Access to Information. From and after the Closing Date, the
Seller shall afford to the Purchaser and its authorized accountants, counsel and
other designated representatives reasonable
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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 Seller's possession relating to the Company, insofar
as such access is reasonably required by the Purchaser. Similarly, the Purchaser
shall afford to the Seller and its 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, Communications and all subsidiaries and Affiliates
thereof and/or their businesses as conducted prior to the Closing Date, insofar
as such access is reasonably required by the Seller.
(c) Provisions of Corporate Records. The Seller 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 Company's cost to the Purchaser of the records, if any, in
the Seller's possession relating to the Company, the corporate minutes 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 any of the Purchaser or the Company
or (ii) it is necessary or appropriate for the Seller to retain such records for
use in preparation of Tax Returns or otherwise under the provisions hereof. The
Seller may make and retain copies of all or any such records or documents at
their expense.
(d) Witnesses. At all times from and after the Closing Date, each
of the Seller 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.
Section 6.8 Insurance Policies and Claims Administration.
(a) Insurance Coverage Prior to the Closing Date. On the terms
and subject to the conditions of this Agreement, Seller shall be responsible for
the administration of all claims under the Company's insurance policies relating
to periods prior to the Closing Date. If
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any claim is asserted against the Company relating to periods prior to the
Closing Date, 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 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 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 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 Sellers shall
provide reasonable cooperation and assistance to the Company and the Purchaser.
(b) 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 ▇▇▇▇ Transaction Assets as provided herein.
Section 6.9 Other Tax Matters.
(a) 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), if any, which are in the
possession of the Sellers and which relate to any Taxes of the Company for any
taxable period through the Closing Date. Prior to the delivery of the materials
described in the preceding sentence, the Sellers shall cooperate with the
Purchaser in providing access to such materials as
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is reasonably required by the Purchaser. To the extent any such records are in
the possession of the Company at the Closing Date, such records shall remain on
the Company's premises.
The parties hereto agree that the Sellers shall prepare or cause to be
prepared and pay (but only to the extent not fully paid or reserved against on
the Financial Statements or Unaudited Financial Statements) all Taxes arising
therefrom, all Tax Returns for the Company for the periods ending on or before
the Closing Date and for all Taxes imposed against or attributable to the
Sellers arising as a result of the transactions contemplated by this Agreement.
Upon mutual agreement between the Sellers and the Purchaser, the Company may
prepare any such required Tax Returns. Purchaser shall prepare, and pay or cause
the Company to pay all Taxes arising therefrom, all Tax Returns for the Company
for the periods ending after the Closing Date.
(b) 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.
Section 6.10 Profit-Sharing Plan/COBRA Coverage. Prior to Closing, the
Seller shall amend (or cause to be amended) the 1989 Amended and Restated
Profit-Sharing Plan and Trust of The ▇▇▇▇▇▇ Telephone Company (the "Plan") to
provide that those eligible employees who are employed by the Company on the day
prior to Closing shall be entitled to an allocation of the 1999 contribution to
the Plan, based on compensation earned during the entire Plan Year. The Seller
and the Purchaser shall cooperate to ensure that proper allocations are
accomplished for the 1999 Plan Year (with the Company contribution for the 1999
Plan Year not to exceed an aggregate amount of $140,000 without Purchaser's
prior written consent). It is Purchaser's understanding that the Company has
heretofore prepaid the 1999 contribution to the Plan.
Purchaser agrees that no administrative expenses related to the
Plan for the Plan Year ending December 31, 1999 shall be paid out of the Plan.
To the extent not inconsistent with ERISA, Purchaser also
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agrees that the current Trustees of the Plan shall continue to serve as Trustees
until completion of the December 31, 1999 Plan accounting and that Purchaser
shall take no steps to remove such Trustees prior to completion of such
accounting.
To the extent the Company's insurance carrier as at the Closing
Date will not provide COBRA continuation coverage for persons not employed by
the Company after the Closing, the Purchaser or the Company shall make available
COBRA continuation coverage for all employees or former employees of the
Company, and their qualifying beneficiaries, whose qualifying event occurred
prior to or in connection with the transactions contemplated by this Agreement,
in accordance with applicable law. Purchaser has provided Seller with copies of
its health insurance documents and related summary plan descriptions.
ARTICLE VII
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:
Section 7.1 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 Seller and the
Company shall have performed and complied in all material respects with all
Contracts, agreements, covenants and 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 and all Schedules hereto
as accurate on the Closing Date as on the date originally given. The Seller
shall deliver to the Purchaser and the Company, as the case may be, all of the
certificates, stock powers and other documentation referenced in Section 9.2
hereof, evidencing the transfer to the Purchaser and the Company, as the case
may be, of clear title to all of the shares of Company Capital Stock and thereby
to all of the shares of the Communications Capital Stock at the Closing, all in
form and
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substance satisfactory to the Purchaser and its counsel in their sole
discretion.
Section 7.2 Consents and Approvals. The Seller, the Company and the
Purchaser shall have obtained all final consents, approvals, Orders,
qualifications, licenses, Permits, cable television franchise agreement
renewals, regulatory approvals (including but not limited to any necessary
consent, approval, exemption or notice as required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976) and any 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 Seller, the Company or the Purchaser or any of their respective
properties and assets, all 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. Except for
the obtaining of such consents and approvals from, and the giving of notice to,
such Authorities as set forth above, the obligations of the Purchaser under this
Agreement shall not be contingent upon or subject to the Purchaser obtaining
financing for the transactions contemplated by this Agreement.
Section 7.3 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,
financial condition 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 Seller, in a form reasonably satisfactory to
the Purchaser, certifying to the foregoing.
Section 7.4 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.
Section 7.5 Secretary's Certificate. The Purchaser shall have received a
certificate, signed by the Secretary of ▇▇▇▇▇▇ and Communications dated the
Closing Date, as to the charter (attaching a Secretary of State certified copy
thereof, with all amendments) and by-laws of ▇▇▇▇▇▇ and Communications and the
resolutions adopted by the shareholders and directors of ▇▇▇▇▇▇ and
Communications in connection with this Agreement in a form reasonably
satisfactory to the Purchaser.
Section 7.6 Certificates of Good Standing. At the Closing, the Company
shall have delivered to the Purchaser certificates issued
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by the appropriate governmental authorities evidencing the good standing of
▇▇▇▇▇▇, Communications 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.
Section 7.7 Opinion of Seller's Counsel. Seller shall deliver at Closing
an opinion of counsel to the Seller addressed to Purchaser and Purchaser's
lender in substantially the form attached hereto as Exhibit 7.7.
Section 7.8 Noncompetition Agreements. The Seller and Company shall have
caused ▇▇▇ ▇▇▇▇▇▇▇, individually and in her capacity as Trustee of the ▇.
▇▇▇▇▇▇▇ Trust, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually and in his capacity as Trustee
of the ▇. ▇▇▇▇▇▇▇ Trust, to enter into the Noncompetition Agreements in
substantially the form attached hereto as Exhibit 7.8.
Section 7.9 Employment Agreement. The Seller and Company shall have
caused ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇ to enter into the
Employment Agreements in substantially the form attached hereto as Exhibit 7.9.
Section 7.10 Resignations. The Seller shall have caused all directors
and officers of ▇▇▇▇▇▇, Communications and all of their subsidiaries to have
resigned.
Section 7.11 Other Documents. The Purchaser shall have been furnished
with such other and further documents and certificates, including certificates
of the Seller, ▇▇▇▇▇▇'▇ and Communications' officers, directors and others, as
the Purchaser shall reasonably request to evidence compliance with the
conditions set forth in this Agreement.
Section 7.12 Liens. The Seller shall have removed all Liens on the
Shares and/or on the assets and properties of the Company other than Permitted
Liens.
Section 7.13 Delivery of Minute Books. The Seller shall deliver at
Closing all original outstanding share certificates, minute books, corporate
seals and stock transfer records of ▇▇▇▇▇▇, Communications and of all their
direct and indirect subsidiaries, as well as original evidence of all their
respective investments.
Section 7.14 Delivery of Financial Statements. The Seller shall deliver
Unaudited Financial Statements to the Purchaser on
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a monthly basis from and after the date hereof as soon as such Unaudited
Financial Statements shall have been prepared and as provided in Section 4.9
hereof.
Section 7.15 Satisfactory Investigation. Assuming full cooperation from
the Seller and the Company (which shall include Seller granting Purchaser's
requests for particular days for on-site due diligence visits, as well as prompt
delivery of such due diligence documents and information as Purchaser may
reasonably request), no later than thirty-seven (37) days from the date of this
Agreement, the Purchaser shall have determined (in its sole discretion, acting
in good faith), after consideration of the Schedules delivered by Seller as
provided herein and the documents and other information set forth therein, and
after the Purchaser and its representatives shall have completed the
investigations of the affairs of the Company contemplated by Section 4.11
hereof, that the information revealed by such Schedules and documents or
discovered by the Purchaser or its representatives during such investigations is
not Materially at variance with the purported financial condition, or the
business, assets, properties, liabilities, results of operations, or earnings of
the Company as represented to the Purchaser by the Seller prior to the execution
of this Agreement ("Material Variances") and/or that the business prospects of
the Company and/or the regulatory climate for the Company's business are
favorable. Upon Purchaser's determination that there are no such Material
Variances and that the Company's business prospects and the regulatory climate
are favorable, Purchaser shall notify Seller in writing of its desire to proceed
with the transactions contemplated herein within ten (10) days of Purchaser's
determination (but no later than forty (40) days from the date of this
Agreement, and Purchaser shall promptly thereafter commence to obtain all
necessary consents, waivers and authorizations described in Section 5.1 hereof.
In the event Purchaser does not notify the Seller within forty (40) days from
the date of this Agreement either of its desire to proceed pursuant to this
Section 7.15 or of an unsatisfactory investigation pursuant to Section 10.1(f)
hereof, then Purchaser shall be deemed to have determined that there are no
Material Variances and/or no unfavorable climate and to have notified Seller of
Purchaser's desire to proceed with the transactions contemplated herein.
Notwithstanding anything to the contrary herein, if the Purchaser makes an
unreasonable determination that there are Material Variances and/or an
unfavorable climate and terminates this Agreement as provided in Section 10.1(f)
hereof, then the Purchaser shall promptly pay to the Seller the Seller's
out-of-pocket fees, including, without limitation, legal fees and expenses
incurred in connection with the transaction contemplated hereby plus the
additional amount of $25,000.
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Section 7.16 Cable Television Franchise Agreements Renewal. All cable
television franchise agreements described on Schedule 2.26 shall have been
renewed or extended, if necessary, so that each has an expiration date at least
ten (10) years from and after the Closing Date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS
OF THE SELLER
The obligations of the Seller under this Agreement shall be subject to
the satisfaction of each of the following conditions unless waived in writing by
Seller:
Section 8.1 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
Seller a certificate, dated the Closing Date, in a form reasonably satisfactory
to the Seller, 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.
Section 8.2 Consents and Approvals. The Purchaser, the Seller and the
Company shall have obtained all final 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 Seller or the Company or any of
their respective properties and assets, all with respect to the execution,
delivery and performance of this Agreement.
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Section 8.3 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.
Section 8.4 Secretary's Certificate. The Seller shall have received a
certificate, signed by the Secretary of the Purchaser, dated the Closing Date,
as to the charter and by-laws 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 Seller.
Section 8.5 Opinion of Purchaser's Counsel. Purchaser shall deliver at
Closing an opinion of counsel to Purchaser addressed to Seller in substantially
the form attached hereto as Exhibit 8.5.
ARTICLE IX
CLOSING
Section 9.1 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 November 1, 1999 (or on such date either before or after November 1, 1999
as the parties hereto shall mutually agree, which shall be on the first day of
the month which date is at least ten (10) days after receipt of all PUCO, FCC,
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇, municipal and other approvals required as a precondition to
Closing) (the "Closing Date") in the offices of the Seller's counsel; provided,
that the Closing shall occur as soon as practicable after the satisfaction of
the conditions contained in Articles VII and VIII hereof.
Section 9.2 Closing Date Payment and Receipt of Shares. On the Closing
Date, (i) the Seller will assign and transfer to the Purchaser and the Company,
as the case may be, good and valid title in and to the Company Capital Stock,
free and clear of all Liens, by delivering to the Purchaser and the Company, as
the case may be, stock certificates representing the Company Capital Stock, duly
endorsed for transfer or accompanied by duly executed stock powers endorsed in
blank with requisite stock transfer tax stamps, if any, attached, and the
Company shall deliver stock certificates representing the Communications Capital
Stock; (ii) the Purchaser shall, by wire transfer of same-day funds, deposit in
an escrow account the amount of Two Million Dollars ($2,000,000), all as
provided in Section 11.2
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hereof; (iii) the Purchaser shall, by wire transfer of same-day funds, pay to
the Seller the amount of the Purchase Price for the shares of Company Capital
Stock set forth in Section 1.2 hereof, less the Escrow Funds; (iv) the Company
shall transfer and/or assign the ▇▇▇▇ Transaction Assets and ▇▇▇▇ Transaction
Liabilities to the Seller as set forth in Section 1.3 hereof; and (v) the
parties shall deliver to each other the documents required under this Agreement
to be delivered at or prior to the Closing.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.1 Methods of Termination. This Agreement may be terminated
and the transactions herein contemplated may be abandoned at any time:
(a) Mutual Consent. By mutual written consent of the Purchaser
and the Seller.
(b) Seller's Failure to Perform. By the Purchaser if as of the
Closing Date any of the conditions specified in Article VII hereof have not been
reasonably satisfied (and remain so unsatisfied for more than thirty (30) days
after the Purchaser has notified the Seller in writing thereof) or if either the
Seller or the Company is otherwise in default in any Material respect under this
Agreement (and remains in default for more than thirty (30) days after the
Purchaser has notified the Seller 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 either the Seller 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,
(c) Purchaser's Failure to Perform. By the Seller if as of the
Closing Date any of the conditions specified in Article VIII hereof have not
been reasonably satisfied (and remain so unsatisfied for more than thirty (30)
days after the Seller has 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 thirty (30) days after the Seller has
notified the Purchaser in writing of such default) or if at any time prior to
the Closing Date it becomes apparent to the Seller (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.
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(d) Failure to Close by December 31, 1999. By either party in the
event the Closing has not occurred by December 31, 1999, unless such failure to
close shall be due to a breach of this Agreement by the party seeking to
terminate the Agreement.
(e) Material Adverse Change. By the Purchaser if a Material
Adverse Change shall be shown (in the reasonable discretion of Purchaser, acting
in good faith) in any of the Unaudited Financial Statements delivered after the
date hereof or otherwise and written notice of termination of this Agreement
shall have been given by the Purchaser to the Seller within thirty (30) business
days of Purchaser's receipt of such Unaudited Financial Statements.
(f) Unsatisfactory Investigation. By the Purchaser if Purchaser
shall have determined pursuant to Section 7.15 hereof that a Material Variance
exists or that an unfavorable climate exists and that it does not desire to
proceed with the transactions contemplated herein and written notice of
termination of this Agreement shall have been given by the Purchaser to the
Seller within ten (10) days of Purchaser's determination (but no later than
forty (40) days from the date of this Agreement).
(g) 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.
Section 10.2 Procedure Upon Termination. If this Agreement is terminated
as provided herein:
(a) 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.
(b) 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.
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ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
Section 11.1 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, three (3)
years from the Closing Date (the "Indemnification Period"); provided, however,
that with respect to any income tax liability of ▇▇▇▇▇▇, Communications or any
of their subsidiaries 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 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; and further provided,
however, that with respect to the ownership of the Company Capital Stock and/or
the Communications Capital Stock, the agreement of the Sellers to indemnify
Purchaser and its Affiliates shall survive forever and claims with respect
thereto shall be made as any such claims arise.
Section 11.2 Escrow of Liquid Assets. Two Million Dollars ($2,000,000)
of the Purchase Price otherwise payable to Sellers for their Company Capital
Stock (the "Escrow Funds") shall be maintained in an escrow account (the "Escrow
Account"), with The Middlefield Banking Company, Middlefield, Ohio (the "Escrow
Agent"), pursuant to the terms and provisions of an Escrow Agreement to be
executed at Closing substantially in the form attached hereto as Exhibit 11.2
(the "Escrow Agreement"). In the event the Escrow Account is still in existence,
then prior to seeking indemnification directly from the Seller under the
provisions of Section 11.3 hereof, the Purchaser shall make a claim from the
Escrow Account, to the extent there are Escrow Funds remaining in the Escrow
Account at such time, for payment of any indemnity payment due under Section
11.3 in the manner provided in the Escrow Agreement.
Section 11.3 Indemnification by the Seller. After the Closing Date,
subject to the limitations set forth in Sections 11.1, 11.8 and 11.9 hereof, the
Purchaser and its Affiliates (including, without
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limitation, ▇▇▇▇▇▇ and Communications) and their respective officers, directors,
employees, shareholders, representatives and agents shall be indemnified and
held harmless jointly and severally by Seller, their respective heirs,
successors, personal representatives and assigns, against and in respect of any
Damages resulting from, or in respect of, any of the following:
(a) Misrepresentation or Breach. Any misrepresentation or breach
of a warranty of the Seller or the Company (including any relating to the
ownership of the Company Capital Stock and/or of the Communications Capital
Stock, or nonfulfillment of any obligation on the part of the Company (to be
performed prior to the Closing) or the Seller 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 Seller, the Sellers or the Company hereunder.
(b) Taxes. To the extent not fully paid or reserved against on
the Financial Statements or Unaudited Financial Statements or otherwise
specifically disclosed herein, all Taxes of the Seller, of ▇▇▇▇▇▇,
Communications or any of their subsidiaries or Affiliates or with respect to
their investments, including but not limited to Communications' interest in Ohio
RSA #3 Limited Partnership, attributable to any period through the Closing Date.
Notwithstanding anything to the contrary herein, Seller shall have no liability
whatsoever (for indemnification or otherwise) with respect to any Taxes of
▇▇▇▇▇▇, Communications or any of their subsidiaries or Affiliates resulting
from, arising out of or otherwise attributable to any proceedings or
examinations by any taxing Authority of any Tax Returns of the Toledo MSA
Limited Partnership, Youngstown-Warren MSA Limited Partnership, Ohio RSA 5
Limited Partnership, and Ohio RSA 6 Limited Partnership, but only to the extent
such Taxes pertain to the subject matter disclosed on Schedule 2.16 hereto under
the heading "Post-Sale IRS Examinations" (the "Cellular Audit Taxes").
(c) 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 ▇▇▇▇ Transaction Liabilities or ▇▇▇▇ Transaction 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, or any Claim resulting
from or arising as a result of Sellers' transfer of their Company Capital Stock
as provided in Section 4.3 hereof.
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(d) Related Expenses. All expenses and costs, including but not
limited to legal fees, reasonably paid or incurred in connection with any such
indemnified Claim.
Section 11.4 Indemnification by the Purchaser. After the Closing Date,
subject to the limitations set forth in Sections 11.1, 11.8 and 11.9 hereof, the
Seller and its Affiliates and their respective officers, directors, employees,
shareholders, representatives and agents shall be indemnified and held harmless
by the Purchaser, its successors and assigns, against and in respect of any
Damages resulting from, or in respect of, any of the following:
(a) 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.
(b) Taxes. All Taxes of the Purchaser or of the Company
attributable to any period which begins after the Closing Date.
(c) 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.
(d) Related Expenses. All expenses and costs, including but not
limited to legal fees, reasonably paid or incurred in connection with any such
indemnified Claim.
Section 11.5 Third Party Claims.
(a) 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 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
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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 11.5(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 11.5(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 11.5(b) hereof, in connection with such obligation or
liability subject to this Article XI. In the alternative, in the event the
Purchaser or any of its Affiliates is the Indemnitee, and to the extent there
are Escrow Funds remaining in the Escrow Account at such time, the Indemnitor
and the Indemnitee shall jointly instruct the Escrow Agent, in writing, to make
such payment and reimbursement from and out of the Escrow Account. 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 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 11.5(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
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pursuant to the terms of this Section 11.5(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.
(b) 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.
Section 11.6 Other Claims.
(a) 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 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 or, in the event the Purchaser or any
of its Affiliates is the Indemnitee, and to the extent the Escrow Account is
still in existence, give prompt written notice to the Escrow Agent to pay such
amount from and out of the Escrow Funds. 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
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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 submitted to mediation in accordance with Section 11.6(b) hereof. If
such dispute is resolved through negotiations at a time when the Escrow Account
is still in existence, and if the resolution of such dispute involves payment
from and out of the Escrow Funds, then the Indemnitor and the Indemnitee shall
promptly jointly instruct the Escrow Agent, in writing, as to the details of
such payment.
(b) Any dispute required to be submitted to mediation pursuant to
this Section 11.6 shall be submitted to mediation before an impartial, neutral
mediator selected by the parties. Mediation shall be conducted in accordance
with the rules applicable to the mediation of civil actions pending in the
Superior Court, Mecklenburg County, North Carolina. If the parties are unable to
agree upon the mediator within fifteen (15) days after the expiration of the
period for negotiation provided in Section 11.6(a) above, either party may
request the appointment of a mediator by the American Arbitration Association.
The mediation shall be conducted in Charlotte, North Carolina, or at such other
location as may be agreed to by the parties in writing. The fees and expenses of
the mediator shall be borne equally by the parties. If the dispute has not been
resolved through mediation within thirty (30) days from the selection of the
mediator 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 11.6(c)
hereof. If such dispute is resolved through mediation at a time when the Escrow
Account is still in existence, and if the resolution of such dispute involves
payment from and out of the Escrow Funds, then the Indemnitor and the Indemnitee
shall promptly jointly instruct the Escrow Agent, in writing, as to the details
of such payment.
(c) Any dispute required to be submitted to arbitration pursuant
to this Section 11.6 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. In any dispute where the aggregate
amount in controversy is less than $200,000.00, the dispute shall be resolved by
the decision of a single arbitrator selected by the parties. If the parties are
unable to agree on an arbitrator within fifteen (15) days after the expiration
of the period for mediation provided in Section 11.6(b) above, either party may
request the appointment of an arbitrator by the American Arbitration
Association. In any dispute where the aggregate amount in controversy equals or
exceeds $200,000.00, the dispute shall be resolved by the decision of three (3)
arbitrators selected in accordance with the Rules of Arbitration (the "Board of
Arbitrators").
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The arbitration proceedings shall take place in Charlotte, North Carolina or at
such other location as may be agreed to by the parties in writing. The
arbitrator or the Board of Arbitrators shall have the power to subpoena
witnesses and documents, and the parties shall be entitled to reasonable
discovery, including depositions and requests for production of documents, in
accordance with the Federal Rules of Civil Procedure, under the Local Rules of
Practice of the United States District Court for the Western District of North
Carolina. With respect to such discovery and the application of said Local
Rules, the arbitrator or Board of Arbitrators shall classify the pending dispute
as either a "Standard" or "Complex" case (but in no event as an "Expedited"
case), and apply such discovery rules accordingly. The arbitrator or Board of
Arbitrators shall render its decision in writing setting forth in reasonable
detail the findings of fact and conclusions of law of the arbitrator or Board of
Arbitrators 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 arbitrator or Board of Arbitrators shall be rendered as soon as
practical following commencement of proceedings with respect thereto. The
arbitrator or Board of Arbitrators shall cause its written decision to be
delivered to the Indemnitee and the Indemnitor and, in the event the Escrow
Account is still in existence, to the Escrow Agent. Any decision made by the
arbitrator or Board of Arbitrators 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 arbitrator or Board of Arbitrators and to the jurisdiction of any
local, state or Federal court located in the State of Ohio or North Carolina for
the purpose of enforcing the decision or award of the arbitrator or Board of
Arbitrators, as the case may be, 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 awarded to
the prevailing party from the nonprevailing party as part of the decision of the
arbitrator or Board of Arbitrators. For purposes hereof, a "Prevailing Party"
shall mean the party which substantially prevails in its position in
arbitration. Each and every mediation and/or arbitration proceeding commenced
pursuant to Section 11.6(b) or Section 11.6(c) hereof, as the case may be, shall
be consolidated with any mediation and/or arbitration proceedings simultaneously
or
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previously commenced (but not concluded) under Section 11.6(b) or Section
11.6(c) hereof, as the case may be.
Section 11.7 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.
Section 11.8 Basket Amount.
(a) Indemnification by the Seller. Notwithstanding anything to
the contrary herein, Seller will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 11.3 of this
Agreement until the total of all Damages suffered by the Purchaser and/or its
Affiliates exceeds Three Hundred Thousand Dollars ($300,000.00)(the "Basket
Amount"), and then only for the amount by which such Damages exceed the Basket
Amount. Notwithstanding anything in this Agreement to the contrary, to the
extent the aggregate Cellular Audit Taxes are determined with finality to be
less than Three Hundred Twenty-Five Thousand and No/100 Dollars ($325,000.00),
then the Basket Amount shall be increased for all purposes hereunder,
dollar-for-dollar, by the amount of such shortfall.
(b) 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
11.4 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 Purchase Price) until the total of all Damages suffered by
the Seller and/or its Affiliates exceeds the Basket Amount and then only for the
amount by which such Damages exceed the Basket Amount.
(c) Aggregation. Notwithstanding the foregoing, to the extent
indemnification is sought under Sections 11.3(a) or 11.4(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 Seller shall have failed to perform
three obligations of the type referred to in Section 2.12(b) hereof, each
causing Damages of $105,000, then payment in the amount of $15,000 shall be made
to Purchaser as provided herein (assuming the Basket Amount to be $300,000).
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Section 11.9 Maximum Liability. Notwithstanding anything to the contrary
herein, under no circumstances shall the aggregate liability of Seller or
Purchaser (for indemnification or otherwise) for Damages under this Agreement
exceed Five Million Dollars ($5,000,000.00), provided, however, that this
Section 11.9 shall not apply to 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 Purchase Price.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 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.
Section 12.2 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.
Section 12.3 Certain Definitions.
"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.
"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 PUCO and the municipalities of
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▇▇▇▇▇▇ Village, Leipsic Village, Pandora Village, Gilboa Village, Continental
Village, ▇▇▇▇▇▇ City Village, Oakwood Village, Melrose Village, and West
Leipsic, Ohio, and such other municipalities and townships set forth on Schedule
2.26 hereto, 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.
"Business Day" shall mean any day that is not a Saturday or Sunday and
that in Cleveland, Ohio, 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.
"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
▇▇▇▇▇▇, Communications and all their subsidiaries and Affiliates.
"Contract" shall mean any agreement, contract, commitment, instrument or
other binding arrangement or understanding, whether written or oral.
"Damages" shall mean 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
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of the matters described in either Section 11.3 or Section 11.4 of this
Agreement, as the case may be.
"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.
"Escrow Account" shall have the meaning ascribed to such term in Section
11.2 hereof.
"Escrow Agreement" shall have the meaning ascribed to such term in
Section 11.2 hereof.
"Escrow Funds" shall have the meaning ascribed to such term in Section
11.2 hereof.
"FCC" shall mean the Federal Communications Commission.
"Financial Statements" shall have the meaning ascribed to such term in
Section 2.9(a) hereof.
-▇▇-
"▇▇▇▇" ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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.
"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
11.5(a) hereof.
"Indemnitor" shall have the meaning ascribed to such term in Section
11.5(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" shall mean any act or action or failure to act or failure to
comply with any law, Regulation or Contract or any misrepresentation or omission
which has, or could reasonably be expected to have, an impact on the Company's
earnings before taxes, interest, depreciation and amortization and/or Damages or
potential Damages, either individually or in the aggregate, in any one
(1)calendar year of Two Hundred Thousand Dollars ($200,000.00) or more.
"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, financial condition or results
of operations.
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"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.
"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 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
reflected in the Financial Statements or the Unaudited Financial Statements.
"Person" shall mean any corporation, partnership, joint venture,
organization, entity, trust, 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.
"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.
"Purchase Price" shall have the meaning ascribed to such term in Section
1.2 hereof.
"Purchaser" shall have the meaning ascribed to such term in the preamble
hereof.
"PUCO" shall mean the Public Utilities Commission of the State of Ohio.
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"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" 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.
"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.
"Unaudited Financial Statements" shall have the meaning ascribed to such
term in Section 2.9(a) hereof.
"Welfare Benefit Plan" shall have the meaning ascribed to such term in
Section 2.19 hereof.
Section 12.4 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: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Execu- ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
tive Vice President ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇ (Phone) (▇▇▇) ▇▇▇-▇▇▇▇ (Phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax) (▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
Notices to Seller, to the
Company and to the Sellers With a Copy to:
-------------------------- --------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. ▇▇▇▇▇ & Berne LLP
Executive Vice President Ninth Floor, Bond Court ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇ (Phone) (▇▇▇) ▇▇▇-▇▇▇▇ (Phone)
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax) (▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
Section 12.5 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 Seller 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., but only if (a) such
Affiliate has the financial and other wherewithal to fully and completely
perform and otherwise discharge the Purchaser's obligations hereunder and
consummate the transactions contemplated hereby, and (B) the Purchaser remains
liable for its obligations hereunder, or (ii) its lenders as collateral in
connection with the financing of the transactions contemplated hereby; and
further provided, that the Seller may, without the prior written consent of the
Purchaser 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 an Affiliate of the
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Seller to whom the Seller has transferred its shares of Company Capital Stock,
but only if the Seller remains liable for its obligations hereunder.
Section 12.6 Governing Law. This Agreement shall be governed by the laws
of the State of North Carolina, without regard to its principles of conflict of
laws.
Section 12.7 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.
Section 12.8 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.
Section 12.9 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.
Section 12.10 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.
Section 12.11 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.
Section 12.12 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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Section 12.13 Expenses.
(a) Generally. Except as otherwise provided herein, 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 Seller, or the Company prior to Closing, shall be paid by the
Seller and not by the Company).
(b) Seller's Payment of Purchaser's Expenses. Notwithstanding
anything to the contrary herein, in the event a breach of Section 6.4 hereof
occurs and the transactions contemplated hereby are not consummated, the Seller
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.
(c) Purchaser's Payment of Certain of Seller's Expenses.
Notwithstanding anything to the contrary herein, the Purchaser and/or the
Company shall pay up to Fifty Thousand Dollars ($50,000.00) of the Seller's
expenses, and/or the Company's expenses incurred prior to Closing, including
without limitation, legal fees and expenses, incurred in connection with the
transactions contemplated hereby.
Section 12.14 Time of the Essence. Time is strictly of the essence with
respect to the provisions of this Agreement.
Section 12.15 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MJD VENTURES, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive
Vice President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CO-TRUSTEE OF
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST
DATED JANUARY 13, 1992
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (SEAL)
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, CO-TRUSTEE
OF THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST
DATED JANUARY 13, 1992
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (SEAL)
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇ ▇▇▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER THE
DECLARATION OF TRUST DATED
OCTOBER 26, 1989
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (SEAL)
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER
THE DECLARATION OF TRUST DATED
OCTOBER 26, 1989
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THE ▇▇▇▇▇▇ TELEPHONE COMPANY
/s/ The ▇▇▇▇▇▇ Telephone Company
----------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
-66-
Schedule 3.3
Consents and Authorizations of Purchaser
Schedule 3.3
Consents and Authorizations of Purchaser
1. The contemplated purchase and sale transaction set forth in Sections
1.1--1.2 of the Agreement would effect a transfer of control in The ▇▇▇▇▇▇
Telephone Company ("Company"). Since the Company is an Ohio public utility, any
change in control requires the prior approval of the PUCO, for which provision
has been made, inter alia, in Sections 7.2 and 8.2 of the Agreement.
2. The contemplated purchase and sale transaction set forth in Sections
1.1--1.2 of the Agreement would effect a transfer of control in the Company.
Such change in control requires the prior approval of the FCC with respect to
the two Improved Mobile Telephone Service (IMTS) licenses (▇▇▇▇▇▇ Station KLF
475 and Leipsic Station KKB 697) and the radio license (Leipsic Station KNAC
289) used by the Company's construction/maintenance personnel, for which
provision has been made, inter alia, in Sections 7.2 and 8.2 of the Agreement.
3. The contemplated redemption transaction set forth in Sections
1.3--1.4 of the Agreement pursuant to which the ▇▇▇▇ Transaction Assets and ▇▇▇▇
Transaction Liabilities would be transferred/assigned to the Seller requires the
prior approval of the PUCO, for which provision has been made, inter alia, in
Sections 7.2 and 8.2 of the Agreement.
4. The transfer of the LMDS licenses set forth on Schedule 1.3 to ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Trustee, and ▇▇▇ ▇▇▇▇▇▇▇, Trustee, or their nominee, and the transfer
of the Company assets set forth on Schedule 1.3 as part of the contemplated
redemption transaction set forth in Section 1.3--1.4 of the Agreement requires
the prior approval of the FCC, for which provision has been made, inter alia, in
Sections 7.2 and 8.2 of the Agreement and will require a waiver from the United
States of America acting through the Administrator of the Rural Electrification
Administration of its right to obtain a security interest in any and all of the
after acquired property of The ▇▇▇▇▇▇ Telephone Company pursuant to that certain
Supplemental Mortgage and Security Agreement by and among The ▇▇▇▇▇▇ Telephone
Company, the United States of America through the Administrator of the Rural
Electrification Administration and Rural Telephone Bank with respect to the
temporary transfer of such license from ▇▇▇▇▇▇ Communications, Inc. to The
▇▇▇▇▇▇ Telephone Company.
5. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing needed.
6. See also those approvals and/or notifications set forth on Schedules
2.3 and 2.26.
7. Prior approval may be needed with respect to the CATV franchise
agreements and/or with respect to certain of the Company's Contracts.
-2-
Exhibit 7.7
Opinion of Seller's Counsel
Exhibit 7.9
Employment Agreements
EMPLOYMENT AGREEMENT
THE ▇▇▇▇▇▇ TELEPHONE COMPANY
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of the _______ day of ___________, 1999, by and between THE ▇▇▇▇▇▇
TELEPHONE COMPANY, an Ohio corporation (the "Company") and
_________________________________, a resident of the State of Ohio (the
"Employee").
In consideration of continued employment and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Employee agree as
follows:
1. Employment. The Employee agrees to devote his [her] entire work time
to the performance of such duties and responsibilities as are assigned to him
[her] from time to time by the Company, in the exercise of its reasonable
discretion, acting in good faith. The Employee agrees to perform and discharge
such duties and responsibilities faithfully, diligently and in a timely manner,
and agrees to abide by all Company policies relating to its employees generally.
2. Term.
(a) The Employee's initial term of employment hereunder (the
"Initial Term") shall be a period of three (3) years, commencing with
the effective date of this Agreement. Thereafter, so long as the
Employee performs his duties and responsibilities in a reasonable and
efficient manner to the satisfaction of the Company, as determined by it
in its reasonable discretion, acting in good faith, the term of the
Employee's employment shall be at the mutual satisfaction of the
parties, who anticipate it will be of indefinite duration.
(b) Notwithstanding the foregoing, the Company reserves the right
to terminate the Employee's employment at any time, during the Initial
Term, either (1) upon the closure of the Company's office for which the
Employee performs his duties, or (2) for cause, as set forth in
Paragraph 5 below.
(c) Additionally, each party reserves the right, at any time
following the Initial Term, to terminate the relationship for any or no
reason, upon the giving of at least thirty (30) days' written notice to
the other.
3. Compensation. All component parts and aspects of the Employee's
compensation, including any salary, bonuses and any other form of compensation,
are hereafter referred to as "Compensation." During the Initial Term, the
Employee's annualized Compensation shall be not less than $______________.
Following the Initial Term, the Employee's Compensation shall be determined and
modified by the Company, from time to time in its reasonable discretion, acting
in good faith, in accordance with the Company's policies and procedures for
determining compensation for its other employees having comparable compensation
arrangements and performing similar duties and responsibilities as those of the
Employee. The Employee's Compensation shall be paid in accordance with such
payroll policies and procedures as the Company adopts from time to time in its
reasonable discretion, acting in good faith.
4. Benefits. Subject to and contingent upon the Employee meeting and
complying with, and continuing to comply with, all eligibility and participation
conditions and requirements, the Employee shall receive such hospitalization,
major medical, and disability insurance benefits, if any, as well as such other
fringe benefits provided to or made available by the Company for its employees
generally, in accordance with the terms and provisions of such insurance and
benefit programs as they may exist from time to time.
5. Termination for Cause. The Company may terminate immediately the
Employee's employment for cause, as such cause is determined by the Company in
the exercise of its reasonable discretion, acting in good faith, for any one (1)
or more of the following causes:
(a) Failure of the Employee to devote his full employment time
to the Company's business;
(b) Failure of the Employee to perform his duties and
responsibilities, as assigned to him by the Company from time to time,
to the Company's reasonable satisfaction;
(c) Failure of the Employee to comply, to the Company's
reasonable satisfaction, with the Company's policies, standard methods
and procedures; provided, however, that with respect to any such failure
to comply which does not create liability for the Company or does not
constitute an act of dishonesty, the Company has given the Employee
prior written notice of, and a twenty (20) day opportunity to cure, such
failure to comply;
(d) Any act of dishonesty or insubordination by the Employee
resulting or intended to result in a financial loss to
-2-
the Company or resulting in damage to the Company's reputation; or
(e) Conviction of the Employee, including a plea of nolo
contendere by the Employee, of a crime involving an act of moral
turpitude.
In the event the Company terminates the Employee's employment for cause,
no advance notice shall be required to be given to the Employee and no further
Compensation shall be due or owing to the Employee. In such event the Employee
shall remain bound by the provisions of paragraphs 6 through 9 below.
6. Covenant Not to Compete. The Employee agrees to refrain from
"Competing" with the Company during the "Restricted Period," as such terms are
defined below; provided, however, that the provisions of this Paragraph 6 shall
not apply if the Employee's employment with the Company is terminated by the
Company without cause.
(a) The "Restricted Period" is defined as the period of time
commencing with the date hereof and continuing until the end of the
twelfth (12th) month following the termination of the Employee's
employment with the Company.
(b) "Competing" is defined as engaging directly or indirectly in
any one or more of the following activities (other than in furtherance
of the Employee's duties to the Company):
(i) Providing services, whether as an employee, agent,
consultant, independent contractor, stockholder, director,
member, officer, partner or otherwise, to any entity engaged in
the telecommunications business, but only to the extent the
nature of such services is substantially similar to those
performed by the Employee for or on behalf of the Company, and
such services pertain to a branch, division or office of such
entity which is conducting business in any one (1) or more of the
exchange or service areas in which the Company is then conducting
business (the "Restricted Territory").
(ii) Employing or engaging or attempting to employ or
engage, or knowingly arranging or soliciting to have any other
person or entity employ or engage or attempt to employ or engage,
any person who works for the Company at any time during the
Restricted Period, including, without way of limitation, all such
persons working for the Company in the
-3-
capacity of employee, agent, consultant or
independent contractor.
(c) The Employee hereby authorizes the Company to contact any
entity engaged in the telecommunications business for which the Employee
performs services during the Restricted Period for the purpose of
informing it of the terms and provisions of this Agreement.
(d) The Employee hereby acknowledges the reasonableness of the
restrictions contained in this Paragraph 6, including, but not limited
to, the geographic restrictions and duration of the restrictions.
Further, the Employee acknowledges that the Employee has sufficient
training and skills so as to obtain satisfactory employment
notwithstanding the restrictions contained in this Paragraph 6, so that
the enforcement of such restrictions would not prevent the Employee from
earning a satisfactory living.
7. Confidential Information. The Employee acknowledges that the Employee
will, through the Employee's employment with the Company, acquire, be exposed
to, or have access to material, data and information that constitute valuable,
confidential and proprietary information and trade secrets of the Company. Such
items may include, without limitation, methods of operation, demographic
information, customer and supplier lists, prospect lists, contract terms,
methods of pricing, production reports, profit and loss statements, rate and
incentive structures and other financial data, methods of marketing and
advertising, financing sources, business opportunities and other aspects of the
Company's business operations. The Employee shall not, directly or indirectly,
use, misuse, misappropriate, disclose, divulge or make known to any person,
firm, corporation, association, or other entity any such confidential and
proprietary information, except on behalf of the Company. In consideration of
the unique nature of the confidential and proprietary information, all of the
Employee's obligations pertaining to the confidentiality and non-disclosure
thereof shall remain in effect in perpetuity or until the Company has released
any such information into the public domain, in which case the Employee's
obligations hereunder shall cease with respect only to such information so
released.
8. Remedies. The Employee hereby acknowledges that any violation by the
Employee of the provisions of Paragraphs 6 or 7 will cause the Company
irreparable harm and agrees that the Company shall be entitled to an injunction
restraining any violation or attempted or threatened violation of this Agreement
(without any bond or other security being required), or any other appropriate
decree of specific
-4-
performance. Such remedy shall not be exclusive and shall be in addition to any
other remedy which the Company may have.
9. Miscellaneous.
(a) This Agreement sets forth the entire understanding between
the parties and all prior or contemporaneous written or oral agreements
with respect to the subject matter hereof are merged herein. This
Agreement cannot be amended except by a writing signed by both parties.
No waiver of any term or provision shall be deemed to be a waiver of any
subsequent breach of any term or provision hereof.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their respective representatives, successors and
assigns; provided, however, this is an Agreement for the personal
services of the Employee and these services may only be provided by the
Employee. The Company may assign its rights and obligations hereunder to
any subsidiary or affiliate of the Company without the prior written
consent of the Employee.
(d) The provisions of this Agreement shall be separable and a
determination that any provision of this Agreement is either
unenforceable or void shall not affect the validity of any other
provision of this Agreement. Wherever possible all provisions shall be
interpreted so as not to be unenforceable and any court of competent
jurisdiction is authorized and directed by the parties to enforce any
otherwise unenforceable provision in part, to modify it, to enforce it
only to a degree and not fully, or otherwise to enforce that provision
only in a manner and to an extent, or for a shorter period of time, that
renders the provision valid or enforceable. The intent of the parties is
that this Agreement be enforceable and enforced to the maximum extent
possible after excising (or deeming excised) all invalid or
unenforceable provisions, whether or not the remaining provisions are
grammatically correct.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as by law provided as of the date first set forth above.
THE ▇▇▇▇▇▇ TELEPHONE COMPANY
By:________________________________
________________, President
The Employee
(SEAL)
_____________________________
Name_______________________________
Address____________________________
___________________________________
___________________________________
___________________________________
Home Telephone No._________________
-6-
Exhibit 8.5
Opinion of Purchaser's Counsel
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
ATTORNEYS AT LAW
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
C. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. TELEPHONE
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. FACSIMILE
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇ III
__________________, 1999
Shareholders of ▇▇▇▇▇▇
Telephone Company
[Post ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇]
Ladies and Gentlemen:
We have acted as counsel to MJD Ventures, Inc., a Delaware corporation
("MJD" or "Purchaser"), in connection with the purchase by Purchaser of all of
the capital stock of The ▇▇▇▇▇▇ Telephone Company (the "Company") from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, Co-Trustees of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. Trust
dated January 13, 1992, an Ohio sitused trust ("▇. ▇▇▇▇▇▇▇▇ Trust"), ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, individually, an Ohio resident ("▇. ▇▇▇▇▇▇▇▇"), ▇▇▇ ▇▇▇▇▇▇▇, Trustee
under Declaration of Trust dated October 26, 1989, an Ohio sitused trust ("▇.
▇▇▇▇▇▇▇ Trust") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee under Declaration of Trust dated
October 26, 1989, an Ohio sitused trust ("▇. ▇▇▇▇▇▇▇ Trust")(the ▇. ▇▇▇▇▇▇▇▇
Trust, ▇. ▇▇▇▇▇▇▇▇, the ▇. ▇▇▇▇▇▇▇ Trust and the ▇. ▇▇▇▇▇▇▇ Trust collectively
referred to hereinafter as "Seller"), pursuant to a Stock Purchase Agreement
entered into as of June 17, 1999 (with all Exhibits thereto, the "Purchase
Agreement") by, between and among Purchaser, the Company and Seller.
This opinion is being delivered to you pursuant to Section 8.5 of the
Purchase Agreement. Capitalized terms used herein which are not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement.
Shareholders of ▇▇▇▇▇▇
Telephone Company
_______________, 1999
Page 2
In connection with this transaction, we have reviewed the Articles of
Incorporation and Bylaws (the "Organizational Documents") of the Purchaser, the
Purchase Agreement and such other instruments and documents as are executed and
delivered pursuant to the Purchase Agreement, and have examined such other
records and information and have conducted such other investigations as we have
deemed necessary to render the opinion set forth below. As to facts material to
our opinion, we have relied upon the factual representations of Purchaser in the
Purchase Agreement, certificates from certain state authorities and on those
certificates delivered at Closing.
We have assumed the conformity of all copies to the originals of all
documents reviewed by us, the genuineness of all signatures (other than those of
the shareholders, directors and officers of Purchaser) and the authenticity of
all documents submitted to us (whether originals or copies).
For the purposes of our opinion, we have assumed that the Purchase
Agreement and all other instruments and documents executed and delivered
pursuant thereto have been duly authorized, executed and delivered by all of the
parties thereto other than Purchaser.
Whenever a statement herein is qualified by the phrases "known to us" or
"to our knowledge", or similar phrases, it is intended to indicate that during
the course of our representation of Purchaser and the transactions contemplated
by the Purchase Agreement, and having made inquiry of certain officers of
Purchaser as to such matters, no information that would give us actual knowledge
of the inaccuracy of such statement has come to our attention. However, we have
not undertaken any independent investigation or review to determine the accuracy
of any such statement. No inference as to our knowledge of any matters bearing
on the accuracy of any such statement should be drawn from our representation of
Purchaser.
Based upon the foregoing, and subject to the assumptions and
qualifications herein set forth, it is our opinion that:
1. MJD is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is
Shareholders of ▇▇▇▇▇▇
Telephone Company
_______________, 1999
Page 3
engaged, to own, lease and operate its properties, and to enter into and to
perform its obligations under the Purchase Agreement.
2. The execution and delivery of the Purchase Agreement was duly
authorized and approved by the Board of Directors of MJD. The Purchase Agreement
is a valid and binding obligation of MJD enforceable in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights in the event of future bankruptcy,
insolvency or reorganization of Purchaser, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. All persons who have executed this Purchase
Agreement on behalf of MJD have been duly authorized to do so by all necessary
corporate action.
3. To our knowledge, MJD has given all notices to and has obtained from
all state and Federal regulatory authorities any approvals, consents, permits
and authorizations required in order to consummate the transactions contemplated
in the Purchase Agreement.
The opinions expressed herein are based upon and limited to matters
governed by the laws of the State of North Carolina and the State of Delaware,
and we express no opinion as to any matter governed by the laws of any other
jurisdiction. We are not authorized to practice law in the State of Delaware and
the opinions set forth herein are rendered solely upon our review of applicable
provisions of Delaware corporation law as currently published in standard
compilations and such consultations with Delaware local counsel as we have
deemed necessary or appropriate.
This opinion is given as of the date hereof and we assume no obligation
to update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur. This opinion is limited to matters herein, and no opinion may be inferred
or implied beyond the matters expressly stated herein.
Shareholders of ▇▇▇▇▇▇
Telephone Company
_______________, 1999
Page 4
This opinion is being furnished to you in connection with the
transactions contemplated by the Purchase Agreement. This opinion is solely for
your benefit and is not to be used, circulated, quoted or otherwise referred to
for any other purpose nor relied upon by any other person or entity without our
prior written consent.
Finally, the opinions expressed herein represent our reasonable judgment
as to the matters of law addressed herein, based upon the facts presented or
assumed, and are not, and should not be construed or considered as, a guaranty.
Very truly yours,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
Exhibit 11.2
Escrow Agreement
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made as of
______________, 1999, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III,
CO-TRUSTEES OF THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST DATED JANUARY 13, 1992, an Ohio
sitused trust ("▇. ▇▇▇▇▇▇▇▇ Trust"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇"), a resident
of the State of Ohio, ▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER DECLARATION OF TRUST DATED
OCTOBER 26, 1989, an Ohio sitused Trust ("▇. ▇▇▇▇▇▇▇ Trust"), and ▇▇▇▇▇▇
▇▇▇▇▇▇▇, TRUSTEE UNDER DECLARATION OF TRUST DATED OCTOBER 26, 1989, an Ohio
sitused trust ("▇. ▇▇▇▇▇▇▇ Trust"), collectively with ▇. ▇▇▇▇▇▇▇▇, the ▇.
▇▇▇▇▇▇▇▇ Trust and the ▇. ▇▇▇▇▇▇▇ Trust (the "Sellers")), MJD VENTURES, INC., a
Delaware corporation ("Purchaser") and The Middlefield Banking Company, a
________________ corporation (the "Escrow Agent").
STATEMENT OF PURPOSE
On or about June 17, 1999, the Sellers and Purchaser, among others,
entered into a Stock Purchase Agreement (the "Purchase Agreement"), and pursuant
to the provisions of Section 9.2 of the Purchase Agreement, the Sellers and
Purchaser agreed that Two Million Dollars ($2,000,000) (the "Escrow Funds") of
the total purchase price otherwise payable to the Sellers would be deposited
with Escrow Agent to secure the Sellers' agreement to indemnify Purchaser as set
forth in Sections 11.2 and 11.3 of the Purchase Agreement all in accordance with
the terms of this Escrow Agreement.
The Escrow Agent has agreed to serve as escrow agent under this Escrow
Agreement and to accept delivery of the Escrow Funds in accordance with the
terms and conditions set out in this Escrow Agreement.
AGREEMENT
In consideration of the premises, and the agreements set out below, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties enter into the following Escrow Agreement:
1. Deposit with Escrow Agent. At Closing of the sale and purchase of the
Company Capital Stock as provided in the Purchase Agreement, Purchaser shall
deliver to the Escrow Agent the sum of Two Million Dollars ($2,000,000) to be
held, administered and distributed by the Escrow Agent pursuant to the terms of
this Escrow Agreement.
2. Escrow Funds. Upon receipt of the Escrow Funds, the Escrow Agent
shall deposit the Escrow Funds in an escrow account (the "Escrow Account") and
shall hold, administer, invest and distribute the Escrow Funds in accordance
with the terms of this Escrow Agreement. All references in this Escrow Agreement
to Escrow Funds shall include any investment of such funds and all investment
earnings thereon. Any taxes on any investment earnings on the Escrow Funds shall
be paid by Escrow Agent from the Escrow Account.
3. Purposes of Escrow. The Escrow Funds shall be used solely for the
purposes set forth in Sections 11.2 and 11.3 of the Purchase Agreement. The
Escrow Funds shall not constitute an asset of the Sellers until the distribution
thereof to the Sellers in accordance with the terms of the Purchase Agreement
and of this Escrow Agreement.
4. Term. The term of this Escrow Agreement ("Escrow Period") shall
expire on the earlier of June 30, 2000 or thirty (30) days after completion of
the financial audit and submission of a written report by Purchaser's
independent certified public accountants to Purchaser pertaining to the
Company's fiscal/taxable year ending December 31, 1999 (with the Purchaser to
give the Sellers prompt written notice of the completion of such report), except
that the Escrow Period shall be automatically extended as necessary to provide
for the disposition of any Claims filed by Purchaser with the Escrow Agent
during such period, in accordance with the procedures set forth in Section 5
hereof.
5. Disbursement of Escrow Funds.
(a) In the event Purchaser determines that it is entitled to all
or any portion of the Escrow Funds pursuant to Sections 11.2 or 11.3 of
the Purchase Agreement, Purchaser shall deliver written notice to the
Escrow Agent and the Sellers, stating the factual basis for, and the
amount of, such entitlement ("Claim"). Within thirty (30) days following
such delivery of the Claim, the Sellers may deny all or any portion of
the Claim by delivering written notice to the Escrow Agent and
Purchaser, indicating the amount or portion of the Claim which is denied
and the factual basis for such denial ("Denial").
(b) In the event that the Sellers fail to timely deliver a Denial
to the Escrow Agent and Purchaser, the Escrow Agent shall immediately
release and distribute to Purchaser an amount equal to the Claim.
(c) In the event the Escrow Agent receives a timely Denial from
the Sellers as to all or any portion of a Claim, the Escrow
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Agent shall immediately distribute to Purchaser an amount, if any, equal
to the portion of the Claim that the Sellers have not denied. If the
Denial does not state the amount or portion of the Claim denied, the
total amount of the Claim shall be deemed denied. The Sellers and the
Purchaser shall resolve their disagreement with respect to the denied
portion of the Purchaser's Claim pursuant to the negotiation-
mediation-arbitration provisions of Section 11.6 of the Purchase
Agreement (copy attached hereto as Exhibit A and made a part hereof).
Upon the resolution of such disagreement, the Escrow Agent shall
promptly take such action, if any, as is necessary for it to comply with
the terms of such resolution.
(d) The Escrow Agent shall proportionately divide and distribute
to the Sellers any portion of the Escrow Funds remaining in the Escrow
Agent's possession, after reservation for any and all still outstanding
Claims, immediately upon the expiration of the Escrow Period, free and
discharged from any further obligation with respect to the same
hereunder.
(e) Notwithstanding anything herein to the contrary, during the
Escrow Period, the Escrow Agent shall distribute so much of the Escrow
Funds to the Sellers as provided in a written joint instruction received
by the Escrow Agent from the Sellers and the Purchaser and signed by all
of them.
(f) Further, notwithstanding anything to the contrary herein,
Purchaser hereby expressly acknowledges and agrees that any
determination that it is entitled to all or any portion of the Escrow
Funds pursuant to Sections 11.2 or 11.3 of the Purchase Agreement and
this Escrow Agreement is subject to the provisions of Section 11.8 of
the Purchase Agreement pertaining to a "basket" on the Seller's
liability for indemnification with respect to the matters described in
Section 11.3 of the Purchase Agreement.
6. Release From Escrow. As and when all of the Escrow Funds are either
distributed as provided hereunder or deposited with the registry of the court in
interpleader as provided in Section 11 hereof, the Escrow Agent shall be
released and discharged from any further obligation hereunder without further
action of any party. Compliance by the Escrow Agent with any final,
non-appealable order or a judgment of a court concerning the subject matter of
any such dispute or agreement shall thereupon release and relieve the Escrow
Agent from all obligations and responsibility with respect to the Escrow Funds
to which such order or judgment relates.
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7. Investment of Escrow Funds. The Escrow Agent shall hold the Escrow
Funds delivered to it under the terms of this Escrow Agreement and shall invest
the Escrow Funds held by it (i) in interest bearing demand deposit accounts with
commercial banks whose accounts are insured by the Federal Deposit Insurance
Corporation, or (ii) in any other investment upon which the Sellers and the
Purchaser shall agree.
8. Agreement of Escrow Agent. The Escrow Agent hereby agrees to receive
the Escrow Funds and hold the same intact, and to deposit the Escrow Funds in
accordance with the terms of this Escrow Agreement, and shall not permit any
withdrawal except under the terms of this Escrow Agreement. The Escrow Agent
shall be responsible only for the safekeeping and the deposit of the Escrow
Funds and the disbursements or delivery in accordance with the terms of this
Escrow Agreement. The Escrow Agent shall not be responsible for the
appropriateness, sufficiency or accuracy of information contained in any written
notice.
9. Performance of Escrow Agent.
(a) There are no implied duties under this Escrow Agreement. The
duties, obligations and acts of the Escrow Agent shall be construed as
purely ministerial in nature. Escrow Agent shall be responsible for only
those duties expressly set forth in this Escrow Agreement. In performing
any of its duties under this Escrow Agreement, or upon the claimed
failure to perform its duties under this Escrow Agreement, Escrow Agent
shall not be liable to anyone for any damages, losses, or expenses which
they may incur as a result of the Escrow Agent so acting or failing to
act; provided, however, Escrow Agent shall be liable for damages arising
out of its willful default or gross negligence under this Escrow
Agreement. Accordingly, Escrow Agent shall not incur any such liability
with respect to (i) any action taken or omitted to be taken in good
faith upon advice of its counsel or counsel for any other party to this
Escrow Agreement given with respect to any questions relating to the
duties and responsibilities of the Escrow Agent hereunder, or (ii) any
action taken or omitted to be taken in reliance upon any document,
including any written notice or instructions provided for in this Escrow
Agreement, not only as to its due execution and to the validity and
effectiveness of its provisions but also as to the truth and accuracy of
any information contained in any notice or document, which the Escrow
Agent shall in good faith believe to be genuine, to have been signed or
presented by a proper person or persons and to conform with the
provisions of this Escrow Agreement.
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(b) The Sellers and the Purchaser agree to indemnify and hold
harmless Escrow Agent against any and all losses, claims, damages,
liabilities and expenses, including without limitation, reasonable costs
of investigation and counsel fees and disbursements which may be imposed
by Escrow Agent or incurred by it in connection with its acceptance of
this appointment as Escrow Agent or the performance of its duties,
including, without limitation, reasonable attorneys fees and costs
attributable to any interpleader action commenced by the Escrow Agent or
any other litigation arising from this Escrow Agreement or involving the
subject matter of this Escrow Agreement; provided, however, that if
Escrow Agent shall be found guilty of willful default or gross
negligence under this Escrow Agreement, then, in that event, Escrow
Agent shall itself bear all such losses, claims, damages, liabilities
and expenses.
10. Fees of Escrow Agent. For its ordinary services hereunder (which
shall include receipt, investment and disbursement of the Escrow Funds in the
manner described in this Escrow Agreement), the Escrow Agent shall receive
compensation of _________________________________ Dollars ($_______) to be paid
one-half by the Purchaser and one-half by the Sellers upon execution of this
Escrow Agreement and shall receive such additional reasonable compensation
during the term hereof as is commensurate with its services provided hereunder
as Escrow Agent; any such additional compensation to be similarly paid one-half
by each of Purchaser and the Sellers.
11. Resignation of Escrow Agent. The Escrow Agent or successor at any
time may resign by giving thirty (30) business days written notice to the
parties hereto, and such resignation shall take effect at the end of such thirty
(30) business days or upon the earlier appointment, with the approval of the
Sellers and the Purchaser, of a successor. From and after the effective date of
such resignation or appointment of a successor, the Escrow Agent shall not be
obligated to perform any of the duties of the Escrow Agent hereunder and will
not be liable for any nonperformance thereof nor for any act or failure to act
whatsoever on the part of any successor Escrow Agent. If the Sellers and the
Purchaser are unable to agree upon a successor Escrow Agent within thirty (30)
days following notice of the Escrow Agent's resignation, the Escrow Agent shall
commence an action in interpleader with any Ohio court of competent jurisdiction
and deposit the Escrow Funds with the registry or custody of the court, unless a
joint instruction is received by the Escrow Agent from the Sellers and the
Purchaser as to the disposition of the Escrow Funds.
-5-
12. Successor to Escrow Agent. Any corporation resulting from any merger
or consolidation to which the Escrow Agent or any successor to it shall be a
party, or any corporation in any manner succeeding to all or substantially all
of the business of the Escrow Agent or any successor, shall be the successor
escrow agent hereunder without the execution or filing of any paper or any
further acts on the part of any of the parties hereto. In the event of a
resignation of the Escrow Agent pursuant to paragraph 11 of this Escrow
Agreement, any person(s) or corporation hereafter agreed upon by the parties
shall be the successor escrow agent hereunder.
13. Instructions and Notices. In executing and performing its duties
hereunder, except as otherwise provided, the Escrow Agent shall be entitled to
rely upon instructions of the Sellers and the Purchaser. For all purposes
hereunder, the Sellers shall be required to act with unanimity, and ▇. ▇▇▇▇▇▇▇▇
shall act as spokesperson for the Sellers for purposes of all notices,
communications, decisions and determinations. Any notice, payment, demand,
instruction or communication required or permitted to be given by this Escrow
Agreement shall be in writing and shall be given by hand delivery, overnight
messenger or courier service or certified mail, return receipt requested,
addressed to the appropriate party at the address stated below:
If to the Sellers:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Tower East, Suite 400
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇ & Berne LLP
Ninth Floor, Bond Court Bldg.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
-6-
If to Purchaser:
MJD Ventures, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Executive Vice President
Copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Escrow Agent:
The Middlefield Banking Company
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any notice sent by overnight messenger or courier service or hand
delivery shall be deemed made on the date received, and any notice sent by
certified mail shall be deemed made three (3) days after mailing.
14. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina.
15. Headings. The headings in this Escrow Agreement are inserted for
convenience and identification only and are in no way intended to interpret,
define or limit the scope, extent or intent of this Escrow Agreement or any
provision of this Escrow Agreement.
16. Severability. Each provision of this Escrow Agreement is intended to
be severable. If any term or provision of this Escrow Agreement is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity or enforcement of the remainder of this Escrow Agreement.
17. Counterparts. This Escrow Agreement and any amendment hereto may be
executed in one or more counterparts, each of which shall be
-7-
deemed an original, but all of which together shall constitute one and the same
instrument.
18. Amendment. No modification or amendment to this Escrow Agreement
shall be valid unless produced in writing and signed by all of the parties
hereto.
19. Successors. This Escrow Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective assigns and transferees,
as the case may be. Escrow Agent shall not be bound by or incur any liability
with respect to this Escrow Agreement or any other agreement or understanding
between the Sellers and the Purchaser, except as in this Escrow Agreement
expressly provided.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be executed as of the date first above written.
_____________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CO-TRUSTEE OF
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST
DATED JANUARY 13, 1992
______________________________(SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, CO-TRUSTEE OF
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. TRUST
DATED JANUARY 13, 1992
_____________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
_____________________________(SEAL)
▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER
DECLARATION OF TRUST DATED
OCTOBER 26, 1989
______________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER
DECLARATION OF TRUST DATED
OCTOBER 26, 1989
MJD VENTURES, INC.
__________________________________
By: ______________________________
Its: _____________________________
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-10-
Escrow Agent
THE MIDDLEFIELD BANKING COMPANY
By: _______________________________
Its: ______________________________
-11-
Exhibit 7.8
Noncompetition Agreements
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made effective as of
the _________ day of ______________, 1999 (the "Effective Date"), by and between
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a resident of the State of Ohio ("▇▇▇▇▇▇▇"), individually and in
his capacity as Trustee under Declaration of Trust dated October 26, 1989 ("▇.
▇▇▇▇▇▇▇ Trust"), THE ▇▇▇▇▇▇ TELEPHONE COMPANY, an Ohio corporation ("Orwell"),
▇▇▇▇▇▇ COMMUNICATIONS, INC., an Ohio corporation ("Communications") (Orwell and
Communications referred to collectively as "the Companies") and MJD VENTURES,
INC., a Delaware corporation ("MJD").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to that certain Stock Purchase Agreement dated June
17, 1999 (the "Purchase Agreement") by and among MJD, ▇▇▇▇▇▇, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, Co-Trustees of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. Trust
dated January 13, 1992 (the "▇. ▇▇▇▇▇▇▇▇ Trust"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee under Declaration of Trust Dated October 26, 1989 (the
"▇. ▇▇▇▇▇▇▇ Trust"), and ▇▇▇ ▇▇▇▇▇▇▇, Trustee under Declaration of Trust Dated
October 26, 1989 (the "▇. ▇▇▇▇▇▇▇ Trust") (collectively, the "Sellers"), MJD is
purchasing all of the outstanding capital stock of ▇▇▇▇▇▇ from the Sellers; and
WHEREAS, the ▇. ▇▇▇▇▇▇▇ Trust is a principal shareholder of ▇▇▇▇▇▇, and
▇▇▇▇▇▇ is the sole shareholder of Communications, and ▇▇▇▇▇▇▇'▇ knowledge of and
contacts within the Companies' relevant trade area are such that MJD is
unwilling to enter into the Purchase Agreement in the absence of ▇▇▇▇▇▇▇'▇ entry
into, and full compliance with, this Agreement.
NOW, THEREFORE, in consideration of and as an inducement to MJD's
entering into the Purchase Agreement and the transactions contemplated thereby
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, ▇▇▇▇▇▇▇ hereby undertakes and agrees as follows:
1. ▇▇▇▇▇▇▇ will not, without the prior clear and affirmative advance
written approval of the Companies and MJD, directly or indirectly engage, or
attempt to engage, in any of the "Restricted Activities" with respect to the
"Restricted Businesses" within the "Restricted Territory" during the "Restricted
Period." The terms "Restricted Activities," "Restricted Businesses," "Restricted
Territory" and "Restricted Period" are defined in Paragraphs 1(a) through 1(d)
below.
(a) Restricted Activities. The term "Restricted
Activities" shall mean direct or indirect participation by
▇▇▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇▇▇ in the:
(i) formation, ownership (excluding any ownership interest
of five percent (5%) or less of a publicly held company),
control, management or operation, in whole or in part, of any
entity which engages in one or more of the "Restricted
Businesses" within the "Restricted Territory"; and/or advising,
providing consulting services to, or otherwise assisting such
entity in the analysis or development of business opportunities
and/or the solicitation of customers with respect to one or more
of the "Restricted Businesses" within the "Restricted Territory";
provided, however, that nothing herein shall prohibit ▇▇▇▇▇▇▇ or
an Affiliate of ▇▇▇▇▇▇▇ from entering into agreements or
otherwise doing business with a Person which has customers within
the Restricted Territory, so long as neither ▇▇▇▇▇▇▇ nor his
Affiliate, through such agreements or business transactions,
engages in one or more of the Restricted Activities within the
Restricted Territory; or
(ii) employment, engagement, solicitation for potential
employment or engagement, or assistance in the employment,
engagement or solicitation for potential employment or
engagement, by any third party, of any person who, on the
Effective Date or thereafter, is employed or engaged as an
employee of any of the Companies or MJD. Notwithstanding anything
in this Agreement to the contrary, the restrictions set forth in
this subparagraph 1(a)(ii) shall apply regardless of whether such
third party is located inside or outside of the Restricted
Territory.
(b) Restricted Businesses. The term "Restricted Businesses" shall
encompass the offering, marketing, sale or provision of any
telecommunications, enhanced or information service within the
Restricted Territory to any existing or future customer of the
Companies. The prohibited telecommunications, enhanced or information
services include the following named services (whether offered on a
retail or wholesale basis, and whether provided on a facilities-based or
resale basis), plus any existing or future service which becomes capable
of substitution for one or more of the named services during the
Restricted Period:
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(i) Wireline local exchange and exchange access services;
(ii) Wireless local loop and access services;
(iii) Wireless mobility services (including analog and
digital cellular, PCS, SMR, satellite and paging services);
(iv) Wireline or wireless Internet access services;
(v) Competitive local exchange carrier services;
(vi) Interstate and intrastate toll services;
(vii) Video conferencing and conference calling services;
(viii) Voice and electronic mail services;
(ix) Facsimile and data services;
(x) Directory and operator assistance services;
(xi) Prepaid calling cards and other prepaid
telecommunications and information services;
(xii) Customer premises equipment and inside wiring
maintenance services;
(xiii) Local multipoint distribution service; and
(xiv) Cable television, wireless cable, open video system,
and other multichannel video programming distribution services.
For purposes of this Agreement, any Person shall be deemed an
existing or future customer of the Companies if such Person has a
business or residence located within the Restricted Territory.
(c) Restricted Territory. The term "Restricted Territory" shall
include any and all locations which as of the Effective Date are within
any of the exchange areas of the Companies, as defined by the Public
Utilities Commission of Ohio.
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(d) Restricted Period. The term "Restricted Period" shall be a
period of five (5) consecutive years, commencing with the Effective
Date.
(e) Affiliate. The term "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.
(f) Person. The term "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.
2. ▇▇▇▇▇▇▇ shall not, directly or indirectly, at any and all times
hereafter, use, divulge or make available to any Person, any confidential
information or any documents, files or other papers concerning the business of
the Companies, except for such disclosure which is consented to in writing in
advance by MJD, or otherwise required by applicable law or regulations.
Information shall not be considered confidential information within the scope of
protection of this Paragraph 2, however, if it is in the public domain other
than through a wrongful disclosure. However, information shall not be considered
to be in the public domain because it is known to third parties who attempt to
maintain the confidentiality of it or otherwise do not publish such information.
3. In the event of any breach by ▇▇▇▇▇▇▇ of any provision contained
herein, the Restricted Period shall, to the extent permitted by law, be extended
by any period of time during which (i) such breach continues, or (ii) there is
pending litigation in which MJD is seeking in good faith to enforce the terms of
this Agreement.
4. Except as otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Purchase Agreement. In the event
that any provision contained herein is held to be invalid, prohibited or
unenforceable because of the scope, duration or area of its applicability or for
other reasons, such provision shall be ineffective only to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions hereof.
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No narrowed construction, court-modification or invalidation of any provision
hereof shall affect the construction, legality, validity or enforceability of
any other provision hereof.
5. ▇▇▇▇▇▇▇ acknowledges that the Companies and MJD will be irreparably
damaged if the provisions hereof are not specifically enforced, and agrees that
either or both of the Companies and/or MJD shall be entitled to an injunction
restraining any violation or attempted violation of this Agreement, or any other
appropriate decree of specific performance. Such remedies shall not be exclusive
and shall be in addition to any other remedy which the Companies and/or MJD may
have.
6. This Agreement shall be governed and construed in accordance with the
laws of the State of North Carolina. This Agreement shall inure to the benefit
of the Companies and MJD and their successors and assigns, and the provisions
hereof shall apply to ▇▇▇▇▇▇▇, his successors and assigns. Further, the parties
hereto agree and acknowledge that the provisions hereof shall apply to the ▇.
▇▇▇▇▇▇▇ Trust and its successors and/or assigns and any of its distributees or
beneficiaries who shall receive any of the Trust's local multipoint distribution
service licenses. The terms hereof may not be modified or terminated except by a
writing signed by the Companies, MJD and ▇▇▇▇▇▇▇.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first set forth above.
______________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
______________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, TRUSTEE UNDER
DECLARATION OF TRUST DATED
OCTOBER 26, 1989
THE ▇▇▇▇▇▇ TELEPHONE COMPANY
ATTEST:
_____________________________ _____________________________
By: _________________________ By: _________________________
Title: ______________________ Title: ______________________
(Corporate Seal)
▇▇▇▇▇▇ COMMUNICATIONS, INC.
ATTEST:
_____________________________ _____________________________
By: _________________________ By: _________________________
Title: ______________________ Title: ______________________
(Corporate Seal)
MJD VENTURES, INC.
ATTEST:
_____________________________ _____________________________
By: _________________________ By: _________________________
Title: ______________________ Title: ______________________
(Corporate Seal)
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